Bafna Pharmaceuticals Ltd Directors Report.

To

The Shareholders,

Your Directors have pleasure in presenting the Twenty Sixth Annual Report of your Company together with Audited Accounts for the Financial Year ended 31st March,2021.

Financial Performance

The summarized Audited Financial Results for the year ended 31st March, 2021 along with comparative figures for the previous year is as under:

(Rs.in Lakhs)

Standalone
Particulars 31st March 2021 31st March 2020
Revenue from operations 7121.79 4247.24
Other Income 74.93 25.54
Total Income 7196.72 4272.78
Expenses
Operating Expenditure 6166.23 4133.92
EBDITA 1030.49 138.86
Depreciation and Amortisation Expenses 447.82 326.66
Profit before Exceptional Items and Taxes 582.67 187.80
Add:Exceptional Items - (2332.56)
Profit before tax (PBT) 582.67 (2520.36)
Tax expenses (Current and Deferred Tax) - -
Profit for the year 582.67 (2520.36)

Standalone Operating Results

Your Company’s Total Income during the year under review was Rs.7196.72 Lakhs as compared to Rs.4272.78 Lakhs in the previous year. Profit before Tax for the year 2020-21 was Rs.582.67 Lakhs as against Rs.187.80 Lakhs in the previous year. Profit After Tax for the year 2020-21 stood at Rs.582.67 Lakhs as against Loss of Rs.2520.36 Lakhs.

Subsidiary Company and Consolidated Financial Statements

Pursuant to the approval of the shareholders at 25th Annual General Meeting held on 31st July 2020 application for strike off subsidiary Company M/s.Bafna Lifestyles Remedies Limited (BLRL) was filed with Ministry of Corporate Affairs under Section 248 of the Companies Act 2013 and hence consolidated financial statements was not provided since the name of the Company has been strike off.

Change in Capital Structure

(Rs. In Lakhs)

Particulars 31st March, 2021 31st March, 2020
Authorized Capital 4000.00 4000.00
Issued, Subscribed & Paid up Capital 2365.56 236.56*

* Pursuant to the approval of National Company Law Tribunal, Chennai under IBC, 2016 vide its Order dated 01st February 2019 there was 90% capital reduction.

During the year under review the Issued, Subscribed and Paid up capital has been increased from Rs.236.56 lakhs to Rs.2365.56 lakhs by way of preferential allotment of shares as per the Order passed by National Company Law Tribunal, Chennai under IBC, 2016.

Allotment and listing of 21290701 shares pursuant to the approved Resolution Plan under IBC 2016

During the year under review pursuant to the approved Resolution Plan under IBC 2016 by Hon’ble National Company Law Tribunal, Chennai vide its order dated 01st February 2019 and consequent approval of the Board at their meeting held on 10.09.2020 allotted 2,12,90,701 equity shares of Rs.10 each at a premium of Rs.16/- each (issue price Rs.26) to SRJR Lifesciences LLP.

Name of Allottee No of shares allotted Distinctive Number (From) Distinctive Number (To)
SRJR Lifesciences LLP 2,12,90,701 2365635 23656335

Post listing of 21290701 shares at NSE and BSE the issued, subscribed and paid up capital now stands at Rs.23,65,63,350/- consisting of 23656335 equity shares of Rs.10 each as on 31st March 2021.

Fixed Deposits

The company has not accepted / invited any deposits from the public in terms of Section 73 of the Companies Act,2013.

Dividend

The Board has not declared any dividend for the Financial Year.

Reserves

The Company has not transferred any amount to the general reserves during the year in view of the accumulated losses.

Material changes and commitments affecting the financial position of the Company:

There have been no material changes and commitments affecting the financial position of the Company which have occurred between the end of the financial year of the Company to which the financial Statements relate and the date of the report.

Details of significant and material orders passed by the Regulators or Courts or Tribunals impacting the going concern status and company’s operations in future; Implementation of Resolution Plan

During the year under review the Company has fully implementedResolution Plan as approved by the National Company Law Tribunal, Chennai vide its Order dated 01st February 2019.

