Fredun Pharmaceuticals Ltd Directors Report.

DEAR MEMBERS,

On behalf of the Board of Directors of the Company it gives me immense pleasure to present the 34th Annual Report for the year ended March 31, 2021 along with the Audited Financial Statement and Accounts for the year ended March 31,2021.

The Financial year 2020-2021 started with COVID-19 related lockdowns in India and several parts of our major markets. The pandemic which started about 16 months back impacted almost everyone and your Company was no exception. There were challenges around movement of people and all the business operations were impacted; be it manufacturing, research and development (R&D), marketing or the supply chain and logistics. Our team accepted all the challenges and solved these issues to ensure that your Company continued manufacturing. We also undertook several precautionary measures to ensure good health and safety of our employees and business partners. We also contributed our bit to support the needy and front line workers during the pandemic, driven by our- policy of ‘Good Health Cant Wait . It reflects the dynamism and empathy which are core to us.

1. FINANCIAL RESULTS:

(Rs. In Lakhs)

Particulars
Income from Business Operations 13,155.19 11,029.86
Other Income 373.80 298.99
Total Income
Profit / Loss before Interest, Depreciation and Taxes 1,053.61 878.73
Finance Cost 416.21 441.39
Depreciation / Amortization 200.37 187.87
Profit / Loss Before tax
Exceptional Income / Expenses (116.37)* 00
Prior Period adjustments 00 00
Profit / Loss before Tax 320.66 249.46
Income Tax 119.19 59.27
Profit / Loss after Tax

Explanation for Exceptional Expenses.: Exceptional Expenses of Rs..116.37/- lakhs was due to heavy loss of raw materials and packing materials in the factory due to heavy flood in the last year .

However, the stocks were insured and the Company had claimed an amount of Rs. 116.37/- lakhs from the Insurance Company. But the Company has received only Rs. 98.51/- lakhs during the Financial Year 2020-21 which we have shown in the other income in Profit and Loss Account.

2. FINANCIAL PERFORMANCE:

Your Company earned a total income of ^.13,528.99 lakhs as compared to the total income of 11,328.85 lakhs for the previous year. There was 19.42 % hike in the total income of the Company.

The Companys turnover was Rs.. 13,155.19 lakhs as compared to the turnover of Rs.11029.86 lakhs for the previous year. There was 19.27% hike in the turnover of the Company.

Your Companys net profit for the Financial Year 2020-21 was Rs.. 201.47 lakhs as compared to the net profit of Rs.. 190.19 lakhs for the previous year i.e. 2019-20.

Your Company has received WHO cGMP Certificates to manufacture pellets of different APIs and topical creams and gels and have also succeeded in launching new formulations from these two Departments.

Considering the overall growth in Pharma Industry vigorous efforts are put in by your Managing Director, to increase the turnover of the Company by at least 30% in the next financial year.

3. STATE OF AFFAIRS OF THE COMPANY:

Your Company is well diversified in the business ranging from Formulations to Diagnostics to Consultancy. The Company has an unique range of products from niche formulations , anti-diabetics to the latest anti- retroviral and anti - Hypertensive products.

Your Company has the daily capacity of Tablet manufacturing of over 22 million tablets along with a dedicated DC Granules manufacturing division which manufactures 12 tons of granules of specialized products for the Indian Market as well as for the Overseas Market.

Your Company supplies finished formulations to over 42 Countries globally. As stated above , your Company continues to implement new systems with current GMP norms and has also set up new facilities for Ointments and Pelletization.

Your Company is associated with many Governments of different countries which have also realised the need for robust and consistent healthcare systems. Hence there is a great potential for growth in near future.

Your Company is focusing in the Southeast Asian Markets and is doing well in African Markets by adding new molecules to achieve further economics of scale. Your Company has decided to add new products like cosmeceuticals and nutraceuticals in existing as well as in new markets where the registration process is going on. Considering a good potential for growth, your Company has ventured into a separate Generic Division to market different generic products at very competitve prices.

4. DIVIDEND:

The Board of Directors have recommended a Dividend of 7 % on the paid-up Ordinary Equity Shares of the Company payable to those shareholders of the Company whose names appear in the Register of Members as on the Record date i.e. Saturday, September 18, 2021.

5. SHARE CAPITAL:

The paid-up Share Capital of the Company as on March 31,2021 was Rs.. 3,98,96,340 consisting of 39,89,634 Equity Shares of Rs.. 10 each. The Equity Shares of the Company are listed on the BSE Limited since March 21,2016.

6. TRANSFER TO RESERVES:

The Company proposes to transfer an amount of Rs.. 3908.06 Lakhs to reserves for its future growth and diversification.

