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Directors Report of Wintac Ltd.

Mar 31, 2018

To the Members,

The Directors have pleasure in presenting their 28^th Annual Report on the business and operations of the Company for the Financial Year ended March 31, 2018.

1. Financial summary and Performance of the Company Rs. Lakhs

	For the year Ended 31st March 2017	For the year ended 31st March 2018
Gross Sales	3699.41	4524.45
Excise Duty	209.60	44.74
Net Sales	3489.81	4479.71
Other Income	110.50	71.88
Total Revenue	3600.31	4551.59
Total Expenditure	4229.18	5087.33
Operating Profit/(Loss)	(628.87)	(535.74)
Interest	99.65	89.91
Profit/(Loss) before Depreciation (PBDT)	(728.52)	(625.65)
Depreciation	363.18	354.65
Loss before exceptional expenditure	(1091.70)	(980.30)
Exceptional Expenditure	(118.87)	-
Profit/(Loss) before Tax	(972.83)	(980.30)
Deferred tax	(121.03)	9.24
Net Profit/(Loss) after Tax	(851.80)	(989.54)

2. Dividend & Transfer to Reserves

In view of the operating losses, no dividend is considered during the year under review and no amount is transferred to reserves.

3. Brief description of the Company''s working during the year

The net sales during the year under review was Rs. 4479.71 lakhs as compared to Rs. 3489.81 lakhs during the previous year, a growth of 28.36%. The net loss before tax during the current year was Rs. 980.30 lakhs as against the loss of Rs.1091.70 lakhs during the previous year, a decrease in loss by 10.20%. The export supplies to US Market was higher during the year for the two products resulting in increase in the sales turnover. However, the Company has not yet achieved the break-even level of sales and still reporting a net loss of Rs. 989.54 lakhs. The Management expects to achieve the break-even sales during the current financial year.

Your Directors are pleased to inform that USFDA Regulatory authorities inspected the Manufacturing Plant during November 2017 and the Inspection was successful. The Company expects the approval of few more products in the near future and expect a reasonable increase in the sales and turnaround in the operations during the current year.

In order to cater to the export US Market on approval of more ANDA''s, the Company proposes to set-up additional capacities for injectable and ophthalmic products during the current financial year at a cost of ^85 crores. The Management expects to fund this capital expenditure through borrowings temporarily.

4. Material changes and commitments affecting the financial position between the end of the financial year and date of report.

i. The Promoters of the Company have made a proposal to delist the equity shares of the Company from the Stock Exchange in compliance with SEBI (Delisting of Equity Shares) Regulations, 2009 and the Board of Directors of the Company at their meeting held on April 26, 2018 appointed Arihant Capital Markets Limited as Merchant bankers for conducting due diligence pursuant to Regulation 8(1A) of the SEBI Delisting Regulations. The proposal of delisting of equity shares of the company is subject to approval of shareholders.

ii. The Board of Directors have approved the proposal to effect slump sale of the pharmaceutical business undertaking of the Company to Par Formulations Pvt. Ltd., subject to all requisite approvals, specially shareholders'' approval and also subject to the successful completion of the delisting of equity shares by the Promoters.

iii. The Board of Directors have also approved a proposal to increase the borrowing limits of the Company upto Rs.130 crores subject to the approval of the shareholders for meeting the Capital Expenditure and working capital requirements of the Company.

4. The Company during the year has not provided any loans, guarantees or investments in terms section 186 of the Companies Act 2013.

5. There are no material orders by any Regulators, or Courts or Tribunals during the year impacting the going concern status and company''s operations in future.

7. Details in respect of adequacy of internal financial controls with reference to the Financial Statements.

The Company has adopted the policies and procedures for ensuring the orderly and efficient conduct of its business including adherence to the Company''s policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records and the timely preparation of reliable financial disclosures.

8. Fixed Deposits

The details relating to deposits, covered under Chapter V of the Companies Act, 2013:

a. accepted during the year; : Nil

b. remained unpaid or unclaimed as at the end of the year; : N.A.

c. whether there has been any default in repayment of deposits : N.A.

or payment of interest thereon during the year and if so,

number of such cases and the total amount involved-

d. at the beginning of the year; : Nil

e. maximum during the year; : N.A.

f. at the end of the year; : Nil

The Company has not accepted or renewed any deposits during the year which are not in compliance with the requirements of Chapter V of the Act.

9. Share Capital

During the year the Company has not issued any (i) equity shares with differential rights,

(ii) Sweat Equity Shares (iii) Employee Stock Options and (iv) the company has not provided money for purchase of its own shares by employees or by trustees for the benefit of employees.

10. Directors:

A. Changes in Directors and Key Managerial Personnel

Sri.S.Jayaprakash Mady, Managing Director resigned as the Managing Director of the Company and was relieved as the Managing Director on 29.05.2017. However Mr.S.Jayaprakash Mady continues to be a non-executive Director on the Board.

Sri.S.T.R.Mady, Chairman and Director retires by rotation and being eligible offers himself for re-appointment.

Mr.R.A.Thirumoorti and Mrs.Kavitha Krishnamoorthy, Independent Directors on the Board resigned on 11.08.2017.

Dr.K.Paranhothy and Ms.K.M.Ganga were appointed as Additional Directors (Independent) on the Board on 27.07.2017.

B. Declaration by Independent Director (s):

The Company has received necessary declaration from each independent director under Section 149 (7) of the Companies Act, 2013 that he/she meets the criteria of independence laid down in Section 149(6) of the Companies Act 2013.

C. Policy on Directors'' appointment and remuneration:

D. Formal Annual Evaluation

The Board evaluates the effectiveness of its functioning and that of the Committees and of individual Directors by seeking their inputs on various aspects of Board proceedings. This would cover the active participation of Directors at the Board and Committee meetings, monitoring of corporate governance practices and participation in the long-term strategic planning of the Company.

The Chairman of the board interacted with all the Independent Directors to obtain Directors'' inputs on effectiveness of Board/Committee processes and the Board considered and discussed the inputs received from the Directors. Further Independent Directors at their meeting, reviewed the performance of Board, Chairman and NonExecutive Directors.

11. The Board met six times during the financial year, the details of which are provided in the Corporate Governance Report that forms part of this Annual Report. The intervening gap between any two meetings was within the period prescribed by the Companies Act 2013.

12. Audit Committee - The Board has constituted an Audit Committee as required under Section 177 of the Companies Act 2013 and under the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015. The composition of the Audit Committee is as under:

Mr.Arun Eashwar - Chairman (Independent and non-executive Director)

Dr.K.Paranjothy - Member (Independent and non-executive Director)

Ms.K.M.Ganga - Member (Independent and non-executive Director)

Mr.S.T.R.Mady - Member (Non-executive Chairman)

The Company has established a vigil mechanism (Whistle Blower policy & Vigil Mechanism) for Directors and employees to report concerns of unethical behaviour, actual or suspected, fraud or violation of the Company''s code of conduct. The Whistle Blower Policy & Vigil Mechanism is disclosed on the Company''s website.

13. Nomination and Remuneration Committee and Stakeholders Relationship Committee

(i) the level and composition of remuneration is reasonable and sufficient to attract, retain and motivate senior management personnel required to run the operations successfully and (ii) remuneration is commensurate with the performance and efficiency and meets performance benchmarks. The Committee has been now entrusted with the responsibility of administering the ESOP Scheme which was approved by the shareholders and for which in-principle approval of the Stock Exchange has been received. However, the Committee has not allotted any ESOPs to the employees during the year 2017-18.

The Stakeholders Relationship Committee constituted by the Board reviews and ensures redressal of investor grievances. The Committee consists of four non-executive directors and the Chairman of the Committee is an Independent Director.

14. During the year the Company has not given any loans (other than loans to employees as per the policy of the Company), Guarantee, Security, Investments under section 186 of the Companies Act 2013.

15. Managerial Remuneration:

A. Details of the ratio of the remuneration of each director to the median employee''s remuneration and other details as required pursuant to Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014.

i. Ratio of the remuneration of Manager to the median remuneration of employees of the Company for the financial year - 01: 0.045

ii. Percentage of increase in the remuneration of:

a. Manager/C.O.O -23%

b. Company Secretary - 10 %

c. Chief Financial Officer - 15 %

d. Median Employee -17%

e. No. of employees on the rolls - 334

f. Average increase made in salaries of employees other than KMP - 16%

The remuneration is as per the remuneration policy of the Company.

