J B Chemicals & Pharmaceuticals Ltd Directors Report.

Your directors are pleased to present forty-fifth report and audited financial statement of the Company for the financial year ended on March 31, 2021.

1. FINANCIAL HIGHLIGHTS

The following are the highlights of financial performance of the Company during the year under review . (Rs. in lakhs)

2020-21 2019-20
Sales 184,907.75 160,619.62
Other Operating revenue 4,291.80 3,454.82
Other Income 11,188.94 4,934.27
Total Income 200,388.49 169,008.71
Profit before finance cost and depreciation 66,825.48 41,758.73
Less: Finance cost 719.18 293.51
Less: Depreciation & Amortisation expense 6,735.50 6,509.05
Profit before exceptional item and tax 59,370.80 34,956.17
Exceptional Item ? 1,000.00
Profit before tax 59,370.80 33,956.17
Tax Expense (Net) 14,662.32 7,141.77
Net Profit after tax 44,708.48 26,814.40
Other Comprehensive Income (1,249.67) (506.42)
Total Comprehensive Income after tax 43,458.81 26,307.98
Earnings per share of Rs.2 (in Rs.) (Basic & Diluted) 57.85 33.70

2. DIVIDEND

Your directors recommend a final dividend ofRs. 8 (400%) per equity share of face value of Rs. 2, payment whereof will be subject to deduction of tax at source. During the year, Board of directors declared interim dividend of Rs. 8.50 (425%) per equity share, which was paid on 5-3-2021. The final dividend, if declared, together with interim dividend already paid would result in total outgo of Rs. 127.52 crores. The Board has not proposed any transfer out of profit for the financial year to reserves in relation to these dividend payments. The Company paid interim dividend of Rs. 10 (500%) and final dividend of Rs. 1 (50%) per equity share in the previous year.

3. CHANGE IN CONTROL

Pursuant to Share Purchase Agreement dated 2-7-2020 entered into between founder Mody Family members and Tau Investment Holdings Pte. Ltd., Singapore, an affiliate of global private equity firm KKR, Tau Investment Holdings Pte. Ltd. acquired controlling stake of 41,731,363 (54%) equity shares of Rs. 2 each in the Company from Mody Family members. Consequently, Mody Family members having representation on the Board and occupying senior management positions resigned, following which other directors on the Board appointed prior to 2-7-2020 also resigned due to their personal reason. Hence, the Board of directors was re-constituted on 31-8-2020. The details of appointment and resignation of directors in the course of such re-constitution are set out in paragraph 10 below.

Following execution of the above referred Share Purchase Agreement to acquire shares in and control over the Company, Tau Investment Holdings Pte. Ltd. and persons acting in concert made an open offer for acquisition of 20,093,346 shares (26%) @ Rs. 745 per share from public shareholders of the Company as per provisions of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011.

4. OPERATIONS/STATE OF AFFAIRS

The financial year 2020-21 was eventful as the Company saw change of control and management on one hand and witnessed unprecedented business environment due to COVID-19 on the other. There was no major impact of COVID-19 on business of the Company. Company’s manufacturing facilities continued to operate but with some impact of restrictions on movement of people and materials due to COVID-19.

Total standalone sales during the year at Rs. 1,849.08 crores were 15.1% higher over the previous year, while EBITDA at Rs. 556.37 crores grew by 51.09% and was 29.4% of operating revenue.

Domestic formulations business at sales of Rs. 839.07 crores registered growth of 14.1% over the previous year against industry growth of 4% MAT March 2021). This robust performance was enabled ( by strong performance of Company’s key brands. In this business, the Company has implemented a new ‘go to market’ model with focus on productivity and driving progressive product portfolio, which should aid the performance in this business. Sales of contrast media products in the domestic market at Rs. 52.83 crores were 14% lower over the previous year due to COVID-19.

