Ajanta Pharma Ltd Directors Report.

Dear Shareholders,

Your Directors present their Forty-First Annual Report and Audited Financial Statements for the Year ended 31 March 2020.

1. Financial performance

(Rs. in cr. except EPS)




Year ended 31 March 2020 2019 2020 2019
Revenue from operations 2,196 1,773 2,588 2,055
Other Income 184 102 92 21
Profit before Depreciation, Finance Costs and Tax expense 717 583 776 588
Profit after Tax 441 392 468 387
Total Comprehensive Income 439 390 473 384
Earning Per Share (EPS) (Rs.) (Basic) 50.55 44.51 53.60 43.97

2. Performance Review

There is no change in the nature of business of the company and it continues to operate only in one segment i.e. Pharmaceutical. Your company achieved a growth of 26% in Consolidated Revenue from Operations over the previous year, while Consolidated Profit After Tax grew at 21%. Exports contributed around 70% of the business. We commenced operations at newly set up Pithampur manufacturing facility as also oral solid section at Guwahati. Sterile Ophthalmic section at Guwahati will be operationalised in the next financial year, after which the major capex plans of the company will come to conclusion. Management Discussion & Analysis forming part of this report further gives the details of major events occurred during the year as well as state of companys affairs.

3. Dividend

The Board had during the year, declared and paid interim dividend of Rs.13/- (650%) per equity share in accordance with the dividend policy. Total dividend payout was Rs.115.93 cr. including dividend distribution tax. With a view to conserve the resources for the business operations, Board recommends interim dividend to be considered as final. The Dividend Distribution Policy is placed on the website of the company and its weblink is http:// www.ajantapharma.com/AdminData/PolicyCodes/ DividendPolicy.pdf

4. Subsidiaries, Associates and Joint Ventures

Your company continues to have five subsidiaries overseas, including one step down subsidiary and there were no changes in the same during the year. Financials of subsidiaries are included in the consolidated financial statements, which forms part of this Annual Report. There have been no material change in the nature of business of subsidiaries. The Company does not have any Associate company or Joint Venture.

All the subsidiaries have contributed positively in the growth and profitability of the company. Statement containing salient features of financials of subsidiaries pursuant to Section 129 of the Companies Act, 2013 ("Act") read with Rule 5 and 8(1) of the Companies (Accounts) Rules, 2014, is annexed as "Annexure A" to this Report in the prescribed Form AOC-1. Audited Financial Statements of Companys subsidiaries are available on Companys website at www.ajantapharma.com and the same are available for inspection at the Registered Office of the Company. The same will also be made available to interested members upon getting request.

Web-link of the Policy for Material Subsidiaries can be accessed at http://www. ajantapharma.com/ AdminData/PolicyCodes/ PolicyonMaterialSubsidiaries2019.pdf

5. Consolidated Financial Statements

The Annual Audited Consolidated Financial Statements for the financial year ended 31 March 2020, together with Report of Auditors thereon, forms part of this annual report.

6. Share capital

During the year, 7,500 shares were issued against the options exercised and 500 new options were granted under Ajanta Pharma Share Based Incentive Plan 2019. Disclosures with regard to Employees Stock Options Scheme are put up on the Companys website and can be accessed at http://www.ajantapharma. com/Annual Reports. aspx

7. New projects & CAPEX

Company places emphasis on building infrastructure to be future ready and to keep tab with the growing needs. During the year, third phase of Guwahati plant, new manufacturing facility in Pithampur, Madhya Pradesh and new R & D building in Kandivli, Mumbai were completed and became fully functional. Expansion of facility at Dahej has been commenced and the same is expected to be over by December 2020. During the year, an amount ofRs.245 cr. was incurred on capex.

8. Directors and Key Managerial Personnel

During the year, Dr. Anil Kumar resigned on 3 April 2019. There were no changes in Key Managerial Personnel during the year.

8.1. Independent Directors

All the Independent Directors have given declarations that they continue to meet the criteria of independence as laid down under Section 149(6) of the Act and Rules made thereunder and under the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 ("Listing Regulations"). They have also affirmed compliance to the Code of Conduct for Independent Directors as prescribed in Schedule IV of the Act. Based on disclosures provided by them, none of them are disqualified from being appointed as Director under Section 164 of the Act and are independent from the management.

8.2. Re-appointment of Whole time Director

Based on recommendation of the Nomination & Remuneration Committee, Board of Directors have, subject to approval of Members, re-appointed Mr. Madhusudan B. Agrawal (DIN: 00073872) as Vice-Chairman for a period of 5 years with effect from 1 April 2020. Resolution seeking approval of members for his re-appointment forms part of the notice of the Annual General Meeting, forming part of this report.

