Fredun Pharmaceuticals Ltd Directors Report.

Dear Members.

Your Directors are pleased to present their report and financial statements for the year ended March 31,2019.

1 . Financial Results:

(Rs. In Lakhs)
Particulars For the financial year ended 31.03.2019 For the financial year ended 31.03.2018
Income from Business Operations 9,540.70 5,806.73
Other Income 199.60 164.35
Total Income 9,740.30 5,971.08
Profit / Loss before Interest, Depreciation and Taxes 1,058.8 586.42
Finance Cost 309.62 193.75
Depreciation / Amortization 133.00 128.50
Profit/Loss Before tax 616.18 264.17
Exceptional Income / Expenses 00 00
Prior Period adjustments 00 00
Profit / Loss before Tax 616.18 264.17
Income Tax 170.18 89.08
Profit/Loss after Tax 446.00 175.09

2. Financial Performance:

Your Company earned a total income of Rs. 9740.30 lakhs compared to the income of Rs. 5,971.08 lakhs for the previous year and the net profit of Rs. 446 lakhs compared to the net profit of Rs 175.09 lakhs for the previous year i.e., there was 63% hike in the total income of the Company.

The turnover of the Company has increased manifold due to the right strategy adopted by the Directors since last 3 years. Emphasis was put on increasing the infrastructure of the manufacturing unit at Palghar and installing high speed automatic machines for both production and packing departments. This helped the Company in strengthening the core operations and managing the overall cost structure. A very important aspect of regulatory compliance was indirectly met with, due to the installation of the latest machines having computerized data assurance and transparency in the manufacturing processes. Thus by upgrading the manufacturing unit as per the latest regulatory framework, your Company expects new drug approvals at a much faster pace in the countries we already export to and also in other countries where health is considered a priority and where a substantial amount of GDP is spent on health.

3. State of Affairs of the Company:

Your Companies entire focus is on providing quality medicines at affordable prices. A review of the Indian Pharma Companies for the F.Y. 2018-19 shows that the Companies have to compete on low cost generics, so rationalisation of cost of production and marketing are very important factors.

As per our current Government Policies, health awareness is given the utmost priority through "Aayushman Bharat Scheme" for the poor and the underprivileged. This accounts for about 25 crores of Indians and will create a voluminous market and will definitely boost the requirements for generics. Your Company to ensure competitiveness in the market has started participating in Government Tender Business and has already been successful in winning some tenders which would yield higher growth in the future.

Further, the licenses of 1wo new departments of ointments / gels / creams and pellets manufacturing of different APis have been obtained and the validation processes of some of the products are also over, so your Company looks ahead to achieve more revenue through consumer health products in the ointments and creams market.

4. Dividend:

The Board of Directors have recommended a Dividend of 6.5% on the paid-up 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.

5. Share Capital:

The paid-up Share Capital of the Company as on March 31, 2019 was Rs. 3,98,96,340 consisting of 39,89,634 Equity Shares having Face Value of Rs. 10 each. The Equity Shares of the Company are listed on the BSE Limited since March 21,2016.

During the F.Y. 2018 - 2019; there was an increase In the capital structure of the Company. Considering the Business expansion and requirement of funds; the Company had issued 5,64,500 Equity Shares having Face Value of Rs. 10/- each under the Preferential Guidelines of Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009 at Rs. 225/- each including premium of Rs. 215/- each to the Eligible Investors and Promoters. The details of the Issue is available on the website of the Company via the Postal Ballot notice dated May 24, 2018.

An increase in the Capital structure of the Company has occurred from the Financial Year 2017-18 till the Financial Year 2018-19 as shown In the table below:

No. of Equity Shares Issue Price Allotment date Equity Share Capital before allotment Equity Share Capital after allotment
5,72,735 Rs. 150/- September 1,2017 Rs. 2,35,24,000/- Rs. 2,92,51,350/-
4,99,999 Rs. 150/- January 16, 2018 Rs. 2,92,51,350/- Rs. 3,42,51,340/-
5,64,500 Rs. 225/- 1,2018 Rs. 3,42,51,340/- Rs. 3,98,96,340/-

6. Transfer to Reserves:

The Company proposes to 1ransfer an amount of Rs. 3499.95 Lakhs to reserves for its future growth and diversification.