B. There was no employee employed during the year or part of the year drawing remuneration in excess of the limits specified under Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014.

C. Corporate Governance - Pursuant to Clause 49 of the Listing Agreement with the Stock Exchange, a Management Discussion and Analysis statement, Corporate Governance Report and Auditors'' Certificate on the compliance of conditions of Corporate Governance forms part of the Annual Report.

16. Particulars of contracts or arrangements with related parties:

The particulars of contract or arrangements entered into by the Company with related parties referred to in sub-section (1) of section 188 of the Companies Act, 2013 including certain arm''s length transactions under third proviso thereto in the prescribed form AOC-2 is appended to the Board''s report.

17. Statutory Auditors - M/s.Ramadhyani & Co LLP, Chartered Accountants (Firm Registration No.002878S/S200021) were appointed as the Statutory Auditors of the Company for a term of 5 years from the conclusion of 27^th Annual General Meeting by the shareholders of the Company during the previous AGM held on 10.08.2017.

18. Secretarial Auditor- Parameshwar G Hegde, Practicing Company Secretary has been appointed to conduct the secretarial audit of the Company for the financial year 2017-18 as required under Section 204 of the Companies Act, 2013. The Secretarial Audit Report for FY 2017-18 is annexed to the Board''s Report and forms part of the Annual Report.

19. Extract of the annual return - In accordance with the provisions of Section 134(3) (a) of the Companies Act, 2013, extract of the annual return in the prescribed format is enclosed to the Board''s Report.

20. Conservation of energy, technology absorption and foreign exchange earnings and outgo.

The details of conservation of energy, technology absorption, foreign exchange earnings and outgo are as follows:

(A) Conservation of energy:

(i) The steps taken and its impact on conservation of energy;

- Installation of Automatic power factor correction panel.

- Steam condensate recovery with insulated pipelines.

- Rain water harvesting.

- Recycling of purified water from process machineries as infeed water to boiler.

(ii) The steps taken by the company for utilising alternate sources of energy;

- Installation of Bricket fired Boilers which is environmental friendly and uses brickets (agricultural by-product) as fuel instead of Diesel or Furnace Oil.

- Energy efficient motors for Air Handling Units.

(iii) The capital investment on energy conservation equipment: Nil

(B)Technology absorption:

(i) the efforts made towards technology absorption;

- Formulation development activities for Export market i.e., USA is carried out. ANDA for 9 products developed in house were filed for USA market during last year by our customer.

- ANDA for 4 products developed in house will be filed shortly for USA market.

- 4 products developed in house are ready for execution of exhibit batches for USA market.

- 7 products got USFDA approval and commercialised.

(ii) the benefits derived like product improvement, cost reduction, product development or import substitution;

- More Foreign Exchange revenue since the products are developed for export market.

- After approval of dossiers from respective Regulatory Agencies, regular commercial supplies is expected and ensure good growth in export business.

- Technical capability of the personnel strengthened to handle additional products.

(iii) in case of imported technology (imported during the last three years reckoned from the beginning of the financial year)-

- the details of technology imported : Nil

- the year of import : N.A.

- whether the technology been fully absorbed : N.A.

- if not fully absorbed, areas where absorption has not : N.A.

taken place, and the reasons thereof; and

(iv) the expenditure incurred on R & D Rs. 886.91 lakhs

Foreign Exchange Earnings : Rs. 3889.56 Lakhs

Foreign Exchange Outflows : Rs. 240.93 Lakhs

21. Directors'' Responsibility Statement

The Directors'' Responsibility Statement referred to in clause (c) of sub-section (3) of Section 134 of the Companies Act, 2013, state thatâ

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

b. the directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the company at the end of the financial year, of the profit and loss and cash-flow of the company for that period;

c. the directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities;

d. the directors have prepared the annual accounts 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 are operating effectively and

f. the directors have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems are adequate and operating effectively.

22. Acknowledgements

The Board places on record its appreciation of the continued cooperation and support received from the various government authorities, shareholders, business associates, medical profession, employees and bankers.

For and on behalf of the Board of Directors

Date : 23^rd May, 2018 (S.T.R.MADY)

Place : Bengaluru. Chairman

Mar 31, 2017

To the Members,

Your Directors have pleasure in presenting the Twenty Seventh Annual Report on the business and operations of the Company for the Financial Year ended March 31, 2017.

1. Financial summary and Performance of the Company Rs. Lakhs

	For the year Ended 31st March 2017	For the year ended 31st March 2016
Gross Sales	3489.81	2011.17
Excise Duty	209.60	201.32
Net Sales	3280.21	1809.85
Other Income	47.41	18.48
Total Revenue	3327.62	1828.33
Total Expenditure	3963.71	3159.08
Operating Profit/(Loss)	(636.09)	(1330.75)
Interest	134.92	77.50
Profit/(Loss)before Depreciation (PBDT)	(771.01)	(1408.25)
Depreciation	363.18	386.74
Loss before exceptional expenditure	(1134.19)	(1794.99)
Exceptional Expenditure	158.18	160.92
Profit/(Loss) before Tax	(976.01)	(1634.07)
Deferred tax	107.18	120.86
Net Profit/(Loss) after Tax	(868.83)	(1513.21)

2. Dividend & Transfer to Reserves

In view of the operating losses, no dividend is considered during the year under review and no amount is transferred to reserves.

3. Brief description of the Company''s working during the year

The net sales during the year under review was Rs. 3280.21 lakhs as compared to Rs. 1809.85 lakhs during the previous year, a growth of 81.24%. The net loss before tax during the current year was Rs. 976.01 lakhs as against the loss of Rs.1634.07 lakhs during the previous year, a decrease in loss by 40.27%. The export supplies to US Market commenced from October 2016 for the two products resulting in a considerable increase in the sales turnover. The Manufacturing Plant shut-down for the up gradation purposes during the first quarter and lower sales during the second quarter are the major factors contributing to the losses during the year. On commencement of export sales to US Market, the losses were reduced considerably during the third quarter and with the higher volume of sales, the fourth quarter operations were positive.

Your Directors are pleased to inform that USFDA Regulatory authorities inspected the Manufacturing Plant during second week of April 2017 and the Inspection was successful and there were No 483 observations. The Company expects the approval of few more products in the near future and expect a reasonable increase in the sales and profitability during the current year.

The Order Bank position of the Company for both domestic and export market is good and expect reasonable growth in turnover and to turnaround the operations during the financial year 2017-18.

In order to cater to the export US Market on approval of more ANDA''s, the Company proposes to set-up additional capacities for injectable and ophthalmic products during the current financial year.

There is no other material changes and commitments affecting the financial position between the end of the financial year and date of report.

4. The Company during the year has not provided any loans, guarantees or investments in terms section 186 of the Companies Act 2013.

5. There are no material orders by any Regulators or Courts or Tribunals during the year impacting the going concern status and company''s operations in future.

6. The Company has no subsidiaries. The company has investments in an Associate Company (Medispec Pharmaceutics Pvt. Ltd.) whose net worth has completely eroded and the investment in the Associate Company and the amount due from it has been fully provided for in the Books of the Company. The associate company has ceased to carry on any business since last three years and is now defunct and therefore the Company is not expecting any economic benefits from it. In the light of the same, separate consolidated financial statement incorporating the transactions of the associate company is not prepared as AS-27 "Financial Reporting of Interest in Associates and Joint Ventures" requires that the interest in such a JV has to be reported in accordance AS-13 ''Accounting for investments'' which is now being followed in the standalone financial statement. As the Company has no other subsidiary or associates, the present standalone financial statement represent the consolidated financial statement required to be prepared as per Schedule III of the Companies Act, 2013.

7. Details in respect of adequacy of internal financial controls with reference to the Financial Statements.

8. Fixed Deposits

The details relating to deposits, covered under Chapter V of the Companies Act, 2013:

a. accepted during the year; : Nil

b. remained unpaid or unclaimed as at the end of the year; : N.A.

c. whether there has been any default in repayment of deposits : N.A. or payment of interest thereon during the year and if so, number of such cases and the total amount involved-

d. at the beginning of the year; : Nil

e. maximum during the year; : N.A.

f. at the end of the year; : Nil

The Company has not accepted or renewed any deposits during the year which are not in compliance with the requirements of Chapter V of the Act.

