Healthcare Global Enterprises Ltd Directors Report.

Dear Members,

Your Directors are pleased to present the Twenty Second Annual Report of your Company together with the Audited Standalone and Consolidated Financial Statements and the Auditors Report thereon for the financial year ended March 31, 2020.

1. Financial Highlights:

The highlights of Standalone and Consolidated financial results of your Company and its subsidiaries are as follows:

(Rs. in million)

Consolidated 2019-20 2018-19
Income from operations including Income from Govt Grants 10,956.4 9,786.7
Total Expenditure excluding Depreciation, Interest cost and tax 9,234.6 8,534.8
Profit including income from govt. grant and before other income, depreciation, interest cost, tax 1,721.8 1,251.9
Other income 69.7 74.1
Depreciation and Finance Charges 2,860.9 1,549.9
Share of (loss) of equity accounted investees -123.2 -109.8
Loss before tax -1,192.6 -333.8
Loss after tax attributable to the owners of the Company -1,067.0 -248.0
Standalone
Income from operations including Income from Govt Grants 6,895.8 6,414.3
Total Expenditure excluding Depreciation, Interest cost, tax and exceptional items 5,726.1 5,464.3
Profit including income from govt. grant and before other income, depreciation, interest cost, tax and exceptional items 1,169.7 950.0
Other income 108.6 125.5
Depreciation, Finance Charges and exceptional items 1,932.9 949.8
Profit/(Loss) before tax -654.6 125.7
Profit/(Loss) after tax -533.0 72.5

Note: The Company has adopted Ind AS 116 with effect from April 01, 2019. The figures for FY 2019-20 are including the accounting treatment for Ind AS 116.

2. Performance Overview

The standalone and consolidated financial statements for the financial year ended March 31, 2020, forming part of this Annual Report, have been prepared in accordance with the Indian Accounting Standards (Ind AS) as notified by the Ministry of Corporate Affairs.

Consolidated Operations:

The consolidated income from operations including income from government grant for FY 2019-20 was RS 10,956.4 million as compared to RS 9,786.7 million in the previous fiscal year, reflecting a growth of 12%. EBITDA in FY 2019-20 was Rs.1721.8 million as compared to RS 1,251.9 million in FY 2018-19, reflecting an year-on-year increase of 37.5%. EBITDA margin for the year was 15.7% as compared to 12.8% in FY 2018-19, reflecting an increase of 2.9%. This was primarily due to the accounting impact on adoption of Ind AS 116, partially offset by losses incurred by new centers. Profit (loss) after tax in the current fiscal year was H (1067.0) million as compared to H (248.0) million in FY 2018-19 mainly on account of adoption of Ind AS 116 and losses from newly set up centres.

The revenue growth was driven by 12.1% growth from HCG Centres (including the multi-specialty hospitals) while Revenue from Milann centres grew by 9.0%. HCG Centres constituted 93.6% of the consolidated revenues for the Company and the remaining 6.4% of the consolidated revenue was contributed by Milann Centres.

Standalone Operations:

The Company ended the year FY 2019-20 with income from operations including Govt. Grants of RS 6,895.76 million as compared to RS 6,414.3 million for the previous financial year, reflecting an increase of 7.5%. Our EBITDA before exceptional items for FY 2019-20 was RS 1,169.67 million with EBITDA margin of 17%.

For more information, please refer to the Financial and Operating Highlights in Management Discussion and Analysis Report.

3. Business and Strategy:

3.1 Business:

The Company is a provider of specialty healthcare in India focused on cancer and fertility. Under the "HCG" brand, we operate the largest cancer care network in India in terms of the total number of private cancer treatment centres licensed by the AERB as of May 31, 2015 (Government of India, Atomic Energy Regulatory Board).

In our HCG network, our specialist physicians adopt a technology-focused approach to diagnosis and treatment. For instance, we use advanced technologies, including molecular pathology and molecular imaging for accurate diagnosis and staging of cancer, which enable us to decide upon the appropriate course of treatment for each patient. We also utilise targeted nuclear medicine therapies as well as advanced radiation treatments to minimise side effects and improve the outcome of treatments. By ensuring that we adopt these diagnostic and treatment technologies throughout our HCG network, we are able to provide consistent quality of care to all patients.

Given the large number of patient cases treated across our HCG network, we believe that we are able to efficiently utilise our equipment, technologies and human resources, thereby deriving economies of scale. We believe that our business model is scalable and when combined with efficient utilisation of resources, it enables us to operate within a competitive cost structure.

As a group, we continue to deliver the highest standards of clinical outcomes across all our centres. Our standardised clinical protocols for diagnosis and treatment of cancer patients have allowed us to manage the large volume of patient cases across our HCG network with successful clinical outcomes. Mapping our own clinical outcomes and constantly evolving HCG treatment guidelines has paved way for standardization of clinical pathways and improvement in the functioning of the clinical departments. We believe that we are able to attract and retain highly skilled specialist physicians due to our reputation for clinical excellence, our technology-focused approach, the exposure and experience we provide in relation to clinical best practices and the training programmes we offer for their ongoing development. We believe that the abilities and expertise of our team of specialist physicians differentiate us relative to our competitors.

We also provide fertility treatment under our "Milann" brand. Our Milann fertility centres provide comprehensive reproductive medicine services, including assisted reproduction, gynaecological endoscopy and fertility preservation; and follow a multidisciplinary and technology-focused approach to diagnosis and treatment. Our Milann network also operates on a model similar to our HCG network, wherein the various Milann fertility centres aim to provide medical services following established protocols with a focus on quality medical care across diagnosis and treatment.

As of March 31, 2020, our HCG network consisted of 25 centres including comprehensive cancer centres and multispecialty hospitals across India and 1 centre in Africa. Each of our comprehensive cancer centres offers, at a single location, comprehensive cancer diagnosis and treatment services (including radiation, medical oncology and surgical treatments). The details of our existing comprehensive cancer centres as on the date of this report and their facilities and service offerings, including those under development forms part of the Management Discussion and Analysis Report.

3.2 Strategy:

a) Expand the reach of our cancer care network in India:

We plan to expand our network in India by establishing new cancer centres across India and by expanding the capacity and service offering of the existing HCG cancer centres. We carry out a competitive assessment of the markets in which HCG plans to expand the network, based on a number of factors, including the estimated incidence of cancer in the primary and secondary catchment population, the number of comprehensive cancer centres, if any, in the catchment; the average distance patients have to travel to avail of such comprehensive cancer care; affordability of healthcare generally and cancer care in particular; and the available third party payer options, whether corporate, government or private insurance. HCG will continue to expand its network through green field projects, partnership arrangements and acquisitions; and that the past experiences will aid the Management in identifying potential opportunities in the future and assist HCG in integrating new cancer centres into the existing HCG network. We believe that our planned network will cater to the increasing unmet demand for cancer care in India.

b) Strengthen our HCG brand to reach more cancer patients:

We believe that our HCG brand distinguishes us from our competitors. As we establish new comprehensive cancer centres across India, we plan to invest in building our brand, enhancing our market presence, brand image and visibility. We intend to strengthen our patient support groups comprising cancer survivors to further spread awareness of cancer screening and to educate patients regarding cancer treatment options and their relative outcomes and benefits. Through these initiatives, we seek to further strengthen our brand and our commitment to the community, cancer patients and their families.

c) Expand our cancer care network overseas:

