Hester Biosciences Ltd Directors Report.

Your Directors are pleased to present the Thirty Third Annual Report and the Audited Financial Statements for the financial year ended on 31 March 2020.

FINANCIAL RESULTS

The financial statements of the Company have been prepared in accordance with the Indian Accounting Standards (Ind AS) notified under section 133 of the Companies Act, 2013, read with Rule 7 of the Companies (Accounts) Rules, 2014.

The standalone and Consolidated financial performance of the Company, for the financial year ended on 31 March 2020 is summarized below:

(Rs. in million)

Particulars Standalone Consolidated
For the year ended on 31 March 2020 For the year ended on 31 March 2019 For the year ended on 31 March 2020 For the year ended on 31 March 2019
Revenue from operations and other income 1,723.52 1,742.84 1,896.35 1,852.77
Profit before interest, depreciation, amortisation expenses and tax (PBIDT) 556.28 708.60 617.69 752.45
Less: Finance Cost 50.34 35.43 73.30 66.34
Less: Depreciation, Amortisation Expenses 93.85 75.66 130.72 117.55
Profit before tax (PBT) 412.29 597.51 413.26 568.56
Less: Tax Expenses 100.05 158.99 103.24 161.62
Profit after tax (PAT) 312.24 438.52 310.02 406.94
Profit for the year 312.24 438.52 310.02 406.94
Attributable to:
Owners 312.24 438.52 291.71 415.67
Non-Controlling Interest - - 18.32 (8.74)
Other Comprehensive Income /(Loss) (4.01) (2.38) 20.48 (2.51)
Total Comprehensive Income 308.23 436.14 330.50 404.42
Attributable to:
Owners 308.23 436.14 312.19 413.09
Non-Controlling Interest - - 18.32 (8.66)
Opening Balance in Retained Earnings 1,132.54 798.95 1,030.84 728.97
Amount available for appropriation 1,440.77 1,235.09 1,361.34 1,133.39
Less: Dividend (including Dividend Distribution Tax) on equity shares 71.79 102.55 71.79 102.55
Closing Balance in Retained Earnings 1,368.98 1,132.54 1,289.55 1,030.84
Earnings Per Share (Basic / Diluted) 36.70 51.55 36.44 47.84
(Face Value of Share Rs. 10 each)

RESULTS OF OPERATIONS

Sales

During the year under review, the standalone revenue from operations was Rs. 1,694.25 million, as compared to Rs. 1,711.87 million in the previous year. The consolidated revenue from operation was Rs. 1,832.68 million in the financial year ended on 31 March 2020, as compared to Rs. 1,780.67 million in the previous year.

Profitability

The Company achieved a standalone profit before tax of

Rs. 412.29 million, as compared to Rs. 597.51 million in the previous year. The consolidated profit before tax was Rs. 413.26 million in the financial year ended on 31 March 2020, as compared to Rs. 568.56 million in the previous year.

Earnings per share

The EPS on the standalone financials was Rs. 36.70 for the year ended on 31 March 2020 as against Rs. 51.55 as on 31 March 2019. The EPS on consolidated financials was Rs. 36.44 for the year ended on 31 March 2020 as against Rs. 47.84 as on 31 March 2019.

Transfer to Reserve

During the year, no amount was transferred to the General Reserve. Rs. 1,368.98 million is proposed to be retained in the surplus.

Share Capital

The paid-up equity share capital as on 31 March 2020 stood at Rs. 85.07 million. The members of the Company approved the special resolution on 24 January 2020 for Issuance of equity shares, and/or equity linked securities and/or securities convertible into equity shares through Qualified Institutional Placement (QIP) or preferential allotment up to an aggregate amount of Rs. 150 Crores, through the Postal Ballot process.

Net Worth

The Companys standalone net worth as on 31 March 2020 was at Rs. 2,030.80 million as compared to Rs. 1,794.36 million as on 31 March 2019. The Companys consolidated net worth as on 31 March 2020 was at Rs. 2,064.93 million as compared to

Rs. 1,811.55 million as on 31 March 2019.