Overall formulations exports at Rs. 850.55 crores registered growth of 19.6% over the previous year. Exports to Rest of the World markets (other than Russia-CIS) with sales of Rs. 626.52 crores achieved good growth of 24.8%. The sales to US market and sales of branded generics products to other markets in this business achieved growth of 63% and 18% respectively. Sales to Russia-CIS market at Rs. 130.59 crores achieved growth of 4% as the demand in local markets was impacted by COVID-19 consequences. API sales at Rs. 81.79 crores achieved growth of 17.7% over the previous year.

Profitbefore tax at Rs. 593.71 crores registered growth of 74.85% mainly due to higher sales of chronic segment products, lower than normal operating cost during most part of the year due to COVID-19, favourable exchange rate during first half of the year and higher other income. Profit after tax atRs. 434.58 crores consequently grew by 65.19%.

5. RESPONSIBILITY STATEMENT

The directors confirm:

(i) that in the preparation of the annual accounts for the year under review, the applicable accounting standards have been followed;

(ii) that they have selected appropriate accounting policies and applied them consistently and made judgements 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 financial year 2020-21 and of profit of the Company for that

(iii) that they 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;

(iv) that they have prepared the annual accounts for the year ended on March 31, 2021 on a going concern basis;

(v) that they have laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively; and that there was (vi) that they have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

6. SUBSIDIARIES

The highlights of performance of subsidiary companies in Rupee terms for the year 2020-21 is presented in Schedule-A. After inter-company adjustments, subsidiary companies contributed Rs. 151.02 crores to consolidated income and Rs. 3.18 crores to consolidated profit before tax of the Company. Sales of Biotech Laboratories (Pty.) Ltd., South Africa, for the financial year 2020-21 were Rand 477.19 million, which represents growth of 35.51% over the previous year, while its operating profit and profit after tax at Rand 34.58 million and Rand 25.67 million were 90.08% and 71.52% higher over the previous year respectively. Sales of LLC Unique Pharmaceutical Laboratories, Russia, for the financialyear 2020-21, at Ruble 653.58 million were 9.1% lower over the previous year, while it incurred loss of Ruble 1.45 million against profit of Ruble 4.03 million in the previous year. Unique Pharmaceutical Laboratories FZE, Dubai is presently not engaged in any business activity. It earned net profitof AED 26,080 due to exchange gain.

7. CORPORATE GOVERNANCE AND COMPLIANCES

A certificate from practising company secretary on comliance with conditions of corporate governance is annexed to this Board’s report. Management Discussion and Analysis Report, Compliance report on Corporate Governance, Business Responsibility Report and Dividend Distribution Policy form part of this annual report.

8. PUBLIC DEPOSITS

The Company has not accepted any deposit covered under Chapter V of the Companies Act, 2013 during the year. All the public deposits accepted prior to the commencement of the said Act have been repaid in 2014-15.

9. TRIBUTE TO MR. JYOTINDRA B. MODY

Board has to inform the members with immense grief that Mr. J. B. Mody, founder Chairman and managing director of the Company since incorporation of the Company passed away on 21-07-2020. Mr. J. B. Mody built businesses, built brands and built organisation over the years through his vision, sheer entrepreneurship, deep focus and commitment. He played a vital role in growth of the Company and development of the businesses. Board has placed his valuable contributions on record with sense year; of gratitude.

10. DIRECTORS

Board appointed Mr. Ranjit Shahani, Mr. Sumit Bose and Ms. Padmini Khare Kaicker as additional directors (independent directors) and Mr. Sanjay Nayar, Mr. Prashant Kumar, Mr. Ajay Candade, Ms. Ananya Tripathi and Mr. Mayank Mishra as additional directors (non-executive) on 31-8-2020. Mr. Shirish B. Mody, Whole time director (Marketing), Mr. Bharat P. Mehta, Whole time director (Planning & Development), Mr. Kamlesh L. Udani, Executive director (Technical & Production), and Dr. Satyanarain Agarwala, Mr. Rajiv Mody, Ms. Krupa Gandhi, Mr. Devang Shah, Mr. Shaukat Merchant and Dr. Manoj Mashru, independent directors, resigned on 31-8-2020. These independent directors resigned because of their personal reason and they all confirmed no other material reason for their resignation. Mr. Pranabh Mody stepped down from his executive position of President and Whole time director (Operations) on 31-8-2020 and resigned as director on 9-11-2020.

