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Directors Report of Procter & Gamble Health Ltd.

Jun 30, 2023

The Board of Directors have the pleasure of presenting the 56^th Annual Report and the Audited Financial Statements of the Company for the Financial Year ended June 30, 2023.

FINANCIAL HIGHLIGHTS

(Rs. in Crores)
Particulars	2022-23	2021-22
Revenue from Operations	1,229.62	1,114.41
Sale of Products	1,205.86	1,092.04
Other Income	18.39	13.19
Profit before Interest, Depreciation and Tax	342.34	281.60
Profit before tax	314.20	253.37
Profit after tax	229.47	192.52
Appropriations:
Opening Reserve	237.07	327.70
Re-measurement gain/loss on defined benefit plan (net of tax)	(1.84)	0.70
Dividend paid in the year	(93.79)	(283.85)
Balance carried to the Balance Sheet	370.91	237.07
Earnings per share
- Basic (?)	138	116
- Diluted (?)	138	116

FINANCIAL YEAR

The Company''s Financial Year is July 1^st to June 30^th. DIVIDEND

During the Financial Year, the Board of Directors of the Company at its meeting held on February 5, 2023, declared an interim dividend of '' 45 per equity share, which was paid on March 2, 2023.

The Board of Directors of the Company, at its meeting held on August 23, 2023, have recommended a final dividend of '' 50 per equity share, for the Financial Year ended June 30, 2023. This final dividend is subject to approval of the Members at the ensuing 56^th Annual General Meeting of the Company.

The aggregate dividend for the Financial Year ended June 30, 2023, (including the interim dividend) amounts to '' 95 per equity share.

ECONOMY AND MARKETS

The operating environment this year continued to be volatile, marked by macro-economic challenges and high commodity inflation contributing to significant cost headwinds. Consumers continued to face inflationary pressures during the year, leading to consumer demand remaining tepid. Despite these headwinds, the Indian economy gained momentum towards the end of the Fiscal Year, achieving a real GDP growth of 7.2%* in Fiscal Year 2022-23.

Several initiatives and measures taken by the Government, including higher Capital Expenditure (Capex) among others contributed to the economic growth as it boosted private consumption and consumer confidence. Further, encouraging growth in the countryâs digital and physical infrastructure, innovative measures such as PM GatiShakti, the National Logistics Policy, and the Production-Linked Incentive schemes to boost manufacturing output, have also contributed significantly to the economic growth.

* Source: Press release of Ministry of Statistics & Programme Implementation dated May 31, 2023.

OPPORTUNITIES, RISK AND OUTLOOK

The International Monetary Fund (IMF) projects Indian economy to grow by 6.3%^A in 2023-24. With this, India continues to enjoy a positive outlook as one of the fastest-growing major economies in the world, also reaffirmed by global economic agencies.

The IMF projects that global headline inflation is expected to steadily decline from its peak of 8.7%^Ain 2022 (annual average) to 6.9%^A in 2023 and 5.8%^Ain 2024. Amidst this, it will be imperative to navigate through uncertainties caused by external factors and leverage the opportunities with agility and resilience. The long-term outlook for the consumer healthcare sector remains positive. The Company is well positioned to sustain and improve its performance with a resilient workforce, leverage opportunities with agility, address challenges and overcome the risks.

^A Source: IMF World Economic Outlook, October 2023.

FINANCIAL RATIOS
Particulars	2022-23	2021-22	change (%)
Debtors (trade receivables) turnover	12.35	15.56	(21%)
Inventory turnover	9.83	9.54	3%
Return on investmentA	0.05	0.03	67%
Net capital turnover	2.50	2.96	(16%)
Trade payables turnover*	1.86	1.30	43%
Return on Capital Employed	0.42	0.41	2%
Interest coverage ratio**	N.A.	N.A.	-
Current ratio	2.62	2.62	0%
Debt equity ratio**	N.A.	N.A.	-
Operating profit margin	26%	23%	13%
Net profit margin	19%	17%	8%
Return on Networth	42%	41%	2%

a Due to increase in interest rates * Due to optimised credit terms with vendors

** The Company did not have any borrowings during the Financial Year.

FINANCIAL & BUSINESS PERFORMANCE

The Company recorded sales of '' 1,205.86 crores for the Financial Year ending June 30, 2023, up by 10% vs year ago, supported by strong established brands trusted by healthcare professionals. Profit after tax (PAT) for the Financial Year ended June 30, 2023 is '' 229.47 crores, up by 19% vs. year ago. The Company continued its efforts towards brand and category development and thus delivered a strong performance in the fiscal, marked by consistent growth across all its brands.

During the Financial Year, in order to achieve efficiencies in its operations, the Company transitioned from its previous go-to-market model, which was serviced via carrying and forward agents, to a new distributor led go-to-market model by appointing distributors. This transition was completed in April 2023.

The Company bolstered its go-to-market strategy and strengthened its partnerships across omnichannel stores, increasing the availability and access of its brands across online and offline platforms, thereby helping meet the needs of our consumers and customers.

The Company is well known in India for its rich heritage in healthcare with brands that are household names. Despite challenging circumstances during the fiscal year where industry has seen low footfall of patients, the Companyâs brand franchises delivered strong results continuing to further our commitment to bringing quality and affordable vitamins, minerals and supplements to patients, consumers and customers across the country.

Neurobion delivered double digit growth fuelled by focused initiatives to build awareness on neuropathy, nerve care and the benefits of Neurobion across customer and consumer touchpoints. True to its brand promise, the Companyâs flagship brand Neurobion Forte has been helping consumers fight body discomforts due to lack of Vitamin B. Recently launched variants like Neurobion Alfa & Alfa D for patients with Diabetic Neuropathy have seen prolific growth fuelled by robust activations driving the scientific superiority among Health Care Professionals (HCPs). Being a Nerve health promoter and a partner to International Diabetes Federation, on World Diabetes Day 2022, the Company launched a large-scale collective awareness effort on Peripheral Neuropathy which was recognized among Indiaâs top diabetes campaigns by Obesity International. During the year, the Company also raised awareness and education among its consumers through initiatives

like the Neuropathy Awareness Week, wherein leading global health experts converged to address the growing public health concern of Peripheral Neuropathy. This also reinforced Company''s efforts towards building an ecosystem for scientific collaboration and knowledge-sharing among HCPs.

Livogen delivered a strong year of growth, driven mainly by industry leading campaign âNa Na Anemiaâ aimed to drive awareness and diagnosis about Iron Deficiency-Anemia. On World Iron Deficiency Day, the Company in partnership with FOGSI (The Federation of Obstetric and Gynecological Societies of India) initiated the ''Na Na Anemia Bus Yatra'', a 40-day Bus Yatra across 20 cities and 5 states of India to create awareness on Iron Deficiency.

Polybion continued to strengthen its foothold with a year of remarkable growth. During the year, we launched Polybion A injection, a new and improved formulation, helped to deliver superior benefits to the Consumers. The Company also commemorated World Health Day by launching the Pragati Utsav, an initiative to raise awareness and empower the HCPs of rural hinterlands, on Vitamin B deficiency.

Evion continued to create awareness on the benefits of Vitamin E among HCPs and consumers. Innovative campaigns helped deliver another year of strong growth.

Nasal decongestant brand Nasivion delivered another year of double digit growth behind brand building activations like cricket partnerships & in-serial integrations.

The Company has delivered strong results over the years, in a volatile macro environment against very capable competition, through focus on executing our integrated strategies with excellence. We are focused on delighting and serving consumers, customers and shareholders through five strategic and integrated choices: a portfolio of products where performance drives brand choice; superiority across product, package, brand communication, retail execution and value; productivity in everything we do; constructive disruption across the value chain; and an agile, accountable and empowered organization. These are not independent strategic choices. They reinforce and build on each other, and when executed well, they lead to balanced top-line and bottom-line growth and value creation. There is still meaningful opportunity for improvement and leverage in every facet of this strategy, and we continue to work to strengthen our execution of these choices.

RISK MANAGEMENT

The Company has set up a Risk Management Committee and has also adopted a risk management policy. The Company''s risk management policy is in line with the parent Companyâs global guidelines and as such adequate measures have been adopted by the Company to anticipate, plan and mitigate the spectrum of risks it faces. The Companyâs Risk Management process focuses on ensuring that these risks are identified on a timesely basis and adequately addressed.

For financing risks, the Company has a robust operational contingency plan. It also undertakes Business Contingency Plan for key vendors and natural disasters. The Company also has adequate insurance coverage to protect the value of its assets.

The Company has in place a very stringent and responsive system under which all its distributors and vendors are assessed before being selected.

As part of the business sustainability and governance process, in order to ensure a robust risk management system, in line with the applicable laws, the Company follows a proactive risk management policy, aimed at protecting its employees, assets and the environment, while at the same time ensuring growth and continuity of its business.

The risks are identified by a consistent process across functions and the Company also strives to link each risk with a mitigation step to ensure business continuity. Risk managers consistently map the risks to establish a risk management culture. The risk report is reviewed at regular intervals, to ensure that risks are planned for mitigation, for the fact that not all risks can be eliminated.

REGULATORY AND COMPLIANCE

The Company operates within the letter and spirit of all applicable laws. General compliance with legal requirements is an important component of the Company''s Worldwide Business Conduct Manual and the same expects the following action from every employee:

â¢ To uphold our Purpose, Values, and Principles in our work and in the business decisions we make;

â¢ To do the right thing at all times;

â¢ To follow standards set forth in the WBCM and the law at all times;

â¢ To know and fully comply with the laws, regulations, and Company policies that apply to the employeesâ work; and

â¢ To be alert to any situations or actions that may violate the law, the WBCM or Company policies, and to report them appropriately.

The Companyâs business is subject to stringent compliances under various laws, such as the local pricing regulations set by the Government, Foods and Drugs Administration legislation, food safety regulations and standards, DCGI approvals and the Companyâs internal code of conduct with respect to compliances, including those applicable to interactions with HCPs. Amendments to statutes and the compliance with applicable laws as well as policies may prove to be challenging and time consuming as it requires constant monitoring. To support such monitoring requirement, the Company has set in place the requisite mechanism for meeting with the compliance requirements, periodic monitoring of compliance to avoid any deviations, and regular updates to keep pace with the regulatory changes.

A number of training programs are conducted periodically for employees with respect to various compliance related topics such as Pharma Compliance Guidelines, Global Anti-Corruption Standards, Prevention of Sexual Harassment at Workplace, Whistle-blower Mechanism, Conflict of Interest, Data Privacy, Data Integrity, Anti-Trust Compliance, etc.

INFORMATION TECHNOLOGY (IT)

The Company uses varied IT systems and processes in its day-to-day businesses operations. There are software related precautions like handling of data integrity, access rights, virus firewalls, data protection, social media risk, etc. The Company has robust framework and policies on information security which cover risks related to cyber security. Adherence to the Companyâs information security guidelines and processes is continuously monitored and are subject to Controls Self-Assessments and global audits at regular intervals.

INTERNAL CONTROLS AND THEIR ADEQUACY

The Company continues to prioritize sustainable control processes that are an integral part of the organization culture. It has built strong Internal Controls Environment and Risk Assessment & Management systems. These systems enable the Company to comply with Internal Company policies, procedures, standard guidelines and local laws to help protect Companyâs assets and confidential information including personally identifiable information (PII) against financial losses and unauthorized use. The robust controls environment at the Company is efficiently managed through:

â¢ Controls Self-Assessments (CSAs):

CSAs are performed every Financial Year across business processes. The purpose of this thorough exercise is to review and evaluate process compliances against standard control objective, activities, and attributes. This enables the Company to proactively identify control weaknesses and initiate actions to sustainably mitigate them.

â¢ Stewardship and Global Internal Audit (GIA):

Reviews/audit led by a team of independent fulltime Internal Controls experts, wherein their role is to ensure that all key processes i.e. selling, revenue, distribution, trade & marketing spends, vendor payments, and plant operations are reviewed and assessed at appropriate intervals. The observations and findings are shared with senior management for implementing quality action plans to strengthen overall controls environment in these processes. The assessment of high risks and SOX compliance areas are assessed by an independent internal audit department led by the Companyâs Global Internal Audit team. This team comprises of certified internal controls process experts who have experiences across different markets that the Company operates in. The action taken by the management to correct the processes is then reviewed and reported appropriately.

â¢ Governance Board:

The Governance Board comprises of the Managing Director, Chief Financial Officer, Chief Human Resource Officer, Supply Chain Leader, General Counsel and Sales leader. The Governance Board assesses, and reviews enterprise level risks and works with process owners and functional managers to ensure that corrective action is taken, and risk is mitigated as appropriate.

BUSINESS RESPONSIBILITY AND SUSTAINABILITY REPORT

A separate report on Business Responsibility and Sustainability has been appended as Annexure I to this Report.

CORPORATE SOCIAL RESPONSIBILITY

As a responsible Healthcare Company, the Company continued to channelize its Corporate Social Responsibilities (CSR) efforts towards building a Healthier India under its CSR umbrella program -âSEHATâ (meaning Health). With SEHAT, the Company aspires to make a sustainable impact to Public Health in India.

The Company has constituted a CSR Committee. The composition and terms of reference of the Corporate Social Responsibility Committee are provided in the Corporate Governance Report annexed to this Annual Report.

A brief outline of the Corporate Social Responsibility Policy of the Company and the initiatives undertaken by the Company on CSR activities during the Financial Year are set out in Annexure II to this report in the format prescribed in the Companies (Corporate Social Responsibility Policy) Rules, 2014. In compliance with requirements of Section 135 of the Companies Act, 2013, the Company has laid down a CSR Policy which is published on its website-https://www.pghealthindia.com/investors/.

ENVIRONMENTAL SUSTAINABILITY ANDCONSERVATION OF ENERGY

Environment, Health and Safety encompasses the laws, rules, guidance and processes designed to help protect employees, the public and the environment from harm, further supported by group standards, current best approaches and audits at regular intervals.

The Companyâs plant at Goa is zero-manufacturing-waste-to-landfill site. The Company has a systematic approach for complying with environmental regulations, such as managing wastewater, air emissions and hazardous wastes. This also includes other non-hazardous waste management at site. The plant strives to reduce environmental pollution with a proactive approach. Use of renewable fuel for generating energy, use of solar energy for generating power are some examples for reducing carbon foot print.

An 2MW in-house solar power plant had been commissioned at the Goa Plant site last year.

During the Financial Year 2022-23, some of the key initiatives taken at the Goa plant in this direction were:

1. Installation of rainwater harvesting system at three different Locations within the site which helped to reduce underground water dependency by 15KL/Day;

2. Automation of quality control air handling unit (AHU) & forced draft ventilation (FDV) for time-based operations. AHU & FDV made to run based on set time as per area requirement reducing power consumption;

3. Energy audit conducted for the entire site for identifying opportunities & eliminating losses in power, steam, compressed air etc.

TECHNOLOGY ABSORPTION AND RESEARCH & DEVELOPMENT

The Company avails benefits from The Procter & Gamble Company and it subsidiaries'' research and development efforts and activities across the globe, including India.

The Company has the advantage of availing advanced technology and continuous upgradation thereof from The Procter & Gamble Company, USA and its subsidiaries. This is an unmatched competitive advantage that helps the Company deliver strong business results. The Company, having ongoing access to cutting-edge technology, derives benefits such as product development, consistent superior product quality, process efficiencies, cost effectiveness and energy efficiency.

Technology absorption and adaptation is a continuous process. The products manufactured and soLd by the Company are a resuLt of the imported technology received on an ongoing basis. Initiatives are constantly undertaken for innovation of products, new product development, improvement of packaging, enhancement of product quality and appLication of best information technoLogy to automate, simpLify and generate efficiencies in various business processes.

The Company believes in exploring the latest technoLogy from both within India and beyond to ensure the best quaLity product is made by the company for our consumers.

Details of the expenditure on Research & Development (R&D) undertaken during the Financial Year:

('' in Lakhs)
Expenditure on R&D*	2022-23	2021-22
Capital	-	-
Recurring	571	655
Total	571	655
Total R&D expenditure as a percentage of total turnover	0.47%	0.60%
* The aforesaid R&D expense does not include people costs.