7. FOREIGN EXCHANGE EARNINGS AND OUTGO:

Foreign Exchange Earnings: Export of Goods- Rs.. 44,17,96,526.14 Foreign Exchange Outgo: Import of Goods- Rs.. 74,43,457.35

As per RBI Guidelines, the Company manages Foreign Exchange Risk to protect value of exposures. From time to time the Board reviews the Foreign Exchange Exposure.

Foreign Exchange Inflow - Outflow (Rs.. In Lakhs)

8. BOARD MEETINGS AND COMMITTEE MEETINGS:

• Four (4) Board meetings were held during the Financial Year 2020-21. The details of the Board meetings and the attendance of the Directors are provided in the Corporate Governance Report which is annexed herewith.

• Four (4) Audit Committee Meetings were held during the Financial Year 2020-21. The details of the Audit Committee Meetings and the attendance of the Directors are provided in the Corporate Governance Report which is annexed herewith.

• Two (2) Nomination & Remuneration Committee Meeting were held during the Financial Year 2020-21 .The details of the Nomination & Remuneration Committee Meeting and the attendance of the Directors are provided in the Corporate Governance Report which is annexed herewith.

• One (1) Independent Directors Committee Meeting was held during the Financial Year 2020-21. The details of the Committee Meeting and the attendance of the Directors are provided in the Corporate Governance Report which is annexed herewith.

• One (1) Stakeholders Relationship Committee Meeting was held during the Financial Year 202021. The details of the Committee Meeting and the attendance of the Directors are provided in the Corporate Governance Report which is annexed herewith.

9. DIRECTORS AND KEY MANAGERIAL PERSONNEL:

During the year, the Non-Executive Directors of the Company had no pecuniary relationship or transactions with the Company, other than the sitting fees.

Mr. Nariman Medhora the Founder Promoter Director of the Company whose tenure as the Whole Time Director has completed on June 4, 2021 has now decided not to continue as the Whole Time Director of the Company and hence he will be Promoter Director without any salary.

Mr. Nariman Medhora was associated with the Company as the Founder Promoter Director for more than 30 years. The Company acknowledges his hard work, determination and business acumen which has kept the graph of the Companys progress always rising. Your Company recalls that it is because of his foresight and his urge to grow, the Company has widened its sphere of activities. His motivation of the employees and staff has been exemplary.

10. DIRECTOR RETIRING BY ROTATION:

In accordance with the provisions of the Companies Act, 2013 and in terms of the Memorandum and Articles of Association of the Company; Dr. (Mrs.) Daulat Medhora (DIN No: 01745277) is liable to retire by rotation at the ensuing 34th Annual General Meeting and being eligible, has offered herself for re-appointment. Her re-appointment is being placed for your approval at the ensuing 34th Annual General Meeting.

11. DECLARATION BY INDEPENDENT DIRECTORS:

The Company has received declaration from all the Independent Directors under Section 149(7) of The Companies Act, 2013 in the first Board Meeting of the Financial Year 2020-21 held on July 29, 2020; stating that they meet the criteria of Independence as laid down under Section 149(6) of The Companies Act, 2013.

12. ANNUAL EVALUATION OF BOARD PERFORMANCE AND PERFORMANCE OF ITS COMMITTEES AND OF INDIVIDUAL DIRECTORS:

Pursuant to the provisions of Section of 134 (3) (p) of The Companies Act, 2013 and Rule 8 (4) of the Companies (Accounts) Rules an annual performance evaluation was carried out by the Board of its own performance, Directors individually and Committees of the Board. Performance evaluation of the Board and Committees was done by the Board after seeking inputs from all Directors, inter-alia covering different criteria viz, adequacy and composition of the Board, quality of deliberations, transparency, effectiveness of Board procedures, observance of governance and contributions of Directors at Board and Committee meetings. In evaluating the performance of Individual Directors, criteria such as leadership qualities, qualifications, responsibilities shouldered, analytical skills, knowledge, participation in long-term strategic planning, inter-personal relationships and attendance at meetings was taken into consideration. In compliance with Regulation 17(10) of the Listing Regulations, 2015, the Board carried out performance evaluation of Independent Directors without the participation of the Director being evaluated. The performance evaluation was carried out based on parameters such as, initiative, contributions, independent judgement, understanding the business environment and understanding of strategic issues. Independent Directors are a diversified group of recognised professionals with wide horizon of knowledge, competence and integrity who express their opinions freely and exercise their own judgements in decision-making.