DIVIDEND

Your Directors have recommended a dividend of Rs. 6.60 (66%) per equity share on 8,506,865 Equity Shares of Rs. 10 each fully paid-up for the financial year 2019-20, amounting to

Rs. 56.15 million. The dividend, if declared by the members at the ensuing Annual General Meeting ("AGM"), will be paid to those shareholders, whose names registered in the Register of Members on 28 August 2020. In respect of shares held in dematerialised form, it will be paid to the members whose names furnished by the National Securities Depository Limited and the Central Depository Services (India) Limited, as beneficial owners. The Dividend Pay-out Ratio for the current year is 18% of standalone profits.

During the year, the unclaimed dividend pertaining to the dividend for the year ended 31 March 2012 was transferred to Investors Education and Protection Fund.

REVIEW OF OPERATIONS

Sales during the financial year remained flat as compared to the previous year.

For domestic sales reasons beyond our control forced the sales to be flat while the additional expenses towards expanding the sales and marketing team as well as expanding to the other geographies pulled down the bottom line. Exports showed a growth of 67%.

Our CARE credit rating was reaffirmed and assigned as follows:

Long-term Bank Facilities rating ‘A- : Stable ("A" Minus, Outlook: Stable)

Long-term/ Short-term Bank Facilities rating ‘A- : Stable (A" Minus, Outlook: Stable) / ‘A2 Short-term rating ‘A2

We continue to hold the following certifications:

1. WHO - GMP

2. GLP (Good Laboratory Practices)

3. ISO 9001:2008

4. ISO 14001:2004

5. OHSAS 180001:2007

6. DSIR approved R&D Centre

CONSOLIDATED FINANCIAL STATEMENTS

The consolidated total income from operations is Rs. 1,896.35 million and total comprehensive income attributable to owners equity after non-controlling interest is Rs. 330.50 million for the financial year 2019-20 as compared to the consolidated total income from operations of Rs. 1,852.77 million and total comprehensive income attributable to owners equity after non-controlling interest of Rs. 404.42 million for the previous financial year 2018-19. Consolidated financial results include the financial results of following entities:

1. Hester Biosciences Nepal Foreign Subsidiary

Private Limited:
2. Texas Lifesciences Private Limited: Subsidiary
3. Hester Biosciences Africa Limited: Foreign Wholly-owned Subsidiary
4. Hester Bioscience Kenya Limited: Foreign Wholly-owned Subsidiary
5. Hester Biosciences Tanzania Limited: Foreign Step-down Subsidiary (Subsidiary of Hester Biosciences Kenya Limited)

In accordance with the Indian Accounting Standard (Ind AS) - 110 Consolidation of Financial Statements and as provided under the provisions of the Companies Act, 2013 (hereinafter referred to as "Act") read with Schedule III to the Act and Rules made thereunder and the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Audited Consolidated Financial Statements are provided in the Annual Report, which show the financial resources, assets, liabilities, incomes, profits and other details of the Company, its subsidiary Companies after elimination of minority interest, as a single entity.

SUBSIDIARY COMPANIES

As on 31 March 2020, your Company has two wholly-owned subsidiary Company namely, Hester Biosciences Africa Limited and Hester Biosciences Kenya Limited; and two subsidiary Companies namely, Hester Biosciences Nepal Private Limited and Texas Lifesciences Private Limited. One Step-down subsidiary company namely, Hester Biosciences Tanzania Limited, which is subsidiary of Hester Biosciences Kenya Limited. There has been no material change in the nature of business of the subsidiaries.

The business details of the subsidiary companies are as under:

Hester Biosciences Nepal Private Limited (HBNPL)

HBNPL is a subsidiary of Hester Biosciences Limited and holds 65% stake in HBNPL. HBNPL is in the business of manufacturing veterinary vaccines in Nepal.

Texas Lifesciences Private Limited (Texas Lifesciences)

Teaxs Lifesciences is a subsidiary of Hester Biosciences Limited and holds 54.80% stake. Texas Lifesciences is in the business of manufacturing and supplying pharma formulations, tablets, capsules, powder and oral liquid for human and veterinary markets.

Hester Biosciences Africa Limited (HBAL)

HBAL is 100% wholly-owned subsidiary of Hester Biosciences Limited in Tanzania. HBAL will be in the business of manufacturing veterinary vaccines and animal health product in Tanzania. HBAL may commence commercial production at the end of 2020.