FOREIGN EXCHANGE EARNINGS & OUTGO

The details of foreign exchange earnings and outgo as required under Section 134 of the Companies Act, 2013 and Rule 8(3) of the Companies (Accounts) Rules, 2014 are mentioned below:

('' in Crores)
	For the Financial	For the Financial
	Year ended June	Year ended June
	30, 2023	30, 2022
Foreign Exchange earnings	146.52	122.61
Foreign Exchange outgo	160.54	126.28

RELATED PARTY TRANSACTIONS

The Company has formulated a policy on related party transactions for the purposes of review and approval of related party transactions. The policy on related party transactions as approved by the Board is uploaded on the Companyâs website - https:// www.pghealthindia.com/investors/.

Prior omnibus approvaL is obtained for reLated party transactions which are of repetitive nature and entered in the ordinary course of business and at armâs Length. ALL related party transactions are subjected to independent review by Chartered Accountant firm to confirm compLiance with the requirements under the Companies Act, 2013 and the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015.

All related party transactions entered during the Financial Year were in ordinary course of the business and on armâs Length basis. AccordingLy, the discLosure of related party transactions as required under section 134(3)(h) of the Companies Act, 2013 in Form AOC-2 is not applicable to the Company.

PUBLIC DEPOSITS

The Company has not accepted any pubLic deposits during the Financial Year 2022-23.

PARTICULARS OF LOANS AND GUARANTEES GIVEN OR INVESTMENTS MADE

The Company has neither given any loans or guarantees nor made any investments during the Financial Year 2022-23.

DISCLOSURE AS PER SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION,PROHIBITION AND REDRESSAL) ACT, 2013

The Company has zero tolerance towards sexual harassment at the workplace and has adopted a policy

on prevention, prohibition and redressal of sexual harassment at workplace in Line with the provisions of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 and Rules thereunder. The Company has ensured a wide dissemination of the Policy and has conducted various awareness program at all locations of the Company. The Company has constituted an Internal Complaints Committees. During the Financial Year, 3 complaints with allegations of Sexual Harassment were filed with the Company. The said complaints were addressed and closed during the Financial Year. No complaints were pending as on June 30, 2023.

DIRECTORSâ RESPONSIBILITY STATEMENT

Pursuant to the requirement under Section 134(3) of the Companies Act, 2013, the Directors confirm that:

a. That in the preparation of the annual accounts for the Financial year ended June 30, 2023, the applicable accounting standards have been followed along with proper explanation relating to material departures;

b. That the Directors had selected appropriate accounting policies 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 at the end of the Financial Year and of the profit of the Company for that period;

c. That the Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

d. That the Directors have prepared annual accounts on a going concern basis;

e. That the Directors have had laid down appropriate internal financial controls and that such internal financial controls were adequate and were operating effectively; and

f. That 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.

CORPORATE GOVERNANCE

A separate report on Corporate Governance along with the Auditorsâ Certificate on its compliance is annexed to this Report.

ANNUAL RETURN

The annual return for the Financial Year 2022-23 as required under Section 92(3) of the Companies Act, 2013 and Rule 12 of the Companies (Management and Administration) Rules, 2014 is available on the website of the Company, which can be accessed at https://www.pghealthindia.com/investors/.

HUMAN RESOURCES

The Company continues to look at the fundamentals of creating an appealing employer brand, attracting talent that is a suitable match for the Company, and consequently nurturing that talent. We have designed holistic Human Resource strategies to ensure that the organization is geared up to deliver the future.

India continues to be a critical source of talent. With the changing times we have strategized to be preemptive with our campus initiatives. We have proactively launched new innovative campus programs, along with revamping existing programs. Our internships, onboarding, and learning & development programs are being executed in a mix of virtual and face-to-face setup, to accommodate a dispersed audience. We continue to retain our rankings across various campus surveys. We bolster nurturing our talent to create diverse leaders and set them up for success as they grow in the ecosystem.

To craft a winning culture, it is vital that we enroll and empower the organization right from Day 1 during their comprehensive corporate on-boarding program - GETiN. By enhancing our company DNA via Growth Mindset, we also encourage our organization to create a love of learning and resilience that is essential for achieving organizational and personal goals.

We strongly believe in co-creating careers with our employees, which allows them to partner with the business to achieve a fulfilling career with us. We encourage our employees to bring their true authentic self to work in order to consistently evolve from Good to Great. Our Companyâs performance management system continues to clearly assess employees based on their impact through growth, and not only performance.

AVTAR Seramount recognized P&G India as top 100 Best Companies for Women.

The number of employees as on June 30, 2023 was 1,407.

The statement of disclosure of remuneration under Section 197 of the Companies Act, 2013 and Rule 5 (1)

of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is appended as Annexure III to this Report.

As per the provisions of first proviso to Section 136(1) of the Companies Act, 2013, the Report and Financial Statements are being sent to the Members of the Company excluding the statement of particulars of employees under Rule 5 (2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014. Any Member interested in obtaining a copy of the said statement may write to the Company Secretary at investorgrievance.im@ pg.com.

DIRECTORS AND KEY MANAGERIAL PERSONNEL

Mr. Amit Gupta, Executive Director & Chief Financial Officer and Dr. Elizabeth Desmond, Non-Executive Director resigned from the Board of the Company effective March 31, 2023. The Board places on record its appreciation for the contributions of Mr. Amit Gupta and Dr. Elizabeth Desmond during their tenure of directorship on the Board of the Company.

The Board of Directors, at its meeting held on March 17, 2023, on the recommendation of the Audit Committee and Nomination & Remuneration Committee, have appointed Mr. Lokesh Chandak as Executive Director & Chief Financial Officer of the Company for a period of five years, effective April 1, 2023 and Ms. Seema Sambasivan as Non-Executive Director of the Company, effective April 1, 2023. The Shareholders of the Company approved said appointments by resolutions passed by postal ballot & e-voting on May 10, 2023.

The Board of Directors, at its meeting held on February 5, 2023, on the recommendation of the Nomination & Remuneration Committee, have reappointed Mr. Milind Thatte as the Managing Director of the Company for a further term of five years effective April 01, 2023. The shareholders of the Company approved his re-appointment as Managing Director vide resolution passed by postal ballot and e-voting on March 22, 2023.

Mr. Aalok Agrawal, Non-Executive Director, retires by rotation and being eligible, offers himself for re-appointment at the ensuing 56^th Annual General Meeting. Brief profile and details of the Directorships of Mr. Agrawal, are contained in the Corporate Governance section of this Annual Report.

All Independent Directors of the Company have given declarations to the Company stating that they meet the criteria of independence as mentioned under Section 149 (6) of the Companies Act, 2013 and the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

The Board is of the opinion that all the Independent Directors of the Company possess integrity, have relevant expertise and experience and fulfil the conditions specified under the Companies Act, 2013 and the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. Details of the familiarization programmes and annual Board evaluation process for Directors have been provided under Corporate Governance section of the report.

During the Financial Year, none of the Directors and Key Managerial Personnel of the Company had any material pecuniary relationship or transactions with the Company.

NUMBER OF MEETINGS OF THE BOARD

Six (6) meetings of the Board were held during the Financial Year 2022-23. For details of the meetings of the Board and its Committees, please refer to the Corporate Governance section of the Report.

POLICIES

The Company has adopted various policies including policies on related party transactions, corporate social responsibility, vigil mechanism, nomination and remuneration, materiality of events and dividend distribution, which are available on the website of the Company at https://www.pghealthindia.com/ investors/#policies

INTERNAL AUDITOR

Mr. Lokesh Chandak was appointed as Internal Auditor of the Company for the Financial Year 202223. Pursuant to appointment of Mr. Chankak as Executive Director and Chief Financial Officer of the Company, effective April 1, 2023, he ceased to be Internal Auditor of the Company. Mr. Arihant Jain was appointed as Internal Auditor of the Company, in place of Mr. Chandak for the period April 1, 2023 to June 30, 2023.

STATUTORY AUDITORS

The Shareholders at the 55^th Annual General Meeting (AGM) held on November 23, 2022 had approved the re-appointment of M/s. Haribhakti & Co. LLP, Chartered Accountants (ICAI Firm Registration No.: 103523W/W100048), as statutory auditors of the Company, to hold office from the conclusion of 55^thAGM upto the conclusion of the 60^th AGM.

The Report issued by the Statutory Auditors on the financial statements of the Company for the Financial

Year ended June 30, 2023 is part of the Report. There have been no qualification, reservation or adverse remark given by the Auditors in their Report.

SECRETARIAL AUDITORS

Pursuant to the provisions of Section 204 of the Companies Act, 2013 and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, Secretarial Audit has been carried out by Dholakia & Associates LLP, Company Secretaries, for the Financial Year ended June 30, 2023. There were no qualifications, reservation or adverse remarks given by Secretarial Auditors of the Company. The Secretarial Audit report has been appended as Annexure IV.

SECRETARIAL STANDARDS

During the Financial Year, the Company has complied with the mandatory Secretarial Standards issued by the Institute of Company Secretaries of India.

COST AUDITORS

Pursuant to Section 148 of the Companies Act, 2013 read with the Companies (Cost Records and Audit) Rules, 2014, the Central Government has prescribed cost audit of the accounts to be maintained by the Company. M/s. Joshi Apte & Associates, Cost Accountants carried out the cost audit for the Financial Year 2022-23. The Board of Directors has re-appointed M/s. Joshi Apte & Associates, Cost Accountants for the Financial Year 2023-24.

A resolution for ratification of the remuneration payable to the Cost Auditor for the Financial Year

2023-24 is proposed in the Notice of the ensuing 56^thAnnual General Meeting.

MATERIAL ORDERS PASSED BY THE REGULATORS AND COURTS

During the Financial Year under review, no regulator or court has passed any significant and/or material orders impacting the going concern status of the Company and its future operations.

ACKNOWLEDGEMENT

We are grateful to The Procter & Gamble Company, USA and its subsidiaries for their invaluable support in terms of access to the latest information and knowledge in the field of research & development for products, ingredients and technologies, exceptional marketing strategies, and the goodwill of its worldrenowned trademarks and superior brands.

The Board of Directors place on record its deep appreciation for the co-operation and support of the Government authorities, distributors, wholesalers, retailers, suppliers, clearing and forwarding agents, business associates, bankers, consumers, employees and Shareholders and look forward to their continued support on the journey ahead.

On behalf of the Board of Directors

Mumbai S. N. Talwar

August 23, 2023 Chairman

Jun 30, 2022

Your Directorsâ have the pleasure of presenting the 55^th Annual Report and the Audited Financial Statements of your Company for the Financial Year ended June 30, 2022.

FINANCIAL HIGHLIGHTS

(? in lakhs)
Particulars	2021-22	2020-21
Revenue from Operations	111 441	100 873
Other Income	1 319	1 810
Profit before Interest, Depreciation and Tax	28 160	26 412
Depreciation/ Impairment	2 781	3 004
Profit before tax	25 337	23 328
Provision for Taxation (net)	6 085	5 648
Profit after tax	19 252	17 680
Appropriations:
Opening Reserve	32 770	53 226
Re-measurement gain/loss on defined benefit plan (net of tax)	70	42
Dividend (including tax on dividend)	(28 385)	(38 178)
Balance carried to the Balance Sheet	23 707	32 770
Earnings per share
- Basic (?)	116	107
- Diluted (?)	116	107

FINANCIAL YEAR

Your Company''s Financial Year is July 1^st to June 30^th. DIVIDEND

During the Financial Year, the Board of Directors declared an interim dividend of '' 41 per Equity Share. The payment of interim dividend to the Shareholders was completed on May 27, 2022.

Your Board of Directors are pleased to recommend a final dividend of '' 11.50 per Equity Share, for the Financial Year ended June 30, 2022. This final dividend is subject to approval of the Members at the ensuing 55^th Annual General Meeting of the Company.

MANAGEMENT DISCUSSION & ANALYSISECONOMY AND MARKETS

The operating environment this year continued to be volatile, with unprecedented challenges, such as high inflation in key commodities and supply chain disruptions, among others. Despite these headwinds, the Indian economy grew by 8.7%* in the Financial year 2021-2022 as we emerged from the pandemic.

Several initiatives and measures introduced by the government, most importantly the accelerated rate of vaccinations, provided impetus and contributed towards economic recovery by aiding mobility, resumption of services and helping boost consumer confidence.

The pandemic accelerated many consumer and market trends, including the emergence of new channels, an enhanced focus on health, hygiene, and wellbeing. Digital dependency in everyday consumer lives increased substantially. However, inflation has ebbed consumption momentum, especially in rural markets.

* Source : Press release of Ministry of Finance dated August 1, 2022

OPPORTUNITIES, RISK AND OUTLOOK

The International Monetary Fund (IMF) projects Indian economy to grow by 6.8%^A in 2022. With this, India will remain to be one of the fastest growing major economies in the world in 2022-23.

However, IMF projects global inflation in 2022 at 8.8%^A. Sustained inflationary outlook, supply-chain constraints and external headwinds will continue to pose challenges. Amidst this, it will be imperative for companies to navigate through uncertainties caused by external factors and leverage the available opportunities with agility.

While short to medium term challenges exist owing to a weak global economic outlook, the long-term outlook for the consumer healthcare sector remains positive. Your Company is well positioned to sustain and improve its performance with a resilient workforce, leverage opportunities with agility, address challenges and overcome the risks.

^A Source : IMF World Economic Outlook, October 2022

FINANCIAL PERFORMANCE

In a year impacted by macroeconomic challenges, your Company recorded sales of '' 1,092 crore for the fiscal year ending June 30, 2022, up by 10% vs year ago, supported by strong established brands trusted by healthcare professionals. Profit after tax (PAT) for the Financial Year ended June 30, 2022 is '' 193 crores, up by 9%, despite unprecedented commodity inflations during this fiscal.

Your Company has registered consistent growth in revenue in a challenging environment which saw the industry facing headwinds across many categories. This has been a result of extensive efforts across all fronts to improve awareness and accessibility of our superior quality products, and better serve our customers, consumers, partners and communities.

Your Company continued its efforts to create awareness through integrated campaigns encouraging consumers to identify symptoms and seek timely treatment. Our team stepped up on scientific education efforts for healthcare practitioners through accredited symposiums, roundtables and congresses with leading medical and pharmacy associations. This year, we also launched the âP&G Health Academyâ, a virtual platform that brings together health experts from across the globe to converge, share and learn. We strengthened our go-to-market strategy through new initiatives that aim to increase reach and distribution.

FINANCIAL RATIOS
Particulars	2021-22	2020-21	Change
			(%)
Debtors (trade	15.56	16.87	-8%
receivables) turnover
Inventory turnover	9.54	8.52	12%
Interest coverage ratio	N.A.	N.A.	-
Current ratio	2.60	3.04	-14%
Debt equity ratio	N.A.	N.A.	-
Operating profit margin	23%	23%	-
Net profit margin	17%	18%	-1%
Return on Networth	41%	33%	24%

BUSINESS PERFORMANCE

Your Company is one of Indiaâs largest Vitamins, Minerals and Supplements (VMS) companies manufacturing and marketing VMS products for a healthy lifestyle and improved quality of life, including Neurobion, Livogen, SevenSeas, Evion, Polybion and Nasivion. Despite challenging circumstances during the fiscal year, your Companyâs brand franchises delivered strong results continuing to further our commitment to bringing quality and affordable vitamins, minerals and supplements to patients, consumers and customers across the country.

Neurobion delivered double digit growth fuelled by focused initiatives to build awareness on neuropathy, nerve care and the benefit of Neurobion across customer and consumer touchpoints. True to its brand promise, your Companyâs flagship brand Neurobion Forte has through its campaign, ''helping true heroes'', continued to drive importance of nerve health and help consumers fight body discomforts due to lack of Vitamin B. Recently launched variants like Neurobion Alfa & Alfa D for patients with Diabetic Neuropathy have seen prolific growth.

As a leader in the Vitamin E segment in India, Evion continued to create awareness on the benefits of

Vitamin E among Health Care Professionals (HCPs) and consumers and for the first time the brand leveraged key opinion leaders (KOLs) on digital media. Innovative campaigns helped deliver another year of growth, despite all the headwinds.

Livogen continued to be the No. 1 Doctor prescribed Iron Supplement of India. With strong campaigns with HCPs and consumers, your Brand delivered itâs best ever year of growth. Livogen went onto create a Guinness World Record in the course of taking a pledge to âHelp India Break Free from Anaemiaâ.

Polybion continued to be the No. 1 B-Complex liquid brand, strengthening its foothold with another year of strong growth behind HCP campaigns.

Nasal decongestant brand Nasivion delivered very strong growth while reaching HCPs and consumers through television and display mediums.

Overall, your Companyâs business saw very strong growth during the Financial Year 2021-22.