We believe that despite the growing incidence of cancer, there is a shortage of cancer centres in many countries in Africa. As a result, patients suffering from cancer often travel outside the region at a significant cost for availing quality cancer care, including to our comprehensive cancer centres in India. In the past, we have experienced an increase in the number of patients travelling from Africa and other regions to our centre of excellence in Bengaluru, as well as to our other comprehensive cancer centres in India for cancer treatment. We believe that this growing demand presents us with an opportunity to establish a network of speciality cancer centres in Africa. In addition, we periodically and selectively evaluate partnering opportunities in countries in the Middle East and South and Southeast Asia.

d) Upgrade and strengthen our information technology infrastructure:

We are in the process of significantly upgrading our information technology infrastructure in order to enhance the quality of care delivered to patients and to further enhance our clinical best practices and research capabilities. Our planned information technology infrastructure will be based on a private cloud-computing system and will encompass a centralised EMR system seamlessly integrated with various other centralised systems including HIS and ERP system. We believe that the implementation of these information systems will maximise efficiencies through the greater integration of our network and help us fine tune protocols through knowledge sharing and collaboration. Further, we believe that these initiatives will enhance our ability to conduct longitudinal research studies (which are long-term observational research studies), and associate clinical outcomes with mutation and other genomic findings in cancer patient tissues maintained at our biorepository. We believe that this will position us as a partner of choice for cancer researchers and academia.

4. Management Discussion and Analysis Report:

In terms of Regulation 34 of Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (hereinafter referred to as "SEBI LODR Regulations"), the Management Discussion and Analysis Report (MD&A) on the Companys financial and operational performance, industry trends, business outlook and Initiatives and other material changes with respect to the Company and its subsidiaries, wherever applicable, are presented in separate section which forms part of the Annual Report. The MD&A Report provides a consolidated perspective of economic, social and environmental aspects material to its strategy and its ability to create and sustain value to your Companys key stakeholders.

5. Transfer to Reserves and Surplus/Retained Earnings:

The adjustments made to the reserves and surplus/ retained earnings are available in the Statement of Changes in Equity, which forms part of the Financial Statements.

6. Dividend:

The Company continues to look at growth prospects through new investment opportunities. Considering that consolidation is taking place in the Healthcare Industry in India, it presents us with more challenges in terms of growth and it is imperative that the Company looks at available options for organic as well as in-organic growth. Achieving a consistent sustainable growth over the next few years and consolidating Companys position competitively would be a key objective.

Keeping in view the growth strategy of the Company, the Board of Directors of your Company have decided to plough back the profits and thus do not recommended any dividend for the financial year under review.

In terms of Regulation 43A of the SEBI LODR Regulations, the Company has adopted Dividend Distribution Policy setting out the parameters and circumstances that will be taken into account by the Board in determining the distribution of Dividend to the Shareholders and/or retaining profits earned by the Company. The said policy is hosted on the website of the Company at https://hcgel.com/policies-and-guidelines/.

7. Transfer of unpaid and unclaimed amount to IEPF:

Pursuant to the provisions of Section 124(5) of the Companies Act, 2013, dividend and refund of share application money due for refund which remains unpaid or unclaimed for a period of seven years from the date of its transfer to unpaid dividend/ unclaimed account is required to be transferred by the Company to Investor Education and Protection Fund (IEPF), established by the Central Government under the provisions of Section 125 of the Companies Act, 2013. During the year, no amount was due for transfer to IEPF.

8. Consolidated financial statements:

In accordance with the Companies (Indian Accounting Standards), Rules, 2015 of the Companies Act, 2013, the Company has started following the Indian Accounting Standards (Ind AS) for preparation of its financial statements from April 1, 2016.

9. Subsidiaries and Associates:

As on March 31, 2020, the Subsidiaries, Associates and Joint Venture Companies of the Company are as under:

Sl. No. Name of the entity Country of Incorporation Primary business activity for which it was formed % of ownership held by the Company as at March 31, 2020
1 HCG Medi-Surge Hospitals Private Limited India Cancer Care 74.00%
2 Malnad Hospital & Institute of Oncology Private Limited India Cancer Care 70.25%
3 HealthCare Global Senthil Multi Specialty Hospitals Private Limited India Cancer Care 100.00%
4 Niruja Product Development And Healthcare Research Private Limited (name changed with effect from November 10, 2016 from MIMS HCG Oncology Private Limited) India Research and Development 100.00%
5 BACC Health Care Private Limited (Refer Note 46 to the Consolidated Financial Statements) India Fertility 50.10%
6 HealthCare Diwan Chand Imaging LLP India Radiology/ Imaging 75.00%
7 APEX HCG Oncology Hospitals LLP (along with the Shareholding of Niruja Product Development and Healthcare Research Private Limited) India Cancer Care 100.00 %
8 HCG NCHRI Oncology LLP India Cancer Care 76.00%
9 HCG Oncology LLP India Cancer Care 74.00%
10 HCG EKO Oncology LLP India Cancer Care 50.50%
11 HCG Manavata Oncology LLP India Cancer Care 51.00%
12 HCG SUN Hospitals LLP India Health Care Services (Multi- Specialty) 74.00%
13 HCG (Mauritius) Pvt. Ltd. (along with the Shareholding of Niruja Product Development and Healthcare Research Private Limited) Mauritius Health Care Services 100.00%
14 Healthcare Global (Africa) Pvt. Ltd. Mauritius Health Care Services 76.73%
15 HealthCare Global (Uganda) Private Limited (Wholly Owned Subsidiary of Healthcare Global (Africa) Pvt. Ltd) Uganda Cancer Care 76.73%
16 HealthCare Global (Kenya) Private Limited (Wholly Owned Subsidiary of Healthcare Global (Africa) Pvt. Ltd) Kenya Cancer Care 76.73%
17 HealthCare Global (Tanzania) Private Limited (Wholly Owned Subsidiary of Healthcare Global (Africa) Pvt. Ltd) Tanzania Cancer Care 76.73%
18 Cancer Care Kenya Limited (Subsidiary of HealthCare Global (Kenya) Private Limited) Kenya Cancer Care 59.47%
19 Strand Life Sciences Private Limited (shareholding on fully diluted basis) India Clinical Diagnostics, Bioinformatics & Clinical Research 38.2%
20 Advanced Molecular Imaging Limited (HealthCare Global (Kenya) Private Limited holds 50% of the share capital) Kenya Production of Fluro Deoxi Glucose (FDG) 38.37%

As on the date of the Report, none of the subsidiary companies other than HCG Medi-Surge Hospitals Private Limited is a Material Subsidiary, within the meaning of Material Subsidiary as defined under the SEBI LODR Regulations, as amended from time to time.

There were no new subsidiaries, associates incorporated during the Financial Year.

During the year, the Board of Directors reviewed the affairs of the subsidiaries. Pursuant to the provisions of Section 129(3) of the Companies Act, 2013, a statement containing the salient features of the Financial Statements of the Companys Subsidiaries and Associates in Form AOC-1, that forms part of this Report is attached as Annexure 5. Pursuant to Section 129 of the Companies Act, 2013, the Consolidated Financial Statements of the Company, prepared in accordance with the relevant Accounting Standards specified under Section 133 of the Companies Act, 2013 read with the Rules made thereunder, forms part of this Annual Report.

Further, pursuant to the provisions of Section 136 (1) of the Companies Act, 2013:

a) The Annual Report of the Company, containing therein its standalone and consolidated financial statements, is placed on the website of the Company, being https://hcgel.com/investors.

b) The audited financial statements of subsidiary companies together with related information and other reports of each of the subsidiary companies would be placed on the website of the Company https://hcgel.com/investors.