9. Share Capital

During the year the Company has not issued any (i) equity shares with differential rights,

(ii) Sweat Equity Shares (iii) Employee Stock Options and (iv) the company has not provided money for purchase of its own shares by employees or by trustees for the benefit of employees.

10. Directors:

A. Changes in Directors and Key Managerial Personnel:

Sri.S.Jayaprakash Mady, whose term as Managing Director ended on 31^st January 2017 and was re-appointed as the Managing Director on 11^th February 2017. Sri.S.Jayaprakash Mady has resigned as the Managing Director of the Company from 30.05.2017. However, Mr.S.Jayaprakash Mady continues to be a non-executive Director on the Board.

Sri.S.Jayaprakash Mady, Director retires by rotation and being eligible offers himself for re-appointment.

The Board has appointed Sri.Sunil Gundewar as the Manager of the Company under section 196 & 197 of the Companies Act 2013 and his appointment and terms and conditions are subject to approval of the shareholders at the ensuing Annual General Meeting.

B. Declaration by Independent Director (s):

C. Policy on Directors'' appointment and remuneration:

The Company''s policy is to have an appropriate mix of executive and independent Directors to maintain the independence of the Board, and separate its functions of governance and management. As on March 31, 2017, the Board consists of 5 Members, one of them is the Managing Director and three are independent directors. However, the Managing Director has resigned as the Managing Director effective from 30.05.2017 and consequently, there is no executive Director on the Board from that date.

D. Formal Annual Evaluation:

11. The Board met four times during the financial year, the details of which are provided in the Corporate Governance Report that forms part of this Annual Report. The intervening gap between any two meetings was within the period prescribed by the Companies Act 2013.

12. Audit Committee - The Board has constituted an Audit Committee as required under Section 177 of the Companies Act 2013 and under the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015. The composition of the Audit Committee is as under:

Mr.Arun Eashwar - Chairman (Independent and non-executive Director)

Mr.R.A.Thirumoorti - Member (Independent and non-executive Director)

Ms.Kavitha Krishnamoorti - Member (Independent and non-executive Director)

Mr.S.T.R.Mady - Member (Non-executive Chairman)

13. Nomination and Remuneration Committee and Stakeholders Relationship Committee

The Board has constituted a Nomination and Remuneration Committee. This Committee consists of four non-executive Directors and three of them are Independent Directors. The Chairman of the Committee is an Independent Director. The role of the Committee is to identify persons who are qualified to become Directors, recommend to the Board their appointment. The Committee also recommends to the Board a policy relating to the remuneration for the Directors and Key Managerial personnel. As part of the policy Company strives to ensure that (i) the level and composition of remuneration is reasonable and sufficient to attract, retain and motivate senior management personnel required to run the operations successfully and (ii) remuneration is commensurate with the performance and efficiency and meets performance benchmarks. The Committee has been now entrusted with the responsibility of administering the ESOP Scheme which is subject to the approval of shareholders in the ensuing AGM.

14. During the year the Company has not given any loans (other than loans to employees as per the policy of the Company), Guarantee, Security, Investments under section 186 of the Companies Act 2013.

15. Managerial Remuneration:

Details of the ratio of the remuneration of each director to the median employee''s remuneration and other details as required pursuant to Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014.

Ratio of the remuneration of Managing Director to the median remuneration of employees of the Company for the financial year - N.A.

Percentage of increase in the remuneration of:

Managing Director - Nil

Company Secretary - 8.95%

Chief Financial Officer - 9.02%

Median Employee - 31.72%

No. of employees on the rolls - 291

Average increase made in salaries of employees other than KMP - 10.55 %

The remuneration is as per the remuneration policy of the Company.

There was no employee employed during the year or part of the year drawing remuneration in excess of the limits specified under Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014.

Corporate Governance - Pursuant to Clause 49 of the Listing Agreement with the Stock Exchange, a Management Discussion and Analysis statement, Corporate Governance Report and Auditors'' Certificate on the compliance of conditions of Corporate Governance forms part of the Annual Report.

16. Particulars of contracts or arrangements with related parties: The particulars of contract or arrangements entered into by the Company with related parties referred to in sub-section (1) of section 188 of the Companies Act, 2013 including certain arm''s length transactions under third proviso thereto in the prescribed form AOC-2 is appended to the Board''s report.

17. Statutory Auditors - M/s. Rao & Swami, Chartered Accountants and the Auditors of the Company retire at the forthcoming Annual General Meeting and are not eligible for reappointment pursuant to provisions of Section 139(2) of the Companies Act 2013. Hence the Board of Directors have recommended the appointment of M/s. Ramadhyani & Co LLP, Chartered Accountants (Firm Registration No.002878S/S200021) as Statutory Auditors of the Company for a term of 5 years from the conclusion of 27^th Annual General Meeting to the shareholders of the Company for approval

18. Secretarial Auditor - Parameshwar G Hegde, Practicing Company Secretary has been appointed to conduct the secretarial audit of the Company for the financial year 2016-17 as required under Section 204 of the Companies Act, 2013. The Secretarial Audit Report for FY 2016-17 is annexed to the Board''s Report and forms part of the Annual Report.

19. Extract of the annual return - In accordance with the provisions of Section 134(3) (a) of the Companies Act, 2013, extract of the annual return in the prescribed format is enclosed to the Board''s Report.

20. Conservation of energy, technology absorption and foreign exchange earnings and outgo.

The details of conservation of energy, technology absorption, foreign exchange earnings and outgo are as follows:

(A) Conservation of energy:

(i) The steps taken and its impact on conservation of energy;

- Installation of Automatic power factor correction panel.

- Steam condensate recovery with insulated pipelines.

- Rain water harvesting.

- Recycling of purified water from process machineries as in feed water to boiler.

(ii) The steps taken by the company for utilizing alternate sources of energy;

- Installation of Bricket fired Boilers which is environmental friendly and uses brickets (agricultural by-product) as fuel instead of Diesel or Furnace Oil.

- Energy efficient motors for Air Handling Units.

(iii) The capital investment on energy conservation equipment: Nil

(B) Technology absorption:

(i) the efforts made towards technology absorption;

- Formulation development activities for Export market i.e., USA and Europe is carried out. ANDA for 1 product developed in house were filed for USA market during last year by our customer.

- ANDA for 6 products developed in house will be filed shortly for USA market.

- 3 products got USFDA approval and commercialized.

(ii) the benefits derived like product improvement, cost reduction, product development or import substitution;

- More Foreign Exchange revenue since the products are developed for export market.

- After approval of dossiers from respective Regulatory Agencies, regular commercial supplies is expected and ensure good growth in export business.

- Technical capability of the personnel strengthened to handle additional products.

(iii) in case of imported technology (imported during the last three years reckoned from the beginning of the financial year)-

(a) the details of technology imported : Nil

(b) the year of import : N.A.

(d) if not fully absorbed, areas where absorption has not : N.A. taken place, and the reasons thereof; and

(iv) the expenditure incurred on R & D : Rs. 596.22 Lakhs

Foreign Exchange Earnings : Rs. 2148.51 Lakhs

Foreign Exchange Outflows : Rs. 581.37 Lakhs

21. Directors'' Responsibility Statement

The Directors'' Responsibility Statement referred to in clause (c) of sub-section (3) of Section 134 of the Companies Act, 2013, state thatâ

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 directors have prepared the annual accounts 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 are operating effectively and

f. the directors have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems are adequate and operating effectively.

22. Acknowledgements

For and on behalf of the Board of Directors

Date : 29.05.2017 (S.T.R.MADY)

Place : Bangalore. Chairman

Mar 31, 2016

DIRECTORS'' REPORT

To the Members,

The Directors have pleasure in presenting the Twenty Sixth Annual Report on the business and operations of the Company for the Financial Year ended March 31, 2016.