The members of the Company at annual general meeting held on 30-9-2020 appointed Mr. Ranjit Shahani, Mr. Sumit Bose and Ms. Padmini Khare Kaicker as independent directors for a term of five years from 31-8-2020 and Mr. Sanjay Nayar, Mr. Prashant Kumar, Mr. Ajay Candade, Ms. Ananya Tripathi and Mr. Mayank Mishra as directors liable to retire by rotation. Subsequent to this, Mr. Ajay Candade resigned on 5-10-2020 and Mr. Mayank Mishra resigned on 10-2-2021.

Board appointed Mr. Nikhil Chopra as additional director on 5-10-2020 and also appointed him as Chief Executive Officer and Whole-time director of the Company on the even date. The members appointed Mr. Nikhil Chopra as director of the Company and also approved his appointment as Chief Executive Officer and Whole-time director and remuneration payable to him as such on 23-12-2020.

Board appointed Mr. Gaurav Trehan as additional director on 10-2-2021, who holds office up to the date of ensuing annual general meeting. The Company has received, a notice from a member proposing candidature of Mr. Gaurav Trehan to the office of director of the Company,pursuantto Section 160 of the Companies Act, 2013. It is proposed to appoint Mr. Gaurav Trehan as non-executive director of the Company. Mr. Gaurav Trehan is Partner and Head of the Private Equity business for KKR India and possesses expertise in the areas of business strategy, business management and corporate governance. His detailed profile is given in notice for the ensuing annual general meeting. This profile is deemed to form part of this report.

In accordance with provisions of the Companies Act, 2013, Ms. Ananya Tripathi would retire by rotation at the ensuing annual general meeting. Being eligible, she has offered herself for re-appointment.

In the opinion of the Board of directors, Mr. Ranjit Shahani, Mr. Sumit Bose and Ms. Padmini Khare Kaicker, independent directors, are persons of integrity and they all possess relevant expertise and experience necessary for effective functioning of the Company. These independent directors have given declarations to the Board that they meet the criteria of independence as provided in Section 149(6) of the Companies Act, 2013 as well as in Regulation 16 of Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015. They have also confirmed that they have registered with the Indian Institute of Corporate Affairs to include their names in the databank of independent directors. However, in terms of Companies (Appointment and Qualification of Directors) Rules, 2014 as amended, these independent directors are not required to test conducted by the passanonlineproficiency said Institute notified under sub-section (1) of Section 150 of the Companies Act, 2013.

Total eight (8) meetings of the Board of directors were held during the financial year 2020-21. They were held on June 25, 2020, July 14, 2020, August 25, 2020, August 31, 2020, September 14, 2020, October 5, 2020, November 10, 2020 and February 10, 2021.

11. POLICY ON DIRECTORS’ APPOINTMENT AND REMUNERATION POLICY

The Company’s policy on directors’ appointment is set out in Schedule-B. The salient features of the Company’s policy on remuneration for the directors, key managerial personnel and other employees is set out in Schedule-C. The said Policy including and criteria for determining independence of a director has been posted on the Company’s website www.jbcpl.com.

12. CONSERVATION OF ENERGY, TECHNOLOGY ABSORTION, FOREIGN EXCHANGE EARNINGS AND OUTGO

The particulars as required under Section 134(3)(m) of the Companies Act, 2013 read with Rule 8(3) of the Companies (Accounts) Rules, 2014 are given in Schedule-D.