Impact of CoVID 19

Your Directors have been periodically reviewing with the Management, the impact of COVID-19 on the Company. The business model position was such that the Company was able to minimize the impact on operation of the Company and was able to deliver better growth prospectus.

Change in the nature of business

Your Company is engaged in the manufacture of pharmaceutical products. There is no change in the nature of business during the year compared to previous year.

Risk Management Policy:

The Company has in place a mechanism to identify, assess, monitor and mitigate various risks to key business objectives. Major risks identified by the businesses and functions are systematically addressed through mitigating actions on a continuing basis.

Adequacy of Internal Financial Controls with reference to the Financial Statements:

The company has adequate internal financial controls , Internal Audit and review of financial statement mechanism in vogue except in few areas :

Although the company has an organization structure, now with the implementation of SAP, authority matrix has to be formulated and clearly documented,

Standard operating procedures in respect of various functions, processes and approvals have to be documented and made available to the functional heads to ensure controls.

Roles and responsibilities have to be documented as per terms or in line with KRAs mentioned in employees’ appointment letters

Regular employee performance reviews have to be held and increments / incentives have to be fixed and paid on the basis of the same.

Directors

The Composition of Board and number of meetings attended by them are given in the corporate governance report.

Inductions

Ms. S. Hemalatha (DIN:02714329) was appointed as Additional Whole-Time Director with effect from 10.09.2020. The Board recommends her appointment as a Whole-Time Director of the Company for a period of three years with effect from the date of appointment.

Mrs. Akila C Raju (DIN: 07590312) was appointed as an Additional Director (Non-Executive) of the Company with effect from 10.09.2020. The Board recommends her appointment as a Non- Executive Director of the Company whose period is liable to retire by rotation.

Harish Battu Laxmaiah (DIN: 06390117) was appointed as an Additional Director (Non-executive ) with effect from 10.09.2020.

Ms.Ravichandran Chitra (DIN: 07749125) was appointed as Additional Non-executive Independent Director with effect from 12.11.2020. The Board recommends her appointment as an Independent Director of the Company for a period of 5 years with effect from the date of appointment.

Mr.Atul Sachdeva (DIN: 07645130) was appointed as an Additional Director (Non-Executive) of the Company with effect from 12.11.2020. The Board recommends his appointment as a Non- Executive Director of the Company whose period is liable to retire by rotation.

Mr. Palamadai Krishnan Sundaresan (DIN:06954189) was appointed as an Additional Non-executive Independent Director with effectfrom 25.06.2020 for a period of five years which was ratified at the 25 th Annual General Meeting held on 31.07.2020.

Resignations

Mr. V. Rajamani (DIN: 00052868), Non-executive Independent Director resigned from the Board with effect from 25.06.2020. Sunil Bafna (DIN: 01458225) Non-executive Independent Director resigned from the Board witheffectfrom 10.09.2020 .

Mr.Paras Bafna(DIN: 01933663 and Mrs.Sabitha (DIN: 02643259), resigned as Directors with effect from 10.09.2020. Mr. Mahaveer Chand Bafna (DIN: 01458211) resigned as Director as well as Managing Director witheffectfrom 10.09.2020. Harish Battu Laxmaiah (DIN: 06390117) resigned as an Additional Director (Non-executive ) with effect from 12.11.2020. The Board wishes to place on record their valuable services rendered by them during their tenure as Director.

Directors Liable to Retire by Rotation

The executive and Non-executive Non-independent Directors in the current board were all appointed after the last Annual General Meeting held on 31st July 2020, their appointments need to be regularized at 26th Annual General Meeting. Hence no director will be bound to retire by rotation in the 26th Annual General Meeting.

Information Relating to Appointment/ Reappointment of Directors

The brief resume of the Directors seeking appointment/ reappointment and other information have been detailed in the Notice. Your Board recommends the above appointments/reappointment of Directors in the best interest of the Company.