1. Financial summary and Performance of the Company Rs. Lakhs

	For the year ended 31^st March 2015	For the year Ended 31^st March 2016
Gross Sales	3058.08	2011.17
Excise Duty	110.84	201.32
Net Sales	2947.24	1809.85
Other Income	13.66	18.48
Total Revenue	2960.90	1828.33
Total Expenditure	3146.87	3162.63
Operating Profit/(Loss)	(185.97)	(1334.30)
Interest	6.73	73.95
Profit/(Loss)before Depreciation (PBDT)	(192.70)	(1408.25)
Depreciation	363.70	386.74
Loss before exceptional expenditure	(556.40)	(1794.99)
Exceptional Expenditure	311.73	(160.92)
Extraordinary Income	101.60	-
Profit/(Loss) before Tax	(766.53)	(1634.07)
Deferred tax	151.05	120.86
Net Profit/(Loss) after Tax	(615.48)	(1513.21)

2. Dividend & Transfer to Reserves

In view of the operating losses, no dividend is considered during the year under review and no amount is transferred to reserves.

3. Brief description of the Company''s working during the year

The total revenue from the operations during the year under review was Rs. 1809.85 lakhs as compared to Rs. 2947.25 lakhs during the previous year, a decline of 38.59%. The net loss before tax during the current year was Rs. 1634.07 lakhs as against the loss of Rs.766.53 lakhs during the previous year, an increase in loss by 113%. The decline in revenue is due to shut-down of the manufacturing plant for nearly four months (from January 2016 to April 2016) for up gradation purposes before the commencement of commercial production to the Regulated markets. Further, there was also a reduced off-take from couple of customers for Ophthalmic Products during the year. This has resulted in substantial reduction of turnover during the year and as there was no corresponding reduction in expenses, the losses during the year was high at Rs. 1634 lakhs. Although GAVIS Pharma has received the approval of ANDA''s for some products, the commercial manufacturing could not be commenced due to shut-down of the Plant. The commercial Manufacturing operations for both domestic and export market were resumed in May 2016. The Order Bank position of the Company for both domestic and export market is good and expect the operations to turnaround during the Second Quarter of Financial year 2016-17.

There is no other material changes and commitments affecting the financial position between the end of the financial year and date of report.

4. The Company during the year has not provided any loans, guarantees or investments in terms section 186 of the Companies Act 2013.

5. There are no material orders by any Regulators, or Courts or Tribunals impacting the going concern status and company''s operations in future during the year.

6. The Company has no subsidiaries. The company has investments in an Associate Company (Medispec Pharmaceuticals Pvt. Ltd.) whose net worth has completely eroded and the investment in the Associate Company and the amount due from it has been fully provided for in the Books of the Company. The associate company has ceased to carry on any business since last two years and is now defunct and therefore the Company is not expecting any economic benefits from it. In the light of the same, separate consolidated financial statement incorporating the transactions of the associate company is not prepared as AS-27 "Financial Reporting of Interest in Associates and Joint Ventures" requires that the interest in such a JV has to be reported in accordance AS-13 ''Accounting for investments'' which is now being followed in the standalone financial statement. As the Company has no other subsidiary or associates, the present standalone financial statement represent the consolidated financial statement required to be prepared as per Schedule III of the Companies Act, 2013.

7. Details in respect of adequacy of internal financial controls with reference to the Financial Statements.

8. Fixed Deposits

The details relating to deposits, covered under Chapter V of the Act :

a. accepted during the year; : Nil

b. remained unpaid or unclaimed as at the end of the year; : Nil

c. whether there has been any default in repayment of deposits : No

or payment of interest thereon during the year and if so, number of such

cases and the total amount involved;

d. at the beginning of the year; : Rs. 33.55 lakhs

e. maximum during the year; : Rs. 33.55 lakhs

f. at the end of the year; : Nil

The Company has not accepted or renewed any deposits during the year which are not in compliance with the requirements of Chapter V of the Act.

9. Share Capital: During the year the Company has not issued any (i) equity shares with differential rights, (ii) Sweat Equity Shares (iii) Employee Stock Options and (iv) the company has not provided money for purchase of its own shares by employees or by trustees for the benefit of employees.

10. Directors:

A. Changes in Directors and Key Managerial Personnel

Sri.S.T.Raghavendra Mady retires by rotation and being eligible offers himself for re-appointment.Sri.S.Jayaprakash Mady''s tenure as Managing Director ended on 31^st January 2016 and the Board re-appointed him as the Managing Director of the Company for another term of one year effective from 01.02.2016 and is also subject to approval of the Shareholders at the ensuing Annual General Meeting.

B. Declaration by Independent Director(s):

The Company has received necessary declaration from each independent director under Section 149(7) of the Companies Act, 2013 that he/she meets the criteria of independence laid down in Section 149(6) of the Companies Act 2013.

C. Policy on Directors'' appointment and remuneration:

D. Formal Annual Evaluation

11. The Board met eight times during the financial year, the details of which are provided in the Corporate Governance Report that forms part of this Annual Report. The intervening gap between any two meetings was within the period prescribed by the Companies Act 2013.

12. Audit Committee-The Board has constituted an Audit Committee as required under Section 177 of the Companies Act 2013 and under the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015. The composition of the Audit Committee is as under:

i. Mr.Arun Eashwar - Chairman (Independent and non-executive Director)

ii. Mr.R.A.Thirumoorti - Member (Independent and non-executive Director)

iii. Ms.Kavitha Krishnamoorti - Member (Independent and non-executive Director)

iv. Mr.S.T.R.Mady - Member (Non-executive Chairman)

13. Nomination and Remuneration Committee and Stakeholders Relationship Committee

14. During the year the Company has not given any loans (other than loans to employees as per the policy of the Company), Guarantee, Security, Investments under section 186 of the Companies Act 2013.

15. Managerial Remuneration:

i. Ratio of the remuneration of Managing Director to the median remuneration of employees of the Company for the financial year - 1:0.10

ii. Percentage of increase in the remuneration of:

a. Managing Director - Nil

b. Company Secretary - 4.69%

C. Chief Financial Officer - 26.47%

d. Median Employee - 43.49%

e. No. of employees on the rolls - 262

f. Average increase made in salaries of employees other than KMP - 9.55%

g. Ratio of highest paid Director to that of employees who are not

Directors but received remuneration in excess of highest paid Director -1:3

Although the performance of the company was not satisfactory during the year under review, the increase in remuneration of employees was average and is as per Industry Standards. The average salary increase was essential to retain the efficient employees including the Key Managerial Personnel.

There is no variable component in the remuneration availed by the Director or KMP. The remuneration is as per the remuneration policy of the Company.

Market capitalization of the Company was decreased by 11.42% to Rs. 19,447.03 Lakhs as of 31.03.2016 from Rs. 21,953.09 lakhs as of March 31, 2015. The price earnings ratio for March 31, 2016 as well as for March 31, 2015 is not applicable as EPS is negative for these periods at Rs. -15.10 and Rs. -6.14 respectively. The closing price of the Company''s equity shares on the BSE as of March 31, 2016 was Rs.194.00 representing a 487.88% increase over the previous Rights Issue price.

C. Corporate Governance - Pursuant to Regulation 34(2)(a) of SEBI (LODR) Regulation, 2015, a Management Discussion and Analysis statement, Corporate Governance Report and Auditors'' Certificate on the compliance of conditions of Corporate Governance forms part of the Annual Report.

16. Particulars of contracts or arrangements with related parties:

17. Statutory Auditors -_M/s.Rao & Swami, Chartered Accountants and the Auditors of the Company retire at the forthcoming Annual General Meeting and being eligible, are recommended for appointment for a period of one year to hold office up to the conclusion of 26^th Annual General Meeting pursuant to Section 139 of the Companies Act, 2013.

18. Secretarial Auditor - Parameshwar G Hegde, Practicing Company Secretary has been appointed to conduct the secretarial audit of the Company for the financial year 2015-16 as required under Section 204 of the Companies Act, 2013. The Secretarial Audit Report for FY 2015-16 is annexed to the Board''s Report and forms part of the Annual Report.

20. Conservation of energy, technology absorption and foreign exchange earnings and outgo.

The details of conservation of energy, technology absorption, foreign exchange earnings and outgo are as follows:

(A) Conservation of energy:

(i) The steps taken and its impact on conservation of energy;

- Installation of Automatic power factor correction panel.

- Steam condensate recovery with insulated pipelines.

- Rain water harvesting.

- Recycling of purified water from process machineries as in feed water to boiler.

(ii) The steps taken by the company for utilizing alternate sources of energy;

- Installation of Bricket fired Boilers which is environmental friendly and uses brickets (agricultural by-product) as fuel instead of Diesel or Furnace Oil.

- Energy efficient motors for Air Handling Units.