7. Foreign Exchange Earnings and Outgo:

Foreign Exchange Earnings: Export of Goods - Rs. 4074,88,593.88/- Lakhs Foreign Exchange Outgo: Import of Goods - Rs. 192,06,298/- Lakhs

In compliance with the Reserve Bank of India guidelines, the Company proactively manages Foreign Exchange Risk to protect value of exposures, if any; with an objective to manage financial statement volatility. Currently, the Company has in place appropriate risk hedging strategy for its Imports and Exports. Foreign Exchange exposures are periodically reviewed and if necessary, hedged while avoiding trading and speculative positions. The Board periodically reviews Foreign Exchange Exposure.

8. Meetings and Committee Meetings;

• Seven (7) Board meetings were held during the Financial Year 2018-19. The details of the Board meetings and the attendance of the Directors are provided in the Corporate Governance Report annexed herewith.

• Four (4) Audit Committee Meetings were held during the Financial Year 2018-19. The details of the Audit Committee Meetings and the attendance of the Directors are provided In the Corporate Governance Report annexed herewith.

• Three (3) Nomination & Remuneration Committee Meetings were held during the Financial Year 2018-19. The details of the Committee Meetings and the attendance of the Directors are provided in the Corporate Governance Report annexed herewith.

• One (1) Independent Director Committee Meeting was held during the Financial Year 2018-19. The details of the Committee Meeting and the attendance of the Directors are provided in the Corporate Governance Report annexed herewith.

• Three (3) Stakeholder Relationship Committee Meetings were held during the Financial Year 2018-19. The details of the Committee Meetings and the attendance of the Directors are provided in the Corporate Governance Report 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.

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; Mr. Nariman Medhora (DIN: 02060357) is liable to retire by rotation at the ensuing 32nd Annual General Meeting and being eligible, has offered himself for re-appointment. His re-appointment is being placed for your approval at the ensuing Annual General Meeting. The Members of the Company may refer to the accompanying Notice of the 32nd Annual General Meeting of the Company for the brief Resume of Mr. Nariman Medhora.

11 . Declaration by Independent Directors:

The Company had 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 2018-19 held on May 24, 2018; 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:

The Board of Directors had carried out an Annual Evaluation of its performance. Board Committees and individual Directors, pursuant to the provisions of the Companies Act, 2013 and SEBI Listing Regulations, 2015.

The performance of the Board was evaluated by the Board after seeking inputs from all the Directors on the basis of criteria such as the Board Composition and structure effectiveness of Board process, participation in the long-term strategic planning, information, functioning etc.

The performance of the Committees was evaluated by the Board after seeking inputs from the Committee Members on the basis of the criteria such as the Composition of Committees, effectiveness of Committee meetings, etc.

The contribution and impact of individual members is evaluated on a number of parameters such as level of engagement, independence of judgment, preparedness on the issues to be discussed, conflicts resolution and contributions to enhance the Boards overall effectiveness. In addition, the Chairperson was also evaluated on the key aspects of her role by other Board members.

A separate meeting of Independent Directors was convened on May 24, 2018; to discuss the following aspects:

i Review the performance of Non- Independent Directors and the Board as a whole;

ii Review the performance of the Chairperson of the Company, taking into account the views of Executive and Non-Executive Directors;

iii Assess the quality, quantity, and timeliness of flow of information between the Companys Management and the Board that is necessary for the Board to effectively and reasonably perform its duties.

Outcome of evaluation process

Based on inputs received from the Members, it emerged that the Board had a good mix of competency, experience, qualifications and diversity, OVerall, the Board was functioning very well in a cohesive and interactive manner.