Your Company continued to export its products to third parties based out of Asia including Sri Lanka, Nepal, Myanmar & Maldives. In 2021-22, the Companyâs total exports saw a decline given the adverse economic situations and supply chain challenges.

RISK MANAGEMENT

Your Company has set up a Risk Management Committee and has also adopted a risk management policy. The Company''s risk management policy is in line with the parent Companyâs global guidelines and as such adequate measures have been adopted by the Company to anticipate, plan and mitigate the spectrum of risks it faces. The Companyâs Risk Management process focus on ensuring that these risks are identified on a timely basis and adequately addressed.

BUSINESS, FINANCE & OPERATIONAL RISKS

The Companyâs performance is impacted by factors such as coverage of products under price control, customer behaviour change, new demand development of the Companyâs products, impact of Covid-19 on economy, changing economic policies due to geopolitical situations, changed composition of legacy brand product sales to total turnover, employee talent development and management, employee union negotiations, trade unions, cyber security, legal & regulatory etc.

REGULATORY AND COMPLIANCE RISKS

Your Company operates within the letter and spirit of all applicable laws. General compliance with legal requirements is an important component of your Company''s Worldwide Business Conduct Manual and the same demands the following action from every employee:

â¢ To obey all legal requirements at all times;

â¢ To understand exactly what legal requirements apply to the work function;

â¢ To consult the legal personnel if there are conflicting legal requirements in different jurisdictions;

â¢ To strictly follow the directions from the legal personnel;

â¢ To address and resolve, in a timely manner, any legal compliance issues that have been identified;

â¢ Absolutely no violation of any law; and

â¢ To immediately report any instance of violations to the Legal Department.

The Companyâs business is subject to stringent compliances under various laws, such as the local pricing regulations set by the Government, FDA legislation, food safety regulations and standards, DCGI approvals and the Companyâs internal code of conduct with respect to compliances, including those applicable to interactions with healthcare professionals. Amendments to statutes and the compliance with applicable laws as well as policies may prove to be challenging and time consuming as it requires constant monitoring. To support such monitoring requirement, the Company has implemented an online tool which enables tracking of overall compliance requirements.

Workplace, Whistleblower Mechanism, Conflict of Interest, Data Privacy, Data Integrity etc. INFORMATION TECHNOLOGY RISKS

The Company uses varied IT systems and processes in its day-to-day businesses operations. There are software related precautions like handling of data integrity, access rights, virus firewalls, data protection, social media risk, etc. The Companyâs IT guidelines and processes are in place and their adherence is continuously monitored and are subject to Controls Self-Assessments and global audits at regular intervals.

INTERNAL CONTROLS AND THEIR ADEQUACY

Your Company continues to prioritize control processes that are an integral part of the organization culture. It has built strong Internal Controls Environment and Risk Assessment & Management systems. These systems enable the Company to comply with Internal Company policies, procedures, standard guidelines and local laws to help protect Companyâs assets and confidential information against financial losses and unauthorized use. The robust controls environment at your Company is efficiently managed through:

â¢ Controls Self-Assessments (CSAs):

â¢ Stewardship and Global Internal Audit (GIA):

In addition to the compliance programs, company has in place internal compliance experts to help guide our business in complying with existing laws and regulations. Reviews/Audit led by a team of independent fulltime Internal Controls experts, wherein their role is to ensure that all key processes i.e. selling, revenue, distribution, trade & marketing spends, vendor payments, and plant operations are reviewed and assessed at appropriate intervals. The observations and findings are shared with senior management for implementing quality action plans to strengthen overall controls environment in these processes. The high risks and SOX compliance areas are assessed by an independent internal audit department led by the Companyâs Global Internal Audit team. This team comprises of certified internal controls process experts who have experiences across different markets that

the company operates in. The action taken by the management to correct the processes is then reviewed and reported appropriately.

â¢ Governance Board:

The Governance Board comprises of the Managing Director, Chief Financial Officer, Chief Human Resource Officer, Supply Chain Leader, General Counsel and Sales leader. The Governance Board assesses and reviews enterprise level risks and works with process owners and functional managers to ensure that corrective action is taken, and risk is mitigated as appropriate.

BUSINESS RESPONSIBILITY REPORT

A separate report on Business Responsibility has been appended as Annexure I to this Report.

CORPORATE SOCIAL RESPONSIBILITY

As a responsible Healthcare Company, your Company continued to channelize all its Corporate Social Responsibilities (CSR) efforts towards building a Healthier India under its CSR umbrella program -âSEHATâ (meaning Health). With SEHAT, your Company aspires to make a sustainable impact to Public Health in India.

ENVIRONMENTAL SUSTAINABILITY ANDCONSERVATION OF ENERGY

Environmental sustainability is embedded in our Purpose, Values, Principles, and our business. Your Company is committed to improving lives, now and for generations to come by ensuring that our products, packaging and operations are safe for employees, consumers and the environment. We ensure by focusing on technologies, processes and improvements that matter for the environment.

Your Companyâs plant at Goa has a systematic

approach for complying with environmental regulations, such as managing wastewater, air emissions and hazardous wastes. This also includes other non-hazardous waste management at site. The plant ensured 100% compliance to wastewater via continuous online monitoring of all legal parameters and hazardous waste management via last mile disposal to government authorised waste disposal vendors. The plant employs latest technology to scrub waste out of the air emissions.

For safety of employees and community, the plant continues to invest in latest technology to make operations inside the plant safe. The plant has made significant investment on various safety upgrades across the site and the plant currently stands at zero open notifications from the state pollution control board.

A new in-house solar power plant has been commissioned at the Goa Plant site. In line with P&G Group''s global Ambition 2030 on energy efficiency and conservation, the Company has been continuously striving to meet the mighty sustainability targets. These initiatives are not only limited to generating cost benefits for the Company by optimization in the operations strategy but also contribute towards the environment being a force for good in the neighbouring community.

Additionally, the P&G Group put forth a new ambition to achieve net-zero greenhouse gas (GHG) emissions across its operations and supply chain, from raw material to retailer, by the year 2040.

The plant site targets to reduce reliance on diesel generators by installing biomass boilers to bring down the carbon footprint.

In Financial Year 2021-22, some of the key initiatives taken at the Goa plant in this direction were:

1. Installation of 2MW solar power plant at the Plant site which would help us reduce ~20% indirect Greenhouse Gas Emissions in line with our Ambition 2040 along with generating significant savings;

2. Installation and commissioning of state of art heat pump technology has enabled reduction in energy consumption in HVAC in production areas, electric heating coils have been replaced with hot water heat exchangers in AHUs and building management systems have been put in place to track, monitor, analyse and optimise overall fixed energy consumption for HVAC operations in production areas, contributing towards our net zero 2040 goals;

3. Scanning and identification of site wide

compressed air Leakages by experts, revamping air compressor operating strategies in order to optimise overall energy consumption for air compressors; and

4. Replacement of old conventional light fixtures with LED lights require less maintenance as well as save electricity.

TECHNOLOGY ABSORPTION AND RESEARCH & DEVELOPMENT

Your Company has the advantage of availing advanced technology and upgradation thereof from The Procter & Gamble Company, USA and its subsidiaries (Procter & Gamble group). This is an unmatched competitive advantage that helps the Company deliver strong business results.

Your Company benefits from the Procter & Gamble groupâs research and development efforts and activities across the globe, including India. Technology absorption and adaptation is a continuous process. The products manufactured and soLd by the Company are a result of the imported technology received on an ongoing basis. Initiatives are constantly undertaken for innovation of products, new product development, improvement of packaging, enhancement of product quality and application of best information technology to automate, simplify and generate efficiencies in various business processes.

The Company beLieves in expLoring the Latest technology from both within India and beyond to ensure the best quaLity product is made in the pLant for our consumers.

Details of the expenditure on Research & Development undertaken during the Financial Year:

('' in Lakhs)
Expenditure on R&D*	2021-22	2020-21
Capital	-	3
Recurring	562	393
Total	562	396
Total R&D expenditure as a percentage of total turnover	0.50%	0.40%

* The aforesaid R&D expense does not include people costs.

FOREIGN EXCHANGE EARNINGS & OUTGO

The details of foreign exchange earnings and outgo as required under Section 134 of the Companies Act, 2013 and Rule 8(3) of the Companies (Accounts) Rules, 2014 are mentioned below:

('' in Lakhs)
	For the Financial	For the Financial
	Year ended June	Year ended June
	30, 2022	30, 2021
Foreign Exchange earnings	12 261	13 312
Foreign Exchange outgo	12 628	14 622

RELATED PARTY TRANSACTIONS

ALL reLated party transactions are pLaced before the Audit Committee for approvaL. Prior omnibus approvaL of Audit Committee is obtained for reLated party transactions which are of repetitive nature and entered in the ordinary course of business and at armâs length.

There were no material related party transactions entered into by the Company during Financial Year 2021-22. All related party transactions entered during the Financial Year were in the ordinary course of business and on armâs Length basis. ALL reLated party transactions are subjected to independent review by chartered accountant firm. AccordingLy, the disclosure of related party transactions as required under Section 134(3)(h) of the Companies Act, 2013 in Form AOC-2 is not applicable to your Company.

PUBLIC DEPOSITS

Your Company has not accepted any public deposits during the Financial Year 2021-22.

PARTICULARS OF LOANS, AND GUARANTEES GIVEN OR INVESTMENTS MADE

Your Company has neither given any loans or guarantees nor made any investments during the Financial Year 2021-22.

DISCLOSURE AS PER SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION AND REDRESSAL) ACT, 2013

Your Company has zero tolerance towards sexual harassment at the workplace and has adopted a policy on prevention, prohibition and redressaL of sexual harassment at workplace in line with the provisions of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and RedressaL) Act, 2013 and Rules thereunder. The Company has ensured a wide dissemination of the Policy and has conducted

various awareness program at all Locations of the Company. The Company has constituted an Internal Complaints Committee. During the Financial Year, one complaint with allegations of Sexual Harassment was filed with the Company. The said complaint was addressed and closed during the Financial Year. No complaints were pending as on June 30, 2022.

DIRECTORSâ RESPONSIBILITY STATEMENT

In accordance with Section 134(5) of the Companies Act, 2013, your Directors confirm that, to the best of their knowledge and belief:

a. In the preparation of the annual accounts for the Financial year ended June 30, 2022, the applicable accounting standards have been followed along with proper explanation relating to material departures;

b. Appropriate accounting policies 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 at the end of the Financial Year and of the profit of the Company for that period;

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

d. The annual accounts have been prepared on a going concern basis;

e. Appropriate internal financial controls have been laid down and that such internal financial controls were adequate and were operating effectively; and

f. Proper systems have been devised to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

CORPORATE GOVERNANCE

A separate report on Corporate Governance along with the Auditorsâ Certificate on its compliance is annexed to this Report.

ANNUAL RETURN

The annual return as required under Section 92(3) of the Companies Act, 2013 and Rule 12 of the Companies (Management and Administration) Rules, 2014 is available on the website of the Company, which can be accessed at https://www.pghealthindia. com/investors/.

HUMAN RESOURCES

For your Company, human capital is an intangible asset which is not listed in the Company''s balance sheet. Thus, human capital is the stock of knowledge, skills, know-how and other acquired personal attributes. Human Resources (HR) department oversees workforce management, workforce planning and strategy, recruitment, employee training and development, reporting and analytics and employee safety. We continue to facilitate and speed up expansion with a clear roadmap âSMILEâ (S-Seamless Teams, M - Meaningful Work, I - Inclusion & Equality, L - Leadership & Capability Building, E-Empowered and Entrepreneurial Organization). We leverage talent exposure and growing talent from within through diverse workforce.

Your Company operates in a highly competitive environment vis-a-vis attracting the best talent for its operations and therefore the human resources management function has assumed vital importance in the Company. Your Company focuses on attracting, motivating and retaining the best talent. Its people systems like talent supply, performance management and talent development are robust and competitive. We have put in place robust HR programs to ensure that the organization is geared up to deliver the future.

Attracting & Retaining Talent: Your Company continues to be a key source for global talent and a preferred Employer of Choice for the workforce in India. We continue to drive our build from within, strategized and focus on our core campus programs, which coupled with our innovative campus branding initiative ensures we continue to be an ''Employer of Choice'' in our Core Campuses and beyond. Over the course of the last year, we have massively scaled up our lateral hiring capabilities, in line with our growing business needs. We implemented a fully face to face internship program this year for all our campus interns. P&G Group continued to retain its Top 10 Best Employer ranking in the Annual Dare2Compete Campus Survey.

Developing Talent: Our policies on leadership pipeline, talent planning, mentoring and diversity & inclusion continue to evolve and stay ahead of the times, to ensure that we attract and retain the best talent. All our new hires undergo a very comprehensive 3-day corporate on-boarding program called âGetINâ which is coupled with functional onboarding programs to ensure that they are able to make an impact and feel valued from Day 1. Building organization capability continues to be a key focus area for us and we continue to organize virtual learning sessions as part of the P&G Learning Academy offerings.

Our Companyâs performance management system is robust and strives for Impact through Growth. It clearly assesses and differentiates employees on the

basis of performance. We have established a CARE program to build the capability of our people managers. With its focus on inclusive development, P&G India was recognized by ''Working Mothers'' Magazine as one of the Best Companies for Women in India 6^th year in a row.

P&G believes in investing into genuine care of its employees and community. In this fiscal year, many initiatives were undertaken towards making Lives of our employees healthier and happier. Your Company''s plant at Goa has best in class occupational health cLinic to take care of any heaLth issue immediateLy at the pLant. The Company has aLso invested into proactive mental and physical healthcare with best in class health check-ups, access to best mental health experts and tie ups with best hospitals in the state to take care of any heaLth escaLations. In the last fiscal year, the Company enabled nearly 100% of employees to be fully vaccinated against Covid-19 and aLso worked with other service provider partners to get their employees also vaccinated.

The number of employees as on June 30, 2022 was 1,368.

The statement of discLosure of remuneration under Section 197 of the Companies Act, 2013 and Rule 5 (1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is appended as Annexure III to this Report.

The information as per Rule 5 (2) of the Companies (Appointment and Remuneration of Managerial PersonneL) RuLes, 2014 forms part of this Report. As per the provisions of first proviso to Section 136(1) of the Companies Act, 2013, the Report and Financial Statements are being sent to the Members of the Company excLuding the statement of particuLars of empLoyees under RuLe 5 (2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014. Any Member interested in obtaining a copy of the said statement may write to the Company Secretary at investorgrievance.im@ pg.com.

DIRECTORS AND KEY MANAGERIAL PERSONNEL

Ms. Zeal Shah was appointed as Compliance Officer of the Company effective July 1, 2021 and as the Company Secretary of the Company effective August 26, 2021.

Mr. Sujay Wasan, Non-Executive Director resigned from the Board effective September 23, 2021. The Board pLaces on record its appreciation for contribution of Mr. Wasan during his tenure of directorship on the Board of the Company.

The Board of Directors, at its meeting heLd on August 26, 2021 on the recommendation of

the Nomination & Remuneration Committee, have appointed Dr. Elizabeth Desmond as Non-

Executive Director on the Board effective September 24, 2021. Further, the Shareholders of the Company approved such appointment at the 54^th AnnuaL GeneraL Meeting.

On the recommendation of the Nomination & Remuneration Committee, the Board at its meeting held on November 9, 2021 appointed Mr. S. Madhavan as a Non-Executive Independent Director of the Company for a period of five years, effective November 15, 2021. Requisite approvaL for his appointment was obtained from the Shareholders via postal ballot on December 29, 2021.

Mr. Amit Gupta, Executive Director and Mr. Aalok Agrawal, Non-Executive Director, retire by rotation and being eligible, offer themselves for re-appointment at the ensuing 55^th Annual General Meeting.

Brief profiles and details of the Directorships of Directors proposed to be re-appointed as required under the SEBI (Listing Obligations and Disclosure Requirements) ReguLations, 2015 are contained in the Notice convening the ensuing 55^th AnnuaL GeneraL Meeting of the Company.

The Independent Directors of your Company have given decLarations to your Company stating that they meet the criteria of independence as mentioned under the Companies Act, 2013 and the SEBI (Listing Obligations and Disclosure Requirements) ReguLations, 2015.

The Board is of the opinion that aLL the Independent Directors of the Company possess integrity, have relevant expertise and experience and fulfill the conditions specified under the Companies Act, 2013 and the SEBI (Listing Obligations and DiscLosure Requirements) ReguLations, 2015. DetaiLs of the famiLiarization programme and annuaL Board evaluation process for Directors have been provided under Corporate Governance section of the report.