Hester Biosciences Kenya Limited (HBKL)

HBAL is 100% wholly-owned subsidiary of Hester Biosciences Limited in Kenya. HBKL is in the business of Trading of veterinary vaccines and animal health product in Kenya.

Hester Biosciences Tanzania Limited (HBTL)

HBTL is subsidiary of HBKL and step-down subsidiary of Hester Biosciences Limited. HBTL is in the business of Trading of veterinary vaccines and animal health product in Tanzania and other Africa region.

As provided in section 136 of the Act, the Balance Sheet, Statement of Profit and Loss and other documents of the subsidiary companies are not being attached with the Balance Sheet of the Company. The Company have uploaded on its website the Audited Financial Statements of the subsidiary companies and the related detailed information to any member of the Company who may be interested to receive the same. The Financial Statements of the subsidiary companies will also be kept open for inspection at the Registered Office of the Company and that of the respective subsidiary companies. The Consolidated Financial Statements presented by the Company include financial results of its subsidiary companies and the financial highlights of subsidiaries are part of this Annual Report as Annexure-2 as prescribed in Form AOC-1.

As provided under section 129(3) of the Companies Act, 2013 and Rules made thereunder a statement containing the salient features of the financial statements of its subsidiaries in the format prescribed under the rules is attached to the financial statements. The policy relating to material subsidiaries as approved by the Board may be accessed on the Companys website at the link:https://www.hester.in/s/Policy-for-Determining-Material-Subsidiaries-9m3y.pdf

RELATED PARTY TRANSACTIONS

All contracts/arrangements/transactions entered by the Company during the previous financial year with the related parties were in the ordinary course of business and on arms length basis. There were no materially significant related party transactions entered by the Company with its Promoters, Directors, Key Managerial Personnel or other persons which may have potential conflict with the interest of the Company.

All Related Party transactions are placed before the Audit Committee for approval, wherever applicable. Prior omnibus approval for normal business transactions is also obtained from the Audit Committee for the related party transactions which are of repetitive nature and accordingly, the required disclosures are made to the Committee on a quarterly basis in terms of the approval of the Committee.

The disclosure of Related Party Transactions as required under Section 134(3)(h) of the Act in Form AOC - 2 is annexed as Annexure -3. The Related Party Transactions took placed during the financial year 2019-20 have placed in Notes of Financial Statements of the Company.

The policy on Related Party Transactions as approved by the Board may be accessed through the web link: https://www. hester.in/s/Related-Party-Transaction-Policy-rr76.pdf

PARTICULARS OF LOANS, GUARANTEES AND INVESTMENTS

Details of loans, guarantees and investments covered under the provisions of Section 186 of the Companies Act, 2013 are given in the notes to the Financial Statements.

COST ACCOUNTS AND RECORDS

The Company has made and maintained the cost accounts and records as specified by the Central Government under section 148 (1) of the Act and Rules made thereunder.

BOARD OF DIRECTORS AND KEY MANAGERIAL PERSONNEL

Appointment, Cessation and Re-appointment of Directors

During the year, upon recommendation of Nomination and Remuneration Committee, Ms. Sandhya Patel (DIN: 02215022) and Mr. Ashok Bhadakal (DIN: 00981201), were appointed as an Additional Independent Directors of the Company for the period of period of 3 years with effect from 1 April 2020 subject to approval of the members at the ensuing Annual General Meeting.

Mr. Naman Patel (DIN: 05143261) and Mr. Amit Shukla (DIN: 00709322), were appointed as an Independent Directors on 15 September 2015 for a period of 5 (five) consecutive years i.e. up to 31 March 2020. Based on the performance evaluation and upon the recommendation of Nomination and Remuneration Committee, the Board of Directors through circular resolution passed on 31 March 2020 approved their re-appointment as an Independent Directors of the Company, subject to approval of the members by way of a special resolution, to hold office for a second term of 3 (three) consecutive years with effect from 1 April 2020 to 31 March 2023.

Mr. Vishwesh Patel and Ms. Grishma Nanavaty, Independent Directors of the Company, were ceased to hold office with effect from 1 April 2020, due to completion of two consecutive terms as independent directors.