(iii) The capital investment on energy conservation equipment: Nil

(B) Technology absorption:

(i) the efforts made towards technology absorption;

- Formulation development activities for Export market i.e., USA, Canada, Australia and Europe is carried out. ANDA for 5 products developed in house were filed for USA market during last year by our customers.

- ANDA for 3 products developed in house will be filed shortly for USA market.

- 6 products developed in house are ready for execution of exhibit batches for USA market.

- 3 products got USFDA approval and ready for commercialization.

- Site transfer of one product meant for USA Market is being carried out and will be completed during the current year.

- Technology transfer documents received for two products.

(ii) the benefits derived like product improvement, cost reduction, product development or import substitution;

- More Foreign Exchange revenue since the products are developed for export market.

- After approval of dossiers from respective Regulatory Agencies, regular commercial supplies is expected and ensure good growth in export business.

- Technical capability of the personnel strengthened to handle additional products.

(iii) in case of imported technology (imported during the last three years reckoned from the beginning of the financial year)-

(a) the details of technology imported : Nil

(b) the year of import : N.A.

(d) if not fully absorbed, areas where absorption has not : N.A.

taken place, and the reasons thereof; and

(iv) the expenditure incurred on R & D : Rs. 643.11 lakhs

Foreign Exchange Earnings : Rs. 757.95 Lakhs

Foreign Exchange Outflows : Rs. 314.88 Lakhs

21. Directors'' Responsibility Statement

The Directors'' Responsibility Statement referred to in clause (c) of sub-section (3) of Section 134 of the Companies Act, 2013, state thatâ

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 directors have prepared the annual accounts 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 are operating effectively and

f. the directors have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems are adequate and operating effectively.

22. Acknowledgements

For and on behalf of the Board of Directors

Date : 28^th May, 2016 (S.T.R.MADY)

Place : Bengaluru. Chairman

Mar 31, 2015

Dear Members,

Your Directors have pleasure in presenting the Twenty Fifth Annual Report together with the Audited Accounts for

the Financial Year ended March 31,2015.

1. Financial Summary and Performance of the Company

Rs. Lakhs

For the For the year ended year ended 31st March 31st March 2014 2015

Gross Sales 3269.95 3058.08

Excise Duty 222.19 110.84

Net Sales 3047.76 2947.24

Other Income 58.45 13.66

Total Revenue 3106.21 2960.90

Total Expenditure 3188.23 3146.87

Operating Profit/(Loss) (82.02) (185.97)

Interest 27.87 6.73

Profit/(Loss)before Depreciation (PBDT) (109.89) (192.70)

Depreciation 187.97 363.70

Loss before exceptional expenditure (297.86) (556.40)

Exceptional expenditure 349.16 311.73

Extraordinary Income - 101.60

Profit/(Loss) before Tax (647.02) (766.53)

Deferred tax 52.42 151.05

Net Profit/(Loss) after Tax (699.44) (615.48)

2. Dividend & Transfer to Reserves

In view of the operating losses, no dividend is considered during the year under review and no amount is transferred to reserves.

3. Brief description of the Company's working during the year

The total revenue from the operations during the current year was Rs. 2960.90 lakhs as compared to Rs. 3106.21 lakhs during the previous year, a decline of 4.67%. The net loss before exceptional and extraordinary items during the current year was Rs. 556.40 lakhs as against the loss of Rs. 297.86 lakhs during the previous year. The increase in the depreciation expenses by Rs. 175 lakhs as compared to the previous year, was one of the reason for the increase in the operating losses and this increase was due to change in method of computing the depreciation as per the New Companies Act, 2013. Further the delay in commencement of export sales subsequent to the revocation of warning letter by USFDA, was also another reason for the continued losses. The total net loss, after the exceptional expense (Rs. 312 lakhs) and extraordinary income of Rs. 101 lakhs, during the year was Rs. 766.53 lakhs as compares to Rs. 647.02 lakhs during the previous year. The major exceptional expense during year was write off of inventory of Rs. 200 lakhs and depreciation of fixed assets of Rs. 100 lakhs which have completed the useful life prior to 01.04.2014 as per the provisions of new Companies Act 2013. The extraordinary profit of Rs. 101.60 lakhs was on sale of Oncology Business during the year. The net loss for the year, after the recognition of the deferred tax asset, was Rs. 615.48 lakhs as compared to Rs. 699.44 lakhs during the previous year. Your Directors are hopeful of commencement of export business to US Market during the current year and turn around the operations.

There are no material changes and commitments affecting the financial position between the end of the financial year and the date of the report.

4. The Company during the year has not provided any loans, guarantees or investments in terms section 186 of the Companies Act 2013.

5. There are no material orders by any Regulators or Courts or Tribunals impacting the going concern status and company's operations in future during the year.

6. The Company has no subsidiary/Joint Ventures/Associate Companies.

7. The Company has developed and implemented a risk management policy for identification of elements of risk, if any.

8. Details in respect of adequacy of internal financial controls with reference to the Financial Statements.

The Company has adopted the policies and procedures for ensuring the orderly and efficient conduct of its business including adherence to the Company's policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records and the timely preparation of reliable financial disclosures.

9. Fixed Deposits

The details relating to fixed deposits, covered under Chapter V of the Companies Act, 2013 :-

a. accepted during the year; : Nil

b. remained unpaid or unclaimed as at : Nil the end of the year;

c. whether there has been any default in : No repayment of deposits or payment of interest thereon during the year and if so, number of such cases and the total amount involved-

d. at the beginning of the year; : Rs. 96.76 lakhs

e. maximum during the year; : Rs. 96.76 lakhs

f. at the end of the year; : Rs. 33.55 lakhs

The Company has not accepted or renewed any deposits during the year which are not in compliance with the requirements of Chapter V of the Act.

10. Share Capital : During the year the Company has not issued any (i) equity shares with differential rights, (ii) Sweat Equity Shares (iii) Employee Stock Options and (iv) during the year the company has not provided money for purchase of its own shares by employees or by trustees for the benefit of employees.

11. RIGHTS ISSUE : Pursuant to the approval of Shareholders on 9th May 2014 through the Postal Ballot for the Rights Issue of Shares up to Rs. 35 crores, the Company had filed the draft Offer Document with SEBI and has received the final observations. The Board of Directors are yet to take a final decision on the Rights Issue pending the finalisation of new Project Proposal.

12. Directors:

A. Changes in Directors and Key Managerial Personnel

During the year Dr.K.Paranjothy, an Independent Director, resigned as a Director of the Company due to personal reasons w.e.f. 23.08.2014

The Board appointed Ms.Kavitha Krishnamoorthy as a Non-Executive Independent Director of the Company w.e.f.13.10.2014 who shall hold office till the conclusion of this Annual General Meeting. Ms.Kavitha Krishnamoorthy is also proposed to be appointed as Independent Director of the Company pursuant to the Provisions of the Companies Act 2013.

Sri.S.T.Raghavendra Mady retires by rotation and being eligible offers himself for re-appointment.

Mr.V.S.Krupendra was appointed as the Chief Financial Officer of the Company with effect from 01.02.2015.

B. Declaration by Independent Director(s):

The Company has received necessary declaration from each independent director under Section 149(7) of the Companies Act, 2013 that she meets the criteria of independence laid down in Section 149(6) of the Companies Act 2013.

C. Policy on Directors' appointment and remuneration:

The Company's policy is to have an appropriate mix of executive and independent Directors to maintain the independence of the Board, and separate its functions of governance and management. As on March 31, 2015, the Board consists of 5 Members, one of whom is the Managing Director and three are independent directors.

D. Formal Annual Evaluation

The Board, in the process of annual evaluation of the performance of the Board of Directors and Committees and individual Directors, has considered the (i) Issues considered in the Board Meeting including the review of operations/business, budgets, capex requirements, financial statements, funding options, (ii) the decisions of the Board, (iii) number of meetings, (iv) level of Compliances with various Regulations, (v) the attendance of Directors and participation of individual Directors in forming the opinion/decisions of the Board, etc.

13. The Board met six times during the financial year, the details of which are provided in the Corporate Governance Report that forms part of this Annual Report. The intervening gap between any two meetings was within the period prescribed by the Companies Act 2013.

14. Audit Committee : The Board has constituted an Audit Committee as required under Section 177 of the Companies Act 2013 and under the Listing Agreement with stock exchange.