8.3.Retirement by rotation

Mr. Mannalal B. Agrawal retires by rotation at the ensuing Annual General Meeting and being eligible, offers himself for re-appointment. The Board recommends his re-appointment.

8.4.Policies on appointment and remuneration of Directors

Policy for determining qualifications of directors and Policy for remuneration of Directors approved by the Nomination and Remuneration Committee of the Board of Directors, are available at (http:// www.ajantapharma.com/AdminData/PolicyCodes/ Policy for determining qualifications of Directors. pdf) and (http://www.ajantapharma.com/AdminData/ PolicyCodes/Policyforremuneration2018.pdf) The same are briefly mentioned in Corporate Governance Report, which forms integral part of this report.

8.5. Key Managerial Personnel

Mr. Yogesh M. Agrawal, Managing Director (DIN: 00073673), Mr. Rajesh M. Agrawal, Joint Managing Director (DIN: 00302467), Mr. Arvind Agrawal, Chief Financial Officer (DIN: 00648589) and Mr. Gaurang Shah, Company Secretary (FCS No.: 6696) are the Key Managerial Personnel of the Company as on the date of this report.

8.6. Independent Directors familiarisation programme

Company continued to familiarise Independent Directors with business operations, critcal functions and other important aspects to enable them to contribute on fully-informed basis and discharge their functions and responsibilities effectively.

During the year, the Independent Directors were familiarised with following:

i. Annual Budget and capex plan for FY 2020;

ii. Overview of US operations;

iii. Commercial aspects of sourcing of APIs/other materials;

iv. Corporate Governance @ APL and corporate law amendments.

Details of familiarisation programme imparted is placed on the companys website and its weblink is: http://www.ajantapharma.com/AdminData/ Director Familiarization Program/Directors familiarization programme.pdf

8.7. Board and Directors evaluation

Performance evaluation of the Board as whole, individual directors and of the Board Committees, was carried out by Board of Directors, as suggested by the Nomination and Remuneration Committee. The evaluation was done in accordance with the framework and criteria laid down by the Committee. Further, at a separate meeting, the Independent Directors evaluated performance of Non-Independent Directors, Board as a whole and of the Chairman of the Board. Manner of evaluation of Board of Directors performance and matters incidental thereto, are detailed in the Corporate Governance Report, which forms part of this report. Board of Directors were satisfied with the evaluation process and expressed satisfaction over performance of individual directors, Board as a whole and of the Board Committees, as revealed by the evaluation reports.

9. Board meetings

During the year, four Board meetings were held, details of which are given in the Corporate Governance Report.

10.Board Committees

Details of composition of various Board Committees and matters incidental thereto are provided in the Corporate Governance Report.

11. Related Party Transactions and Policy

All the Related Party transactions (RPTs) entered into during the financial year were on an arms length basis and in the ordinary course of business and in accordance with the Companys Policy on Related Party Transactions. Pursuant to Regulation 23(3) of the Listing Regulations and Rule 6A of the Companies (Meetings of Board and its Powers) Rules, 2014, the Audit Committee granted omnibus approvals to the transactions likely to be entered into by the Company with related parties during the year. The Audit Committee also reviewed all RPTs on quarterly basis.

All the RPTs affected during the year are disclosed in the notes to Financial Statements. Companys Policy on Related Party Transactions is uploaded on the website and its weblink is http:// www.ajantapharma.com/AdminData/PolicyCodes/ PolicyonRelatedPartyTransactions2019.pdf There were no material related party transactions that required disclosures under Section 134(3)(h) of the Act.

12. Corporate Social Responsibility (CSR)

Company considers its economic, environmental and social responsibility to foster sustainable local development as well as add value to the local economy in which it operates.

During the year, Company continued several initiatives under the CSR program, directly as well as through agencies permitted under the Act, for the benefit of thousands of underprivileged in rural & tribal areas. These included, conducting cataract surgery camps, skin camps, family welfare camps, providing subsidised food for patients & relatives and various educational initiatives at schools & colleges. Company also donated to PM Cares Fund, Government of Maharashtra and Brihanmumbai Municipal Corporation for supporting their fight against COVID-19, as also provided ventilators, thermal thermometers, sanitisers and protective gears such as latex gloves, gamex gloves, N-95 masks, PPE kits, etc. for the same. The CSR Committee reviews and monitors the CSR projects and expenditure undertaken by the Company on a regular basis.

CSR policy and CSR activities undertaken during the year in accordance with Section 134 & 135 of the Act read with Rule 8 of the Companies (Corporate Social Responsibility Policy) Rules, 2014 and Rule 9 of the Companies (Accounts) Rules, 2014, are annexed to this report as "Annexure B".

13. Management Discussion and Analysis

A detailed review of the operations, performance and future outlook is given in the Management Discussion and Analysis, which forms part of this report.