13. CORPORATE SOCIAL RESPONSIBILITY

Corporate Social Responsibility (CSR) Committee of the Board consists of Mr. Ranjit Shahani, Mr. Sumit Bose, Mr. Nikhil Chopra and Ms. Ananya Tripathi. The CSR Committee formulated and recommended revised CSR Policy to the Board, which the Board approved on 10-2-2021. The salient features of the revised CSR Policy of the Company and the annual report on CSR in the prescribed form are set out in Schedule-E. The CSR Policy and annual report on CSR are posted on the Company’s website www.jbcpl.com.

The Company spent Rs. 516.75 lakhs on prescribed CSR activities during financial year 2020-21 as against obligation ofRs. 509.35 lakhs being 2% of the average net profits of the Company made during three immediately preceding financial years.

14. AUDIT COMMITTEE AND VIGILANCE MECHANISM

The Board has constituted Audit Committee that consists of Ms. Padmini Khare Kaicker, Chairperson, Mr. Ranjit Shahani, Mr. Sumit Bose and Mr. Prashant Kumar. There has been no instance of non-acceptance of recommendation of Audit Committee by the Board.

The Board of directors has, on 10-11-2020, adopted revised vigil mechanism in the form of Whistle Blower Policy to enable directors, employees and other stakeholders to make Protected Disclosures (as defined in the Policy) in relation to Alleged Wrongful Conduct (as defined in the Policy) to the Redressal Committee for evaluation and investigation in consultation with the Audit Committee. The Policy empowers the Redressal Committee to initiate inquiry and investigation if the issue raised constitutes bona fide Protected Disclosure made in good faith. The Redressal Committee is required to complete the investigation in a time bound manner. Where it concludes that Unethical and/or Improper Activity (as defined in the Policy) has been committed, it shall recommend, after consultation with the Audit Committee, to the management of the Company to take such disciplinary or corrective action as it or the Audit Committee deems fit. The Policy provides for access of whistle blower to the Chairman of the Audit Committee in appropriate or exceptional circumstances. The Policy provides for adequate safeguards of whistle blowers against any kind of victimisation or unfair treatment but also provides for taking stern disciplinary action against who abuses the protection so granted. This functioning of vigil mechanism will be periodically reviewed by the Audit Committee. The Company has posted the Whistle Blower Policy and the associated Complaint Response Plan Policy on its website www.jbcpl.com.

15. ANNUAL PERFORMACE EVALUATION

The Board of Directors carried out formal annual evaluation of performance of the Board, its Committees and individual directors during 2020-21 in accordance with the manner specified by the Nomination and Remuneration Committee (NRC) and using evaluation criteria recommended by the NRC and approved by the Board. The performance evaluation was carried out in the following manner, being manner recommended by the NRC.

Evaluation of performance of the Board: Each member of the Board evaluated the Board on the given criteria on scale of 1 to 4 (4 being highest). The aggregate of simple average of rating assigned by each Board member was further averaged to ascertain Board’s performance.

Evaluation of performance of the Board Committees: Each member of the concerned committee evaluated performance of the committee on the given criteria on scale of 1 to 4. Aggregate of simple average of rating assigned by each such member was further averaged to ascertain performance of the concerned committee.

Evaluation of performance of Individual Director: Each Board member (excluding director being evaluated) evaluated performance of all other Board members on the given criteria on scale of 1 to 4. Aggregate of simple average of rating assigned to each Board member was further averaged to ascertain performance of such director.

16. CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES

Form AOC-2 prescribed under Section 134(3)(h) read with Rule 8(2) of the Companies (Accounts) Rules, 2014 provides for disclosure of (a) details of contracts or arrangements or transactions not at arm’s length basis, and (b) details of material contracts or arrangement or transactions at arm’s length basis.