None of the Non-Executive Directors serve as an Independent Director on more than seven Listed Companies and none of the Executive Directors serve as an Independent Director on any listed Company.

During the FinanciaL Year, none of the Directors and Key ManageriaL PersonneL of the Company had any materiaL pecuniary reLationship or transactions with the Company.

NUMBER OF MEETINGS OF THE BOARD

Four (4) meetings of the Board were held during the Financial Year 2021-22. For details of the meetings of the Board and its Committees, please refer to the Corporate Governance section of the Report.

POLICIES

Your Company has adopted various poLicies incLuding poLicies on reLated party transactions, corporate social responsibility, vigil mechanism, nomination

and remuneration, materiality of events and dividend distribution, which are available on the website of the Company at https://www.pghealthindia.com/ investors/.

AUDITORS

M/s. Haribhakti & Co. LLP, Chartered Accountants (ICAI Firm Registration No.: 103523W/W100048), were appointed as statutory auditors of the Company, at the 50^th Annual General Meeting held on May 31, 2017, for a term of 5 consecutive years upto ensuing 55^thAnnual General Meeting of Company. It is proposed to re-appoint M/s. Haribhakti & Co. LLP, Chartered Accountants as Statutory Auditors of your Company to hold office from the conclusion of the ensuing 55^th Annual General Meeting until the conclusion of the 60^th Annual General Meeting. The Audit Committee and the Board of Directors of the Company recommend the said re-appointment to the Shareholders for their approval. Appropriate resolution for the said re-appointment is being moved at the ensuing Annual General Meeting.

The Report given by the Statutory Auditors on the financial statements of the Company for the Financial Year ended June 30, 2022 is part of the Report. There have been no qualification, reservation or adverse remark given by the Auditors in their Report.

SECRETARIAL AUDIT

Pursuant to the provisions of Section 204 of the Companies Act, 2013 and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, Secretarial Audit has been carried out by Dholakia & Associates LLP, Company Secretaries, for the Financial Year ended June 30, 2022. There were no qualifications, reservation or adverse remarks given by Secretarial Auditors of the Company. The Secretarial Audit report has been appended as Annexure IV.

SECRETARIAL STANDARDS

During the Financial Year, your Company has complied with the mandatory Secretarial Standards issued by the Institute of Company Secretaries of India.

COST AUDIT

Financial Year 2021-22. The Board of Directors has re-appointed M/s. Joshi Apte & Associates, Cost Accountants for the Financial Year 2022-23.

A resolution for ratification of the remuneration payable to the Cost Auditor for the Financial Year 2022-23 is included in the Notice of the ensuing 55^th Annual General Meeting.

MATERIAL ORDERS PASSED BY THE REGULATORS AND COURTS

During the Financial Year under review, no regulator or court has passed any significant and/or material orders impacting the going concern status of the Company and its future operations.

VIGIL MECHANISM AND WHISTLE BLOWER POLICY

In terms of the provisions of Section 177(9) of the Companies Act, 2013 and the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Company has implemented a vigil mechanism. The Company provides protection to employees and business associates reporting unethical practices and encourages employees to report genuine concerns or grievances such as unethical behaviour, actual or suspected fraud or violation of the Companyâs code of conduct or ethics policy. The Audit Committee oversees the vigil mechanism. Whistleblower complaints and their redressal are discussed at each Audit Committee meeting of the Company. No employee has been denied access to the Audit Committee. The Vigil Mechanism is available on the Companyâs website at https://www.pghealthindia. com/investors/.

ACKNOWLEDGEMENT

Your Directors place on record its deep appreciation for the co-operation and support of the Government authorities, healthcare professionals, distributors, wholesalers, retailers, suppliers, clearing and forwarding agents, business associates, bankers, consumers, employees and shareholders and look forward to their continued support on the journey ahead.

On behalf of the Board of Directors

Mumbai S. N. Talwar

August 29, 2022 Chairman

Dec 31, 2017

The are pleased to present the report on our business and operations for the year ended December 31, 2017.

FINANCIAL HIGHLIGHTS:

The Financial performance of your Company for the year ended December 31, 2017 is summarized below:

(Rupees million)

Particulars	2017	2016*
Income from Operations	11,194.5	10,297.7
Other Income	239.7	244.1
Profit before Interest,	1,958.2	1,484.8
Depreciation and Tax
Depreciation/ Impairment	436.3	333.0
Provision for Taxation (net)	582.8	360.5
Profit after tax	939.1	791.3
Profit available for	3,856.0	3,155.7
appropriations
Appropriations:
Transfer to General Reserve	-	75.9
Re-measurement gain/loss on	25.0	13.0
defined benefit plan (net of tax)
Dividend (including Tax on	219.8	150.0
Dividend)
Balance carried to the Balance	3,611.2	2,916.8
Sheet
EPS
- Basic (Rs.)	56.6	47.7
- Diluted (Rs.)	56.6	47.7

* Prior year figures have undergone changes in line with the Indian Accounting Standards (âInd ASâ) applicable to the company with effect from January 1, 2017

COMPANYâS OPERATIONAL PERFORMANCE:

The Company continued to operate in two business segments, i.e. Pharmaceuticals and Chemicals. Detailed operational working of your Company is provided in the Management Discussion and Analysis Report forming part of this report as Annexure I. During the financial year ended December 31, 2017, your Company achieved a turnover of Rs.10,885.7 million as against a turnover of Rs. 10,017.7 million in the previous year, registering a growth of 8.7%. During the year under report, the Pharmaceutical segment showed an increase in turnover by 7.5%, the Chemical segment registered an increase of 12.7% as compared to the respective segment turnover achieved during the previous financial year. After providing for taxes, net profit was Rs. 939.1 million higher by 18.7% over the previous year.

The export turnover of your Company during the year 2017 was Rs.995.4 million as against Rs.1008.1 million achieved in the previous year.

Pursuant to the notification issued by the Ministry of Corporate Affairs your Company has adopted Indian Accounting Standards (âInd ASâ) notified under the Companies (Indian Accounting Standards) Rules with effect from January 1, 2017.

CONSUMER HEALTH DIVISION:

Merck KGaA, Germany, the ultimate holding Company of the Company, has announced that it is preparing for strategic options for its Consumer Health business globally including a potential full or partial sale of the business as well as strategic partnerships. This strategic initiative would involve the Companyâs Consumer Health business in India as well, the implementation of potential measures and their specific design are subject to further analysis and decision making by competent bodies.

DIVIDEND:

Your Board of Directors has recommended a dividend of Rs. 15/- (Rupees Fifteen Only) per equity share for the year ended December 31, 2017. This is subject to approval of the Members at forthcoming Annual General Meeting.

PUBLIC DEPOSITS:

Your Company has not accepted any public deposits from the public or the Members during the year 2017 and no amount on account of principal or interest on public deposits was outstanding as on the date of this Balance Sheet.

CORPORATE GOVERNANCE:

A Report on the compliance of Corporate Governance Code along with certificate from Secretarial Auditor thereon, as stipulated under Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, is annexed at Annexure II to this Report.

CORPORATE SOCIAL RESPONSIBILITY:

Your Company has been carrying out CSR activities since many years. It has established, nurtured and promoted various Non-Profit Organizations primarily having focus on Education, Health care and Environment.

A brief outline of the Corporate Social Responsibility (CSR) Policy of the Company and the initiatives undertaken by the Company on CSR activities during the year are set out in Annexure IV of this report in the format prescribed in the Companies (Corporate Social Responsibility Policy) Rules, 2014. In compliance with requirements of Section 135 of the Companies Act, 2013, the Company has laid down a CSR Policy which is published on its website www.merck.co.in

DIRECTORSâ RESPONSIBILITY STATEMENT:

In accordance with Section 134(5) of the Companies Act, 2013 (the Act), your Directors confirm that, to the best of their knowledge and belief that:

(a) In the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures.

(b) Such accounting policies have been selected 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 of the Company for that period.

(c) Proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities.

(d) The annual accounts have been prepared on a going concern basis.

(e) The directors have laid down internal financial controls to be followed by the company and that such internal financial controls are adequate and were operating effectively.

(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.

DIRECTORS:

Resignation of Mr. Anand Nambiar, Managing Director:

Mr. Anand Nambiar, (DIN 02006594) the Managing Director of the Company, has been offered a position as Head of Integrated Circuit Material Business Unit of Merck based out of Darmstadt, Germany. He has accepted the offer and, accordingly, he will demit Office of the director and Managing Director of the Company effective from close of business on March 31, 2018. Your Board placed on record its deep appreciation for the excellent contributions made by Mr. Anand Nambiar as the Managing Director of the Company.

Appointment of Mr. Milind Thatte, as Additional Director and Managing Director:

Board of Directors at their meeting held on March 27, 2018, on the recommendations of the Nomination and Remuneration Committee, has resolved to appoint Mr. Milind Thatte, General Manager - Healthcare, as an additional director and Managing Director of the Company in place of Mr. Anand Nambiar, for a term of 5 years effective from April 01, 2018. The required resolution for approval of appointment of Mr. Milind Thatte as Managing Director of the Company is placed before the ensuing Annual General Meeting of the shareholders of the Company.

Director liable to retire by rotation:

Mr. N. Krishnan, (DIN 01027659) Executive Director, Finance will retire by rotation at the forthcoming Annual General Meeting of the Company and being eligible offers himself for re-appointment as Director of the Company. The Board recommends his reappointment.

Independent Directors/Non- Executive Directors:

During the year, non-executive directors of the Company had no pecuniary relationship or transactions with the Company.

Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, is annexed at Annexure II to this Report.

CORPORATE SOCIAL RESPONSIBILITY:

DIRECTORSâ RESPONSIBILITY STATEMENT:

In accordance with Section 134(5) of the Companies Act, 2013 (the Act), your Directors confirm that, to the best of their knowledge and belief that:

(a) In the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures.

(d) The annual accounts have been prepared on a going concern basis.

(e) The directors have laid down internal financial controls to be followed by the company and that such internal financial controls are adequate and were operating effectively.

(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.

DIRECTORS:

Resignation of Mr. Anand Nambiar, Managing Director:

Appointment of Mr. Milind Thatte, as Additional Director and Managing Director:

Director liable to retire by rotation:

Independent Directors/Non- Executive Directors:

During the year, non-executive directors of the Company had no pecuniary relationship or transactions with the Company.

Mr. S.N. Talwar, (DIN 00001456) Mr. H.C.H. Bhabha [DIN 00286072] and Mrs. Rani Ajit Jadhav [DIN 07070938] are the Independent Directors on the Board of the Company, they have confirmed to the Company that they meet the criteria of independence as prescribed under Section149(6) of the Act.

None of the Non-Executive Directors serve as an Independent Directors on more than seven listed Companies and none of the Executive Directors serve as an Independent Director on any listed Company.

NUMBER OF MEETINGS OF THE BOARD:

Five meetings of the board were held during the year. For details of the meetings of the board and its committees, please refer to the corporate governance report, which forms part of this report.

BOARD PERFORMANCE EVALUATION:

Pursuant to the provisions of the Companies Act, 2013 and Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 the Board and Nomination & Remuneration Committee have adopted and reviewed the formal mechanism for evaluating its performance and effectiveness as well as that of its Committees and Individual Directors, including the Chairman of the Board. During the year under report the Board carried out an annual evaluation of performance of the Board, its committees and individual performance of directors.

For Board and its Committees, the performance evaluation was carried out through a structured evaluation process covering various aspects of the Boardâs functioning such as composition of the Board & Committees, experience & competencies, performance of specific duties & obligations, governance issues, etc. For evaluation of performance of individual directors, non-executive and executive directors, response was solicited from each director by way of a questionnaire on various parameters and traits of the directors, level of participation, including their attendance and contribution in the Board and Committee meetings, domain knowledge, accessibility to management and others, objectivity in their decision making. Chief Financial Officer, who is also an executive director was evaluated on additional parameters including financial planning, cost effectiveness, tax planning and risk mitigation measures taken. Performance of the Chairman of the Board was separately evaluated on additional parameters including his ability to manage the Board, ability to deal with conflict, domain knowledge, etc. Each director also self-evaluated himself / herself. Individual response of each director was collated by Company Secretary and discussed with the Board and Nomination and Remuneration Committee. In conclusion, the Board and Nomination and Remuneration committee was satisfied with the performance and functioning of the Board, its Committees and individual members.

AUDITORS AND THEIR REPORT:

Auditors in their report and the Company Secretary in practice in their secretarial audit report have not made any adverse remark, qualification or reservation, in their respective reports.

The shareholders at their 50^th Annual General Meeting (AGM) held on May 31, 2017 had approved the appointment of M/s. Haribhakti & Co. LLP, Chartered Accountants (Firm Registration No.: 103523W/W-100048), as statutory auditors of the Company, to hold office from the conclusion of the 50^th AGM up to the conclusion of the 55^th AGM to be held for the year 2022. In terms of first proviso of Section 139 of the Companies Act, 2013, the appointment of the auditors is subject to ratification by the shareholders at every subsequent AGM. Accordingly, the resolution for ratification of appointment of M/s. Haribhakti & Co. LLP, Chartered Accountants, as statutory auditors of the Company from the conclusion of the 51^st AGM until the conclusion of the 52^nd AGM, is being placed before the shareholders at the ensuing AGM. The Board has recommended the ratification of appointment of M/s. Haribhakti & Co. LLP to the shareholders.

COST AUDIT:

Pursuant to Section 148 of the Companies Act, 2013 read with the Companies (Cost Records and Audit) Amendment Rules, 2014, the Central Government has prescribed cost audit of the accounts to be maintained by your Company. To conduct the cost audit, M/s. Joshi Apte & Associates, Cost Accountants, has been re-appointed as Cost Auditors of your Company for the year 2018 in the meeting of Board of Directors held on Thursday, February 22, 2018, subject to the approval of the Central Government, if any, required. The Cost Audit Report in XBRL format for the financial year ended December 31, 2017 will be filed before the due date.

A resolution for ratification of the remuneration payable to the Cost Auditor is included in the Notice of the Annual General Meeting for seeking approval of Members.

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, Secretarial Audit has been carried out by M/s. Kanj & Associates, Practicing Company Secretaries for the year ended December 31, 2017and their report is annexed at Annexure III.

INTERNAL CONTROLS AND THEIR ADEQUECY:

The Board of Directors of the Company is responsible for ensuring that Internal Financial Controls have been established in the Company and that such controls are adequate and operating effectively.

The Company has laid down certain guidelines and processes which enables implementation of appropriate internal financial controls across the organisation. Such internal financial controls encompass policies and procedures adopted by the Company for ensuring orderly and efficient conduct of business, including adherence to its policies, safeguarding of its assets, prevention and detection of frauds and errors, the accuracy and completeness of accounting records and the timely preparation of reliable financial information.

Internal auditors in their review report to the audit committee has confirmed that basis their review no significant deficiencies were established in design and operating effectiveness of internal financial controls. The Statutory auditors in their audit report has opined that these controls are operating effectively.

The Internal Audit team develops an annual audit plan based on the risk profile of the business activities. The annual internal audit plan is approved by the Audit Committee, which also reviews compliance to the plan. The Internal Audit team monitors and evaluates the efficacy and adequacy of internal control systems in the Company, its compliance with operating systems, accounting procedures and policies at all locations of the Company. Based on the report of internal audit function, process owners undertake corrective action(s) in their respective area(s) and thereby strengthen the controls. Significant audit observations and corrective action(s) thereon are presented to the Audit Committee.

The Audit Committee reviews the reports submitted by the Internal Auditors in each of its meeting. Also, the Audit Committee at frequent intervals has independent sessions with the external auditor and the Management to discuss the adequacy and effectiveness of internal financial controls.

The Board has implemented systems to ensure compliance of all applicable laws, these systems were effective and operative. At every quarterly interval the Managing Director and the Company Secretary place before the Board a certificate certifying compliance of laws and regulations as applicable to the business and operations of the Company after obtaining confirmation from all business unit and functional heads responsible for compliance of such applicable laws and regulations. The Company Secretary is responsible for compliance of corporate laws including Companies Act 2013, SEBI Act and rules/guidelines and listing rules applicable to the Company.

During the year no frauds were reported by auditors in terms of section 143 (12) of the Act.

AUDIT COMMITTEE RECOMMENDATIONS:

During the year all recommendations of the Audit Committee were accepted by the Board. The Composition, details of its meetings of the Audit Committee are fully described in the Corporate Governance Report, which form part of this report.