Retirement by Rotations

In accordance with the provisions of section 152 (6) of the Act and in terms of the Articles of Association of the Company, Mr. Sanjiv Gandhi, Non-Executive Director (DIN: 00024548) will retire by rotation at the ensuing Annual General Meeting and being eligible, offers himself for re-appointment. The Board recommends his re-appointment.

Profile of Directors seeking Appointment/ Re-appointment

As required under Regulation 36 (3) of the SEBI (LODR) Regulations, 2015, particulars of Directors seeking appointment/ re-appointment at the ensuing Annual General Meeting are annexed to the notice convening Thirty Third Annual General Meeting.

Declaration by Independent Directors

The Company has received necessary declaration under Section 149(7) of the Companies Act, 2013 and16(b) of the Listing Regulations from Independent Directors confirming that they are not disqualified for continuing as an Independent Director.

Training of Independent Directors

To familiarize the new inductees with the strategy, operations and functions of our Company, the executive directors /senior managerial personnel make presentations to the inductees about the Companys strategy, operations, product and service offerings, organisation structure, finance, human resources, technology, quality and facilities. Further, the Company has devised a Familiarisation Program for Independent Directors as per Regulation 46 (2) of SEBI (Listing Obligations and Disclosures Requirements) Regulations, 2015 and the same has been placed on the website of the Company at: https:// www.hester.in/s/Policy-on-Familarization-Programme-for-the-Independent-Directors-bwm9.pdf

Key Managerial Personnel

Mr. Rajiv Gandhi, CEO & Managing Director, Mr. Sahil Shah, Chief Financial Officer and Mr. Vinod Mali, Company Secretary of the Company are the Key Managerial Personnel as per the provisions of the Companies Act, 2013, as on 31 March 2020. During the year, Mr. Jigar Shah, has resigned from the post of Chief Financial officer of the Company with effect from 1 September 2019 and Mr. Sahil Shah has been appointed as Chief Financial Officer with effect from 1 March 2020. Mr. Rajiv

Gandhi has been re-appointed as a CEO & Managing Director of the Company with effect from 1 April 2020 by members of the Company through postal ballot process on 24 January 2020. Thereafter, Mr. Sahil Shah has resigned from the post of Chief Financial Officer and Mr. Chetas Patel has been appointed as a Chief Financial Officer of the Company with effect from 29 April 2020.

Evaluation of Performance of the Board, its Committees and Individual Directors

During the year, the evaluation of the annual performance of individual directors including the Chairman of the Company and Independent Directors, Board and Committees of the Board was carried out under the provisions of the Act and relevant Rules and the Corporate Governance requirements as prescribed under Regulation 17 of Listing Regulations, 2015 and the circulars with respect to Guidance Note on Board Evaluation. The Nomination and Remuneration Committee had approved the indicative criteria for the evaluation based on the SEBI Guidance Note on Board Evaluation. The evaluation for the performance of the Board as a whole and of the Committees were conducted by questionnaires.

In a separate meeting of Independent Directors held on 7 February 2020, performance of Non-Independent Directors and performance of the Board as a whole was evaluated. Further, they also evaluated the performance of the Chairman of the Company, taking into account the views of the Executive Directors and Non-Executive Directors.

The performance of the Board was evaluated by the Board after seeking inputs from all the Directors on the basis of various criteria such as structure and diversity of the Board, experience of Directors, strategy and performance evaluation, secretarial support, evaluation of risk, evaluation of performance of the management and feedback, independence of the management from the Board and other indicators. The Nomination and Remuneration Committee reviewed the performance of the individual Directors on the basis of the criteria such as knowledge and competency, fulfillment of functions, availability and attendance, initiative integrity contribution and commitment, independence, independent views and judgment among other components.

Nomination and Remuneration Policy

The Board has on the recommendation of the Nomination and Remuneration Committee framed a policy on selection and appointment of Directors, Senior Management Personnel and their remuneration. The Remuneration Policy is stated in the Corporate Governance Report, which is a part of this Annual Report.

Board of Director Meetings

The information of meetings of the Board of Directors is given in Corporate Governance Report, forming a part of this Annual Report.