14. Report on Corporate Governance

Company is committed to maintain the highest standards of Corporate Governance and adhere to the Corporate Governance requirements set out by the Securities and Exchange Board of India ("SEBI"). Report on Corporate Governance together with certificate from the Practicing Company Secretary regarding compliance of conditions of Report on Corporate Governance, is annexed and forms an integral part of this report.

15. Business Responsibility Report

Business Responsibility Report (BRR) for FY 2020, forms part of the Annual Report and as a green initiative the same has been hosted on the Companys website, which can be accessed at http:// www.ajantapharma.com/AnnualReports.aspx Any Member interested in obtaining a copy of BRR may write to the Company Secretary.

16. Credit Rating

The Companys bank facilities are rated by Credit Analysis and Research Limited (CARE). They have assigned rating Care A1+ for working capital facilities and Care AA for long term borrowings, which indicates very strong/high degree of safety regarding timely payment of financial obligations.

17. Annual Return

As per Rule 12(1) of the Companies (Management & Administration) Rules, 2014, an extract of Annual Return in Form MGT. 9 forms part of this report and is annexed as "Annexure C". Annual Return as per Section 92(3) of the Act is available at http://www. ajantapharma.com /AnnualReports.aspx

18. Auditors

18.1. Statutory Auditors

At the 38th Annual General Meeting held on 5 July 2017, the shareholders had approved appointment of B S R & Co. LLP., Chartered Accountants (ICAI Firms Registration No. 101248W/W-100022) as the Statutory Auditors for a period of 5 years commencing from the conclusion of the 38th Annual General Meeting until the conclusion of 43rd Annual General Meeting. Auditors have confirmed that they hold a valid certificate issued by the Peer Review Board of the ICAI, in pursuance of the Listing Regulations.

Auditors Report for the year under review forms part of this annual report. It does not contain any qualifications, reservations or adverse remarks.

18.2. Internal Auditors

M/s. Ernst & Young LLP conducted internal audit of important centralised functions. For other locations, viz. factories, C&F agents and warehouses, local Chartered accounting firms having requisite expertise and resources are appointed as internal auditors. Internal audit findings are discussed at the meetings of Audit Committee and appropriate actions are taken by concerned functions/locations.

18.3. Secretarial Auditors

Pursuant to provisions of Section 204 of the Act and the Companies (Appointment and Remuneration of ManagerialPersonnel)Rules,2014andRegulation24A of the Listing Regulations, Board had appointed M/s. Alwyn DSouza & Co., Practicing Company Secretary to undertake the Secretarial Audit of the Company. Secretarial Audit Report in prescribed Form No. MR-3 is annexed to this report as "Annexure D". There are no qualifications or reservations or adverse remarks in the Secretarial Audit Report.

18.4. Cost Auditors

The company maintains cost records as per the provisions of Section 148(1) of the Act and the same are audited by the Cost Auditors. Cost Audit Report for the financial year 2018 - 19 has been filed with the Ministry of Corporate Affairs on 26 August 2019. Board has appointed M/s. Sevekari, Khare & Associates, Practicing Cost Accountants to audit the cost records of the Company for the financial year 2020-21. Their remuneration is subject to ratification by shareholders at the ensuing Annual General Meeting. Accordingly, resolution seeking members ratification of their remuneration, forms part of the Notice convening the 41st Annual General Meeting. Board recommends the same for approval of members. During the year under review, the statutory auditors, internal auditors, secretarial auditors and cost auditors have not reported any instances of fraud committed in the Company by its officers or employees.

19. Annual Secretarial Compliance Report

M/s. Alwyn DSouza & Co., Practicing Company Secretary, have issued Secretarial Compliance Report for the year ended 31 March 2020, which confirms that the Company has maintained proper records as stipulated under various Acts, Rules and Regulations and that no action has been taken against the Company or its material subsidiaries or promoters/ directors by the SEBI/Stock Exchanges.

20. Internal Control System, Risk Management and Compliance Framework

The Company has a well-established internal control framework, which is designed to continuously assess the adequacy, effectiveness and efficiency of financial and operational controls. It also has Risk Management framework in place which defines roles and responsibilities at various levels of the risk management process. Board has set up Risk Management Committee (RMC) as per details set out in the Corporate Governance report. Audit Committee and RMC reviews key risk elements of the companys business, finance, operations & compliance and its mitigation strategies. RMC reviews key strategic, business, compliance and operational risks; whereas issues around ethics and fraud, internal control over financial reporting, process risks and their mitigation, are reviewed by the Audit Committee. Risk Management system followed by the Company is detailed in the Management Discussion and Analysis report.