RISK MANAGEMENT:

The Company has well defined process to ensure the risks are identified and mitigation steps are put in place. The Companyâs Risk Management process focus on ensuring that these risks are identified on a timely basis and reasonably addressed.

The Board of the Company has formed a risk management committee to frame, implement and monitor the risk mitigation plan for the Company. The committee is responsible for identifying the key risk areas and reviewing periodically the risk management plan and ensuring its effectiveness. The audit committee has additional oversight in the area of financial risks and controls. Major risks are identified by the businesses and functions and these are systematically addressed through mitigating actions on continuing basis.

The development and implementation of risk management policy has been covered in the management discussion and analysis, which forms part of this report.

PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS:

The particulars of loans, guarantees and investments have been disclosed in the financial statements.

RELATED PARTY TRANSACTIONS:

All Related party transactions that were entered into during the financial year were on armâs length basis and were in the ordinary course of business. There were no materially significant related party transactions made by the Company which may have potential conflict with the interest of the Company.

All related party transactions are placed before the Audit Committee for approval. Prior approval of the Audit Committee is obtained for the transactions which are planned and/ or repetitive in nature and omnibus approvals are taken within a criteria/ limit laid down for any unforeseen transactions.

The details of the material related party transactions as required under Section 134(3)(h) r/w Rule 8 of the Companies (Accounts) Rules, 2014, is attached as Annexure V.

MATERIAL ORDERS PASSED BY THE REGULATORS AND COURTS:

During the year under review no regulator or court has passed any significant and material orders impacting the going concern status of the Company and its future operations except in one show cause notice received from National Pharmaceutical Pricing Authority or NPPA, which was considered material by the Company and necessary disclosure to stock exchange was made.

During the year 2016, NPPA in its show cause notice alleged that the Company has overcharged price for one of its drugs during the period from Jan 2006 to June 2009. It demanded a sum of Rs.116.8 million plus interest Rs.157.8 million on this occasion. The Company has challenged the said orders by way of a writ petition before Honâble Delhi High Court. Currently the matter is pending with the Court. The Company has been legally advised it has a good defendable case on merits.

VIGIL MECHANISIM AND WHISTLE BLOWER POLICY:

In terms of the provisions of Section 177(9) of the Companies Act, 2013 and the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Company has implemented a vigil mechanism which include implementation of the whistleblower policy. The purpose of the policy is to enable employees to raise concerns about unacceptable improper practices and/ or any unethical practices in the organisation. No employee has been denied access to the chairman of the audit committee. The Company in conjunction with the Corporate Compliance and Investigation policy of its ultimate holding Company has informed all its employees that any non-compliant behavior of directors or employees including the non-compliance of its code of conduct shall be brought to the notice of the management for investigation and necessary action, using the speak-up line number provided therein. The Company provides protection to employees and business associates reporting unethical practices and encourages employees to report the incidence of fraud. Whistleblower complaints and their redressal are discussed at each audit committee meeting of the Company. The Indian addendum to the global policy is available on the Companyâs website www.merck.co.in.

NOMINATION AND REMUNERATION POLICY:

Pursuant to the provisions of Section 134(3)(e), 178 of the Companies Act, 2013 and Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Company adopted a Nomination and Remuneration Policy. The Nomination and Remuneration Committee (NRC) is responsible for developing competency requirements for the Board, based on the industry and strategy of the Company. The NRC makes recommendations to the Board in regard to appointment of new directors. The Companyâs Remuneration Policy provides a broad framework to support the implementation of the Merck Total Rewards Philosophy, specifically, it is intended to provide more detailed clarification on the guiding principles so as to support its implementation; guidance as to design of reward programs; and explanation as to roles, responsibilities and governance for program design, administration and communication. The performance linked bonus is driven by the outcome of the performance appraisal process and the performance of the Company. The remuneration of Directors and employees is a fair mix of fixed and incentive pay reflecting short and long-term performance objectives appropriate to the working of the Company.

PARTICULARS OF EMPLOYEES:

The information as required under Section 197 of the Act read with rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is given below:

(a) The ratio of the remuneration of each director to the median remuneration of the employees of the Company for the financial year:

Non- Executive Directors	Ratio of median remuneration
Mr. S.N. Talwar	2.23
Mr. HCH Bhabha	1.67
Mrs. Rani Ajit Jadhav	1.42
Ms. Zoe Tang	-
Executive Directors
Mr. Anand Nambiar	96.37
Mr. N. Krishnan	30.74

Note - Median means the numerical value separating the higher half of a population from the lower half and the median of a finite list of number may be found by arranging all the observations from lowest value to highest value and picking the middle one.

(b) The percentage increase in remuneration of each director, chief executive officer, chief financial officer, company secretary in the financial year:

Director, Chief Financial Officer & Company Secretary	% Increase in remuneration during the financial year
Mr. Suresh Talwar (Chairman and Independent Director)	10
Mr. H. C H Bhabha (Independent Director)	10
Mrs. Rani Ajit Jadhav (Independent Director)	27.27
Mr. Anand Nambiar (Managing Director)	19.24
Mr. N. Krishnan (Executive Director and Chief Financial Officer)	10.95
Mr. Vikas Gupta (General Counsel & Company Secretary)	9.5

(c) The percentage increase in the median remuneration of employees in the financial year: 9%

(d) The number of permanent employees on the rolls of Company: 1544 as on December 31, 2017

(e) Average percentile increase already made in the salaries of employees other than the managerial personnel in the last financial year and its comparison with the percentile increase in the managerial remuneration and justification thereof and point out if there are any exceptional circumstances for increase in the managerial remuneration

Average increase in the remuneration of salaries of the employees is based on a detailed performance evaluation which inter-alia include their performance viz-a-vis the objectives achieved by them during the year. The overall financial performance of the Company is also taken into consideration while arriving at the average percentage increase of the salaries of employees. Salaries of employees is adjusted periodically against the industry benchmark. During the year under review average increase in the salaries of employees was around 11%.

(f) Key Parameters for any variable component of remuneration availed by directors:

Executive Directors are entitled for payment of bonus which is dependent upon the Companyâs overall performance and their individual performance rating. Additionally, non-executive independent directors are entitled for payment of commission which is determined based on the time spent by the Non-Executive Directors at the Audit Committee Meetings, Board Meetings, other Committee Meetings and contribution made by them from time to time on strategic matters.

(g) Affirmation that the remuneration is as per the remuneration policy of the Company:

It is hereby confirmed that the remuneration paid during the year is as per the Remuneration Policy of the Company.

The statement containing particular of employees 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) Rules, 2014, is provided in a separate annexure forming part of this report. Considering the first proviso of Section 136 (1) of the Companies Act, the report and the accounts are being sent to the members excluding the aforesaid annexure. The said annexure is open for inspection at the Registered Office of the Company on any working day upto the date of 51^st Annual General Meeting. Any shareholder interested in obtaining a copy of the same may write to the Company Secretary.

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

The particulars as prescribed under Section 134(3)(m) of the Act, read with Rule 8 of the Companies (Accounts) Rules, 2014, are set out in Annexure VI.

EXTRACT OF ANNUAL RETURN:

Extract of Annual Return in the prescribed format under the Companies Act, 2013 forms part of this report and is annexed at Annexure VII.

DISCLOSURE AS PER SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION AND REDRESSAL) ACT, 2013:

The Company has zero tolerance towards sexual harassment at the workplace and has adopted a policy on prevention, prohibition and redressal of sexual harassment at workplace in line with the provisions of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 and Rules thereunder. The Company has ensured a wide dissemination of the Policy and have conducted various awareness program at all locations of the Company.

During the year ending December 31, 2017, the Company has not received any new complaint of sexual harassment. During the year under review the investigation into the sexual harassment complaint received in 2016 was completed and necessary disciplinary action was taken against the erring employee.

GREEN INITIATIVE:

Your Company has taken the initiative of going green and minimizing the impact on the environment. The Company has been circulating the copy of the Annual Report in electronic format to all those Members whose email address is available with the Company. Your Company would encourage other Members also to register themselves for receiving Annual Report in electronic form. Kindly refer the contact details and ways to register your email address given under the heading âRequest to the Membersâ at the end of the notice of the Annual General Meeting.

ACKNOWLEDGEMENTS:

Your Directors thank and express their gratitude to the Companyâs employees, customers, vendors, investors, and institutions for their continued support to the Company. Your Directors also thank the State Government and concerned Government Departments/ Agencies for their co-operation.

Your Directors also register sincere thanks and infinite appreciations to the contributions made by every Member of the Merck family globally.

On behalf of the Board of Directors

S. N. Talwar

Chairman

Mumbai, March 27, 2018

Dec 31, 2016

We are pleased to present the report on our business and operations for the year ended December 31, 2016.

FINANCIAL HIGHLIGHTS:

The Financial performance of your Company for the year ended December 31, 2016 is summarized below:

(Rupees million)

Particulars	2016	2015
Income from Operations	9,963.3	9395.0
Other Income	242.4	233.1
Profit before Interest,	1,435.2	1067.5
Depreciation and Tax
Depreciation/ Impairment	333.0	234.2
Provision for Taxation (net)	343.3	297.7
Profit after tax	758.9	535.6
Profit available for	3,028.9	2473.4
appropriations
Appropriations:
Transfer to General Reserve	75.9	53.6
Dividend (including Tax on
Dividend)	219.8	149.8
Balance carried to the	2,733.2	2270.0
Balance Sheet
EPS
- Basic (Rs.)	45.7	32.3
- Diluted (Rs.)	45.7	32.3

COMPANY''S OPERATIONAL PERFORMANCE:

The Company continues to operate in two business segments, i.e. Pharmaceuticals and chemicals. Detailed operational working of your Company is provided in the Management Discussion and Analysis Report forming part of this report (as Annexure I.) During the financial year ended December 31, 2016, your Company achieved a turnover of Rs. 9,683.3 million as against a turnover of Rs. 9,083.2 million in the previous year, registering a growth of 6.6%. During the year under review, the Pharmaceutical segment showed an increase in turnover of 15%, the Chemical segment registered a decrease of 15.7% in comparison with the respective segment turnover achieved during the previous financial year. The profit after tax increased by 41.7% during the year 2016 over previous financial year, 2015.

The export turnover of your Company during the year 2016 was Rs. 869.4 million as against Rs.802.0 million achieved in the previous year.

TRANSFER TO RESERVES:

The Company proposes to transfer Rs. 75.9 million to the general reserve out of the amount available for appropriation and an amount of Rs. 2,733.2 million is proposed to be retained in the profit and loss account.

DIVIDEND:

Your Board of Directors has recommended a dividend of Rs. 11/- (Rupees Eleven Only) per equity share for the year ended December 31, 2016. This is subject to approval of the Members at the forthcoming Annual General Meeting.

FIXED DEPOSITS:

Your Company has not accepted any deposits from the public or the Members during the year 2016 and no amount on account of principal or interest on public deposits was outstanding as on the date of the balance sheet.

CORPORATE GOVERNANCE:

CORPORATE SOCIAL RESPONSIBILITY:

A brief outline of the Corporate Social Responsibility (CSR) Policy of the Company and the initiatives undertaken by the Company on CSR activities during the year are set out in Annexure IV of this report in the format prescribed in the Companies (Corporate Social Responsibility Policy) Rules, 2014. The Corporate Social Responsibility Policy is available on the website of the Company, www.merck.co.in

DIRECTORS'' RESPONSIBILITY STATEMENT:

In accordance with Section 134(5) of the Companies Act, 2013, your Directors confirm that, to the best of their knowledge and belief that:

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

(b) such accounting policies have been selected 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 of the Company for that period.

(c) proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities.

(d) the annual accounts had been prepared on a going concern basis.

(e) the directors have laid down internal financial controls to be followed by the company and that such internal financial controls are adequate and were operating effectively.

(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.

DIRECTORS:

Director liable to retire by rotation:

Mr. N. Krishnan, [DIN 01027659] Executive Director, Finance will retire by rotation at the forthcoming Annual General Meeting of the Company and being eligible offers himself for re-appointment as Director of the Company. The Board recommends his reappointment.

Resignations:

Pursuant to an internal organizational restructuring, Mr. Brijesh Kapil, [DIN 06949048] Executive Director, Consumer Health Care and Mr. Ali Slieman, [DIN 07055130] Executive Director, Bio Pharma resigned from the Board of Directors of the Company effective from October 04, 2016.

Mr. Bradley Simpson [DIN 07187375] resigned from the Board of Directors effective October 04, 2016 since his nomination on the Board of the Company was withdrawn by Merck KGaA. Hence, he ceased to be a director w.e.f. October 04, 2016.

The Directors place on record their appreciation for the valuable contributions made by Mr. Brijesh Kapil, Mr. Ali Slieman and Mr. Bradley Simpson during their tenure as members of the Board of the Company.

Appointments:

Ms. Zoe Tang (aka Mei Lin Tang) [DIN 07658011] was nominated as Non-Executive Director by Merck KGaA in place of Mr. Bradley Simpson. Her appointment as member of the Board became effective from December 23, 2016.

Independent Directors/Non- Executive Directors:

During the year, the non-executive directors of the Company had no pecuniary relationship or transactions with the Company.

Mr. S.N. Talwar, Mr. H.C.H. Bhabha and Mrs. Rani Ajit Jadhav are the Independent Directors on the Board of the Company, they have confirmed to the Company that they meet the criteria of independence as prescribed under Section 149(6) of the Act.

None of the Non-Executive Directors serve as an Independent Directors on more than seven listed Companies and none of the Executive Directors serve as an Independent Director on any other listed Company.

NUMBER OF MEETINGS OF THE BOARD:

Five meetings of the board were held during the year. For details of the meetings of the board and its committees, please refer to the corporate governance report, which forms part of this report.

BOARD EVALUATION:

Pursuant to the provisions of the Companies Act,

2013 and Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 the Board and Nomination & Remuneration Committee have adopted and reviewed the formal mechanism for evaluating its performance and effectiveness as well as that of its Committees and Individual Directors, including the Chairman of the Board. The Board carried out an annual evaluation of performance of the Board, its committees and individual performance of directors.

For Board and its Committees, the exercise was carried out through a structured evaluation process covering various aspects of the Boards functioning such as composition of the Board & Committees, experience & competencies, performance of specific duties & obligations, governance issues, etc. For evaluation of performance of individual directors, non-executive and executive directors, responses were solicited from each director by way of a questionnaire on various parameters and traits of the directors, including their attendance and contribution in the Board and Committee meetings, domain knowledge, accessibility to management and objectivity in their decision making. Chief financial officer, who is also an executive director was evaluated on additional parameters including financial planning, cost effectiveness, tax planning and risk mitigation measures. Performance of the Chairman of the Board was separately evaluated on additional parameters including his ability to manage the Board, ability to deal with conflict, domain knowledge, etc. Each director also self-evaluated. Individual response of each director was collated by Company Secretary and discussed with the Board and Nomination and Remuneration Committee. On the basis of the individual response received and its own evaluation, the Board evaluated the performance and functioning of the Board, committees and nonexecutive directors. Nomination and Remuneration Committee evaluated the performance of executive directors. During the evaluation the directors whose performance was being evaluated abstained from the meeting. In conclusion, the Board and Nomination and Remuneration committee was satisfied with the performance and functioning of the Board, its Committees and individual members. Ms. Zoe Tang, who joined the Board of the Company only a week before the close of the financial year, did not get any chance to meet and interact with the board members. As such the Board deferred her evaluation to the next performance evaluation cycle.

AUDITORS AND THEIR REPORT:

Auditors in their report and Company Secretary in Practice in their secretarial audit report have not made any adverse remark, qualification or reservations.

In terms of the provisions of the section 139 (2) of the Companies Act 2013 and applicable rules, M/s B.S.R. & Co LLP, Chartered Accountant will retire as auditor of the Company at the conclusion of the ensuing Annual General Meeting of the Company.

The Board of Directors on the recommendation of the audit committee have recommended to the shareholders appointment of M/s Haribhakti & Co. LLP Firm Registration No. 103523W/W100048 as Statutory Auditor of the Company for a period of 5 years commencing from the conclusion of the ensuing annual general meeting. If appointed by the shareholders they will hold office until the conclusion of 55^th Annual General Meeting of the Company.

The Board places on record its appreciation for the contribution of M/s B.S.R. & Company. LLP Chartered Accountant during the tenure as the Statutory Auditorâs of the company.