DIRECTORS RESPONSIBILITY STATEMENT

In terms of section 134(3)(c) read with 134(5) of the Companies Act, 2013 and to the best of their knowledge and belief, and according to the information and explanations provided to them, your Directors hereby make the following statements:

a) That in preparation of Financial Statements for the year ended 31 March 2020, the applicable accounting standards have been followed and no material departures have been made from the same;

b) The Directors had selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit or loss of the Company for that year;

c) The Directors had 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 had prepared the Financial Statements for the year ended 31 March 2020 on going concern basis;

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

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

COMMITTEES OF BOARD OF DIRECTORS

Your Company has several Committees which have been established as part of best corporate governance practices and are in compliance with the requirements of the relevant provisions of applicable laws and statutes.

The Company has following Committees of the Board:

Audit Committee

Nomination and Remuneration Committee

Stakeholders Grievances and Relationship Committee

Corporate Social Responsibility Committee

Management Committee

Share Transfer Committee

A detailed note on the committees with respect to composition, meetings, powers and terms of reference is provided under the Corporate Governance Report section in this Annual Report.

CORPORATE SOCIAL RESPONSIBILITY _"CSR"_

Your Company has contributed for healthcare, education, research and improvisation of livelihood of poors as a part of initiatives under "Corporate Social Responsibility" for the year under review. Pursuant to section 135 of the Act and the relevant rules, the Board has constituted a Corporate Social Responsibility ("CSR") Committee under the Chairmanship of Mr. Rajiv Gandhi. The details of membership of the Committee & the meetings held are detailed in the Corporate Governance Report, forming part of this Report. The contents of the CSR Policy of the Company as approved by the Board on the recommendation of the CSR Committee is available on the website of the Company and can be accessed through the website of the Company: www.hester.in. The Disclosures with respect to CSR Activities form part of this Directors Report as

Annexure-1.

PUBLIC DEPOSITS

During the period under review, the Company has not accepted deposits from shareholders and public falling within the ambit of Section 73 of the Companies Act, 2013 and rules made thereunder.

FINANCE

During the year, State Bank of India has enhanced total credit facilities of the Company to Rs. 753 million from existing limits of Rs. 557 million for working capital requirement and capital expenditures.

INSURANCE

The Companys plant, properties, equipment and stocks are adequately insured against all major risks.

VIGIL MECHANISM /WHISTLE BLOWER POLICY

The Company has established a vigil mechanism and framed a Whistle Blower Policy for Directors and employees to report concerns about unethical behaviour, actual or suspected fraud or violation of the Companys Code of Conduct or Ethics Policy. The functioning of vigil mechanism is reviewed by the Audit Committee from time to time. No whistle blower has been denied access to the Audit Committee of the Board. The Whistle Blower Policy of the Company is available on the Companys website.

DISCLOSURE AS PER THE SEXUAL

HARASSMENT OF WOMEN AT WORKPLACE _PREVENTION, PROHIBITION AND REDRESSAL_ ACT, 2013

The Company has zero tolerance towards sexual harassment at the workplace and has adopted a policy on prevention, prohibition and redressal of sexual harassment at workplace in line with the provisions of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 and the Rules made there under.

The Company always endeavors to create and provide an environment to its employees and external individuals engaged with the Company that is free from discrimination and harassment including sexual harassment. The Company has in place a robust policy on prevention of sexual harassment at workplace. The policy aims at prevention of harassment of employees as well as contractors and lays down the guidelines for identification, reporting and prevention of sexual harassment.

During the financial year 2019-20, no complaints were received with regards to sexual harassment.

CORPORATE GOVERNANCE

The Company has complied with the Corporate Governance requirements under the Companies Act, 2013 and Regulations 17 to 27 and 46 of the SEBI (LODR) Regulations, 2015 and amendments therein. A separate section on detailed report on Corporate Governance practice followed by the Company under SEBI (LODR) Regulations, 2015 along with a certificate from Practicing Company Secretary, confirming the compliance forms a part of this report. The Board of Directors supports the basic principles of corporate governance and lays strong emphasis on transparency, accountability and integrity.

SECRETARIAL STANDARDS

Secretarial Standards for the Board of Directors and General Meetings (SS-1 & SS-2) are applicable to the Company. The Company has complied with the provisions of both Secretarial Standards.

BUSINESS RESPONSIBILITY REPORTING

As per regulation 34(2)(f) of the Listing Regulations, a separate section on Business Responsibility Reporting forms a part of this Annual Report.