The composition of the Audit Committee is as under:

i. Mr.Arun Eashwar - Chairman (Independent and non-executive Director)

ii. Mr.R.A.Thirumoorti - Member (Independent and non-executive Director)

iii. Ms.Kavitha Krishnamoorthy - Member (Independent and non-executive Director)

iv. Mr.S.T.R.Mady - Member (Non-executive Chairman)

The Company has established a vigil mechanism (Whistle Blower policy & Vigil Mechanism) for Directors and employees to report concerns of unethical behaviour, actual or suspected, fraud or violation of the Company's code of conduct. The Whistle Blower Policy & Vigil Mechanism is disclosed on the Company's website.

15. Nomination and Remuneration Committee and Stakeholders Relationship Committee

The Board has constituted a Nomination and Remuneration Committee. This Committee consists of four nonexecutive Directors and three of them are Independent Directors. The Chairman of the Committee is an Independent Director. The role of the Committee is to identify persons who are qualified to become Directors, recommend to the Board their appointment and carry out evaluation of every director's performance. The Committee also recommends to the Board a policy relating to the remuneration for the Directors and Key Managerial personnel. The policy provides that (i) the level and composition of remuneration is reasonable and sufficient to attract, retain and motivate senior management personnel required to run the operations successfully, (ii) remuneration is commensurate with the performance and efficiency and meets performance benchmarks.

The Stakeholders Relationship Committee constituted by the Board reviews and ensures redresal of investor grievances. The Committee consists of four non-executive directors and the Chairman is an Independent Director.

16. During the year the Company has not given any loans (other than loans to employees as per the policy of the Company), Guarantee, Security, Investments under section 186 of the Companies Act 2013.

17. Managerial Remuneration:

A. Details of the ratio of the remuneration of each director to the median employee's remuneration and other details as required pursuant to Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014.

i. Ratio of the remuneration of - 12.80 : 1 Managing Director to the median remuneration of employees of the Company for the financial year

ii. Percentage of increase in the remuneration of:

a. Managing Director - Nil

b. Company Secretary - 8.54%

c. Chief Financial Officer - 26.32%

d. Median Employee - 11.82%

e. No. of employees on the rolls - 235

f. Average increase made in salaries - 23.27 % of employees other than KMP

g. Ratio of highest paid Director to that of employees who are not Directors but received remuneration in - 1 : 1.005 excess of highest paid Director

Although the performance of the company was not satisfactory during the year under review, the increase in remuneration of employees was average and is as per Industry Standards. The average salary increase was essential to retain the efficient employees including the Key Managerial Personnel.

There is no variable component in the remuneration availed by the Director or KMP. The remuneration is as per the remuneration policy of the Company.

Market capitalisation of the Company was increased by 141.86% to Rs. 21953.09 Lakhs as of 31.03.2015 from Rs.9076.95 lakhs as of March 31,2014. The price earning ratio was -35.67 as of March 31,2015 which was a decrease of 175% as compared to March 31,2014. The closing price of the Company's equity shares on the BSE as of March 31,2015 was Rs. 219.00 representing a 563.64% increase over the Rights Issue price.

B. There was no employee employed during the year or part of the year drawing remuneration in excess of the limits specified under Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014.

C. Corporate Governance - Pursuant to Clause 49 of the Listing Agreement with the Stock Exchange, a Management Discussion and Analysis statement, Corporate Governance Report and Auditors' Certificate on the compliance of conditions of Corporate Governance forms part of the Annual Report.

18. Particulars of contracts or arrangements with related parties: The particulars of contract or arrangements entered into by the Company with related parties referred to in sub-section (1) of section 188 of the Companies Act, 2013 including certain arm's length transactions under third proviso thereto in the prescribed form AOC-2 is appended to the Board's report.

19. Statutory Auditors: M/s.Rao & Swami, Chartered Accountants and the Auditors of the Company retire at the forthcoming Annual General Meeting and being eligible, are recommended for appointment for a period of one year to hold office upto the conclusion of 26th Annual General Meeting pursuant to Section 139 of the Companies Act, 2013.

20. Secretarial Auditor : Parameshwar G Hegde, Practicing Company Secretary was appointed to conduct the secretarial audit of the Company for the financial year 2014-15 as required under Section 204 of the Companies Act, 2013. The Secretarial Audit Report for FY 2014-15 is annexed to the Board's Report and forms part of the Annual Report.

21. Extract of the annual return : In accordance with the provisions of Section 134(3)(a) of the Companies Act, 2013 an extract of the annual return in the prescribed format is enclosed to the Board's Report.

22. Conservation of energy, technology absorption and foreign exchange earnings and outgo.

The details of conservation of energy, technology absorption, foreign exchange earnings and outgo are as follows:

(A) Conservation of energy:

(i) The steps taken and its impact on conservation of energy;

* Installation of Automatic power factor correction panel.

* Steam condensate recovery with insulated pipelines.

* Rain water harvesting.

* Recycling of purified water from process machineries as infeed water to boiler.

(ii) The steps taken by the company for utilising alternate sources of energy;

* Installation of Bricket fired Boilers which is environmental friendly and uses brickets (agricultural by-product) as fuel instead of Diesel or Furnace Oil.

* Energy efficient motors for Air Handling Units.

(iii) The capital investment on energy conservation equipments: Rs. 9.25 Lakhs

(B) Technology absorption:

(i) the efforts made towards technology absorption;

* Expansion of Formulation development department is done to bring more focus on product development for registering the Products in all Regulated Markets.

* Formulation development activities for Domestic as well as Export market i.e., USA, Canada, Australia and Europe is carried out. ANDA for 20 products developed in house were filed for USA market during last year by our customers.

* Site transfer of two products meant for USA Market is being carried out and will be completed during the current year.

(ii) the benefits derived like product improvement, cost reduction, product development or import substitution;

* More Foreign Exchange revenue since the products are developed for export market.

* After approval of dossiers from respective Regulatory Agencies, regular commercial supplies is expected and ensure good growth in export business.

* Technical capability of the personnel strengthened to handle additional products.

(iii) in case of imported technology (imported during the last three years reckoned from the beginning of the financial year)-

(a) the details of technology imported : Nil

(b) the year of import : N.A.

(c) whether the technology been fully absorbed : N.A.

(d) if not fully absorbed, areas where : N.A. absorption has not taken place, and the reasons thereof ;

(iv) the expenditure incurred on R & D : Rs. 413.07 lakhs

(C) Foreign exchange earnings and Outgo:

Foreign Exchange Earnings : Rs. 845.63 Lakhs

Foreign Exchange Outflows : Rs. 636.77 Lakhs

23. Directors' Responsibility Statement

The Directors' Responsibility Statement referred to in clause (c) of sub-section (3) of Section 134 of the Companies Act, 2013, state thatÂ

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

b. the directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the company at the end of the financial year, of the profit and loss and cash-flow of the company for that period;

c. The directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities;

d. The directors have prepared the annual accounts 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 are operating effectively and

f. The directors have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems are adequate and operating effectively.

24. Acknowledgments

The Board places on record its appreciation of the continued cooperation and support received from the various government authorities, shareholders, business associates, medical profession, employees, depositors and bankers.

For and on behalf of the Board of Directors

Date : 22nd May, 2015 S.T.R.MADY Place : Bengaluru. CHAIRMAN

Mar 31, 2013

To the Shareholders

The Directors have pleasure in presenting the Twenty-third Annual Report together with the Audited Accounts for the year ended 31s1 March, 2013:

Financial Performance Rs.Lakhs

For the year ended For the year ended 31st March 2012 31st March 2013

Gross Sales '' 2593.41 2268.64

Excise Duty 166.53 180.16

Net Sales 2426.88 2088.48

Other Income 16.34 35.11

Total Revenue 2443.22 2123.59

Total Expenditure 2453.70 2393.38

Operating Profit/(Loss) (10.48) (269.79)

Interest 299.91 282.10

Profit/(Loss)before Depreciation (PBDT) (310.39) (551.89)

Depreciation 196.12 194.11

Loss before exceptional expenditure (506.51) (746.00)

Exceptional/Extraordinary expenditure 1.19 1032.38

Profit/(Loss) before Tax (507.70) (1778.38)

Deferred tax 30.64 (58.23)

Net Profit/(Loss) after Tax (538.34) (1720.15)

Operations

The operating results of the Company during the year was not satisfactory due to stoppage of sales to US Market and higher operating expenses. The net sales were lower by about 14% at Rs. 2088.48 lakhs as compared to Rs. 2426.88 lakhs during the previous year. The net loss during the year under review was also higher at Rs. 1720.15 lakhs as compared to a net loss of Rs. 538.34 lakhs during the previous year.

