Krebs Biochemicals & Industries Ltd Directors Report.

To,

The Members,

The directors submit annual report of Krebs Biochemicals& Industries Limited (the Company) along with the audited financial statements for the financial year ended 31st March 2020.

1. Financial Summary

(Rs. in lacs)

Particulars 2019-20 2018-19
Net Sales 2358.38 3713.27
Other Income 1,019.35 1095.59
Total Income 3377.73 4808.86
Expenditure 5204.25 5757.07
P(L)BDIT (1826.52) (948.21)
Loss on sale of Assets Nil Nil
PBDIT(After Extra Ordinary Items) (1826.52) (948.21)
Finance Charges 592.78 623.80
Depreciation 467.90 440.23
Profit/(Loss) Before Tax (2887.20) (2012.24)
Exceptional Items Nil 11.09
Deferred Tax Asset Nil Nil
Taxes of earlier years Nil Nil
Net profit/(Loss) after Tax (2887.20) (2001.15)
Other Comprehensive Income (127.08) (132.07)
Total comprehensive income for the period (comprising Profit/(loss) and other comprehensive income for the year) (3,014.28) (2133.22)
Add: balance brought Forward (12292.01) (10158.60)
Less: Depreciation Nil Nil
Add: Transferred from Profit & Loss Account (3013.67) (2133.22)
Balance Carried to Balance Sheet (15305.68) (12291.82)

3. Financial Performance

During the year under review, the Company has posted net sales of Rs. 2358.38 lakhs and Rs. 1019.35 lakhs as other income. For the FY 2019-20 the company has incurred a loss of Rs.(3,014.28) lakhs as against loss of Rs. (2133.22) lakhs of the previous year ended 31st March 2019. Detailed Performance of the Company is given in the Management Discussion and analysis forming part of the Corporate Governance report.

4. Change in nature of business

During the year under review, there is no change in the nature of business of the company.

5. Dividend

On account of losses during the year, no dividend is proposed to be declared for the financial year 2019-20.

6. Operations

During the FY 2019-20, A total of four products are being produced in our plant which include Phenylephrine HCl, Simvastatin, Serratiopeptidase and RSS. Backward integaration for one of the current products and new product development is on going. Significant investment has been made into upgrading the effulent and waste management system and also safety systems to comply with the latest regulations. All statutory licensing and legal requirements are being continuously complied by your company.

7. Material changes and commitments affecting the financial position of the company.

a. Covid-19 In the last month of FY 2020, the COVID-19 pandemic developed rapidly into a global crisis, forcing governments to enforce lock-downs thereby stalling of all economic activity. The Company immediately focused and ensured the health and well-being of all employees, and on minimizing disruption of production by the Company. As of March 31, 2020, work from home was enabled to employees who could accommodate the same and to work remotely and securely. Although there are uncertainties due to the pandemic the Company has engaged in the best practises to continue the manufacturing operations.

b. Andhra Pradesh Pollution Control Board The Andhra Pradesh Pollution Control Board has on 9th May, 2019 issued an Stop-Production order for the plant of the company located at Kasimkota Mandal, Anakapalli, Vishakapatnam for non-compliance with Board Directions and Consent Order Directions.

However, on 1st August, 2019 the Pollution Control Board has issued temporary revocation of the stop production order.

Subsequently on 20th September, 2019 the Pollution Control Board has issued a Stop-production order due to non-compliance of the orders issued by the Board on 1st August, 2019.

On 4th November, 2019 the Pollution Control Board has issued a temporary revocation of the stop production order for a period of 3 months. Subsequently on 11th March, 2020 the Pollution Control Board has issued permanent revocation of the stop production order with certain directions.