13. DIRECTORS RESPONSIBILITY STATEMENT:

To the best of their knowledge and belief and according to the information and explanations obtained by them, your Directors make the following statement in terms of Section 134 (3) (C) of The Companies Act, 2013:

a) That in the preparation of the Annual Financial Statement for the year ended March 31,2021, the applicable accounting standards have been followed along with proper explanation relating to material departures, if any;

b) That such accounting policies as mentioned in the Notes to the Accounts have been selected and applied consistently and judgement and estimates have been made that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as on March 31, 2021, and of the profit of the Company for the year ended on that date;

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) The Annual Accounts has been prepared on a "Going Concern Basis";

e) The Internal Financial Controls has been laid down, to be followed by the Company and such Internal Financial Controls are adequate and were operating effectively; and

f) In order to ensure compliance with the provisions of all applicable laws, proper systems has been devised and that such systems were adequate and operating effectively.

14. PARTICULARS OF EMPLOYEES:

None of the employees of the Company fall under the limits laid down in Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014.

15. EXTRACT OF ANNUAL RETURN:

In compliance with the provisions of Sections 92 (3) and 134 (3) (a) of the Act, the Annual Return of the Company for the financial year ended March 31, 2021 has been hosted on the Companys website www.fredungroup.com and web link for the same is: https://www.fredungroup.com/investor relations/extract of annual return/.

16. TRAINING AND HUMAN RESOURCE MANAGEMENT:

Your Company is working strategically to recruit, develop and utilize people Our most valuable business resource. Your Company is actively pursuing policies for the strategic and well-planned recruitment, development and utilization of human resources who can understand and practice the Companys Management Principles and Activity Guidelines in order to contribute broadly to society and continue creating new values.

Effective recruitment, development and the utilization of globally competitive human resources are the most important issues for your Company to survive the current ever-changing business environment and achieve sustainable growth. Our concern is to ensure that each of our employees exercise their full potential in line with the business strategy of their respective departments.

Current Employees Tenure with the Company In years

17. SUBSIDIARY COMPANY, ASSOCIATE COMPANY AND JOINT VENTURE COMPANY:

Your Company does not have any Subsidiaries or Associates or Joint Venture Companies.

18. DEPOSITS:

The Company has not accepted any deposits covered under Chapter V of the Companies Act, 2013 ("the Act"). Accordingly, there is no disclosure or reporting required in respect of details relating to deposits.

19. PARTICULARS OF LOANS, GUARANTEES AND INVESTMENTS:

During the year your Company has not given any new loans, but your Company has made investments in Mutual funds. During the year, your Company has not provided any Guarantee except those which are already mentioned in the Audited Accounts of the Company.

20. STATUTORY AUDITORS:

The Statutory Auditors of the Company M/s. Savla & Associates, Chartered Accountants (ICAI Registration No: 109361W) were appointed at the 31st Annual General Meeting of the Company held on September 27, 2018 for a period of 5 years i.e. upto the conclusion of the 36th Annual General Meeting that will be held in the year 2023.

The Company had received a confirmation from M/s. Savla & Associates to the effect that their appointment is in compliance with the eligibility criteria in terms of Section 141 (3) of The Companies Act, 2013.

The requirement of ratification of the Auditors Appointment each year during the continuation of their tenure is waived off by the Ministry of Corporate Affairs and thus there is no requirement each year to pass a resolution for Ratification of the Auditors Appointment.

There are no qualifications, reservations or adverse remarks or disclaimers made by M/s. Savla & Associates, in their Report dated June 28, 2021; on the Financial Statements of the Company for Financial Year 2020-21.

21. PARTICULARS OF CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES:

There were no materially significant Related Party transactions made by the Company during the year that would fall under the scope of Section 188 of the Companies Act, 2013. Disclosure in Form AOC-2 in terms of Section 134(3)(h) of The Companies Act, 2013 is annexed as Annexure A.

The policy on materiality of information / documents and dealing with it has been approved by the Board and the same is also available on the website of the Company at www.fredungroup.com

22. SECRETARIAL AUDIT REPORT:

Pursuant to the provisions of Section 204 of The Companies Act, 2013 read with the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014; the Board of Directors had appointed M/s. Rajendra and Co., Practicing Company Secretaries, to undertake the Secretarial Audit of the Company for the F.Y. ended March 31,2021. The Secretarial Audit Report is annexed as Annexure B.

23. COST AUDIT REPORT:

Pursuant to Section 148 of the Companies Act, 2013 read with the Companies (Cost Records and Audit) Amendment Rules, 2014; your Company with reference to its Pharma business is required to maintain the cost records as specified under Section 148 of the Companies Act, 2013 and the said cost records are also required to be audited by the Practicing Cost Accountants. Your Company is maintaining all the cost records referred above.