In view of certain Regulatory issues with US Regulatory Authorities (USFDA), the commercial supplies to US Market were suspended and USFDA had issued a Warning Letter. The Company has filed necessary compliance reports and the same has been accepted by the USFDA and inspection is expected to be conducted shortly.

Your Company undertook a major restructuring exercise during the year in view of the higher borrowings, suspension of export supplies due to regulatory issues and consequential higher operating losses. Your Company entered into a strategic alliance with GAVIS Pharma LLC, USA. GAVIS Pharma is a US based Pharmaceutical Company promoted by Dr.Veerappan Subramanian, a person of Indian Origin and based in United States.

Dr.Veerappan Subramanian, promoter of GAVIS Pharma, is a seasoned pharmaceutical scientist and entrepreneur with a track record of starting, developing, managing and turning around pharmaceutical companies in USA. He has over forty years of experience in the generic pharmaceutical industry. GAVIS Group of Companies lead by their executive team have excellent end-to-end expertise in all aspects of pharmaceutical business in the US and all regulated markets. Novel Laboratories, GAVIS''s development and manufacturing arm, has expertise in product identification, formulation development, ANDA Filing, Manufacturing, Quality Control, Compliance and Regulatory affairs. Novel Laboratories has successfully developed and filed more than 50 ANDAs. GAVIS Pharmaceuticals, the marketing arm of GAVIS group markets and distributes products to all channels of trade including chain drug stores, hospitals, long term care facilities, etc practically covering the entire US Market.

GAVIS Pharma''s association would tremendously benefit the Company in the areas of Regulatory Compliances, Product Development and front-end marketing activities apart from infusion of funds as equity capital into the Company. The Company, pursuant to the Shareholders Approval at the EGM held on 20th December 2012 and other Regulatory Approvals allotted 40,00,000 Equity Shares of Rs. 10 each at a price of Rs. 100 per share aggregating to Rs. 40 crores. The equity funds were utilized for the intended purposes i.e., for repayment of debts, redemption of preference shares, capital expenditure and working capital purposes.

Directors

Dr.C.Prakash and Dr.K.Nagarajan resigned as Directors on 31st January 2013. Dr.K.Paranjothy, Mr.Arun Eashwar and Mr.Ra Thirumoorti joined the Board on 6th December 2012, 31st January 2013 and 11th July 2013 respectively. Mr.K.P.Murali joined the Board as Additional Director and resigned on 11th July 2013. The resolutions for the appointment of Dr.K.Paranjothy, Mr.Arun Eashwar and Mr.Ra Thirumoorthi as Directors of the Company have been proposed for approval of the Members.

Mr.S.T.R.Mady, Chairman retires by rotation and being eligible offer himself for re-appointment.

Mr.S.Jayaprakash Mady, Managing Director was re-appointed as the Managing Director of the Company for a further period of three years effective from 1st February 2013.

Corporate Governance

Pursuant to Clause 49 of the Listing Agreement with the Stock Exchanges, a Management Discussion and Analysis statement, Corporate Governance Report and Auditors'' Certificate on the compliance of conditions of Corporate Governance are made a part of the Annual Report.

Preferential Issue of Equity Shares

The Company, pursuant to the Shareholders Special Resolution passed at the extra ordinary general meeting held on 20th December 2012 and FIPB approval, allotted 40,00,000 Equity Shares of Rs.10 each at a price of Rs.100 each aggregating to Rs. 40.00 crores to GAVIS Pharma LLC, USA on 31st January 2013. The issue proceeds were utilized for the intended use i.e., (i) Repayment of all bank borrowings, (ii) Redemption of preference Shares, (iii) Procurement of capital assets and (iv) for meeting working capital requirements.

The allotment of 40,00,000 equity shares constitutes 39.90% of the post issue paid-up equity share capital of the Company and thus requiring the allottees, i.e., GAVIS Pharma LLC, USA to make open offer to the public shareholders to acquire 26% cf equity shares held by public shareholders under the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations,

2011. Accordingly GAVIS Pharma made an open offer to the public shareholders and acquired a further 15,12,098 Equity Shares. Post public offer the GAVIS Pharma LLC, USA holds 55,12,098 equity shares representing 54.99% of the equity share capital. As stated in the offer document, post public offer GAVIS Pharma LLC, USA would assume the status of Promoters and the existing promoters (prior to public offer by GAVIS) would cease to be the Promoters of the Company and thus changes the Management control of the Company.

Directors'' Responsibility Statement

Pursuant to the requirement of Section 217(2AA) of the Companies Act, 1956, the Directors hereby confirm that

- in the preparation of the annual accounts for the year 2012-13, the applicable accounting standards have been followed along with proper explanation relating to material departures;

- they have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent sc as to give a true and fair view of the state of affairs of the company at the end of the financial year and of the profit or loss of the company for that period;

- they have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities;

- they have prepared the annua! accounts on a going concern basis.

Personnel

There were no employees drawing remuneration during the year in excess of the limits specified under Section 217 (2A) of the Companies Act 1956 read with the Companies (Particulars of Employees) Rules, 1975.

Conservation of Energy, Technology Absorption and Foreign Exchange Earnings/Outgo

In pursuance of the provisions of Section 217(1)(e) of the Companies Act, 1956 read with Rule 2 of the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988, the particulars relating to conservation of energy, technology absorption and foreign exchange earnings and outgo are annexed to the Report.

Auditors

The Auditors M/s Rao & Swami, Chartered Accountants retire at the forthcoming Annua! General Meeting and being eligible offer for reappointment.

As per the requirement of the Central Government and pursuant to Section 233B of the Companies Act, 1956 your Company carries out an audit of cost records relating to manufacturing of Pharmaceutical Formulations. Subject to the approval of the Central Government, the Company has appointed Mr.Sathyanarayana, Partner - KSS, VKG & Associates to audit the cost accounts of the Company for the financial year 2012-13. The Cost Audit report for the financial year 2011- 12 which was due to filed with the Ministry of Corporate Affairs on or before February 28, 2013 was filed on January 2, 2013.

Observations in Audit Report

The Auditors in the Annexure to their report have highlighted that (i) in respect of inventory with third parties, the inventory systems requires to be strengthened and (ii) Internal Control Systems & Procedures needs to be streamlined. Your Directors are of the view that the Company has adequate Internal Control Systems and procedures for accounting Inventory of all the materials which commensurate with the size of the operations. However, necessary steps would be initiated to further strengthen the Internal Control Systems.

Acknowledgement

The Board places on record its appreciation for the continued cooperation and support received from the Medical Profession, various Government Agencies, Shareholders, Business Associates, Employees, Depositors and Bankers.

For and on behalf of the Board of Directors

Date : 11th July, 2013 S.T.R.MADY

Place : Bangalore CHAIRMAN

Mar 31, 2012

The Directors have pleasure in presenting the Twenty-second Annual Report together with the Audited Accounts for the year ended 31st March, 2012.

Financial Performance Rs. Lakhs

For the year ended For the year ended 31-March, 2011 31-March, 2012

Gross Sales 2777.86 2593.41

Excise Duty 111.31 166.53

Net Sales 2666.55 2426.88

Other Income 9.94 16.34

Total Revenue 2676.49 2443.22

Total Expenditure 2177.20 2485.53

Operating Profit/(Loss) 499.29 (42.31)

Interest 249.94 299.91

Profit/(Loss) before Depreciation (PBDT) 249.35 (342.22)

Depreciation 171.22 196.12

Net Profit 78.13 (538.34)

Operations

The operating results of the Company during the year as compared to the previous year are not satisfactory. This is mainly due to (i) Shut down of the Manufacturing Plant for two months for up-gradation of the Plant resulting in loss of revenue of nearly Rs. 300 lakhs and the one time up-gradation cost of approx. Rs.75 lakhs and (ii) stoppage of commercial supplies to US Market. The turnover of the Company during the year under review was Rs. 2426.88 lakhs to as compared to Rs. 2666.55 lakhs during the previous year, a decline of 8.99% over previous year. The net loss during the year was Rs. 538.34 lakhs as compared to a net profit of Rs. 78.13 lakhs during the previous year.