MANAGEMENT DISCUSSION AND ANALYSIS REPORT

Your attention is drawn to the perception and business outlook of the management for your company for the current year and for the industry in which it operates including its position and perceived trends in near future. The Management Discussion and Analysis Report, as required under Regulations 34 of the SEBI (LODR) Regulations, 2015 is attached and forms part of the Annual Report.

AUDITORS

Statutory Auditor and Audit Report

Shah Karia & Associates (Firm Registration No. 131546W), Chartered Accountants, Ahmedabad, was appointed as the Statutory Auditors of the Company till the conclusion of Thirty Third Annual General Meeting. Shah Karia & Associates, Chartered Accountants have furnished a declaration confirming their independence as well as their arms length relationship with the Company and that they have not taken up any prohibited non-audit assignments for the Company.

The Board of Directors of the Company has appointed Chandulal M. Shah & Co. (Firm Registration No. 101698W), Chartered Accountants, Ahmedabad, as statutory auditor of the Company in their Board meeting held on 26 June 2020, subject to approval of the members in the ensuing Annual General Meeting for a period of 3 years from the conclusion of Thirty Third Annual General Meeting till the Conclusion of 36th Annual General Meeting. The Audit Committee has considered the qualifications and experiences of the statutory auditor and has recommended their appointment. Written consent of the auditor together with a certificate that the appointment, if made, shall be in accordance with the conditions specified in Rule 4 of the Companies (Audit and Auditors) Rules, 2014 has been received.

The Board has duly reviewed the Statutory Auditors Report of Shah Karia & Associates for the year ended on 31 March 2020 and the observations and comments, appearing in the report are self-explanatory and do not call for any further explanation/ clarification by the Board of Directors as provided under section 134 of the Companies Act, 2013.

Internal Auditor and Audit Report

Naresh J. Patel & Co., Chartered Accountants, Ahmedabad, has been the internal auditor of the Company for the FY 2019-20. The Internal Auditor is appointed by the Board of Directors of the Company on a yearly basis, based on the recommendation of the Audit Committee. The Internal Auditor reports its findings on the internal audit of the Company to the Audit Committee on a quarterly basis. The scope of internal audit is approved by the Audit Committee.

The Board has appointed Ernest & Young LLP, Chartered Accountants, Ahmedabad for the FY 2020-21 as an Internal Auditor of the Company in the Board meeting held on 26 June 2020, after obtaining its willingness and eligibility letter for appointment as Internal Auditor of the Company.

Cost Auditor

Pursuant to provisions of Section 148 read with Companies (Audit & Auditors) Rules, 2014 and other applicable provisions, if any, of the Companies Act, 2013, the Board of Directors had, on recommendation of the Audit Committee, re-appointed Kiran J. Mehta & Co., Cost Accountants, Ahmedabad, as the Cost Auditor of the Company for the financial year 2019-20, on the remuneration terms as approved by the members at the last Annual General Meeting held on 31 July 2019.The Cost Audit report for the financial year 2018-19 was filed within the due date. The due date for submission of the Cost Audit Report for the year 2019-20 is within 180 days from 31 March 2020.

The Board has appointed Kiran J. Mehta & Co., Cost Accountants, Ahmedabad for the FY 2020-21 as a Cost Auditor of the Company in the Board meeting held on 26 June 2020, after obtaining its willingness and eligibility letter for appointment as Cost Auditor of the Company. As required under the Act and Rules made thereunder, the remuneration payable to the Cost Auditor is required to be placed before the Members in a general meeting for ratification.

Accordingly, a resolution seeking ratification by members for the remuneration payable to Kiran J. Mehta & Co. is included in the Notice convening 33rd Annual General Meeting of the Company.

Secretarial Auditor and Secretarial Audit Report

Pursuant to the provisions of Section 204 of the Companies Act, 2013 and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Board of Directors had appointed Mr. Tapan Shah, Practicing Company Secretary to undertake the Secretarial Audit of the Company for the FY 2019-20. The Secretarial Audit Report for the FY 2019-20 is annexed to this Directors Report as Annexure-4. The Board of Directors has duly reviewed the Secretarial Auditors Report and the observations and comments, appearing in the report are self-explanatory and do not call for any further explanation/clarification by the Board of Directors as provided under section 134 of the Act.