Your company is continuously ensuring that it is complying with all the necessary directions issued by Andhra Pradesh Pollution control board. c. Warrants Conversion The Company has obtained the in-principle approval from NSE and BSE for the issue and allotment of 35,60,000 Convertible Warrants to IPCA Laboratories Limited and has accordingly allotted Convertible warrants to IPCA

ABORATORIES LIMITED on February 5th, 2020. The Company has on 20th May, 2020 converted Warrants to an extent of 16,20,000 and allotted Equity Shares to an extent of 16,20,000 for a price of Rs.10/- each and at a premium of Rs.76/- amounting to Rs.139,320,000/- the same has been listed on NSE and BSE after obtaining the listing and trading approvals. d. Settlement of Cases Some of the Vendors have filed winding up cases against the company for the outstanding dues in the various legal forum. The Company has paid all the debts due to the Vendors by entering into a Memorandum of Understanding with them.

8. Share Capital

a Preferential Issue :

At the Meeting held on 23rd October, 2019, the Board of Directors has approved the proposal of raising of funds by way of offer and issue of equity shares through preferential issue of 17,05,000 Equity shares (2,00,000 Equity shares to Mrs. Hemalata Ravi and 15,05,000 Equity shares to IPCA Laboratories Limited, part of the promoter group of the company) of Rs.10/- each at a premium of Rs 76/- per share aggregating to Rs. 15,66,30,000 on preferential basis and 36,35,000 Convertible warrants of Rs.86/- each to IPCA Laboratories Limited. Pursuant to the same approval of members was obtained at the Extra Ordinary General Meeting held on 22nd November 2019. The Company has obtained the in-principle approval for the proposed issue as mentioned above from National stock Exchange of India Limited. However, BSE Limited has not accorded its in-principle approval for the same raising objection that 1000 shares held by Mrs. Hemalatha Ravi were not in demat form even though it was clarified that the subject 1000 shares are under pending legal case.

It was decided by the Board of Directors to revise the proposed Preferential issue and obtain the approval of members.

The Board of Directors of the Company has at the Meeting held on 2nd January, 2020 approved the proposal of raising funds by way of offer and issue of equity shares through preferential issue of 13,70,000 equity shares of Rs.10/- each at a premium of Rs 76/- per share aggregating to Rs.11,78,20,000/- on preferential basis only to IPCA Laboratories Limited and also 35,60,000 of Convertible warrants at a conversion price of Rs.86/- per share to IPCA Laboratories Limited. Pursuant to the same, approval of members was obtained at the Extra Ordinary General Meeting held on 1st February 2020.

The Company has obtained the in-principle approval and also listing and trading approvals from NSE and BSE for the issue and allotment of 13,70,000 Equity Shares and 35,60,000 Convertible Warrants to IPCA Laboratories Limited and has allotted Equity shares and convertible warrants respective to IPCA Laboratories Limited. b. Issue of Preference Shares During the year under review, the company has issued and allotted 30,00,000, 9%, Redeemable Non-Convertible Non-cumulative Preference Shares (RNNCPS) (of Rs. 30,00,00,000/- (Rupees Thirty Crores Only) on a private placement basis to Ipca Laboratories Limited, a promoter group company. As on 31st March 2019, the paid up preference share capital of the Company is Rs. 30,00,00,000/- comprising of 30,00,000 preference shares of Rs. 100/- each.

9. Investor Education and Protection Fund

No amounts and/or shares were transferred to the Investor Education and Protection Fund during the year under review.

10. Statutory Auditors

At the twenty-seventh AGM held on September 25, 2019 the Members approved appointment of Bhavani & Co, Chartered Accountants (Firm Registration No. 012139S) as Statutory Auditors of the Company to hold office for a period of five years from the conclusion of that AGM till the conclusion of the Thirty Second AGM. The requirement to place the matter relating to appointment of auditors for ratification by Members at every AGM has been done away by the Companies (Amendment) Act, 2017 with effect from May 7, 2018. Accordingly, no resolution is being proposed for ratification of appointment of statutory auditors at this AGM.

11. Internal Auditors:

The Board of Directors based on the recommendation of Audit Committee has re-appointed M/s Suryanarayana & Suresh, Chartered Accountants, Hyderabad, as Internal Auditors of the Company for the Financial Year 2019-20 at their meeting held on 9th August 2019.