10. Public deposits:

Your Company has not accepted any deposits from public in terms of Section 73 of the Companies Act, 2013 and the Companies (Acceptance of Deposits) Rules, 2014; and as such, no amount on account of principal or interest on public deposits was outstanding as on the date of the balance sheet.

11. Unsecured loan from Directors:

In accordance with Section 179 and 73 of the Companies Act 2013 read with Companies (Acceptance of Deposits) Rules 2014, and other applicable provisions, if any, the Company, during the year under review, has received RS 50 Million as unsecured loan from Dr. B.S. Ajaikumar, Whole time Director. As on March 31, 2020, the total amount outstanding towards Principal and interest was RS 31.23 Million. Subsequently, all the amounts outstanding has been repaid; and as on the date of the Report no such amounts are outstanding and payable to Dr. B.S. Ajaikumar in this regard.

12. Particulars of loans, guarantees or investments under Section 186 of the Companies Act, 2013:

Pursuant to Section 186 of the Companies Act, 2013 and Schedule V of SEBI LODR Regulations, disclosure on particulars relating to Loans/advances given, guarantees provided and investments made are provided as part of the financial statements.

13. Related party transactions:

In line with the requirements of the Companies Act, 2013 and SEBI LODR Regulations, your Company has formulated a Policy on Related Party Transactions. This Policy intends to ensure that proper reporting, approval and disclosure processes are in place for all transactions between the Company and Related Parties.

All Related Party Transactions are placed before the Audit Committee for review and approval. Prior omnibus approval is obtained for Related Party Transactions on yearly basis for transactions which are of repetitive nature and/or entered in the ordinary course of business and are at arms length. All Related Party Transactions entered during the year were in ordinary course of the business and at arms length basis. No Material Related Party Transactions, i.e. transactions exceeding 10% of the annual consolidated turnover as per the last audited financial statements, were entered into by your Company during the year.

A statement giving details of all related party transactions, entered pursuant to the omnibus approval so granted, is placed before the Audit Committee for their review, on a quarterly basis. The policy on Related Party Transactions has been hosted on the Companys website https://hcgel. com/policies-and-guidelines/ in terms of the SEBI LODR Regulations relating to Corporate Governance.

Disclosures as required under Section 134(3) (h) read with Rule 8(2) of the Companies (Accounts) Rules, 2014, are given in Form AOC 2 as specified under Companies Act, 2013, which is annexed herewith as Annexure 6 and forms part of the report.

Pursuant to Regulation 23(9) of the Listing Regulations, your Company has filed the reports on related party transactions with the Stock Exchanges.

14. Share capital as on March 31, 2020 and changes made to the capital structure of the Company from the Balance sheet date till the date of the Report:

14.1 Share Capital as on March 31, 2020:

a) Authorized Share Capital: As on March 31, 2020, the authorized share capital of the Company is RS 1,32,00,00,000 consisting of 13,20,00,000 equity shares of RS 10 each,

b) Issued, Subscribed and Paid-up Share Capital: The Issued, Subscribed and Paid-up Share Capital of the Company has increased from RS 87,91,90,330 consisting of 8,79,19,033 equity shares of RS 10 each to RS 88,69,06,290 consisting of 8,86,90,629 equity shares of RS 10 each during the year.

The increase in the Issued, Subscribed and Paid-up Share Capital was on account of allotment of shares as under:

Name of allottee No. of shares allotted Issue price (Rs) Date of allotment
Employees (On exercise of ESOP) 2,500 10 23/05/2019
8,000 10 08/08/2019
25,700 10 07/11/2019
24,870 10 12/02/2020
Preferential allotment of Equity shares to Dr. Kunnathu Philipose Geevarghese 7,10,526 10 24/06/2019

At the Extraordinary General Meeting of the Members of the Company ("EGM") held on Monday, June 24, 2019, shareholders of the Company, by way of Special Resolution, approved the issue of equity shares on preferential allotment/private placement basis to Dr. Kunnathu Philipose Geevarghese. Subsequently the Board of Directors approved the allotment of 7,10,526 equity shares of RS 10 each of the Company, at a price per share of RS 285 (including share premium of RS 275 per share).

14.2 Signing of the Investment Agreement:

The Company has signed an Investment Agreement ("Investment Agreement") by and between Aceso Company Pte. Ltd., Singapore ("Investor") and Dr. B.S. Ajaikumar, ("Promoter") on June 04, 2020. As per the Investment Agreement, the Investor had agreed to subscribe to 2,95,16,260 Equity Shares and 18,560,663 warrants (convertible to equal number of equity shares) of the Company, in tranches, at RS 130 per equity share, aggregating to RS 625 Crore. The Investment Agreement sets out the rights and obligations of the parties in relation to the investment by the Investor in the Company, interse rights and obligations of the Promoter and Investor as shareholders of the Company, management of the Company and other matters in connection therewith.

14.3 Changes in the Share Capital, including details of allotment of securities of the Company since April 01, 2020 till the date of the Report.

a) Authorized Share Capital:

As on the date of this report, the authorizedsharecapitaloftheCompanyisRS 2,00,00,00,000 consisting of 20,00,00,000 equity shares of RS 10 each. The shareholders of the Company, through the Postal Ballot, have approved on June 12, 2020, the increase of authorized share capital of the Company and consequent alteration of Capital Clause V of the Memorandum of Association of the Company from RS 1,32,00,00,000 divided into 13,20,00,000 Equity shares of RS 10 each to RS 2,00,00,00,000 divided into 20,00,00,000 Equity Shares of RS 10 each aggregating to RS 2,00,00,00,000.

b) Changes in Issued, Subscribed and Paid-up Share Capital pursuant to the allotments of shares to the Investor as per the Investment Agreement: The Issued, Subscribed and Paid-up Share Capital of the Company has increased form RS 88,69,06,290 consisting of 8,86,90,629 equity shares of RS 10 to RS 1,25,26,40,840 consisting of 12,52,64,084 equity shares upon the following allotments of securities of the Company to the Investor, on July 28, 2020, based on the Investment Agreement and the approval of the shareholders of the Company received on June 12, 2020.

(i) 2,95,16,260 equity shares of RS 10 each of the Company, at a price per share of RS 130 (including share premium of RS 120 per share), upon receipt of RS 383,71,13,800.

(ii) 1,85,60,663 warrants ("Series A Warrants") to the Investor, at a subscription price per warrant of RS 130 per warrant with a right to the Warrant Holder on exercise to apply for and be allotted 1 (One) Equity Share of the face value of RS 10 each of the Company ("Equity Shares") at a premium of RS 120 per share for each warrant, in one or more tranches, within a period of 18 (Eighteen) months from the date of allotment of the Series A Warrants. As required under the provisions of Issue of Capital and Disclosure Requirements) Regulations, 2018, as amended (the "ICDR Regulations"), the Investor has remitted an amount equivalent to 25% of the Consideration i.e. RS 60,32,21,548 on allotment of series A Warrant and the remaining 75% of the consideration shall be payable by the Investor on the exercise of the Series A Warrant (s), in one or more tranches, within a period of 18 (Eighteen) months from the date of allotment of the Series A Warrants.