The Board of Directors has appointed Mr. Tapan Shah, Practicing Company Secretary to undertake the Secretarial Audit of the Company for the FY 2020-21 in the Board Meeting held on 26 June 2020.

MATERIAL CHANGES AND COMMITMENT AFFECTING FINANCIAL POSITION OF THE COMPANY

There are no material changes and commitments, affecting the financial position of the Company which has occurred between the end of financial year and the date of Directors Report.

BUSINESS RISK MANAGEMENT POLICY AND FRAMEWORK

Risk management is embedded in your Companys operating framework. Your Company believes that managing risks helps in maximising returns. The Companys approach to addressing business risks is comprehensive and includes periodic review of such risks and a framework for mitigating controls and reporting mechanism of such risks. The risk management framework is reviewed periodically by the Board and the Audit Committee.

INTERNAL FINANCIAL CONTROL SYSTEMS AND ITSADEQUACY

The Company has its internal audit function which endeavours to make meaningful contributions to the organisations overall governance, risk management and internal controls. The function reviews and ensures sustained effectiveness of Internal Financial Control by adopting a systematic approach to its work.

The Company has designed and implemented a process driven framework for Internal Financial Controls (IFC) within the meaning of the explanation to section 134 (5) (e) of the Act. For the year ended on 31 March 2020, the Board having opinion that the Company has sound Internal Financial Control commensurate with the size, scale and complexity of its business operations. The Internal Financial Control operates effectively and no material weakness exists. The Company has a process in place to continuously monitor the same and identify gaps, if any, and implement new and/or improved controls whenever the effect of such gaps would have a material effect on the Companys operations.

CREDIT RATING

During the year, CARE Ratings Limited has reaffirmed the credit rating of "CARE A- /Stable" for long-term bank facilities and "CARE A- : Stable / CARE A2" for long-term /short term bank facilities and "CARE A2" for short term bank facilities of the Company. Further, the CARE Ratings Limited has reaffirmed the ratings on request of State Bank of India upon sanctioned of additional term loan facility.

TRANSFER OF SHARES TO INVESTOR EDUCATION ANDPROTECTION FUND _IEPF_ ACCOUNT

During the year, the Company has transferred 4,826 Equity Shares of 58 shareholders whose dividend has remained unclaimed / unpaid for a consecutive period of 7 (seven) years to Investor Education & Protection Fund pursuant in compliance with the provisions of Section 124(6) of Companies Act, 2013 read with Investor Education and Protection Fund Authority (Accounting, Audit, Transfer and Refund) Rules, 2016 ("IEPF Rules"). The Company has sent letters to shareholders to claim their unpaid dividend before the shares transferred to IEPF Account.

EXTRACT OF ANNUAL RETURN

Pursuant to Sub-section 3(a) of Section 134 and Sub-section (3) of Section 92 of the Companies Act, 2013 read with Rule 12 of Companies (Management and Administration) Rules, 2014, the extract of the Annual Return as at 31 March 2020 in Form MGT-9 is annexed to this report as Annexure-5. The same is available on the website of the Company: www.hester.in.

PARTICULAR OF EMPLOYEES

The information required under section 197 of the Act read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, is given in this Annual Report as Annexure-6.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO

The information on conservation of energy, technology absorption and foreign exchange earnings and outgo as stipulated under Section 134(3)(m) of the Act read with Rule 8 of The Companies(Accounts) Rules, 2014, is provided in Annexure-7 and forms part of this report.

GENERAL DISCLOSURES

Your Directors state that the Company has made disclosures in this report for the items prescribed in section 134 (3) of the Act and Rule 8 of the Companies (Accounts) Rules, 2014, to the extent the transactions took place on these items during the year.

Apart from what are mentioned in this report, there are no material changes and commitments affecting the financial position of the Company between the end of the financial year and the date of this report.

ACKNOWLEDGEMENT

Your Directors place on record their sincere appreciation for the continued co-operation and support extended to the Company by various Banks. Your Directors also thank the Medical Profession, the Trade and Consumers for their patronage to the Companys products. Your Directors also place on record sincere appreciation of the continued hard work put in by the employees at all levels. The Directors also thank the Companys vendors, investors, business associates, Stock Exchanges, Government of India, State Government and various departments and agencies for their support and co-operation.