The Board, on the recommendation of the Audit Committee, had appointed M/s. Joshi Apte & Associates, Practicing Cost Accountants, as the Cost Auditors for conducting the audit of cost records of the Company for the Financial Year 2021 -22 subject to the approval of the shareholders at the ensuing 34th Annual General Meeting.

24. SECRETARIAL STANDARDS :

In terms of Section 118(10) of the Act, the Company complies with Secretarial Standards 1 and 2, relating to the ‘Meetings of the Board of Directors and ‘General Meetings respectively as specified by The Institute of Company Secretaries of India and approved by the Central Government.

25. DETAILS OF SIGNIFICANT MATERIAL ORDERS:

No significant and material orders were passed by the Regulatory Authorities or the Courts or Tribunals that may have an impact on the "Going Concern Status" and Companys Operations in the future.

26. INTERNAL FINANCIAL CONTROL SYSTEM AND THEIR ADEQUACY

Company has established Internal Financial Control over financial reporting in current Financial Year 2020-21.

27. CORPORATE SOCIAL RESPONSIBILITY:

Section 135 of The Companies Act, 2013 read with Companies (Corporate Social Responsibility) Rules, 2014 and Schedule VII to the Act; the provisions of The Corporate Social Responsibility shall be applicable to every Company which has during the immediately preceding Financial Year -

• Net worth of Rs.. 500 Crore or more, or

• Turnover of Rs.. 1000 Crore or more, or

• Net Profit of Rs.. 5 crore or more.

During the year under review i.e., for the Financial Year 2020-21; your Company had earned Profit after tax of 201.47 lakhs and thus the provisions of the Corporate Social Responsibility as enumerated under Section 135 of the Companies Act, 2013 and rules made there under are not applicable to the Company for the Financial Year 2020- 2021.

The Company is in the process of constitution of the Committee for the said matter which shall look out into this matter, take adequate steps and guide the Board to undertake necessary activities under the Corporate Social Responsibility regime. Further, the Policy on the Corporate Social Responsibility, the corpus to be spend, the social activity to be undertaken shall be discussed and finalized by the Board of Directors of the Company in consultation of the Corporate Social Responsibility Committee and our stakeholders will be kept informed of every material update on the said matter.

The Company has a Policy on Corporate Social responsibility (CSR) duly approved by the Board and the same has been hosted on Companys website at https://www.fredungroup.com/investor relations/statutory documents and information.pdf. The CSR budget for the Financial Year 20202021 was prepared in accordance with the provisions of Section 135 (5) of the Companies Act, 2013 read with the Companys CSR Policy. The amount so budgeted was fully spent on or before March 31,2021, the detailed report on CSR Activities/Initiatives is enclosed as Annexure-D to the report.

The Company has voluntarily provided for CSR Related Activity in the Statement of Profit and Loss account to the tune of Rs. 7,54,025 for the year ended March 31,2021.

28. VIGIL MECHANISM / WHISTLE BLOWER POLICY:

The Company has adopted a Whistle Blower Policy, to provide a formal mechanism to the Directors, employees and its stakeholders to report their concerns about unethical behaviour, actual or suspected fraud or violation of the Companys Code of Conduct or Ethics Policy. The policy provides for adequate safeguards against victimization of employees and provides for direct access to the Chairman of the Audit Committee. The same is also available on the website of the Company at www.fredungroup.com.

29. Compliance with provisions of Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal), 2013

The Company is committed to uphold and maintain the dignity of Women Employees. An Internal Complaints Committee has been formed for each location of the Company under the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. The Company has a broad and comprehensive policy in place to deal with any such situation. The Policy is available on the website of the Company at www.fredungroup.com

No case of Sexual harassment was reported to the Internal Complaints Committee during the year under review.

30. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION

Your Company has heavily invested into the latest machineries for both the manufacturing and packing departments; hence it is imperative to take care of the internal systems and work culture. The Company is continuously complying as per the Pollution Regulation Control Board of Maharashtra .

The Company also conducts In-House energy audits at regular intervals with proper monitoring and maintenance of all the machines. Conservation of energy in all the departments is an on- going process which requires a proactive compliance. It is a must to have a high performing and competent Quality Control and Quality Assurance team which monitors the compliance of all the regulatory aspects of manufacturing.

Special emphasis is given on improving the manufacturing processes which will help in reducing manufacturing time, manpower and electricity consumption. Additional conveyor belts are installed to transfer the finished goods from manufacturing departments to BSR and also from BSR to the container loading bay. This has helped in reducing time, money and energy to a great extent. The newly installed automatic equipments and instruments will give higher output with less manpower and increase the productivity of the Company.