(iii) 70,57,195 equity shares of RS 10 each of the Company, at a price per share of RS 130 (including share premium of RS 120 per share) upon exercise of 70,57,195 Series A Warrants by the Investor out of the total 1,85,60,663 Series A Warrants, upon receipt of RS 68,80,76,513 towards 75% of the consideration for conversion of 70,57,195 Series A Warrants to Equity.

c) Issue and allotment securities to Dr. B.S. Ajaikumar, Promoter ("Promoter"), on a preferential basis ("Preferential Allotment"): The Board of Directors of the Company on June 26, 2020, pursuant to the approval of the shareholders of the Company received on June 12, 2020, has made a preferential allotment of 20,00,000, Series B Warrants, to Dr. B.S. Ajaikumar, Promoter ("Promoter") with a right to apply for and be allotted 1 Equity Share of the face value of RS 10 each of the Company, at a premium of RS 120 for each series

B Warrant. As required under the provisions of the ICDR Regulations, Promotor has remitted an amount equivalent to 25% of the Consideration i.e. RS 6,50,00,000 on allotment of series B Warrant and the remaining 75% of the consideration i.e. RS 19,50,00,000 shall be payable by him on the exercise of the Series B Warrant(s), in one or more tranches, within a period of 18 (Eighteen) months from the date of allotment of the Series B Warrants.

14.4 Open Offer:

Upon signing of the Investment Agreement, JM Financial Limited, Manager, appointed by the Investor, as required under Regulation 14(2) of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeover) Regulations, 2011 ("SEBI (SAST) Regulations"), has announced an Open Offer pursuant to and in compliance with Regulations 3(1) and 4 of the "SEBI (SAST) Regulations"), where the Investor - Aceso Company Pte. Ltd. along with Aceso Investment Holdings Pte. Ltd. ("PAC 1"), CVC Capital Partners Asia V L.P. ("PAC 2"), CVC Capital Partners Investment Asia V L.P ("PAC 3") and CVC Capital Partners Asia V Associates L.P. ("PAC 4") (hereinafter PAC 1, PAC 2, PAC 3 and PAC 4 are collectively referred to as the "PACs"), in their capacity as the persons acting in concert with the Investor, for acquisition of up to RS 32,613,192 fully paid-up equity shares of face value of RS 10 each ("Equity Shares") from the Public Shareholders of the Company, representing 26% of the Expanded Voting Share Capital, at a price of RS 130/- per Equity Share aggregating to total consideration of RS 423,97,14,960 payable in cash. In this regard, JM Financial Limited, on behalf of the Investor has also filed the Draft Letter of Offer with Securities and Exchange Board of India on June 18, 2020.

Your Company has not issued shares with differential voting rights and sweat equity shares during the year under review.

15. Declaration by Independent Directors:

The Company has received necessary declaration from each Independent Director, in accordance with Section 149(7) of the Companies Act, 2013, that he/she met the criteria of independence as laid out in sub-section (6) of Section 149 of the Companies Act, 2013 and the Regulation 16(1)(B) of the SEBI LODR Regulations. The Company has received and taken on record, the necessary declaration from each of the independent directors under Section 149 of the Companies Act, 2013 that they meet with the criteria of their independence.

For the purpose of Rule 8(5) (iiia) of the Companies (Accounts) Rules, 2014, there were no independent directors appointed during the year ended March 31, 2020. List of key skills, expertise and core competencies of the Board is provided in the Corporate Governance Report, forming part of the Annual Report.

16. Extract of Annual Return:

The extract of the Annual Return of your Company as on March 31, 2020 as provided under sub-section (3) of Section 92 of the Companies Act, 2013 and Rule 12 of the Companies (Management and Administration) Rules, 2014 in the Form MGT 9 is annexed herewith as Annexure 1. Additionally, your Company has also placed a copy of Annual Return on its website at https://hcgel.com/investors.

17. Board of Directors:

Our Board comprises of directors with a broad range of skills, experience, backgrounds and perspectives. This mix of skills, knowledge and experience enriches the Board discussion and contributes towards a high performing and effective Board.

As on March 31, 2020, the Board comprised 5 (five) Independent Non-Executive Directors, 2 (two) Non Executive Non-Independent Directors and 2 (two) Executive Directors/Whole-time Directors. The Executive Director, Dr. B. S. Ajaikumar is the Chairman of the Board. All 5 Independent Directors are free from any business, pecuniary or other relationship that could materially influence their judgment and satisfy the criteria of independence as defined under the Companies Act, 2013, and SEBI LODR Regulations. The Company has 1 (one) woman Director on the Board, who is an Independent and Non-Executive Director. The profiles of these Directors forms part of the Annual Report.

17.1 Appointment of Directors:

During the year under review, there were no new appointments to the Board of Directors of the Company. Since the initial term of 5 years of Dr. Sudhakar Rao and Mr. Shanker Annaswamy, Independent Directors was expiring on February 24, 2020, the Nomination and Remuneration Committee of the Board evaluated the performance of Dr. Sudhakar Rao and Mr. Shanker Annaswamy, and based on the annual performance evaluation conducted by the Board during their tenure, and considering their integrity, expertise and experience, has made its recommendation to the Board for their reappointment. The Board of Directors and the shareholders of the Company have reappointed Dr. Sudhakar Rao and Mr. Shanker Annaswamy as Independent Directors for a second term of 5 years, effective from February 25, 2020.

However, there have been changes to the constitution of the Board after the year under review. The changes in the constitution of the Board from April 01, 2020, till the date of the Report is as under:

(a) Dr Ramesh S Bilimagga has completed his tenure as Executive Director on May 21, 2020. Dr. B.S. Ramesh has continued on the Board of the Company as NonExecutive Director from May 22, 2020. Subsequently,

he has resigned from the Directorship of the Company effective from the closing of business hours of June 30, 2020. Dr B.S. Ramesh has informed the Board that he intends to seek approval of the Board for the declassification of his current categorization as a promoter of the Company, to that of a public shareholder of the Company; pursuant to which he has resigned as a Director of the Company.

(b) Initial term of 5 years of Mr. Suresh Chandra Senapaty and Dr. Sampath Thattai Ramesh, as Independent Directors, have come to an end on May 28, 2020. The said Directors have conveyed their desire not to seek appointment as an Independent Directors of the Company for the second term due to their personal commitments.

(c) On July 28, 2020, Mr. Siddharth Patel and Mr Amit Soni, have been appointed as Additional Directors, as nominees of Asceo Company Pte Ltd, on the Board of the Company, as per the Investment Agreement dated June 04, 2020 entered into by and amongst the Company, Dr. B. S. Ajaikumar and Aceso Company Pte. Ltd ("Investment Agreement").

Members of the Board placed on record their appreciation for the remarkable support and guidance provided by Dr. B. S. Ramesh, Mr. Suresh Chandra Senapaty and Dr. Sampath Thattai Ramesh, during their tenure as Directors, and for their active participation in all the decision making processes of the Board.

17.2 Reappointment of Directors:

(a) Reappointment of Dr. B. S. Ajaikumar (DIN 00713779) as Whole-time Director and CEO of the Company: Nomination and Remuneration Committee of the Board recommended, the Board of Directors and the Shareholders of the Company have approved re-appointment of Dr. B. S. Ajaikumar as Whole-time Director and CEO of the Company for a period of 4 years with effect from July 01, 2019.

(b) Reappointment of Dr. Sudhakar Rao (DIN 00267211) and Mr. Shanker Annaswamy (DIN 00449634) as Independent Non-Executive Directors of the Company: Dr. Sudhakar Rao and Mr. Shanker Annaswamy were appointed as Independent Directors of the Company for a term of 5 years with effect from February 25, 2015 till February 24, 2020.