All the transactions entered into by the Company with the related parties during the year were pursuant to the contract or arrangement approved by the Audit Committee and the Board of Directors. The transactions so entered into were in the ordinary course of business of the Company and on arm’s length basis. The contract or arrangement or transactions were neither material in terms of the Policy on materiality of related party transactions adopted by the Company nor it exceeded the threshold limit prescribed pursuant to first proviso to Section 188(1) of the Companies Act, 2013. However, without going by the materiality as aforesaid, the details of material/major related party contracts/arrangement/ transactions at arm’s length basis and entered into in the ordinary course of business of the Company are given in Form No. AOC-2 given under Schedule-F1.

Every related party contract or arrangement entered into with approval of the Board under Section 188(1) of the Companies Act, 2013 is referred to in Schedule-F2 pursuant to Section 188(2) of the Companies Act, 2013. These contracts or arrangements are in the ordinary course of business and terms thereof are on arm’s length basis, and have been approved by the Audit Committee and the Board of Directors.

17. PARTICULARS OF EMPLOYEES AND OTHER REMUNERATION RELATED DISCLOSURES

The remuneration related and other disclosure 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 as amended, are given in Schedule-G.

A statement showing name and other particulars of the employees in terms of Section 197(12) of the Companies Act, 2013 read with Rule 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 as amended, is given in Schedule-H.

18. EMPLOYEE STOCK OPTION SCHEME

Board, on 28-4-2021 read with modifications/additions approved on 14-6-2021, basis of recommendation of the Compensation Committee, has approved a new employee stock option scheme termed as "JBCPL Employee Stock Option Scheme 2021" ("Scheme") for eligible employees and directors of the Company with a view to make the Company one of the attractive companies in the pharmaceutical industry with long term wealth creation opportunity for its employees linked to the Company’s long term growth. The Scheme is in terms of the Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, 2014, and is subject to approval by members of the Company. 3,091,284 equity shares of Rs. 2 each, being 4% of the paid-up equity share capital of the Company as on March 31, 2021, have been reserved under the Scheme. The Company proposes to issue time-based options and performance-based options under the Scheme on such terms and conditions as determined by the Board/Compensations Committee from time to time.

The disclosure of details in respect of employee stock option scheme set-up with approval of the members of the Company granted at extra ordinary general meeting held on 18-3-2004 (‘the said old scheme"), as required under the Companies (Share Capital and Debentures) Rules, 2014, is set out in Schedule-I to this report. There was no grant, vest, exercise or lapse of options during the year under the said old scheme. There was no change in the said old scheme during the year and it is in compliance with SEBI (Share Based Employee Benefits) Regulations, 2014. Disclosure in respect of the said old scheme required in terms of SEBI Circular CIR/CFD/POLICY CELL/2/2015 dated June 16, 2015 are posted on the Company’s website www.jbcpl.com and web link thereto is https://www.jbcpl.com/investors/pdf/2021Rs.2022ESOPd31032021. pdf. As the said old scheme is not operational for long time and the Company does not plan to use the same and further that all options granted under the said old scheme are either exercised or lapsed, Board, basis recommendation of the Compensation Committee, has withdrawn and revoked the said old scheme effective 1-4-2021.

19. RISK MANAGEMENT

The Board of directors has developed and implemented risk management policy for the Company. Pursuant to the Listing Regulations, the Board has constituted Risk Management Committee and delegated monitoring and review of the risk management plan to the Committee. Committee would periodically review status of mitigation measures taken in respect of risk management plan and would report progress thereof and new risks identified to the Board and Audit Committee. Board at present does not perceive any element of risk, which may threaten existence of Profit before tax atRs. 593.71 crores registered growth of 74.85% mainly due to higher sales of chronic segment products, lower the Company.