The internal auditors submit their reports at quarterly intervals to the Audit Committee and the Board.

12. Directors and Key Managerial Personnel

During the year, the non-executive directors of the company had no pecuniary relationship or transactions with the company, other than sitting fees and reimbursement of expenses incurred by them for the purpose of attending meetings of the Company.

Re-appointments

During the year under review, Dr. R T Ravi has retired by rotation and being eligible for re-appointment, at the 27th Annual General Meeting held on 25th September 2019 he had been re-appointed as Director.

Key Managerial Personnel

During the year under review, Mr. Phani Srinath Sondur has resigned and ceased to be Chief Financial Officer of the Company and the Board of Directors at their meeting held on 2nd November, 2019 had approved his resignation. The Board of Directors at its meeting held on 30th April, 2020 appointed Mr. Ravi Babu as Chief Financial Officer of the Company.

Ms. Haritha Varanasi, Ceased to be Company Secretary w.e.f from 9-08-2019 due to resignation.

Ms. Taruni Banda, has been appointed as Company Secretary w.e.f from 9-08-2019.

Pursuant to the provisions of Section 203 of the Companies Act, 2013, the Key Managerial Personnel of the Company on the date of this report are-

Mr. Avinash Ravi - Managing Director,
Mr. Ravi Babu - Chief Financial Officer
Ms. Taruni Banda - Company Secretary

13.1 Retire by Rotation

Mr. Manish Jain retires by rotation as Director and he offers himself for re-appointmen at the ensuing 28th Annual General Meeting to be held on 26th September, 2020

13.2 Declaration of Independence

The Company has received the declarations under Section 149 (6) of the Companies Act, 2013, from the independent directors that each of them meets the criteria of independence and there has been no change in the circumstances which may affect their status as independent directors during the year.

All the Independent Directors have registered themselves under independent director data bank.

14. Board Meetings

During the financial year 2019-20, Seven (7) meetings of the Board were held. Details of the meetings of the board are provided in the corporate governance report which forms part of this report.

15. Corporate Social Responsibility

Your Company regards the wider community in which it operates to be an important stakeholder and actively contributes towards its welfare. According to the provisions of Section 135 of the Companies Act, 2013 the company doesnt fall under the categories of the companies to which the Corporate Social Responsibility is applicable. However, your company feels that making a positive contribution to the local community is the right thing to do and to this end, during the year, has contributed towards welfare of the poor, old aged and differently abled persons.

16. Quality Initiatives

Company is committed to meet the customers Quality requirements and satisfaction by maintaining high degree of assurance in Quality, Safety, efficacy and Multi disciplinary functions. We maintain mutual and beneficial relationship with the Suppliers, Vendors and Customers. We provide continual training to the employees working in the plants by upgrading the knowledge of GMP practices, enriching the quality of life. We continually focus on developing new products with innovative knowledge and robust practices meeting / fulfilling the Regulatory and statutory requirement.

Company is committed to meet the regulatory standards set by USFDA, WHO-GMP & EDQM and our Unit-II Vizag site has been Accredited certified by EDQ. Many customers have audited Unit-I Nellore plant and have approved as qualified Vendor. Company is totally focusing to be as an integrated company emerging in the Pharma market by improving and implementing best-in class methodologies to meet the World class customer requirements for their satisfaction with zero complaints and by implementing the ALCOA Practices in the plants.

17. Policy on directors appointment and remuneration and other details

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

18. Board Evaluation

The Nomination and Remuneration Committee lays down the criteria for performance evaluation of independent directors, Board of Directors and Committees of the Board. The criteria for performance evaluation is based on the parameters like attendance and participation at the meetings of the Board and Committees thereof, contribution to strategic decision making, review of financial statements, business performance.

The evaluation of Board of Directors is performed by the Board after seeking all the inputs from the Directors and the Board Committees by seeking inputs from the Committee members.