The Nomination and Remuneration Committee of the Board (‘the Committee) evaluated the performance of Dr Sudhakar Rao and Mr. Shanker Annaswamy, based on the annual performance evaluation conducted by the Board during their tenure, and made its recommendation to the Board on November 07, 2019, for the reappointment of Dr. Sudhakar Rao and Mr. Shanker Annaswamy.

Board of Directors and shareholders of the Company on January 16, 2020 and February 20, 2020, respectively, have approved the re-appointment of Dr. Sudhakar Rao and Mr. Shanker Annaswamy as Independent Non-Executive Directors of the Company, for a second term of 5 years, w.e.f February 25, 2020. With regard to the reappointment of Dr. Sudhakar Rao, consent of the shareholders by way of Special Resolution was also obtained in terms of Section 149 of the Act and Regulation 17 of the SEBI LODR Regulations 2015, for continuation of Dr. Sudhakar Rao as Independent Director beyond the age of seventy-five years, as Dr. Sudhakar Rao will attain the age of seventy-five years on 3rd September 2024, which is during the second term of 5 years of reappointment.

(c) Reappointment of Ms. Bhushani Kumar (DIN: 07195076) as Independent Non-Executive Director : On May 21st, 2020, the Board of Directors of your Company have approved the re-appointment of Ms. Bhushani Kumar (DIN: 07195076) as an Independent Director of the Company, for a second term, for a period of 1 (one) year, effective from May 29, 2020, subject to shareholders approval. The Company proposes to seek and obtain the approval of the shareholders before the Annual General Meeting (AGM).

(d) Retirement by rotation: As per the provisions of the Companies Act, 2013, Dr. Amit Varma, Non Independent Non-Executive Director of the Company is retiring by rotation at the forthcoming Annual General Meeting, and being eligible has offered himself for reappointment.

18. Number of meetings of the Board:

The Board met four times during the financial year 201920 viz., on, May 23, 2019, August 08, 2019, November 07, 2019 and February 12, 2020. The maximum interval between any two meetings did not exceed 120 days.

Detailed information regarding the meetings of the Board and meetings of the Committees of the Board is included in the report on Corporate Governance which forms a part of Directors Report.

19. Key Managerial personnel:

Pursuant to the provisions of Section 203 of the Companies Act, 2013, the Key Managerial Personnel (KMPs) of the Company are:

a) Dr. B. S. Ajaikumar - Chairman & CEO

b) Mr. Srinivasa V Raghavan - Chief Financial Officer

c) Ms. Sunu Manuel - Company Secretary

During the year under review, there were no changes in KMPs of the Company.

20. Committees of the Board and their constitution:

The Board has formed the following five Committees. The composition of Committees of the Board along with relevant information pertaining to Directors are detailed in the Corporate Governance Report which forms a part of this Report.

1. Audit and Risk Management Committee

2. Nomination and Remuneration Committee

3. Stakeholders Relationship Committee

4. Corporate Social Responsibility Committee and

5. Strategy Committee.

Keeping in view the requirements of the Companies Act, 2013 and SEBI LODR Regulations, as amended from time to time, the Board reviews the Terms of Reference of these Committees and the nomination of Board Members to various Committees. The recommendations, if any, of these Committees are submitted to the Board for approval.

(a) Audit and Risk Management Committee

Pursuant to the requirements of Section 177 of the Companies Act, 2013 and Rule 6 of the Companies (Meetings of Board and its Powers), Rules 2014, the Company has an Audit and Risk Management Committee and the composition of the committee as on March 31, 2020 was as under:

1. Mr. Suresh Chandra Senapaty, Chairman

2. Dr. Sudhakar Rao, Member ; and

3. Mr. Shanker Annaswamy, Member

Since the initial term of Mr. Suresh Chandra Senapaty as an Independent Director of the Company has come to an end on May 28, 2020, he has ceased to be a member of the Committee on the same day. In this regard, the Board of Directors has appointed Dr. Sudhakar Rao, Independent Director, member of the Audit and Risk Management Committee as the Chairman of the Audit and Risk Management Committee, effective from June 12, 2020. Mrs. Bhushani Kumar, Independent Director was also appointed as a member of the Audit and Risk Management Committee effective from June 12, 2020.

Subsequently, as per the Investment Agreement Mr Amit Soni has been nominated as a member of the Committee on July 28, 2020.

(b) Nomination and Remuneration Committee

Pursuant to the requirements of Section 178 of the Companies Act, 2013 and Rule 6 of the Companies (Meetings of Board and its Powers), Rules 2014, the Board of Directors have reconstituted the Nomination and Remuneration Committee.

The members of the Nomination and Remuneration Committee as on March 31, 2020 were:

1. Mr. Shanker Annaswamy, Chairman;

2. Dr. Sampath Thattai Ramesh, Member; and

3. Mr. Gangadhara Ganapati, Member

Since the initial term of Dr. Sampath Thattai Ramesh as an Independent Director of the Company has come to an end on May 28, 2020, he has ceased to be a member of the Committee on the same day. The members of the Board have appointed Dr. Sudhakar Rao as member of Nomination and Remuneration Committee effective from June 12, 2020.

Subsequently, as per the Investment Agreement Mr. Siddharth Patel has been nominated as a member of the Committee on July 28, 2020.

(c) Stakeholders Relationship Committee

The Stakeholders Relationship Committee was constituted by our Board of Directors at their meeting held on May 29, 2015. The scope and function of the Stakeholders Relationship Committee is in accordance with Section 178 of the Companies Act, 2013.

The members of the Stakeholders Relationship Committee as on March 31, 2020 were :

1. Mr. Gangadhara Ganapati, Chairman

2. Dr. B. S. Ajaikumar, Member; and

3. Ms. Bhushani Kumar, Member.

As per the Investment Agreement Mr Amit Soni has been nominated as a member of the Committee on July 28, 2020.

(d) Corporate Social Responsibility Committee

The Corporate Social Responsibility Committee was constituted by our Board of Directors at their meeting held on May 29, 2015. The terms of reference of the Corporate Social Responsibility Committee of our Company are as per Section 135 of the Companies Act, 2013 and the applicable rules thereunder.

The members of the Corporate Social Responsibility Committee as on March 31, 2020 were:

1. Dr. Sampath Thattai Ramesh; Chairman

2. Dr. Sudhakar Rao, Member;

3. Ms. Bhushani Kumar, Member; and

4. Dr. B. S. AjaiKumar, Member.

Corporate Social Responsibility Committee of the

Board was reconstituted by appointing Dr. Sampath Thattai Ramesh, Independent Director, member of the Committee as Chairman of the Committee in place of Dr. Sudhakar Rao, with effect from the closing of the business hours of 23rd May 2019.

Since the initial term of Dr. Sampath Thattai Ramesh as an Independent Director of the Company has come to an end on May 28, 2020, he has ceased to be a member of the Committee on the same day. In this regard, the Board of Directors has appointed Dr. B.S. Ajaikumar, member of the Committee as the Chairman of the Committee, effective from June 12, 2020.

As per the Investment Agreement Mr. Siddharth Patel has been nominated as a member of the Committee on July 28, 2020.

(e) Strategy Committee

The Committee was constituted by our Board of Directors at their Meeting held on May 26, 2016 with the scope of reviewing strategic initiatives; and for having an ooversight of the strategic direction of the Company.

The members of the Committee as on March 31, 2020 were:

1. Dr. B. S. Ajaikumar, Chairman;

2. Mr. Gangadhara Ganapati, Member;

3. Mr. Suresh Chandra Senapaty, Member;

4. Mr. Shanker Annaswamy, Member; and

5. Dr. Amit Varma, Member

Mr. Suresh Chandra Senapaty has ceased to be a Member of Strategy Committee effective from May 28, 2020.