Appointment of CEO

Mr. Mahaveer Chand Bafna (DIN: 01458211) was appointed as Chief Executive Officer (CEO) with effect from 10.09.2020

Details of KMP:

According to section 203 of the Companies Act, 2013, the following are the Key Managerial Personnel of the Company Mr. Mahaveer Chand Bafna- Chief Executive Officer, Mr. M. Sridhar- Chief Financial Officer Mr. Jitendra Kumar Pal- Company Secretary

Declaration by Independent Directors

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 and Regulation 25 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

Auditors

As per the provisions of the Companies Act, 2013, M/s. R. Sathyanarayanan & Co, Chartered Accountants, Chennai

(FRN003656S),were appointed as Statutory Auditors of the Company for a period of five years at the annual general meeting held in 2017 till the conclusion of 27th annual general meeting. The requirement for the annual ratification of auditor’s appointment at the AGM has been omitted pursuant to Companies (Amendment) Act, 2017 notified on May 07, 2018.

The Notes on financial statements referred to in the Auditors’ Report are self-explanatory and do not call for any further comments. The Auditors’ Report does contain some qualification, reservation, adverse remark or disclaimer for which reply has been given in the Directors Report.

Auditors’ Report:

The Report of Auditors and Notes forming part of the Accounts are attached along with the Annual Report.

Comments on Statutory Auditor’s Report:

Reply to the qualifications made in Auditor’s report:

Qualification Reply
The Company has not complied with principles underlined under IND AS 2 in respect of absorption of overheads (related to manufacture) in computation of BOM (Bill of materials), consequently not enabling capturing of overheads in valuation of stocks of WIP (Work in progress) and Finished goods through the SAP system. Valuation of closing inventories have been computed manually on cost absorption basis. Due to migration from normal accounting package to SAP system, the Company has not valued inventories WIP on the basis of IND AS2 principle. as there was a sudden technical error in the abosorption of overheads *related to Manufacture) in computation of BOM ( Bill of Materials) consequently not enabling capturing of Overheads in Valuation of stocks of WIP(Work in Progress) and Finished Goods through SAP System. However Valuation of Closing Inventories have been computed Manually on Cost absorption Basis. The company is in the process of appointing an Costing Expert to bring the System in SAP.
Fixed Asset Register has not been maintained in SAP system as prescribed in Schedule II of the Companies Act 2013. Review of useful life and residual value of asset on annual basis has not been carried out as prescribed under IND AS 16. Computation of Gratuity as per IND AS 109 has been carried out, but no equivalent provisioning has been made in the accounts nor has the Company created any Fund in respect of the same. Due to Migration from normal accounting package to SAP system, the Fixed Asset Register is in progress and likely to updated in the ensuing Year.
Upon comparison of Input credit between GSTR 3B (filed by the company) and form GST2A (available ITC as per GST site) the Company has represented to us that there is a net excess Unavailed input credit of Rs 15,41,937/- representing corresponding unbooked expenditure. The Management has decided that the same would be complied with in a phased manner beginning from the current FY 2021-22.
The Net Unavailed Input Credits will be indentified during the ensuing year and rectified accordingly.
Internal Financial Control observation:
Although the company has an organization structure, now with the implementation of SAP, authority matrix has to be formulated and clearly documented, • Standard operating procedures in respect of various functions, processes and approvals have to be documented and made available to the functional heads to ensure controls. The Management is initiating the process of setting up (SOP) for all major functions and Departments and also taking necessary steps to comply with the deficiencies pointed out by Statutory Auditor.
Roles and responsibilities have to be documented as per terms or in line with KRAs mentioned in employees’ appointment letters Regular employee performance reviews have to be held and increments / incentives have to be fixed and paid on the basis of the same.

The Company is maintaining Cost Records as per Section 148 of the Companies Act, 2013 and will comply with provisions relating to the appointment of cost auditor in the ensuing year.