13. Directors Responsibility Statement:

Pursuant to Section 134( 3)(c) of the Companies Act, 2013; your Directors hereby confirm that:

i In the preparation of the Annual Accounts, the applicable accounting standards have been followed and there are no material departures;

ii Appropriate accounting policies have been selected and applied consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the Profit of the Company for that period;

iii Proper and sufficient care had 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;

iv The Annual Accounts had been prepared on a Going Concern basis;

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

vi 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 the Annual Return:

Pursuant to the provisions of Section 92(3) of the Companies Act, 2013 read with Rule 12 of the Companies (Management and Administration) Rules, 2014; the extract of the Annual Return in Form MGT-9 is available on the website of the Company at www. fredungroup.com

16. Training and Human Resource Management:

India is one of the worlds biggest supplier of generic drugs and ranks amongst the top five fastest growing Pharma markets; but the top-line growth is declining along with the profitabilily. It needs to invest more Capital in R & D which is becoming hard to find. The only solution is to identify the talent within the organization and develop their mindset and culture. It requires big changes in organizational thinking as it relates to their complete lifestyle transformation.

Your Company makes concerted efforts to retain quality people with leadership commitments and who can align with the Company ethics. This will ensure checks and double checks to maintain the quality of the products and reduce the costs. An outcome- based approach was adopted with the trained leaders and a skilled workforce helped the Company gain a competitive edge.

Your Company has continuously focused on development and training programs of its star performers, especially in the regulatory area and R & D. This has yielded good results as your Company was successful In manufacturing latest molecules which were out of patent and the In-house processes made them cost effective.

Your Company has already registered some of the products in the ARV segment and are continuing to register in different markets. Understanding the importance of the basic strategy of Human Resource Management, your Company believes that it will yield benefits for the Company by maintaining good relations with the employees and will help to enable a sustainable corporate lifestyle.

Your Company consistently abides by Human Resources Policy that is found on a set of principles of equality of opportunity, continuing personnel development, fairness, mutual trust and teamwork.

17. Subsidiary Company. Associate Company and JointVenture Company:

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

18. Deposits:

Your Company has not accepted any deposits from public.

19. Particulars of Loans. Guarantees and Investments:

During the year, your Company has not given any new loans or made any Investments and has not provided any Guarantees 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 10, 2019; on the Financial Statements of the Company for Financial Year 2018-19.

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,fredunaroup.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, 2019. The Secretarial Audit Report is annexed as Annexure B.

There are no qualifications, reservations or adverse remarks or disclaimers made by M/s. Rajendra and Co., Practicing Company Secretaries, in their Secretarial Audit Report dated June 10, 2019 on the Secretarial and other related records of the Company for Financial Year 2018-19.

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 Practising Cost Accountants. Your Company is maintaining all the cost recordsreferred above.

The Board, on the recommendation of the Audit Committee, had appointed M/s. Joshi Apte & Associates, Practising Cost Accountants, as the Cost Auditors for conducting the audit of cost records of the Company for the Financial Year 2019 - 20.

Further, the Cost Auditors are in the process of completing the Cost Audit for the Financial Year 2018-19 and it will be completed before the due date.

24. 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.

25. Internal Financial Control system and their adequacy:

Company has well established Internal Financial Control System for reviewing the Financial reporting of the Company for the Financial Year 2018-19.

26. Corporate Social Responsibility:

As per 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 2018-19; your Company had earned Profit before tax of Rs. 6.16 crores and thus the provisions of the Corporate Social Responsibility as enumerated under Section 135 of the Companies Act, 2013 and rules made thereunder are applicable to the Company for the Financial Year 2019-20.

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.

27. 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 Policy is also available on the website of the Company at www.fredunaroup.com

28. Conservation of Energy. Technology Absorption:

Companies which take care of their internal structures, systems and work culture can only benefit in the long term. It is 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. Conservation of energy in all the departments and its focused audit is an ongoing challenge which requires a proactive compliance. Since last two to three years your Company has heavily invested in latest machineries for both the manufacturing and packing departments. This has helped in speeding up the production with minimum maintenance and smooth running thus reducing the cost of electricity and time.

The upgraded GMP compliant machines are reliable, automated and reduces dependence on manpower and saves operating cost per batch. The other integrated systems with proper data storage and consistent performance also lowers the cost of production. Continuous monitoring is done of existing compressors, boilers, electric heaters, pumps, etc for enhancing energy efficiency.

Your Company is maintaining an ETP plant and complying with the Pollution Control Regulations applicable in the State of Maharashtra.

As your Company has a full-fledged R & D department, research on manufacturing generic versions of just out of patent drugs is continuously going on. Once the manufacturing process is validated, it is tested on a pilot scale and thereafter the products are sent for registration in the countries as per the market demand. Process improvements with latest experiments to improve the quality of our fast-moving products are carried out as a part of technology absorption. This continuous upgradation of technology benefits the Company by cutting down the cost, time and improving the quality of the products.