21. Vigil Mechanism/Whistle Blower policy

Company has been observing zero tolerance for any form of unethical behaviour. In accordance with Section 177(9) of the Act, Rule 7 of the Companies (Meetings of Board and its Powers) Rules, 2014 and Regulation 22 of the Listing Regulations, Company has set up vigil mechanism viz., Whistle Blower Policy to enable the employees and Directors to report to the Audit Committee Chairman, genuine concerns, unethical behavior and irregularities, if any, noticed by them in the Company, which could adversely affect companys operations.

It is posted on the intranet and website of the Company and the same is available at http:// www.ajantapharma.com/AdminData/PolicyCodes/ WhistleBlowerPolicy2019.pdf The same is reviewed by the Audit Committee from time to time. No concerns or irregularities have been reported by employees/directors till date.

22. Managerial Remuneration and particulars of employees

There were 7,167 permanent employees of the Company as of 31 March 2020. The information pursuant to Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is annexed to this report as "Annexure E". Information pursuant to Rule 5(2) & 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 also forms part of this report. However, this information is not sent along with this report pursuant to proviso to Section 136(1) of the Act. Any shareholder interested in obtaining a copy of the same may write to the Company Secretary at the registered office address of the Company.

23. Loans, Guarantees or Investments

Details of Loans, Guarantees and Investments, pursuant to provisions of Section 186 of the Act, are given in Notes to Financial Statements.

24. Deposits

Your Company has not accepted any deposits from the public falling within the purview of Section 73 of the Act read with the Companies (Acceptance of Deposits) Rules, 2014.

25. Directors Responsibility Statement

To the best of their knowledge and belief and according to the information and explanations obtained by them, your Directors confirm: a. that in the preparation of the annual accounts for the year ended 31 March 2020, the applicable Accounting Standards have been followed along with proper explanation relating to material departures, if any;

b. that the directors had selected accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the company at the end of the financial year ended 31 March 2020 and of the profit of the company for the period;

c. that 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. that the annual accounts/financial statements have been prepared on a going concern basis;

e. that proper internal financial controls were in place and that the financial controls were adequate and were operating effectively;

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

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

Pursuant to Section 134 of the Act read with Companies (Accounts) Rules, 2014, particulars of conservation of energy, technology absorption, foreign exchange earnings and outgo, are given in "Annexure F" to this report.

27.Unclaimed Dividend/Shares

In pursuance of Regulation 39 read with Schedule VI of the Listing Regulations, the details of shares lying in unclaimed suspense account and unclaimed shares/dividend transferred to IEPF, are provided in the Corporate Governance Report.

28. Compliance with Secretarial Standards

During Financial Year 2020, the Company has complied with all applicable mandatory Secretarial Standards issued by the Institute of The Company Secretaries of India.

29. Material changes & commitment affecting the financial position of the company

There are no material changes and commitments affecting the financial position of the company, which have occurred between the end of the financial year and the date of this report. There has been no change in nature of business of the Company.

30. Significant & material orders passed by the Regulators or Courts or Tribunals

No significant or material orders have been passed against the Company by the Regulators, Courts or Tribunals, which impacts the going concern status and companys operations in future.

31. Human Resource, Health & Safety

Human resources are invaluable assets of the Company. It believes that its employees are pivotal to all the initiatives that drive to realise its plans. Company takes pride in its human capital, which comprises people from diverse backgrounds and cultures. The organisations achievements are an outcome of efforts, dedication and conviction demonstrated by its people. Company maintains highest standards of health and safety in all the plants.

Various training and grooming programs, sports events and fun events like cricket tournament, karaoke competition, hobby classes like clay Ganapati making, kettle painting etc. were conducted during the year as part of employee engagement and motivation initiatives.

32. Policy on sexual harassment of women at work place

The Company has put in place and has complied with the provisions of Policy on prevention, prohibition and redressal of sexual harassment of women at workplaces in accordance with The Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. The policy has set guidelines on the redressal and enquiry process that is to be followed by complainants and the Internal Complaints Committees (ICC), whilst dealing with issues related to sexual harassment at the work place. All women employees (permanent, temporary, contractual and trainees) are covered under this policy. Company has set up ICC at all the locations where there are more than 10 women employees, to address the complaints regarding sexual harassment. The company has not received any complaints during the year. Policy is available on intranet of the company. The Company is committed to providing safe and conducive work environment to all of its employees and associates.

33. Gratitude & Acknowledgements

Your Directors convey a sense of high appreciation to all employees of the Company for their commitment, hard work, significant contributions and continued dedication. The Directors also wish to express their gratitude to investors for the faith that they continue to repose in the Company. They also acknowledge the whole-hearted support, encouragement and cooperation received by it from various departments of the Governments & other statutory bodies, financial institutions, banks, distributors, suppliers, business associates, analysts, medical professionals and customers.

For and on Behalf of the Board of Directors,

Mannalal B. Agrawal


Mumbai, 20 May 2020