COST AUDIT:

Pursuant to Section 148 of the Companies Act, 2013 read with the Companies (Cost Records and Audit) Amendment Rules, 2014, the Central Government has prescribed cost audit of the accounts to be maintained by your Company. To conduct the cost audit, M/s. Joshi Apte & Associates, Cost Accountants, has been re-appointed as Cost Auditors of your Company for the year 2017 in the meeting of Board of Directors held on Monday, February 27, 2017, subject to the approval of the Central Government, if any, required. The Cost Audit Report in XBRL format for the financial year ended December 31, 2016 was filed within due date.

A resolution for ratification of the remuneration payable to the Cost Auditor is included in the Notice of the Annual General Meeting for seeking approval of Members.

SECRETARIAL AUDITORS 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, Secretarial Audit has been carried out by M/s. Kanj & Associates, Practicing Company Secretary for the year ended December 31, 2016 and their report is annexed as Annexure III.

INTERNAL CONTROLS AND THEIR ADEQUACY:

The Board of Directors of the Company are responsible for ensuring that Internal Financial Controls have been laid down in the Company and such controls are adequate and operating effectively.

The Company has Internal Financial Control framework commensuration with the size, scale and complexity of its operations. The framework has been designed to provide reasonable assurance with respect to recording and providing reliable financial and operational information, complying with applicable laws, safeguarding assets from unauthorized use, executing transactions with proper authorization and ensuring compliance with corporate policies. The controls, based on the prevailing business conditions and processes have been tested during the year and no reportable material weakness in the design or effectiveness was observed. The framework on Internal Financial Controls over Financial Reporting has been reviewed by the internal and Statutory auditors.

The Internal Audit team develops an annual audit plan based on the risk profile of the business activities. The Internal Audit plan is approved by the Audit Committee, which also reviews compliance to the plan. The Internal Audit team monitors and evaluates the efficacy and adequacy of internal control systems in the Company, its compliance with operating systems, accounting procedures and policies at all locations of the Company. Based on the report of internal audit function, process owners undertake corrective action(s) in their respective area(s) and thereby strengthen the controls. Significant audit observations and corrective action(s) thereon are presented to the Audit Committee.

The Audit Committee reviews the reports submitted by the Internal Auditors in each of its meeting. Also, the Audit Committee at frequent intervals has independent sessions with the Statutory auditor to discuss the adequacy and effectiveness of internal financial controls.

The Board has implemented systems to ensure compliance of all applicable laws, these systems were effective and operative. At quarterly intervals the Managing Director and the Company Secretary place before the Board a certificate certifying compliance of laws and regulations as applicable to the business and operations of the Company after obtaining confirmation from all business unit and functional heads responsible for compliance of such applicable laws and regulations. The Company Secretary is responsible for compliance of corporate laws including Companies Act 2013, SEBI Act and rules/guidelines and listing regulations applicable to the Company.

During the year no frauds were reported by auditors in terms of section 143 (2) of the Act.

AUDIT COMMITTEE RECOMMENDATIONS:

During the year all the recommendations of the Audit Committee were accepted by the Board. The Composition, details of its meetings, of the Audit Committee are fully described in the Corporate Governance Report, which form part of this report.

RISK MANAGEMENT:

The Company is exposed to uncertainties in the sectors in which it operates. These uncertainties create new business opportunities with inherent risks. A key factor in determining a companyâs capacity to create sustainable value is the level of risk that the company is willing to take (at strategic and operational levels) and its ability to manage them effectively. Many risks exist in a companyâs operating environment and emerge on a regular basis. The Companyâs Risk Management processes focus on ensuring that these risks are identified on a timely basis and reasonably addressed.

The Board of the Company has formed a risk management committee to frame, implement and monitor the risk mitigation plan for the Company. The committee is responsible for identifying key risk areas, periodically reviewing the risk management plan and ensuring its effectiveness. The audit committee has additional oversight in the area of financial risks and controls. Major risks are identified by the businesses and functions are systematically addressed through mitigating actions on a continuing basis.

The development and implementation of risk management policy has been covered in the management discussion and analysis, which forms part of this report.

PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS:

The particulars of loans, guarantees and investments are given in note no. 11 of the financial statement.

MATERIAL DEVELOPMENTS AFTER THE END OF THE FINANCIAL YEAR:

January 31, 2017 onwards a section workmen at the Companyâs Goa plant stopped work while the Company and the workerâs union were engaged in negotiating the workersâ charter of demand including wage revision. The Company Management has not yet succeeded until the signing of this report to convince these workmen to resume work and to come to the negotiating table. The Company has referred the matter to the labour commissioner for conciliation proceedings which are ongoing. The management is confident that it will arrive at an amicable settlement with the workers, however, continued stoppage would impact operations at the Goa plant and supply of medicines in the market.

RELATED PARTY TRANSACTIONS:

The Company has implemented a Related Party Transactions policy for the purposes of identification and monitoring of such transactions. The policy on related party transactions as approved by the Board is uploaded on the Companyâs website www.merck.co.in. All the related party transactions are entered into by the Company, at armâs length basis and in the ordinary course of business.

All related party transactions are placed before the Audit Committee for approval. Prior omnibus approval of the Audit Committee is obtained on a quarterly basis. The audit committee has reviewed these transactions entered by the Company with these related parties.

The details of the material related party transactions as required under Section 134(3)(h) r/w Rule 8 of the Companies (Accounts) Rules, 2014, is attached as Annexure V in the form AOC 2.

MATERIAL ORDERS PASSED BY THE REGULATORS AND COURTS:

During the year under review no regulator or court has passed any significant and material orders impacting the going concern status of the Company and its future operations. Given hereunder is the gist of orders passed by regulators or the courts which may have material impact on the financial position of the Company:

In March 2016, the Health Ministry banned 344 fixed drug combinations through a gazette notification, based on the recommendation of its expert committee. Two drugs produced by your Company were impacted by this ban order. Pharmaceutical companies including your company challenged the order before the Honâble Delhi High Court and the Court was pleased to set aside the government notification. The Government may challenge the said decision of the Honâble Delhi High Court before Honâble Supreme court. Any adverse decision by the higher court or further addition to this list of banned drugs could impact the growth of the pharmaceutical companies.

The Company has received a demand notice from National Pharmaceutical Pricing Authority (NPPA) demanding a sum of Rs. 116.8 million plus interest Rs. 157.8 million alleging overcharging of price of the formulation Polybion L 100 ML syrup during the period from May 2006 to June 2009. The Company has challenged the said orders by way of a writ petition. In a separate proceedings filed by Cradel Pharmaceuticals Private Limited, the manufacturer of the said drug, Honâble Kolkata High Court granted temporary stay against the demand notice subject to a sum of Rs. 22.5 million being deposited with NPPA, which the Company has made. The Company has been legally advised it has a good defendable case. The Company has challenged the said orders and will defend itself vigorously, however, any adverse orders by the courts may have material impact on the profits of the Company.

VIGIL MECHANISM AND WHISTLE BLOWER POLICY:

In terms of the provisions of Section 177(9) of the

Companies Act, 2013 the Company has implemented a vigil mechanism which include implementation of the whistleblower policy. The whistle blower policy aims at conducting business in a transparent and compliant manner. No employee has been denied access to the chairman of the audit committee. The Company in conjunction with the Corporate Disclosure and Investigation policy of its ultimate holding Company has informed all its employees that any non-compliant behavior of directors or employees including non-compliance of its code of conduct shall be brought to the notice of the management for investigation and necessary action, using the speak-up line number provided therein. Whistleblower complaints and their redressal are discussed at the audit committee of the Company. The said policy is available on the Companyâs website.

NOMINATION AND REMUNERATION POLICY:

Pursuant to the provisions of Section 134(3) (e), 178 of the Companies Act, 2013 and Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 the Company adopted a Nomination and Remuneration Policy which is available on our website www.merck. co.in. The Companyâs Remuneration Policy provides a framework to support the implementation of the Merck Total Rewards Philosophy, specifically, it is intended to provide more detailed clarification on the guiding principles so as to support its implementation; guidance as to design of reward programs; and explanation as to roles, responsibilities and governance for program design, administration and communication. Performance of all employees of the Company is evaluated at regular interval using online tools, their bonus and annual increments are determined on the basis of overall company performance and individual performance rating achieved by them during the year under review.

PARTICULARS OF EMPLOYEES:

The information as required under Section 197 of the Act read with rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are given below:

(a) The ratio of the remuneration of each director to the median remuneration of the employees of the Company for the financial year:

Ratio of median remuneration
Non- Executive Directors
Mr. S.N. Talwar	2.23
Mr. H.C.H. Bhabha	1.67
Mrs. Rani Ajit Jadhav	1.27
Mr. Bradley Simpson^{1, 3}	N.A.
Ms. Zoe Tang ^{2 3}	N.A.
Executive Directors
Mr. Anand Nambiar	88.71
Mr. Brijesh Kapil^{1, 4}	N.A.
Mr. Ali Slieman^{1, 4}	N.A.
Mr. N. Krishnan	30.41

¹ Resigned with effect from October 04, 2016.

² Appointed with effect from December 23, 2016.

³ Directors did not get any remuneration during the year.

⁴ Directors resigned during the year as such their remuneration is not comparable with the annual median remuneration of employees.

Note - Median means the numerical value separating the higher half of a population from the lower half and the median of a finite list of number may be found by arranging all the observations from lowest value to highest value and picking the middle one .

(b) The percentage increase in remuneration of each director, chief executive officer, chief financial officer, company secretary in the financial year:

Director, Chief Financial Officer & Company Secretary	% Increase in remuneration during the financial year
Mr. Suresh Talwar (Chairman	5.26
and Independent Director)
Mr. H. C. H. Bhabha	7.14
(Independent Director)
Mrs. Rani Ajit Jadhav	10
(Independent Director)
Mr. Anand Nambiar (Managing	3.5*
Director)

Director, Chief Financial Officer & Company Secretary	% Increase in remuneration during the financial year
Mr. Brijesh Kapil* (Executive Director - Consumer Health)	@
Mr. Ali Slieman* (Executive Director - Bio Pharma)	@
Mr. N. Krishnan (Executive Director and Chief Financial Officer)	11
Mr. Vikas Gupta (General Counsel & Company Secretary)	11

* Resigned with effect from October 04, 2016

$ The percentage increase in the remuneration as compared to previous year remuneration is not comparable since Mr. Anand Nambiar joined as director last year from February 2015. Additionally, Mr. Nambiar was given one time retention bonus.

@ The percentage increase in the remuneration as compared to previous year remuneration is not comparable since Mr. Brijesh Kapil and Mr. Ali Slieman joined as director last year from February 2015 and resigned from the Board effective from October 2016.

(d) The number of permanent employees on the rolls of Company: 1583 as on December 31, 2016

(f) Key Parameters for any variable component of remuneration availed by directors:

(g) Affirmation that the remuneration is as per the remuneration policy of the Company:

It is hereby confirmed that the remuneration paid during the year is as per the Remuneration Policy of the Company.

The statement containing particulars of employees 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) Rules, 2014, is provided in a separate annexure forming part of this report. Further, the report and the accounts are being sent to the members excluding the aforesaid annexure. In terms of the applicable provisions of the Companies Act, 2013, the said annexure is open for inspection at the Registered Office of the Company. Any shareholder interested in obtaining a copy of the same may write to the Company Secretary.

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

The particulars as prescribed under Section 134(3) (m) of the Act, read with Rule 8 of the Companies (Accounts) Rules, 2014, are set out in Annexure VI.

EXTRACTS OF ANNUAL RETURN:

Extracts of Annual Return in the prescribed format under the Companies Act, 2013 forms part of this Report as Annexure VII.

DISCLOSURE AS PER SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION AND REDRESSAL) ACT, 2013:

During the year ending December 31, 2016, the Company has received one complaint of sexual harassment, which is being investigated in terms of the applicable provisions of the Prevention of Sexual Harassment Act.

GREEN INITIATIVE:

Your Company has taken the initiative of going green and minimizing the impact on the environment. The Company has been circulating the copy of the Annual

Report in electronic format to all those Members whose email address is available with the Company. Your Company would encourage other Members also to register themselves for receiving Annual Report in electronic form. Kindly refer the contact details and ways to register your email address given under the heading âRequest to the Membersâ at the end of the notice of the Annual General Meeting.

ACKNOWLEDGEMENTS:

Your Directors also register sincere thanks and infinite appreciations to the contributions made by every Member of the Merck family globally.

On behalf of the Board of Directors

S. N. Talwar Chairman

Mumbai, April 21, 2017

Dec 31, 2014

Dear Members,

We are pleased to present the report on business and operations for the year ended December 31, 2014.

FINANCIAL HIGHLIGHTS:

The financial performance of your Company for the year ended December 31, 2014 is summarized below:

(Rupees million)

Particulars 2014 2013

Income from Operations 8,674.9 7,977.8

Other Income 203.3 214.5

Profit before Interest, Depreciation and Tax 792.4 983.2

Depreciation 126.8 100.7

Provision for Taxation (net) 233.4 323.7

Profit after tax 432.2 558.8

Profit available for appropriations 2,100.5 1,889.3

Appropriations:

Transfer to General Reserve 43.2 55.9

Dividend (including Tax on Dividend) 119.5 165.1

Balance carried to the Balance Sheet 1,937.8 1,668.3

EPS

Â Basic (Rs.) 26.0 33.7

Â Diluted (Rs.) 26.0 33.7

COMPANY''S OPERATIONAL PERFORMANCE:

Details of operational working of your Company are given in the Management Discussion and Analysis Report forming part of this Report. During the financial year ended December 31, 2014, your Company achieved a turnover of Rs. 8,324.5 million as against a turnover of Rs. 7,729.6 million in the previous year, registering a growth of 7.7%. During the year under report, the Pharmaceuticals segment registered an increase in turnover of 5.1% and, the Chemicals segment registered an increase of 13.5% as compared to the respective segment turnover achieved during the previous financial year.

The export turnover of your Company during the year 2014 was Rs. 677.4 million as against Rs. 707.7 million achieved in the previous year.

SHARE CAPITAL:

Share Capital Audit as per the directives of the Securities and Exchange Board of India is being conducted on a quarterly basis by Messrs Saraf and Associates, Practicing Company Secretaries. The Share Capital Audit Reports are duly forwarded to the Bombay Stock Exchange and National Stock Exchange of India Limited where the equity shares of your Company are listed. During the year ended December 31, 2014 there is no change in the issued and subscribed capital of your Company, the outstanding capital as on December 31, 2014 is Rs. 166.0 million comprising of 16 million equity shares of Rs. 10/- each.

DIVIDEND:

Your Board of Directors have recommended a dividend of Rs. 6/- (Rupees six) per equity share for the year ended December 31, 2014. This is subject to approval of the Members at forthcoming Annual General Meeting.

FIXED DEPOSITS:

Your Company has not accepted any public deposits from the public or the Members during the year 2014 and no amount on account of principal or interest on public deposits was outstanding as on the date of the balance sheet.

CORPORATE SOCIAL RESPONSIBILITY:

In terms of the provisions of Section 135 of the Companies Act, 2013 your Company has constituted a CSR Committee under the chairmanship of an Independent Director of the Company. The Company also adopted CSR policy which is available on its website www.merck.co.in

During the year under review the Company has initiated following projects to meet its corporate social responsibility obligations.

(a) Narmada Samgara Project: During the year your Company has collaborated and extended support for improving lives of the people living in inaccessible areas along the banks of river Narmada, Madhya Pradesh. These tribal people are not having access to healthcare facilities, clean drinking water, and education. The Company has provided assistance by way of provision of medicines, sponsorship of doctors and water test equipment. The Company has also provided cash assistance for running a river ambulance which travels to villages inhabited along the banks of the river Narmada. The ambulance carries medicines and medical staff for on-the-spot medical checkup and providing treatment to sick. During the current financial year the Company intends to provide a boat for extending this service to additional areas. The Company has spent Rs. 3.0 million on this project, in the current financial year.

(b) CSR activities at Goa: The Company, in the villages close to its factory in Goa, distributed free school uniforms and note books to students, through village Panchayat. A medical camp was also organized for the benefit of villagers. During the year the Company has spent Rs. 0.12 million on these activities.

(c) Scholarships to bright stars from weaker section of the Society: During the year the Company, through Merck India Charitable Trust (MICT), continued to provide scholarships to students from the weaker sections of the society. A lump sum amount is given to selected students to meet their expenses on tuition fee, books and other education expenses. Student once selected gets the annual scholarship until she/he continues to perform well in studies and passes the graduation or equivalent examination.