The other Integrated Systems with proper data storage gives consistent performance and lowers the cost of production. The continuous monitoring is done of existing compressors , boilers electrical heaters , pumps etc for enhancing energy efficiency .

For the treatment of waste water, your Company has installed a bigger size ETP plant which controls water pollution. The treated water is used for gardening and a green environment is well maintained and no waste water is allowed to run outside the manufacturing unit. The waste sludge is regularly monitored by MPCB Department.

With a full-fledged R&D Department, your Company has developed and launched many new molecules like antihy pertensives, antidiabetic , ARVs and even narcotics. These molecules are either under patent or still not universally manufactured on a large scale. Continuous efforts are made to improve the quality of the products in respect of better bio availability and stability.

Two new walk-in stability chambers are also installed for monitoring the stability of the products. Continuous R&D is going on for established products also to reduce the cost of manufacturing and improve the quality and stability of the products. Your Company has also installed fully automatic purified water generation and distribution system to cater to newly started ointments, creams and gels manufacturing Department along with the Department for manufacturing pellets of various APIs complying as per cGMP norms.

31. PARTICULARS OF DIRECTORS / KEY MANAGERIAL PERSONNEL / EMPLOYEES:

Details pertaining to remuneration as required under Section 197 of The Companies Act, 2013 read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014; the details of remuneration of Directors, Key Managerial Personnel and the employees and the percentile change in the remuneration; as required under the Rules are furnished hereunder:

The Companys policy on Directors appointment and remuneration and other matters provided in Section 178(3) of the Act has been disclosed in the Corporate Governance Report, which forms part of this report.

(I) THE RATIO OF THE REMUNERATION OF EACH DIRECTOR TO THE MEDIAN REMUNERATION OF THE EMPLOYEES OF THE COMPANY FOR THE FINANCIAL YEAR 2020-21 :-

Name Designation Total Remuneration (in Rs..) Ratio of Remuneration of Director to the Median Remuneration of Employees
Dr. (Mrs.) Daulat Medhora Chairperson & Jt. Managing Director 12,00,000 5.0
Mr. Fredun Medhora Managing Director 24,00,000 10.0
Mr. Nariman Medhora Executive Director 13,20,000 5.5

(II) THE PERCENTAGE INCREASE IN REMUNERATION OF EACH DIRECTOR, CHIEF EXECUTIVE OFFICER, CHIEF FINANCIAL OFFICER, COMPANY SECRETARY IN THE FINANCIAL YEAR 2020-21 ;

Name Designation Total Remuneration (in Rs..) % increase / (decrease) in remuneration in the Financial Year
Dr. (Mrs.) Daulat Medhora Chairperson & Jt. Managing Director 12,00,000 NIL
Mr. Fredun Medhora Managing Director 24,00,000 NIL
Mr. Nariman Medhora Executive Director 13,20,000 NIL
Ms. Ankita Joshi Company Secretary 3,46,302 NIL

The Independent - Non-Executive Directors of the Company are only getting sitting fees.

(iii) The percentage increase in the median remuneration of employees in the Financial Year : NIL The number of Permanent Employees on the rolls of the Company:

There were 267 permanent employees as on March 31,2021.

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

Average Percentile Increase for other than Managerial Personnel: NIL Average Percentile Increase for Managerial Personnel : NIL

The average increase in the salaries of employees excluding Managerial Personnel during Financial Year 2020-21 was: NIL

Affirmation that the remuneration is as per the remuneration policy of the Company :

It is affirmed that the remuneration paid during the period under review is as per the remuneration policy of the Company.

32. COVID-19 PANDEMIC

The Covid-19 pandemic is redefining global health crisis in recent times and has spread rapidly across the globe. The bigger challenge is that it is not a mere health crisis but is having an unprecedented impact on Indian and global business environment. Your Company has taken all necessary measures for the future mitigating impacts of any challenges, if faced due to the Covid-19 pandemic. The key priorities of your Company would be to closely monitor customer demands, conserve cash and control fixed costs, while continuing to invest in the important long term growth areas.

33. ACKNOWLEDGEMENT

The Board of Directors express their deep sense of gratitude to shareholders, bankers, customers, business associates, employees, trade unions and all other stakeholders for their support and looking forward to their continued assistance in future also.

By Order of the Board For Fredun Pharmaceuticals Limited

Sd/-
Dr. (Mrs.) Daulat Medhora
Place: Mumbai DIN: 01745277
Date: June 28, 2021. (Chairperson & Jt. Managing Director)