Listing

The Company’s shares are listed at (i) BSE Limited (BSE) with Scrip Code No.532989 and at(ii) National Stock Exchange of India Limited with Scrip symbol BAFNAPH.

Particulars of Employees a) Details of employees, employed throughout the financial year was in receipt of remuneration for that financial year, in the aggregate, was not less than Rs.1.02 Crores. -Nil-b) Details of employees, employed for a part of the financial year, was in receipt of remuneration for any part of that year, at a rate which, in the aggregate, was not less than Rs. Eight Lakhs and Fifty Thousand per month-Nil -c) Details of employees, if employed through out the financial year or part thereof , was in receipt of remuneration in that year which, in the aggregate, or as the case may be, at a rate which, in the aggregate, is in excess of that drawn by the managing director or whole-time director or manager and holds by himself or along with his spouse and dependent children, not less than two percent of the equity shares of the company. - Nil -The information required pursuant to Section 197 read with rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 in respect of employees of the Company and Rules 5(2) of The Companies (Appointment and Remuneration of Managerial Personnel) Rules,2014, with respect to the statement showing the names of the top ten employees in terms of remuneration drawn, will be provided upon request. In terms of Section 136 of the Act, the reports and accounts are being sent to the members and others entitled there to, excluding the information on employees’ particulars which is available for inspection by the members at the Registered office of the company during business hours on working days of the company upto the date of ensuing Annual General Meeting. If any member is interested in inspecting the same, such member may write to the Company Secretary in advance.

Foreign Exchange Earnings and Outgo

The particulars in respect of Foreign Exchange Earnings and Outgo as required under Section 134 of the Companies Act, 2013 and Rule 8(3) of the Companies (Accounts) Rules 2014, are given as in Annexure to this report at page number 18.

Human Resource, Industrial Relations, Environment, Occupational Health and Safety

The Company is continuously focusing on managing talent and increasingly systematizing the HR processes. We have excellent industrial relations across all facilities including the corporate office and strongly believe that the workers will continue to work towards a profitable and productive company.

The number of employees as on 31st March, 2021 was 288 as against 264 during FY 2019-20.

Conservation of Energy, Technology Absorption & Research and Development (R&D)

The company is conscious of its responsibility to conserve the energy and has taken measures in relation to conservation of energy and technology absorption. The particulars in respect to conservation of energy, Technology Absorption & Research and Development were given in the annexure to the Board’s Report.

Insider Trading Regulations

Based on the requirements under SEBI (Prohibition of Insider Trading) Regulations, 2005, as amended from time to time, the code of conduct for prevention of insider trading and the code for corporate disclosures are in force. The Company has adopted a Code of Conduct for Prevention of Insider Trading with a view to regulate trading in securities by the Directors and designated persons of the Company, as per SEBI (Prohibition of Insider Trading) Regulations,2015.

Corporate Governance

Report on Corporate Governance and Certificate of the Auditors of your Company regarding compliance of the conditions of Corporate Governance as stipulated in Regulation 15 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, with the Stock Exchanges, are enclosed elsewhere in the Annual Report and forms part of this report.

Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013

The Board of Directors has approved policy as per the said Act and an Internal Complaints Committee was constituted. The committeeplaced certificatebefore the Board of Directors on the status of compliance of the Act. As per the by the said committee no complaints were received during the year & that there are no complaints certificate pending as on 31st March,2021.

Particulars of Loans, Guarantee and Investment under Section 186 of Companies Act, 2013

During the year under review, no Loans advanced or investments were made during the year.

Related Party Transactions

All Related Party Transactions, that were entered into during the Financial Year under review, were on an arm’s length basis, and in the ordinary course of business and are in compliance with the applicable provisions of the Act and the Listing Regulations. All Related Party Transactions are placed before the Audit Committee for prior approval. Prior omnibus approval of the Audit Committee is obtained for the transactions which are repetitive in nature or when the need for these transactions cannot be foreseen in advance.