During the year the Company could not spend 2% of its average profit for the last three years since during the year it used its managerial resources to lay the basic frame work for undertaking the CSR activities in accordance with the provisions of the Companies Act, 2013 including finalizing the CSR policy, constituting statutory and executive committees for undertaking CSR activities, identifying the CSR projects which meet the Company policy and statutory requirements.

DIRECTORS'' RESPONSIBILITY STATEMENT:

In accordance with Section 217(2AA) of the Companies Act, 1956, your Directors confirm that:

(a) In the preparation of the annual accounts, the applicable Accounting Standards/Rules have been followed along with proper explanation relating to material departures;

(b) The accounting policies have been consistently applied and reasonable and prudent judgment and estimates have been made so as to give a true and fair view of the state of affairs of the Company as at December 31, 2014 and the profit for the year ended on that date;

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

(d) The annual accounts have been prepared on a going concern basis.

DIRECTORS:

Mrs. Rani Ajit Jadhav was appointed as an Additional Director with effect from February 05, 2015 who holds office up to the date of the ensuing Annual General Meeting. She was appointed as an Independent Director for a term of five years with effect from subject to the approval of the shareholders at the ensuing Annual General Meeting.

Mr. Anand Nambiar was appointed as an additional Director with effect from February 05, 2015 who holds office up to the date of the ensuing Annual General Meeting. He was also appointed as "Managing Director" for a period from February 05, 2015 to September 30, 2017 subject to the approval of the shareholders at the ensuing Annual General Meeting and approval of the Central Government.

Dr. Claus-Dieter Boedecker resigned as a Director and Managing Director of the Company with effect from January 31, 2015, due to his desire to re-locate to Germany, his home country. The Directors placed on record their appreciation of his valuable contributions as member of the Board during his tenure as Managing Director of the Company.

Mr. Brijesh Kapil was appointed as an additional Director with effect from February 05, 2015 who holds office up to the date of the ensuing Annual General Meeting. He was also appointed as Wholetime Director for a period of five years with effect from February 05, 2015 subject to the approval of the shareholders at the ensuing Annual General Meeting.

Mr. Ali Sleiman was appointed as an additional Director with effect from February 05, 2015 who holds office up to the date of the ensuing Annual General Meeting. He was appointed as Wholetime Director for a period from February 05, 2015 to September 30, 2017 subject to the approval of the shareholders at the ensuing Annual General Meeting and approval of the Central Government.

Mr. Pramod Pimplikar, Director (Technical Operations) resigned as Director and Wholetime Director of the Company with effect from January 13, 2015. The Directors placed on record their appreciation of his valuable contributions as member of the Board and senior member of the management team.

Mr. E.A. Kshirsagar, Independent Director resigned from the Board of Directors effective January 13, 2015 to create a vacancy for induction of a woman director on the Board of the Company in compliance with the provisions of the Companies Act, 2013 and to adhere to the Merck principle of keeping its board structure lean. The Directors placed on record their appreciation of his valuable contributions as member of the Board.

In terms of the provisions of Section 149 of the Companies Act, 2013 and other applicable provisions, if any, the Board has recommended the appointment of Mr. S.N. Talwar and Mr. H.C.H. Bhabha, existing Independent Directors, as Independent Directors of the Company for a period of 5 years effective from April 08, 2015.

Mr. N. Krishnan, Director (Finance) will retire by rotation at the forthcoming Annual General Meeting of the Company and being eligible offers himself for re-appointment as Director of the Company. Board recommends his re-appointment.

AUDITORS:

Messrs BSR & Co. LLP, Chartered Accountants, retires as Statutory Auditors of the Company at the conclusion of the forthcoming Annual General Meeting and has confirmed their eligibility and willingness to accept the office of the Auditors for the year 2015, if re-appointed.

A certificate from them has been received to the effect that their appointment as Statutory Auditors if made would be in accordance to the provisions of Sections 139 and 141 of the Companies Act, 2013 and rules framed thereunder.

The Board and Audit Committee of your Company have recommended the re-appointment of Messrs BSR & Co. LLP, Chartered Accountants, as Statutory Auditors of your Company, to hold office as such from the conclusion of the forthcoming Annual General Meeting until the conclusion of subsequent Annual General Meeting to be held in 2016.

COST AUDIT:

Pursuant to Section 233B of the Companies Act, 1956, the Central Government has prescribed cost audit of the accounts to be maintained by your Company concerning its bulk drugs and formulations divisions. To conduct the cost audit of these divisions, M/s. Sanghvi Randeria & Associates, a firm of Cost Accountants has been re-appointed as Cost Auditors of your Company for the year 2014 in the meeting of Board of Directors held on Friday, January 31, 2014, subject to the approval of the Central Government, required if any. The Cost Audit Report for the financial year ended December 31, 2013 was due to be filed on June 30, 2014 has been filed on June 29, 2014.

PERSONNEL:

As on December 31, 2014, the total number of employees on the payroll was 1515. Industrial relations with the employees at various levels generally continued to be cordial.

The particulars of employees, as required under Section 217(2A) read with the Companies (Particulars of Employees) Rules, 1975, form part of this Report. However, pursuant to the provisions of Section 219(1)(b)(iv) of the Companies Act, 1956, the Reports and Accounts are being sent to the Members excluding the statement of particulars of employees. Any Member may obtain a copy of the said statement by writing to the Company Secretary at the registered office of the Company.

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

The information pertaining to conservation of energy, technology absorption, foreign exchange earnings and outgo required to be disclosed as per Section 217(1)(e) of the Companies Act, 1956, read with the Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules 1988, is given in the annexure forming part of this Report.

CORPORATE GOVERNANCE:

A Report on the compliance of Corporate Governance Code along with Auditors'' certificate thereon, as stipulated under Clause 49 of the Listing Agreement, is annexed to this Report.

GREEN INITIATIVE:

Your Company has taken the initiative of going green and minimising the impact on the environment. The Company has been circulating the copy of the Annual Report in electronic format to all those Members whose email address is available with the Company. Your Company would encourage other Members also to register themselves for receiving Annual Report in electronic form. Kindly refer the contact details and ways to register your email address given under the heading ''Request to the Members'' at the end of the notice of the Annual General Meeting.

ACKNOWLEDGEMENTS:

Your Directors thank and express their gratitude to the Company''s employees, customers, vendors, investors, and institutions for their continued support to the Company. Your Directors also thank the State Government and concerned Government Departments/ Agencies for their cooperation.

Your Directors also register sincere thanks and infinite appreciations to the contributions made by every Member of the Merck family globally.

On behalf of the Board of Directors

S. N. Talwar Chairman

Mumbai, February 05, 2015

Dec 31, 2013

The financial performance of your Company for the year ended 31 December, 2013 is summarized below:

(Rupees million)

Particulars 2013 2012

Income from Operations 7,977.8 6,872.8

Other Income 214.5 202.0

Profit before Interest, Depreciation

and Tax 983.2 1,256.9

Depreciation 100.7 89.0

Provision for Taxation (net) 323.7 383.9

Profit after tax 558.8 784.0

Profit available for appropriations 1,889.3 1,457.1

Appropriations:

Transfer to General Reserve 55.9 78.4

Dividend (including Tax on 165.1 48.2

Dividend)

Balance carried to the Balance 1,668.3 1,330.5

Sheet

EPS

Â Basic (Rs.) 33.7 47.2

Â Diluted (Rs.) 33.7 47.2

COMPANY''S OPERATIONAL PERFORMANCE:

Detailed operational working of your Company are discussed in the Management Discussion and Analysis Report forming part of this Report. During the financial year ending 31 December, 2013, your Company achieved a turnover of Rs. 7,729.6 million as against a turnover of Rs. 6,580.7 million in the previous year, registering a growth of 17.5%. During the year under report, the Pharmaceuticals segment showed an increase in turnover of 20%, the Chemicals segment registered an increase of 12% as compared to the respective segment turnover in the previous year.

The devaluation of the Indian Rupee vis-a-vis major currencies resulted in increase of input costs, sluggish in economic environment and impairment of current assets, were key reasons for the dent in operating margins. The Profit after Tax for the year under review was Rs. 558.8 million as against Rs. 784.0 million in previous year, showing a fall of 28.7%.

The export turnover of your Company during the year 2013 was Rs. 707.7 million as against Rs. 729.8 million achieved in the previous year.

SHARE CAPITAL:

Share Capital Audit as per the directives of the Securities and Exchange Board of India is being conducted on a quarterly basis by Messrs K.G. Saraf & Company, Practicing Company Secretaries. The Share Capital Audit Reports are duly forwarded to the Bombay Stock Exchange and National Stock Exchange of India Limited where the equity shares of your Company are listed. During the year ended 31 December, 2013 there was no change in the issued and subscribed capital of your Company, the outstanding capital as on 31 December, 2013 was Rs. 166.0 million comprising of 16.6 million equity shares of Rs. 10.00/- each.

DIVIDEND:

Your Board of Directors has recommended a dividend of Rs. 8.50/- (Rupees Eight and paisa Fifty) per equity share for the year ended 2013. This is subject to approval of Members at the forthcoming Annual General Meeting.

FIXED DEPOSITS:

Your Company has not accepted any public deposits from the public or the Members during the year 2013 and no amount on account of principal or interest on public deposits that may have been accepted in the past was outstanding as on the date of the Balance Sheet.

DIRECTORS'' RESPONSIBILITY STATEMENT:

In accordance with Section 217(2AA) of the Companies Act, 1956, your Directors confirm that:

(a) in the preparation of the annual accounts, the applicable Accounting Standards/Rules have been followed along with proper explanation relating to material departures;

(b) the accounting policies have been consistently applied and reasonable and prudent judgment and estimates have been made so as to give a true and fair view of the state of affairs of the Company as at 31 December, 2013 and the profit for the year ended on that date;

(c) proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 has been taken for safeguarding the assets of the Company and for detecting and preventing fraud and other irregularities; and

(d) the annual accounts have been prepared on a going concern basis.

DIRECTORS:

Mr. S. N. Talwar and Mr. H. C. H. Bhabha, both Non- Executive Independent Directors, will retire by rotation at the forthcoming Annual General Meeting of the Company and being eligible they offer themselves for re-appointment as Directors of the Company.

AUDITORS:

Messrs B S R & Co. LLP, Chartered Accountants, retires as Statutory Auditor of the Company at the conclusion of the forthcoming Annual General Meeting and has confirmed their eligibility and willingness to accept the office of the Auditors for the year 2014, if re-appointed. The Board and Audit Committee of your Company has recommended the re-appointment of Messrs B S R & Co. LLP, Chartered Accountants, as Statutory Auditor of your Company, to hold office as such from the conclusion of the forthcoming Annual General Meeting until the conclusion of the next Annual General Meeting.

COST AUDIT:

Pursuant to Section 233B of the Companies Act, 1956, the Central Government has prescribed cost audit of the accounts to be maintained by your Company with regard to its bulk drugs and formulations divisions. To conduct the cost audit of these divisions, M/s. Sanghvi Randeria & Associates, a firm of Cost Accountants, has been re-appointed as Cost Auditors of your Company for the year 2014 in the meeting of Board of Directors held on Friday, 31 January, 2014, subject to the approval of the Central Government, required if any. The Cost Audit Report for the financial year ended 31 December, 2012 was due to be filed on 30 June, 2013, which was filed on 27 June, 2013.

PERSONNEL:

As on 31 December, 2013, the total number of employees on the payroll was 1,496. Industrial relations with the employees at various levels generally continued to be cordial.

The particulars of employees, as required under Section 217(2A) read with the Companies (Particulars of Employees) Rules, 1975, form part of this Report. However, pursuant to the provisions of Section 219(1)(b) (iv) of the Companies Act, 1956, the Reports and Accounts are being sent to the Members excluding the statement of particulars of employees. Any Member may obtain a copy of the said statement by writing to the Company Secretary at the registered office of the Company.

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

The information pertaining to conservation of energy, technology absorption, foreign exchange earnings and outgo required to be disclosed as per Section 217(1)(e) of the Companies Act, 1956, read with the Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules 1988, is given in the annexure forming part of this Report.

CORPORATE GOVERNANCE:

A Report on the compliance of Corporate Governance Code along with Auditors'' certificate thereon, as stipulated under Clause 49 of the Listing Agreements, is annexed to this Report.

GREEN INITIATIVE:

Your Company has taken the initiative of going green and minimising the impact on the environment. The Company has been circulating the copy of the Annual Report in electronic format to all those Members whose email address is available with the Company. Your Company would encourage other Members also to register themselves for receiving Annual Report in electronic form. Kindly refer the contact details and ways to register your email address given under the heading ''Request to the Members'' at the end of the notice of the Annual General Meeting.

ACKNOWLEDGEMENTS:

Your Directors thank and express their gratitude to the Company''s employees, customers, vendors, investors, and institutions for their continued support to the Company. Your Directors also thank the State Government and concerned Government Departments/Agencies for their co-operation.

Your Directors also register sincere thanks and infinite appreciations to the contributions made by every Member of the Merck family globally.

On behalf of the Board of Directors

S. N. Talwar

Chairman

Mumbai, 31 January, 2014

Dec 31, 2012

The are pleased to present the report on our business and operations for the year ended December 31, 2012.

FINANCIAL HIGHLIGHTS:

(Rupees million)

2012 2011

Income from Operations 6,872.8 5,895.7

Other Income 202.0 168.8

Profit before Interest, Depreciation and Tax 1,257.1 892.8

Interest 0.2 0.2

Depreciation 89.0 79.5

Impairment (reversal) - (142.8)

Provision for Taxation (net) 383.9 319.1

Profit after tax 784.0 636.8

Profit available for appropriations 1,457.1 673.1

Appropriations:

Transfer to General Reserve 78.4 -

Dividend 41.5 -

Balance carried to the Balance Sheet 1,330.5 673.1

EPS

- Basic (Rs.) 47.2 38.4

- Diluted (Rs.) 47.2 38.4

OPERATIONS:

The operational working of the Company in detail is discussed in the Management Discussion and Analysis Report forming part of this Report. During the financial year ending December 31, 2012 the Company achieved turnover of Rs. 6,580.7 million as against turnover of Rs 5,575.7 million achieved during the previous year, registering a growth of 18%. During the year under report, the Pharmaceuticals segment showed an increase in turnover of 14.4% and the Chemicals segment registered an increase of 26.3% as compared to the respective segment turnover in the preceding financial year.

The Profit after Tax for the year under review was Rs. 784.0 million as against Rs. 636.8 million in 2011, showing an increase of 23Â°/o.

The export turnover of the Company during the year 2012 was Rs. 729.8 million as against Rs. 538.9 million achieved in the preceding year.

SHARE CAPITAL:

Share capital audit as per the directives of the Securities and Exchange Board of India is being conducted on a quarterly basis by K.G. Saraf ft Company, Practising Company Secretaries. The Share Capital Audit Reports are duly forwarded to the Bombay Stock Exchange and National Stock Exchange of India Limited where the equity shares of the Company are listed. During the year ended December 31, 2012 there is no change in issued and subscribed capital of the Company, the outstanding capital as on December 31, 2012 is Rs. 166.0 million comprising of 16.60 million equity shares of Rs. 10 each.

DIVIDEND:

The Board of Directors has recommended a dividend of Rs. 2.50/- (Rupees two and fifty paisa per share only) per equity share of the company for the year 2012. This is subject to the approval of the Members at the ensuing annual general meeting.

FIXED DEPOSITS:

The Company has not accepted any public deposits from the public or the members during the year 2012.

DIRECTORS'' RESPONSIBILITY STATEMENT:

In accordance with Section 217(2AA) of the Companies Act, 1956, your Directors confirm that:

(a) in the preparation of the annual accounts, the applicable Accounting Standards/Rules have been followed along with proper explanation relating to material departures;

(b) the accounting policies have been consistently applied and reasonable and prudent judgement and estimates have been made so as to give a true and fair view of the state of affairs of the Company as at December 31, 2012 and the profit for the year '' ended on that date;

(c) proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956, has been taken for safeguarding the assets of the Company and for detecting and preventing fraud and other irregularities and;

(d) the annual accounts have been prepared on a going concern basis.

DIRECTORS:

During the year Dr. Claus-Dieter Boedecker was appointed as Managing Director of the Company for a period of three (3) years effective from August 01, 2012 in place of Dr. Marek Dziki, whose contract of employment expired on July 31, 2012.

The Board appointed Mr. N. Krishnan as Whole- time Director of the Company for a period of five (5) years effective from October 22, 2012 in place of Mr. R. L. Shenoy who ceased to be the Whole-time Director and Chief Financial Officer of the Company upon attaining superannuation.