The Manufacturing Plant at Nelamangala was re-inspected by USFDA during September 2011. There were eight observations from the USFDA and consequently we had to suspend the export supplies to US. The Company sent in the compliance report/response to all eight observations during November and December 2011. However, USFDA was not satisfied with our compliance report in respect of three observations and issued a Warning Letter in February 2012. However, USFDA accepted our compliance report in respect of five observations. The Company has appointed a leading US based consultant Lachman Consultants to address the issues raised by USFDA. Until we resolve the issues with USFDA, the commercial supplies to US market cannot be resumed and this will affect our operating results during the current year also. A detailed response to the Warning Letter has been sent to USFDA and we are hopeful of resolving the issues and commence the commercial supplies towards end of the current financial year.

Directors

Dr.C.Prakash, Director retires by rotation and being eligible offers him-self for re-appointment. Corporate Governance

Pursuant to Clause 49 of the Listing Agreement with the Stock Exchange, a Management Discussion and Analysis statement, Corporate Governance Report and Auditors' Certificate on the compliance of conditions of Corporate Governance are made a part of the Annual Report.

Rights Issue

The Company, during the year on 6th July 2011, issued 14,85,342 Equity shares of Rs. 10 each at a price of Rs. 33 per share on Rights issue basis and the total amount raised was Rs. 490.16 Lakhs. The issue proceeds were utilised for the intended use i.e. (I) Repayment of Loans Rs. 375.00 Lakhs, (II) Redemption of perference shares Rs. 100 Lakhs and (III) Meeting the issue expenses of Rs. 15.16 Lakhs.

Directors' Responsibility Statement

Pursuant to the requirement of Section 217(2AA) of the Companies Act, 1956, the Directors hereby confirm that:

- in the preparation of the annual accounts for the year 2011 -12, the applicable accounting standards have been followed along with proper explanation relating to material departures;

- they have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the company at the end of the financial year and of the profit or loss of the company for that period;

- they have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities;

- they have prepared the annual accounts on a going concern basis.

Personnel

There were no employees drawing remuneration during the year in excess of the limits specified under Section 217 (2A) of the Companies Act 1956 read with the Companies (Particulars of Employees) Rules, 1975.

Conservation of Energy, Technology Absorption and Foreign Exchange Earnings/ Outgo

In pursuance of the provisions of Section 217(1)(e) of the Companies Act, 1956 read with Rule 2 of the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988, the particulars relating to conservation of energy, technology absorption and foreign exchange earnings and outgo are annexed to the Report.

Auditors

The Auditors M/s Rao & Swami, Chartered Accountants retire at the forthcoming Annual General Meeting and being eligible offer for reappointment.

Acknowledgement

The Board places on record its appreciation for the continued cooperation and support received from the Medical Profession, various Government Agencies, Shareholders, Business Associates, Employees, Depositors and Bankers.

For and on behalf of the Board of Directors

Date : 11.08.2012 S.T.R.MADY

Place : Bangalore CHAIRMAN

Mar 31, 2010

The Directors have pleasure in presenting the Twentieth Annual Report together with the Audited Accounts for the year ended 31st March, 2010.

Financial Performance Rs.Lakhs

For the year ended For the year ended

31st March, 2009 31st March, 2010

Gross Sales 1645.28 2167.76

Excise Duty 136.27 88.57

Net Sales 1509.01 2079.19

Increase/(Decrease) in stock (43.97) 12.87

Other Income 36.99 60.68

Total Revenue 1502.03 2152.74

Total Expenditure 1443.85 1701.29

Operating Profit/(Loss) 58.18 451.45

Interest 127.78 174.66

Profit/(Loss) before Depreciation (PBDT) (69.60) 276.79

Depreciation 127.29 145.61

Profit before Provisions/Prior period expenses (196.89) 131.18

Provisions/Prior period expenses 6.04 17.37

Provision for Taxation (FBT) 1.50 -

Profit/(Loss) after Tax (204.43) 113.81

Appropriations:

Balance brought down from previous year (283.63) (488.06)

Balance carried forward (488.06) (374.25)

Operations

The operations of the Company during the year turned around. The total income during the year under review was Rs.2153 lakhs as compared to Rs.1502 lakhs, a growth of 43%. The net profit during the year was Rs.113.81 lakhs as against a loss of Rs.204.43 lakhs during the previous year. The increase in sales and higher technical know-how fee contributed to the turn-around of the operations. We are hopeful of further improving the performance during the current year although we are yet to commence the commercial production for the US market.

Exports

We are happy to inform you that the Company has received the formal USFDA approval for the

Manufacturing Plant and approval for ANDA for one injectable Product (Ondansetron 20ml injection through our customer). We expect approval for couple of more ANDAs during the current year and hope to commence the commercial production towards the end of current financial year. We have so far furnished dossiers for ten products to our Customers who have filed the ANDAs. The commercial production for all these products is expected to commence in the financial year 2011-12. We are confident of a substantial growth in sales and profitability with the commencement of commercial supplies for all the products now under development for the US Market. The development work for other products is as per schedule. Your Company is also taking steps to explore the other regulated markets like Europe, Canada, etc and hope to file the dossiers in the near future.

Your Company has entered into an agreement with Mylan Inc, USA through their Indian subsidiary (Matrix Laboratories Ltd.) for development, submission of documents for filing ANDA/Dossiers and world-wide commercial supplies for an Ophthalmic Product. The customer has already filed the ANDA for this product and commercial volumes are very attractive and would contribute substantially to the top line as well as bottom line of the profitability statement. We are also discussing with this company to tie-up for another product.

Your Company has also tied-up with another US based company Ocusoft Inc. for the supply of certain OTC products. The product development work is under progress and we expect the commercial production to commence towards the last quarter of the current financial year.

Directors

Sri.S.TR.Mady, Director retires by rotation and being eligible offers him-self for re-appointment.

Corporate Governance

Pursuant to Clause 49 of the Listing Agreement with the Stock Exchange, a Management Discussion and Analysis statement, Corporate Governance Report and Auditors Certificate on the compliance of conditions of Corporate Governance are made a part of the Annual Report.

Directors Responsibility Statement

Pursuant to the requirement of Section 217(2AA) of the Companies Act, 1956, the Directors hereby confirm that

. in the preparation of the annual accounts for the year 2009-10, the applicable accounting standards have been followed along with proper explanation relating to material departures;

. they have selected such accounting policies and applied them consistently and made judgements and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the company at the end of the financial year and of the profit or loss of the company for that period;

. they have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities;

. they have prepared the annual accounts on a going concern basis.

Auditors observation

Auditors have drawn attention to Notes No.6, 7(a), 7(b), 9(a), 10(a) of Schedule-R forming part of the accounts and expressed their reservation on the recoverability of the said loans & advances. The Director are of the opinion that the said Loans and Advances are recoverable and the said notes to accounts are self explanatory.

Personnel

Information as per Section 217(2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975 is as under:

Name & Qualifications Age Commencement Remuneration Last Employment

Designation & Experience of employment

Dr.Shiv D Kamat Msc, 60 Years July, 2007 Rs.28,60,000 Strides Acrolab Ltd.,

Executive Vice President Phd.Org. Chemistry Vice President

31 Years 1 year

Dr.Shiv D Kamat is not related to any Director of the Company.

Conservation of Energy, Technology Absorption and Foreign Exchange Earnings/Outgo

In pursuance of the provisions of Section 217(1)(e) of the Companies Act, 1956 read with Rule 2 of the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988, the particulars relating to conservation of energy, technology absorption and foreign exchange earnings and outgo are annexed to the Report.

Auditors

The Auditors M/s Rao & Swami, Chartered Accountants (ICAI Firm Registration No.003105S) retire at the forthcoming Annual General Meeting and being eligible offer for reappointment.

Acknowledgement

The Board places on record its appreciation for the continued cooperation and support received from the Medical Profession, various Government Agencies, Shareholders, Business Associates, Employees, Depositors and Bankers.

For and on behalf of the Board of Directors

Date : 04.08.2010 S.T.R.MADY

Place : Bangalore CHAIRMAN

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