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

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

30. Receipt of Award:

Your Company continuously endeavours to function in the most efficient manner in order to accomplish and achieve its targeted goal in the most efficient and effective manner thus optimizing the available resources / synergies. In the month of December 2018; your Company had received a Prestigious and a well-recegnized award in the Pharma Sector "Pharma Leaders Most Promising and Dynamic Company of the Year 2018" at Pharma Leaders Power Brand Awards 2018 organized by Mr. Satya Brahma. Chairman & Editor in Chief. Network 7 Media Group. The award was presented by Dr. Sudhakar Shinde, CEO of

Mahatma Jyotiba Phule Jan Arogya Yojana and CEO of Aayushman Bharat and Dr. Mukesh Bhatra, CMD of Dr. Batras Positive Health Clinic Pvt. Ltd. and Mr. Salya Brahma, Chairman & Editor in Chief, Network 7 Media Group.

31 . Particulars of Directors / Key Managerial Personnel / Employees:

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 the remuneration of Directors, Key Managerial Personnel and the employees and the percentile change in the remuneration; as required under the Rules are furnished hereunder:

(I) The ratio of the remuneration of each Director to the median remuneration of the employees of the Company for the Financial Year 2018-19:

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 6.03:1
Mr. Fredun Medhora Director 24,00,000 12.06:1
Mr. Nariman Medhora Executive Director 13,20,000 6.63:1

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

(II) The percentage increase in remuneration of each Director. Chief Executive Officer. Chief Financial Officer. Company Secretary in the Financial Year 2018-19:

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

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

Further, the Board of the Company had appointed Ms. Priyanka Chaturvedi as the Company Secretary Cum Compliance Officer of the Company w.e.f. September 18, 2018.

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.

(iii) The percentage increase in the median remuneration of employees in the Financial Year:

The percentage increase in the median remuneration of employees in the Financial Year: Nil

Explanation: For calculation of median remuneration, the employee count taken for the Financial Year 2018-19 and 2017-18, comprise employees (including permanent workmen) who have served for the whole of the respective Financial Years.

(iv) The number of Permanent Employees on the rolls of the Company:

There were 223 permanent employees as on March 31, 2019. (inclusive of permanent workmen)

(v) 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: 2. 12
Average Percentile Increase for Managerial Personnel: NIL

The average increase in the salaries of Employees excluding Managerial Personnel during Financial Year2018-19was2.12%.

(vi) 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. Acknowledgement:

The Board of Directors appreciate the contribution made by the employees of the Company and acknowledge their hard work and dedication to ensure that the Company consistently performs well and remains a leading player in the Pharma Industry. The Directors gratefully acknowledge the support and confidence reposed by the shareholders of your Company. Further, the Board placed on record their sincere thanks to its Bankers, business associates, consultants, and various Government Authorities for their consistent support extended to your Company during the year under review. acknowledge the support and confidence reposed by the shareholders of the Company.

By Order of the Board
For Fredun Pharmaceuticals Limited
Sd/-
Daulat Medhora
Place: Mumbai DIN: 01745277
Date: June 10, 2019 (Chairperson & Jt. Managing Director)

ANNEXURE A

FORM AOC-2

[Pursuant to clause (h) of sub-Section (3) of Section 134 of the Act and Rule 8 (2) of the Companies (Accounts) Rules, 2014]

This Form pertains to the disclosure of particulars of contracts / 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 Arms Length Transactions under third proviso thereto.

1. Details of contracts or arrangements or transactions not at arms length basis:

No such transactions were entered during the financial year 2018-19.

2. Details of material contracts or arrangement or transactions at arms length basis:

The contracts or arrangements or transactions entered with the related parties during the financial year 2018-19 under review, were not material and the same were disclosed in the notes to accounts forming part of the Financial Statements for the year ended March 31, 2019.

By Order of the Board
For Fredun Pharmaceuticals Limited
Sd/-
Fredun Medhora
Place: Mumbai (Managing Director)
Date: June 10, 2019 DIN: 01745348