20. INTERNAL FINANCIAL CONTROLS

The Board has adopted internal financial controls encompassing policies and procedures for ensuring the orderly and efficient conduct of the business, including adherence to Company’s policies, safeguarding the Company’s assets, prevention and detection of fraud and errors, accuracy and completeness of the accounting records and timely preparation of reliable financial information. The specific internal financial to financial statements include internal audit and processes relating to preparation of financial statements, adoption of well-defined standard operating procedure for business transactions and compliance relating thereto, use of ERP for accuracy and control, review of periodically prepared financial statements with objective to ensure that financial statements present true and fair view and are sufficient/credible and in compliance with legal and regulatory requirement. The Board has appointed Ernst & Young LLP as internal auditor to periodically audit systems and controls in all key areas of operations to ascertain effective functioning of internal controls including internal financial controls. In the opinion of the Board, the Company has adequate internal controls with reference to the financial statements. Neither management of the Company has come across any instance of fraud during the year 2020-21 nor the auditors of the Company has reported any such instance to the Audit Committee.

21. LOANS, GUARANTEES AND INVESTMENTS

During the year, the Company has not given any loan or guarantee or made any investment attracting the provisions of Section 186 of the Companies Act, 2013. Hence, there is no information to be furnished pursuant to Section 134(3)(g) of the Companies Act, 2013.

22. COST RECORDS

The Company is required to maintain cost records as specified by the Central Government under sub-section (1) of Section 148 of the Companies Act, 2013, and such accounts and records are duly made and maintained by the Company. The Company is further required to get such cost records audited by a cost auditor in accordance with the Companies (Cost Records and Audit) Rules, 2014 and furnish cost audit report received from the cost auditor to the or material order affecting the going concern Central Government within the prescribed time. The Company is in compliance with these provisions.

23. SECRETARIAL AUDIT REPORT

Ashish Bhatt & Associates, Practising Company Secretaries, Secretarial Auditor of the Company, carried out secretarial audit for the financial year 2020-21 as the Companies Act, 2013 and the rules made there under. The secretarial audit report given by the said auditor is annexed to this report as Schedule-J.

24. AUDITORS

DNV & Co., Chartered Accountants, (having firm registration no. 102079W), auditor of the Company, resigned during the year in order to enable the Company to appoint auditors who have more acceptability among institutional investors as also auditors, who have resources to assign across geographies in which the Company and its subsidiaries function so as to bring time and cost efficiencies. This resignation became effective after signing limited review report for quarter ended 30-9-2020 on 10-11-2020. Board, basis recommendation of the Audit Committee, appointed Deloitte Haskins & Sells LLP, (having firm registration no.117366W/W-100018) as auditor in casual vacancy, which appointment was also approved by members of the Company on 23-12-2020. Deloitte Haskins & Sells LLP thus hold office up to the date of ensuing annual general meeting. Board, on the basis of recommendation of the Audit Committee, now proposes to appoint Deloitte Haskins & Sells LLP as auditor to hold office as such for a term of five (5) years commencing from 23-12-2020 (being the date of passing of resolution through postal ballot for their appointment as auditors in casual vacancy) until conclusion of the 49th annual general meeting of the Company at such remuneration as may be agreed by the Board of directors with the auditors. Board recommends appointment of Deloitte Haskins & Sells LLP to the members for approval.

25. OTHER DISCLOSURES AND CONFIRMATIONS

Board has to make further disclosures and provide confirmations, as required, as under:

The Company has placed annual return referred to in sub-section (3) of section 92 on its website www.jbcpl.com.

No regulator or court or tribunal has passed, during the year, any and significant Company’s operations in future.

The Company has complied with applicable Secretarial Standards specified by the Institute of Company Secretaries of India and approved by the Central Government under Section 118(10) of the

Companies Act, 2013.

The Company has complied with the provisions relating to the providedunderSection204of constitution of Internal Complaints Committee under the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013.

26. HEALTH AND SAFETY

The Company continues to accord high priority to health and safety of employees and workmen at all manufacturing locations. Annual medical check-up of all employees at all sites was carried out. The Company also conducted safety training programmes and mock-drills for increasing disaster preparedness awareness among all employees at the plants. There was no casualty at any site during the year.

For and on behalf of the Board of Directors

Ranjit Shahani

Chairman

Place : Mumbai

Date : June 14, 2021