Terms of appointment of Dr. Claus-Dieter Boedecker and Mr. N. Krishnan are set out in the notice convening annual general meeting.

Pursuant to Article 110 of the Articles of Association of the Company, Merck KGaA, Germany, has appointed Dr. Peter-Ulrich Mannheimer as Director of the Company in place of Mr. Tim Kneen with effect from October 01, 2012.

We place on record our sincere appreciation for the contributions made by Dr. Marek Dziki, Mr. Tim Kneen and Mr. R.L. Shenoy during their respective tenures as members of the Board of the Company.

Mr. Pramod Pimplikar, Executive Director, and Mr. E.A. Kshirsagar, Director, will retire by rotation at the forthcoming Annual General Meeting of the Company being eligible they are seeking re-appointment as Director of the Company. Board recommends their re-appointment.

AUDITORS:

Messrs B S R ft Co., Chartered Accountants, retires as Auditors of the Company at the conclusion of the forthcoming Annual General Meeting and has confirmed their eligibility and willingness to accept the office of the Auditors for the year 2013, if re-appointed. The Board and audit committee of the Company has recommended the reappointment of Messrs B S R ft Co., Chartered Accountants, as statutoiy auditor of the Company to hold office as such until the conclusion of next Annual General Meeting.

COST AUDIT:

Pursuant to Section 233B of the Companies Act, 1956, the Central Government has prescribed cost audit of the accounts to be maintained by the Company concerning its bulk drugs and formulations divisions. To conduct the cost audit of these divisions, Messrs Sanghvi Randeria Et Associates, Cost Accountants, has been re-appointed as Cost Auditors of the Company for the year 2013, subject to the approval of the Central Government.

PERSONNEL:

As on December 31, 2012, the total number of employees on the payroll was 1,277. Industrial relations with the employees at various levels generally continued to be cordial. During the year under review workers union at Goa plant initiated negotiations with the Company which is under finalization and active discussions.

The particulars of employees, as required under Section 217(2A) read with the Companies (Particulars of Employees) Rules, 1975, form part of this Report. However, pursuant to the provisions of Section 219(l)(b) (iv) of the Companies Act, 1956, the Report and Accounts are being sent to the Members excluding the statement of particulars of employees. Any Member may obtain a copy of the said statement by writing to the Company Secretary at the registered office of the Company.

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

The information pertaining to conservation of energy, technology absorption, foreign exchange earnings and outgo required to be disclosed as per Section 217(l)(e) of the Companies Act, 1956, read with the Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988, is given in the annexure forming part of this Report.

CORPORATE GOVERNANCE:

A Report on the compliance of Corporate Governance Code along with auditors'' certificate thereon, as stipulated under Clause 49 of the Listing Agreements, is annexed to this Report.

GREEN INITIATIVE:

Your company has taken the initiative of going green and minimizing the impact on the environment. This year we are circulating the copy of the annual report only in electronic format to all those Members who have registered their email address with us. This would substantially reduce the number of paper printed copies. We would encourage other Members also to register themselves for receiving annual report in electronic form.

ACKNOWLEDGEMENTS:

The Directors thank the Company''s employees, customers, vendors, investors, and institutions for their continued support to the Company. The Directors also thank the Government of various countries, Government of India, State Government and concerned Government Departments/Agencies for their co-operation.

On behalf of the Board of Directors

S. N. Talwar

Chairman

Mumbai, January 30, 2013

Dec 31, 2010

The Directors have the pleasure in presenting their Report on the business and operations of your Company along with the Accounts for the year ended December 31, 2010.

FINANCIAL HIGHLIGHTS:

(Rs. mio.)

2010 2009

TURNOVER 5,090.8 4,731.1

OTHER INCOME 433.7 432.1

Profit before Interest, Depreciation 1,171.6 1,039.9 and Taxation

Interest 0.7 0.3

Depreciation/Impairment loss 213.8 75.1

PROFIT BEFORE TAXATION 957.1 964.5

Provision for Taxation (net) 325.3 309.7

PROFIT AFTER TAXATION 631.8 654.8

Profit & Loss Account brought

forward 1,306.5 1,366.7

PROFIT AVAILABLE FOR

APPROPRIATION 1,938.3 2,021.5

APPROPRIATIONS:

Transfer to General Reserve 63.2 326.6

Interim Dividend Paid 1,576.9 --

Dividend Tax on Interim Dividend 261.9 --

Final Dividend (Proposed) -- 332.0

Dividend Tax on Proposed Final Dividend -- 56.4

Balance carried to the Balance Sheet 36.3 1,306.5

OPERATIONS:

The operational working of the Company, in detail is discussed in the Management Discussion and Analysis Report forming part of this Report. The turnover of the Company showed an increase of 7.6% over the turnover achieved in the previous year. As against Rs. 4,731.1 mio. achieved in the year 2009, the turnover of the Company in 2010 was Rs. 5,090.8 mio. While the Pharmaceuticals segment showed an increase in the turnover of 3.1%, the Chemicals segment showed an increase of 20.9% compared to the respective turnover of the segments in the preceding year.

The Profit After Tax for the year under review was Rs. 631.8 mio. as against Rs. 654.8 mio. in 2009, a decline of 3.5%.

The F.O.B. value of exports of the Company during the year 2010 was Rs. 468.8 mio. as against Rs. 522.2 mio. achieved in the preceding year. The fall in the value of the exports turnover was on account of the decline in the value of Oxynex exports in the year 2010.

The Company has debited the Profit and Loss Account towards the impairment loss to the extent of Rs. 142.8 mio. on the assets used for the manufacture of Oxynex at its Goa plant for the following reasons:

1. There has been an unexpected steep fall in the demand for Oxynex internationally and the future cash flows warrant the impairment of the value of assets to the extent of Rs. 142.8 mio.

2. It will be difficult to get a willing customer to purchase the assets used for the manufacture of Oxynex as the same are located in the midst of Goa plant. Therefore, any interested customers may find it difficult to have an easy access and also find difficulties in installing the utilities as currently most of the utilities of the Goa plant are installed centrally for all the production units.

Under the circumstances, as obtaining the fair value of the assets may not be feasible, the Directors have taken the decision to impair the value of Oxynex assets used for the manufacture of Oxynex to the extent of Rs. 142.8 mio. based on the value in use of the said assets.

SHARE CAPITAL:

The buy back offer of the Companys equity shares process which was initiated in May 2009, was closed in May 2010. The details of the buy back of Companys equity shares are as follows:

Number of equity shares bought back 261,842

The total cost of equity shares bought back Rs. 109.1 mio.

The paid up capital after the buy back Rs. 166.0 mio.

Share capital audit as per the directives of the Securities and Exchange Board of India is being conducted on a quarterly basis by K.G. Saraf ft Company, Practicing Company Secretaries. The Share Capital Audit Reports are duly forwarded to the Bombay Stock Exchange and National Stock Exchange of India Limited where the equity shares of the Company are listed.

DIVIDEND:

Your Company has been exploring the best way to utilize the surplus money lying and invested in the low yielding bank deposits and debt funds for the last few years. This fact was brought to the notice of the Members from time to time. Having not been able to acquire any business or brands meeting our requirements and having received a limited response to the buy back offer, your Directors felt that it would be prudent to distribute a part of the surplus funds lying to the Members. Accordingly, the Directors declared an interim dividend of Rs. 95 per share for the year 2010 in October last year.

The Directors, therefore, do not propose to recommend any final dividend.

FINANCE:

The Company has invested most of the surplus funds in fixed deposits with banks and a small amount in debt based mutual funds.

FIXED DEPOSITS:

The Company has not accepted any public deposits from the public or the Members during the year 2010.

DIRECTORS RESPONSIBILITY STATEMENT:

In accordance with Section 217(2AA) of the Companies Act, 1956, your Directors confirm that:

(a) in the preparation of the annual accounts, the applicable Accounting Standards/Rules have been followed along with proper explanation relating to material departures;

(b) the accounting polices have been consistently applied and reasonable and prudent judgement and estimates have been made so as to give a true and fair view of the state of affairs of the Company as at December 31, 2010 and the profit for the year ended on that date;

(c) proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 has been taken for safeguarding the assets of the Company and for detecting and preventing fraud and other irregularities and;

(d) the annual accounts have been prepared on a going concern basis.

DIRECTORS:

During the year, Mr. Ralph Zaat - Non Executive Director of the Company resigned from the services of the parent company, Merck KGaA which consequent upon such resignation withdrew his nomination as Director from the Board of your Company. In the place of Mr. Ralph Zaat, Mr. Timothy Kneen was nominated by Merck KGaA as Director of your Company in accordance with Article 110 of the Articles of Association of the Company. The Directors while welcoming Mr. Kneen to the Board place on record their sincere appreciation for the valuable contribution and guidance rendered by Mr. Ralph Zaat during his tenure as a Director of the Company.

AUDITORS:

Messrs B S R Et Co., Chartered Accountants, retire as Auditors of trie Company at the conclusion of the ensuing Annual General Meeting and have confirmed their eligibility and willingness to accept the office of the Auditors for the year 2011, if re-appointed. The Audit Committee of the Board recommends the re-appointment of Messrs B S R ft Co. as the Statutory Auditors for the year 2011.

COST AUDIT:

Pursuant to Section 233B of the Companies Act, 1956, the Central Government has prescribed cost audit of the accounts maintained by the Company concerning its bulk drugs and formulations divisions. To conduct the cost audit of these divisions, Messrs S. S. Mani ft Co. have been re-appointed as Cost Auditors of the Company for the year 2011, subject to the approval of the Central Government.

PERSONNEL:

As on 31 December, 2010, the total number of employees on the payroll was 1,257. Industrial Relations with the employees at various levels continue to be cordial.

The particulars of employees, as required under Section 217(2A) read with the Companies (Particulars of Employees) Rules, 1975, form part of this Report. However, pursuant to the provisions of Section 219(l)(b) (iv) of the Companies Act, 1956, the Report and Accounts are being sent to the Members excluding the statement of particulars of employees. Any Member interested in obtaining a copy of the said statement may write to the Company Secretary at the Registered Office of the Company.

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

The information pertaining to conservation of energy, technology absorption, foreign exchange earnings and outgo required to be disclosed as per Section 217{l(e) of the Companies Act, 1956, read with the Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules 1988, is given in the annexure forming part of this Report.

CORPORATE GOVERNANCE:

The Report on the Corporate Governance Code along with a certificate from the Auditors of the Company regarding compliance of conditions of Corporate Governance as stipulated under Clause 49 of the Listing Agreements, as also the Management Discussion and Analysis Report, are annexed to this Report.

On behalf of the Board of Directors

S. N. Talwar Chairman

Mumbai, February 8, 2011.

Dec 31, 2009

The Directors have pleasure in presenting their Report on the business and operations of your Company along with the Accounts for the year ended December 31, 2009.

FINANCIAL HIGHLIGHTS:

(Rs. mio.)

2009 2008

SALES 4.731.1 3,894.6

OTHER INCOME 432.1 477.1

Profit before Interest, Depreciation and Taxation 1,039.9 974.8

Interest 0.3 0.1

Depreciation 75.1 57.3

PROFIT BEFORE TAXATION 964.5 917.4

Provision for Taxation (net) 309.7 287.3

PROFIT AFTER TAXATION 654.8 630.1

Profit a Loss Account Balance brought forward 1,366.7 1,423.5

PROFIT AVAILABLE FOR APPROPRIATION 2,021.5 2,053.6

APPROPRIATIONS:

Transfer to General Reserve 326.6 341.7

Dividend (Proposed) 332.0 295.1

Dividend Tax 56.4 50.1

Balance carried to the Balance Sheet 1,306.5 1,366.7

OPERATIONS:

The turnover of the Company for the year 2009 was Rs. 4,731.1 mio. as against Rs. 3,894.6 mio. for the year 2008, showing a growth of 21.5ÃÂ°/o during the year under review. The profit after tax for the year under review was Rs. 654.8 mio as against Rs. 630.1 mio. in the previous year.

The turnover of the Pharmaceuticals division grew from Rs. 3,189.6 mio. in 2008 to 3,525.5 mio. in 2009 showing a growth of 10.5%. The turnover of the Chemicals division for the year was 1,205.6 mio. as against Rs. 705.0 mio. in the previous year, registering an impressive growth of 71.0%.

During the year under review, the Companys exports increased to Rs. 579.8 mio. as against Rs. 353.2 mio. for the previous year registering an impressive growth of 64.2
BUY BACK OF SHARES:

The Board at its meeting held on May 20, 2009 approved the buy back of Companys fully paid up Equity Shares from the open market at a price not exceeding Rs. 435/- per share. The buy back is limited to an amount of Rs. 451.4 mio being 10% of total paid up capital and free reserves based on audited accounts for the year ended December 31, 2008. The Company has bought back 2,61,842 Equity Shares and all the shares bought back in the buy back offer have been extinguished as on date.

DIVIDEND:

The Board of Directors has recommended a divided of Rs. 20/- per share as against Rs. 17.50 per Equity Share paid for the previous year. This is subject to the approval of the Members at the ensuing Annual General Meeting.

FINANCE:

The investments of the Company in various debt funds, and fixed deposits with Banks as on the date of the Report amount to Rs. 3,435.8 mio.

DIRECTORS RESPONSIBILITY STATEMENT:

In accordance with Section 217(2AA) of the Companies Act, 1956, your Directors confirm that:

(a) in the preparation of the annual accounts, the applicable Accounting Standards/Rules have been followed along with proper explanation relating to material departures;

(b) the accounting polices have been consistently applied and reasonable and prudent judgement and estimates have been made so as to give a true and fair view of the state of affairs of the Company as at December 31, 2009, and the Profit for the year ended on that date;

(c) proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 has been taken for safeguarding the assets of the Company and for detecting and preventing fraud and other irregularities and;

(d) the annual accounts have been prepared on a going concern basis.

DIRECTORS:

Mr. S. N. Talwar and Mr. E. A. Kshirsagar will retire by rotation at the ensuing Annual General Meeting and being eligible, offer themselves for re-appointment. During the year, Mr. Ralph Zaat was nominated on the Board by Merck KGaA pursuant to the provisions of Article 110 of the Articles of Association of the Company in place of Dr. H. S. Hermansson. The Board placed on record its appreciation of the valuable services rendered by Dr. Hermansson during his tenure as a Director of the Company.

Mr. R. L. Shenoys tenure as a Whole-time Director expired on December 26, 2009. The Directors are of the opinion that it would be advisable to re-appoint Mr. R. L. Shenoy as a Whole-time Director for an additional period of two years with effect from December 27, 2009 subject to Members approval at the ensuing Annual General Meeting.

FIXED DEPOSITS:

During the year, the Company has not accepted any fixed deposit.

AUDITORS:

Messrs B S R ft Co., Chartered Accountants retire as the Statutory Auditors at the conclusion of the ensuing Annual General Meeting and are eligible for re-appointment. The Audit Committee of the Board recommends the re-appointment of Messrs B S R Et Co., as the Statutory Auditors for the year 2010. Messrs B S R 8t Co. have confirmed their eligibility and willingness to continue to act as the Statutory Auditors of the Company for the year 2010, if re-appointed.

COST AUDIT:

Messrs S. S. Mani Et Co. have been re-appointed to conduct the cost audit of the accounts maintained by the Company in respect of bulk drugs and formulations, for the year 2010.

PERSONNEL:

As on December 31, 2009, the total number of employees on the payroll was 1,245. Industrial Relations with the employees at various levels continue to be cordial.

The particulars of employees as required under Section 217(2A) read with the Companies (Particulars of Employees) Rules, 1975, form part of this Report.

However, pursuant to the provisions of Section 219(l)(b) (iv) of the Companies Act, 1956, the Report and Accounts are being sent to the Members excluding the statement of particulars of employees under Section 217(2A) of the Companies Act, 1956. Any Member interested in obtaining a copy of the said statement may write to the Company Secretary at the Registered Office of the Company.

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

The information pertaining to conservation of energy, technology absorption, foreign exchange earnings and outgo required to be disclosed as per Section 217(l)(e) of the Companies Act, 1956, read with the Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988, is given in the annexure forming part of this Report.

CORPORATE GOVERNANCE:

The Report on the Corporate Governance Code along with a certificate from the Auditors of the Company regarding compliance of conditions of Corporate Governance as stipulated under Clause 49 of the Listing Agreements, as also the Management Discussion and Analysis Report, are annexed to this Report.

On behalf of the Board of Directors

S. N. Talwar Chairman

Mumbai, January 22, 2010.

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