As per the Investment Agreement Mr. Siddharth Patel and Mr Amit Soni have been nominated to the Strategy Committee as members of the Committee on July 28, 2020.

Details of terms of reference of the Committees, attendance at meetings of the Committees are provided in the Corporate Governance report. The Company Secretary acts as the Secretary of all the Committees of the Board.

21. Board Evaluation:

In terms of the requirement of the Companies Act, 2013 and the SEBI LODR Regulations, an annual performance evaluation of the Board was undertaken. The Board evaluation framework has been designed in compliance with the requirements under the Companies Act, 2013 and the SEBI LODR Regulations, and in consonance with Guidance Note on Board Evaluation issued by SEBI in January 2019. The Board evaluation was conducted through questionnaire having qualitative parameters and feedback based on rating.

Evaluation of the Board was based on criteria such as composition and role of the Board, Board communication and relationships, functioning of Board Committees, review of performance and compensation to Executive Directors, succession planning, strategic planning, etc.

Evaluation of Directors was based on criteria such as participation and contribution in Board and Committee meetings, representation of shareholder interest and enhancing shareholder value, experience and expertise to provide feedback and guidance to top management on business strategy, governance and risk, understanding of the organizations strategy, risk and environment, etc. The process also covered separate evaluation of Chairperson of the Board, Executive Directors, Non- Executive Directors and Independent Directors.

Evaluation of Committees was based on criteria such as adequate independence of each Committee, frequency of meetings and time allocated for discussions at meetings, functioning of Board Committees and effectiveness of its advice/recommendation to the Board, etc.

The Board had, during the year, opportunities to interact and make an assessment of its functioning as a collective body. In addition, there were opportunities for Committees to interact, for Independent Directors to interact amongst themselves and for each Independent Director to interact with the Chairman. The Board found that, there was considerable value and richness in such discussions and deliberations.

The Board Evaluation discussion was focused around how to make the Board and its Committees more effective as a collective body in the context of the business and the external environment in which the Company functions. From time to time during the year, the Board was appraised of the business issues and the related opportunities and risks. The Board discussed various aspects of the functioning of the Board and its Committees such as structure, composition, meetings, functions and interaction with Management and what needs to be done to further improve the effectiveness of the Boards functioning.

Additionally, during the evaluation discussion, the Board also focused on the contribution being made by the Board as a whole, through its Committees and discussions on a one on one basis with the Chairman.

The process of Board Evaluation was led by the Chairman of the Nomination and Remuneration Committee. The overall assessment of the Board was that it was functioning as a cohesive body including the Committees of the Board that were functioning well with periodic reporting by the

Committees to the Board on the work done and progress made during the period. The Board acknowledged the efforts and contributions made by the Chairperson, Executive and Non- Executive Directors and Independent Directors towards the Companys performance.

The Board also noted that the actions identified in the past evaluation had been acted upon. Subsequent to the evaluation done in the financial year 2019-20, given the changing external environment, some areas have been identified for the Board to engage itself with and these will be acted upon.

22. Risk Management:

Pursuant to Regulation 21 of SEBI LODR Regulations, your Company has developed and rolled out a comprehensive Enterprise Risk Management Policy. The policy aims at elimination or reduction of risk exposures through identification and analysis of various types of risks and facilitating timely action for taking risk mitigation measures. The Risk Management and Steering Committee (RMSC) reviews the Companys portfolio of risks and considers it against the Companys risk appetite and recommends changes to the Risk Management technique and/or associated frameworks, processes and practices of the Company. The enterprise risk management process of the Company is progressing satisfactorily, but the entire process is yet to reach a level of maturity. RMSC also advises and guides the Company for making the process more robust and to achieve prudent balance between risk and reward in both ongoing and new business activities. The Audit and Risk Management Committee periodically reviews the risk management process.

For further details on the enterprise wide risk management framework, refer to Management and Discussion Analysis Report forming part of the Annual Report.

23. Compliance Management Framework:

For monitoring compliances to applicable laws, your Company has instituted an online compliance management system within the organization to monitor compliances and provide update to the senior management and Board on a periodic basis. The Audit and Risk Management Committee and the Board periodically monitor status of compliances with applicable laws.

24. Corporate Social Responsibility:

Your Company has been taking initiatives under Corporate Social Responsibility (CSR) for society at large, well before it has been prescribed thorough the Companies Act, 2013; and over the years, had been pursuing as a part of its corporate philosophy, an unwritten CSR policy voluntarily which goes much beyond mere philanthropic gestures and integrates interest, welfare and aspirations of the community with those of the Company itself and create an environment of partnership for inclusive development.

As per the provisions of Section 135 of the Companies Act, 2013, the Company has well defined policy on CSR which covers the activities as prescribed under Schedule VII of the Companies Act 2013. The CSR Policy is available on the website of the Company at https://hcgel.com/policies- and-guidelines/.

For more information on CSR, please refer to the Annual Report on Corporate Social Responsibility annexed herewith as Annexure 7.

25. Internal Audit:

Your Company has continued its engagement with M/s. Ernst & Young LLP, Chartered Accountants, to conduct internal audit across the organization. We have also strengthened the in-house internal audit team to supplement and support the efforts of M/s. Ernst & Young LLP.

26. Internal Financial Control system and their adequacy:

The Management has laid down internal financial controls to be followed by the Company. We have adopted policies and procedures for ensuring the orderly and efficient conduct of the business, including adherence to the Companys policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial disclosures.

The internal control system is commensurate with the nature of business, size and complexity of operations and has been designed to provide reasonable assurance on the achievement of objectives in effectiveness and efficiency of operations, reliability of financial reporting and compliance with applicable laws and regulations. In furtherance to this, your Company has instituted an online compliance management system within the organization to monitor compliances and provide update to senior management and Board on a periodic basis. The Audit and Risk Management Committee and the Board periodically monitor status of compliances with applicable laws.

As part of the Corporate Governance Report, CEO/ CFO certification is provided, for assurance on the existence of effective internal control systems and procedures in the Company.

The internal control framework is supplemented with an internal audit program that provides an independent view of the efficacy and effectiveness of the process and control environment and supports a continuous improvement program. The internal audit program is managed by an Internal Audit function; and the Audit and Risk Management Committee of the Board oversees the Internal Audit function.

The scope and authority of the Internal Audit Function is derived from the Audit Committee Charter approved by the Audit and Risk Management Committee of the Board. The Internal Audit function develops an internal audit plan to assess control design and operating effectiveness, as per the risk assessment methodology. The Internal Audit function provides assurance to the Board and management that a system of internal control is designed and deployed to manage key business risks and is operating effectively.

27. Vigil Mechanism for Directors and employees:

Section 177(9) and (10) of the Companies Act, 2013, mandates every listed company to establish a Vigil mechanism for its directors and employees which shall function as a channel for receiving and redressing their complaints. The Vigil Mechanism provides for (a) adequate safeguards against victimization of persons who use the Vigil Mechanism; and (b) direct access to the Chairperson of the Audit Committee of the Board of Directors of the Company in appropriate or exceptional cases.

Under this policy, we have adopted a vigil mechanism which would encourage our directors, employees and all other stakeholders to report any incidence of fraudulent financial or other information to the stakeholders, reporting of instance(s) of leak or suspected leak of unpublished price sensitive information, and any conduct that results in violation of the Companys code of business conduct, to the management (on an anonymous basis, if employees so desire). Further, your Company has prohibited discrimination, retaliation or harassment of any kind against any employee who reports under the Vigil Mechanism or participates in the investigation.