There are no material related party transactions which are not in ordinary course of business or which are not on arm’s length basis and hence there is no information to be provided as required under Section 134(3)(h) of the Act read with Rule 8(2) of the Companies (Accounts) Rules, 2014.

The Company has adopted a Policy for dealing with Related Party Transactions which has been uploaded on the Company’s website. The web-link as required under SEBI Listing Regulation, 2015 is as under: http://bafnapharma.com/pdf/POLICY%20ON%20RELATED%20PARTY%20TRANSACTIONS%20-%20%20BAFNA.pdf

Corporate Social Responsibility

Provision with respect to Corporate Social Responsibility under Section 135 of the Companies Act, 2013 will be applicable from this year onwards since the Company’s Net Profit is more than Rs.5 Crores. The Company is taking necessary steps to comply with the provisions of CSR. The Company has formed a CSR Committee with effect from 25 th June 2021. The Composition of the Committee is as follows:

Name Designation
1 R. Chitra Chairperson of Committee
2. S. Hemalatha Member
3 Atul Sachdeva Member

Secretarial Audit for the FY 2020-21

In terms of Section 204 of the Companies Act, 2013, the Rules made there under & other applicable provisions, if any, the company is required to appoint a Secretarial Auditor to carry out secretarial Audit of the Company. Your Board of Directors has appointed M/s. A.K. Jain & Associates, Practicing Company Secretaries, Chennai for purpose of Secretarial Audit for the FY 2020-21 at the Board Meeting held on 12.02.2021.

As required under section 204(1) of the Companies Act, 2013 the Company has obtained a secretarial audit report. The copy of the Secretarial Audit report in MR-3 is attached as an annexure to the Director’s Report.

The qualifications made by the Secretarial Auditor and the explanation to the observations are as follows:

QUALIFICATION MANAGEMENT’S EXPLANATION
1 The Company has belatedly submitted the half yearly Related Party Transaction with the Stock Exchanges for the period ended 30.09.2020 as prescribed under the Regulation 23(9) of Securities Exchange Board of India, (Listing Obligation and Disclosure Requirements), 2015. Due to preoccupation on account Corporate Insolvency Resolution Process (CIRP) under IBC and related compliances, compliance of Regulation 23(9) with regard to disclosure pertainingtorelatedpartiesfor the half- year ending 30th September 2020, was inadvertently missed out and was belated filed on 20th January 2021.
The Company has taken adequate steps to ensure due compliance

Audit Committee:

In terms of Section 177 of the Companies Act, 2013 and other applicable provisions if any and as per the Regulation 18 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, as on 31st March, 2021 the Audit committee comprises 3 Directors out of which 2 are Non-Executive Independent Directors and 1 is Non-Executive Non Independent Director. The terms of reference of the Audit Committee includes matters specified in section 177 of the Companies Act 2013 and Regulation 18 of SEBI (Listing Obligations and Disclosure requirements) Regulations,2015.

The Audit Committee consists of the following :-

P K Sundaresan - Chairman

B. Kamlesh Kumar Member

Atul S - Member

In terms of Section 178 of the Companies Act, 2013 & other applicable provisions, if any, and as per the Regulation 19 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, as on 31st March, 2021 the "Nomination & Remuneration Committee" comprises of 3 Directors out of which two are Non-Executive Independent Directors and other one is Non- Executive & Non- Independent . The Policy of Nomination & Remuneration Committee was detailed in the corporate governance report. The constitution, terms and references and other details are elaborated in the Corporate Governance report annexed with this report.

B. Kamlesh Kumar Chairman

P.K.Sundaresan- Member

Akila C Raju Member

Stakeholders Relationship Committee

In terms of Section 178 of the Companies Act, 2013 & other applicable provisions, ifany, Board of Directors at their meeting held on 30.05.2014 renamed the existing "Investor Grievance & Share Transfer Committee" as "Stakeholders Relationship Committee". The constitution, terms and references and other details are elaborated in the Corporate Governance report annexed with this report.