Awareness of policies is created by, inter alia, training and sending group mailers highlighting actions taken by the Company against the errant employees. All complaints received through the Vigil mechanism are reviewed and investigated by the Ombudsperson. Dedicated email address has been created to facilitate receipt of complaints directly by the Ombudsperson.

The Audit and Risk Management Committee periodically reviews the functioning of this mechanism. No individual in the Company has been denied access to the Audit and Risk Management Committee or its Chairman.

This meets the requirement under Section 177(9) and (10) of the Companies Act, 2013 and Regulation 22 of SEBI (LODR) Regulations.

Mechanism followed under the process is appropriately communicated within the Company across all levels and has been displayed on the Companys intranet and website at https://hcgel.com/policies-and-guidelines/. The Audit and Risk Management Committee periodically reviews the functioning of this mechanism.

28. Code for Prevention of Insider Trading:

Your Company has adopted a Code of Conduct to regulate, monitor and report trading by Designated Persons and their Immediate Relatives under the Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 2015. This Code of Conduct also includes code of practices and procedures for fair disclosure of unpublished price sensitive information which has been made available on the Companys website at https:// hcgel.com/policies-and-guidelines/.

29. Companys Policy on Appointment and Remuneration of Directors:

The Nomination & Remuneration Committee has framed a policy for selection and appointment of Directors including determining qualifications and independence of a Director, Key Managerial Personnel (KMP), senior management personnel and their remuneration as part of its charter and other matters provided under Section 178(3) of the Companies Act, 2013.

The Policy of the Company on the Directors appointment and remuneration, including criteria for determining qualifications, positive attributes, independence of a director and other matters, as required under sub-section (3) of section 178 of the Companies Act, 2013, is available on our website https://hcgel.com/policies-and-guidelines/. We affirm that the remuneration paid to Directors is as per the terms laid out in the nomination and remuneration policy of the Company.

30. Particulars of employees:

The information required in terms of Section 197 (12) of the Companies Act, 2013, read with Rule 5 (1) of the Companies (Appointment and Remuneration of Managerial personnel) Rules, 2014 for the year ended March 31, 2020 is provided as Annexure 4 to this Report.

A statement containing, inter alia, names of top ten employees and employees if employed throughout the financial year and in receipt of remuneration of RS 102 Lakhs or more, employees employed for part of the year and in receipt of RS 8.50 Lakhs per month or more, pursuant to Rule 5(2) the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is also provided in Annexure 4 to this report.

31. Significant and Material orders:

During the period under report, there have been no material or significant orders passed by the Regulators/ Courts which would have an impact on the going concern status and operations of the Company in future.

32. Statutory Auditors:

Under Section 139 of the Companies Act, 2013 and Rules made thereunder, it is mandatory to rotate the Statutory Auditors on completion of the maximum term permitted under the said section.

The shareholders at the 19th Annual General Meeting of the Company have approved the appointment of M/s. B S R & Co. LLP (Firm Registration No. 101248W/W-100022) as Statutory Auditors for a term of 5 years commencing from the conclusion of the Annual General Meeting of the Company held on August 10, 2017, till the conclusion of the Annual General Meeting to be held in the year 2022.

Vide notification dated May 7, 2018 issued by Ministry of Corporate Affairs, the requirement of seeking ratification of appointment of statutory auditors by members at each AGM has been done away with. Accordingly, no such item has been considered in notice of the 22nd AGM.

33. Statutory Auditors Report:

There are no qualifications, reservations or adverse remarks made by M/s B S R & Co. LLP, Statutory Auditors, in their report for the financial year ended March 31, 2020. The Statutory Auditors under the Companies (Auditors Report) Order, 2016, as provided under Annexure A to the Independent Auditors Report Clause (vii) (a) have observed that "According to the information and explanations given to us and on the basis of our examination of the records of the Company, amounts deducted/ accrued in the books of account in respect of undisputed statutory dues including Employees State Insurance, Goods and Services tax, duty of Customs, and other material statutory dues have generally been regularly deposited during the year by the Company with the appropriate authorities. However, undisputed income tax (tax deducted at source) and Provident Fund have not been regularly deposited with the appropriate authorities though the delays in deposit have not been serious. Further as explained to us, the Company did not have any dues on account of Sales tax, Service tax, Duty of excise and Value added tax during the year.

In this regard, the Board of Directors places its response as under:

(i) With respect to Provident fund (PF) - The Company was restructuring the salaries of its employees at the beginning of the year. The Company had paid its provident fund as per the prevailing salary structure for the months form April 2019 to June 2019. However, soon after the restructuring got completed, the differential Provident Fund was paid along with interest; and thereafter, there has been no delay in payment of provident fund.

(ii) With respect to Tax deducted at source (TDS), the Company would like to state that, as Yes Banks operations were completely shut down during first half of March 2020 as per the RBI guidelines, and since the Companys money was lying in the Yes bank account, including collection of receivables, the Company due to this complete shut-down, was unable to access funds lying in the Companys bank accounts maintained with Yes Bank, including transfer of money from Yes Bank to other bank accounts to remit the TDS amount for the month of February 2020. Subsequent to this event, complete lock down across the nation was officially announced by government due to COVID -19; and the government had announced certain relaxations with respect to payment of TDS for the period March to June 2020. The Company has availed the relaxation offered and remitted the amount with reduced rate of interest @ 0.75% per month.

Pursuant to provisions of Section 143(12) of the Companies Act, 2013, the Statutory Auditors have not reported any incident of fraud to the Audit and Risk Management Committee during the year under review.

34. Material changes and commitments, if any, affecting the financial position of the Company occurred between the end of the financial year to which these financial statements relate and the date of the report:

Information regarding potential impact of COVID-19 pandemic on your Companys business operations and financial position are provided as part of the Management Discussion and Analysis Report.

There has been no change in the nature of business of the Company during the last financial year.

35. Secretarial Audit:

Pursuant to the provisions of Section 204 of the Companies Act, 2013 and The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, your Company has appointed Mr. V Sreedharan, Partner, M/s V Sreedharan & Associates, a firm of Company Secretaries in Practice to undertake the Secretarial Audit of the Company for the financial year ended March, 31, 2020. The said Report of the Secretarial Audit in Form MR 3 is annexed herewith as Annexure 2 and forms part of the report.

The Secretarial Auditors, in their report for the financial year ended March 31, 2020 under the Companies (Auditors Report) Order, 2016 have opined that "During the period under review the Company has complied with the provisions of the Act, Rules, Regulations, Guidelines, Standards, etc. mentioned in their report except for the following observation: The Annual Compliance Report for the year ended March 31, 2019, as required under Sl. No. 3(b) (iii) of the SEBI Circular CIR/CFD/CMD1/27/2019 dated February 08, 2019, effective from the year ended March 31, 2019, under Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 was uploaded to the stock Exchanges on June 10, 2019, with a marginal delay of 10 days. The Company has informed the National Stock Exchange about submission of the Annual Compliance Report.

In this regard, the Board of Directors places its response as under:

The Company has filed the Annual Compliance Report for the year ended March 31, 2019, as required under Sl. No. 3(b) (iii) of the SEBI Circular CIR/CFD/CMD1/27/2019 dated February 08, 2019, effective from the year ended March 31, 2019, under Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, on June 10, 2019. This was an inadvertent delay.