The Stakeholders Relationship Committee consists of the following:-

R. Chitra - Chairperson

S. Hemalatha - Member

Atul S - Member

Management Discussion and Analysis Report

Management Discussion and Analysis Report, as required under the Listing Agreement with the Stock Exchanges is enclosed in the Annual Report and forms part of this Report. Certain Statements in the report may be forward-looking. Many factors may affect the actual results, which could be different from what the Directors envisage in terms of future performance & outlook.

Extract of Annual Return:

As per the requirements of Section 92(3) of the Act and Rules framed thereunder, the extract of the Annual Return for FY 2020-21 is uploaded on the website of the Company and the same is available at http://bafnapharma.com/pdf/MGT%207%20Bafna%20Pharmaceuticals%20Limited%202020%2021.pdf

Number of Board Meetings:

The Board of Directors met 4 times during the year under review and the gap between 2 meetings did not exceed

120 days.

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

As required under Section 124 of the Act, the Unclaimed Dividend amount aggregating to Rs.61,761/- lying with the Company for a period of seven years were transferred during the year 2020-21, to the Investor Education and Protection Fund (IEPF) established by the Central Government. b) Transfer of shares to IEPF

As required under Section 124 of the Act, 2960 equity shares, in respect of which dividend has not been claimed by the members for seven consecutive years or more, will be transferred by the Company to the Investor Education and Protection Fund Authority (IEPF). Details of shares transfer will be uploaded on the Website of IEPF as well on the website of the Company.

The Company had intimated those eligible shareholders on 19th Feb 2021 requesting them to send their claim before 24th May 2021 if any to the Company’s Registrar and Share Transfer Agent M/s Cameo Corporate Services Ltd. The Company is in the process of transferring the underlying shares of 2960 to IEPF if the Company did not receive any response from them.

Shareholders may claim their unclaimed dividend by applying in the prescribed Form No. IEPF-5. This Form can be downloaded from the website of the IEPF Authority at http://www.iepf.gov.in/IEPF/corporates.html .

Directors Responsibility Statement

Your Directors wish to inform that the Audited Accounts containing Financial Statements for the financial year ended 31stMarch,2021 are in full conformity with the requirements of the Companies Act, 2013. They believe that the Financial Statements reflect fairly the form and substance of transactions carried out during the year and reasonably present your Company’s financial conditions and result of operations. Your Directors further confirm that in preparation of the Annual

Accounts

The applicable accounting standards had been followed and wherever required, proper explanations relating to material departures have been given;

The Directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent to give a true and fair view of the state of affairs of the Company at end of the financial year and of the loss of the Company for that period;

Proper and sufficientcare has been taken for the maintenance the provisions of the Companies Act, 2013 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

The Accounts have been prepared on a "going concern basis".

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

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

Reporting of Frauds

There was no instance of fraud during the year under review, which required the Statutory Auditors to report to the Audit Committee and / or to the Board as required under Section 143(12) of the Act and the rules made thereunder.

Green Initiatives

In commitment to keep in line with the Green Initiatives and going beyond it, electronic copy of the Notice of 26th Annual General Meeting of the Company including the Annual Report for FY 2020-21 are being sent to all Members whose e-mail addresses are registered with the Company / Depository Participant(s).

Acknowledgement and Appreciation

Your Directors would like to thank Company’ would like to express their gratitude for the co-operation and assistance extended to the Company by its Customers, Suppliers, Technical Consultants, Contractors, Government and Local Authorities, etc. The Directors also wish to thank all its Shareholders for their unstinted support. The Directors would like to sincerely thank and place on record their appreciation of the consistent and dedicated services of the employees at all levels who have immensely contributed to the performance of the Company during the period under review.

For BAFNA PHARMACEUTICALS LIMITED
On behalf of the Board of Directors
Place: Chennai S. Hemalatha
Date: 25.06.2021 Chairperson & Executive Director
DIN:02714329