The Institute of Company Secretaries of India had revised the Secretarial Standards on Meetings of the Board of Directors (SS-1) and Secretarial Standards on General Meetings (SS-2) with effect from 1st October 2017. The Company has devised proper systems to ensure compliance with its provisions and is in compliance with the same. Your Company has complied with the applicable Secretarial Standards relating to ‘Meetings of the Board of Directors and ‘General Meetings during the year.

36. Cost Records and Cost Auditor:

The Company maintains cost records as specified by the Central Government under sub-section (1) of section 148 of the Companies Act, 2013.

Pursuant to Section 148 of the Companies Act, 2013 read with The Companies (Cost Records and Audit) Amendment Rules, 2014, your Directors, on the recommendation of the Audit and Risk Management Committee, have appointed M/s. Rao, Murthy & Associates (Firm Registration No. 00065), Costs Accountants as the cost auditors of the Company for FY 2020-21 at a remuneration of RS 1,75,000 (H One Lakh Seventy-Five Thousand Only) (exclusive of taxes and re-imbursement of actual out-of-pocket expenses, if any, in connection with the cost audit).

The Board of Directors of the Company proposes the ratification of remuneration of M/s. Rao, Murthy & Associates, Cost Accountants as the Cost Auditor of the Company, for FY 2020-21 at the ensuing Annual General Meeting.

Cost Audit Report for the financial year ended March 31, 2019 has been filed with the Registrar of Companies.

37. Particulars regarding Conservation of energy, Technology absorption and Foreign exchange earnings and outgo as per Section 134(3)(m) of the Companies Act, 2013:

The information on conservation of energy, technology absorption and foreign exchange earnings and outgo stipulated under Section 134(3)(m) of the Companies Act, 2013 read with Rule 8 of the Companies (Accounts) Rules, 2014 is detailed in Annexure 8.

38. Prevention of Sexual Harassment Policy:

The Company has in place a Prevention of Sexual Harassment policy in line with the requirements of the Sexual Harassment of Women at the Workplace (Prevention, Prohibition and Redressal) Act, 2013. An Internal Complaints Committee has been set up to redress complaints received regarding sexual harassment. All employees (permanent, contractual, temporary, trainees) are covered under this policy. The Company has complied with provisions relating to the constitution of Internal Complaints Committee under the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013.

The Companys process ensures complete anonymity and confidentiality of information. Adequate workshops and awareness programmes against sexual harassment are conducted across the organization.

During the year 2019-2020, Five (5) complaints were received. All the complaints were resolved and there are no complaints outstanding as on March 31, 2020.

39. Green initiative:

As a green initiative in corporate governance, Ministry of Corporate affairs have permitted companies to send electronic copies of Annual Report, notices, etc., to the e-mail IDs of shareholders. We are accordingly arranging to send soft copies of these documents to the e-mail IDs of shareholders available with us.

In case any of the shareholders would like to receive physical copies of these documents, the same shall be forwarded on request to the Company by post or an e-mail.

We are also in the process of starting a sustainability initiative with the aim of being carbon neutral and minimize our impact on the environment. Sustainability practices will be implemented and tracked diligently to ensure that we comply with the goals we set for ourselves.

40. Employee Stock Option Schemes:

As required under Securities and Exchange Board of India (Share Based Employee Benefits) Regulation 2014, the applicable disclosures as on March 31, 2020 are annexed to this Report as Annexure 3.

Pursuant to regulation 12(1) of the Securities and Exchange Board of India (Share Based Employee Benefits) Regulation 2014, the Company has obtained the approval of the members at the Annual General Meeting held on September 29, 2016, for ratifying Employee Stock Option Scheme of the Company (HCG ESOS 2014), the pre-IPO plan. HCG ESOS 2014 is in compliance with Securities and Exchange Board of India (Share Based Employee Benefits) Regulation 2014 and there have been no material changes to the plan during the financial year. Disclosures on various plans, details of options granted, shares allotted upon exercise, etc. as required under the Employee Benefits Regulations read with Securities and Exchange Board of India circular no. CIR/CFD/POLICY CELL/2/2015 dated June 16, 2015 are available on the Companys website at https:// www.hcgel.com/investors/. No employee was issued stock options during the year equal to or exceeding 1% of the issued capital of the Company at the time of grant.

The Nomination and Remuneration Committee of the board evaluates the performance and other criteria of employees and approves the grant of options based on the recommendation of the Management. These options vest with employees over a specified period subject to fulfilment of certain conditions. Upon vesting, employees are eligible to apply and secure allotment of Companys shares at a price determined on the date of grant of options.

The stock compensation cost is computed under fair value method and accounted in line with graded vesting of options over the total vesting period of four years. For the year ended March 31, 2020, the Company has recorded stock compensation expense of RS 2,71,86,754 (FY 2019: RS 30,559,323).

For further details on the Scheme refer Annexure 3 of the Directors report.

41. Directors Responsibility Statement:

Pursuant to Section 134 (3) (C) and 134 (5) of the Companies Act, 2013, the Board of Directors of the Company hereby state and confirm that:

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

b) the Directors have selected such accounting policies and applied them consistently and made judgments and estimates that were 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 and loss of the Company for that period;

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

d) the Directors have prepared the annual accounts on a going concern basis;

e) the Directors have laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively.

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

Based on the framework of internal financial controls and compliance systems established and maintained by the Company, work performed by the internal, statutory and secretarial auditors, including audit of internal financial controls over financial reporting by the statutory auditors, and the reviews performed by management and the relevant Board Committees, the Board is of the opinion that the Companys internal financial controls were adequate and effective during FY 2019-20.

42. Corporate Governance:

The Company is committed to observe good corporate governance practices. The report on Corporate Governance practices followed by your Company, as per regulation 34(3) read with Schedule V of the SEBI LODR Regulation including Certificate from CEO and CFO as per Regulations 17 of SEBI LODR Regulations, is provided in the Annual Report and it forms integral part of this Report.

Further, a certificate from Mr. V Sreedharan, Partner, M/s V Sreedharan & Associates, a firm of Company Secretaries in Practice confirming the compliance with the conditions of Corporate Governance as stipulated by Regulation 34 (3) of SEBI LODR Regulations, 2015 is attached to this report.

43. Declaration on Code of Conduct:

The Company has adopted the Code of Conduct for all its Senior Management Personnel and Directors and the same is affirmed by all the Board Members and Senior Management Personnel as required under Regulation 34 read with Part D of Schedule V of the SEBI LODR Regulations. A declaration signed by Dr. B. S. Ajaikumar, Chairman & CEO of the Company affirming the compliance with the Code of Conduct of the Company for the financial year 2019-20 has been annexed as part of this Report.

44. Acknowledgements and Appreciations:

We stay committed to partnering for value creation and take this opportunity to thank one and all who have participated in our journey this far. Your Directors desire to place on record, its sincere appreciation to all employees at all levels, who with sustained dedicated effort and hard work, enabled the Company to deliver a good allround performance. Your Directors also wish to place on record their appreciation and acknowledge with gratitude the support and co-operation extended by the vendors, business associates, consultants, bankers, regulatory and government authorities, shareholders and investors at large and look forward to their continued support. We also take this opportunity to express sincere thanks to the medical fraternity and patients for their continued cooperation, patronage and trust reposed in the Company and its healthcare services.

For and on behalf of the Board of Directors

Dr. B.S. Ajaikumar

Chairman & CEO

DIN : 00713779

Date: July 28, 2020

Place: Bengaluru.