The performance evaluation of the individual directors could not be done for the Financial year 2019-20 due to Covid-19.

19. Familiarisation program for Independent Directors

The Company has conducted familiarisation programs for the independent directors as required under the provisions of Companies Act, 2013.

20. Internal Financial Control Systems and their adequacy

The details in respect of internal financial controls and their adequacy are included in the Management Discussion and Analysis Report which forms part of this report.

21. Secretarial Standards

The company is in due compliance with the applicable secretarial standards.

22. Audit Committee

Your Company has a duly constituted Audit Committee and the Board has accepted all the recommendations of Audit Committee during the year under review. The members of the Audit Committee are:

a) Mr. G V L Prasad - Chairman
b) Mr. SatishKhivsara - Member
c) Mrs. MalatiTangirala - Member

The details pertaining to meeting, role and responsibilities of Audit Committee are provided in the Corporate Governance Report, which forms part of this report.

23. Nomination and Remuneration Committee

Your Company has in place a duly constituted Nomination and Remuneration Committee which has

a) Mr. SatishKhivsara - Chairman
b) Mr. G V L Prasad - Member
c) Mrs. MalatiTangirala - Member
d) Dr R T Ravi - Member

Details pertaining to meetings, role and responsibilities of Nomination and Remuneration Committee are provided in the corporate Governance Report which forms part of this report.

24. Stakeholders Relationship Committee

Your Company has constituted a Stakeholders Relationship Committee as required under the provisions of SEBI Listing Regulations and the Companies Act, 2013. Members of the committee are

a) Mr. G V L Prasad - Chairman
b) Mr. SatishKhivsara - Member
c) Mr. Avinash Ravi - Member
d) Dr R T Ravi - Member

Details pertaining to meetings, role and responsibilities of Stakeholders Relationship Committee are provided in the corporate Governance Report which forms part of this report.

25. Loans and Investments

During the year under review, the company has not given any loans and not made any investments under the provisions of Section 186 of the Companies Act, 2013.

26. Particulars of Employees.

Pursuant to the provisions of Section 197 of the Companies Act 2013 read with Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, no employee of the Company is drawing salary of more than Rs. 1.02 crores (Rupees One Crore Two Lakhs) per financial year or Rs. 8.5 lakhs (Eight Lakh Fifty Thousand) per month, as the case may be for the year ended 31st March 2020.

Details of the remuneration drawn by the Key Managerial Personnel is provided in Annexure I to the Boards Report.

27. 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, the Company has appointed M/s DSMR and Associates, Practicing Company Secretaries, as Secretarial Auditors to undertake the secretarial audit of the Company. The Secretarial Audit Report is annexed herewith as Annexure-II to the Boards Report.

Qualifications in Secretarial Audit Report :

S. No Observations in Secretarial Audit Report Boards explanation/ comments
1 Delay in payment of annual listing fees to the Stock Exchanges and Depositories There was an inadvertent delay in payment of annual listing fees. However, the annual listing fees are paid along with the applicable penal interest.
2 Non maintenance of 100% promoter shareholding in dematerialized form 1000 shares of Mrs. Hemalata Ravi and 19400 shares of Dr R T Ravi are under legal dispute in the court of law and hence the same could not be dematerialized and the circular given by SEBI vide No SEBI/Cir/ISD/1/2012 dated March 30, 2012 gives exemption from 100% promoter(s) holding in demat form. Thus the company stands exempted.
3 Delay in filing of few Forms with Ministry of Corporate Affairs (MCA) There was an inadvertent delay in filing of Forms with the Ministry but the same has been filed before the date of this report along with Additional fees.
4. Winding up cases against the Company. The Company has paid all the debts due to the Vendors by entering into a Memorandum of Understanding with them.
Accordingly there are no debts due by the Company to them and the winding up cases shall have to be appropriately withdrawn by the Vendors.
5. Pursuant to Regulation 13(3), Statement giving the number of investor complaints for quarter ending 30th June 2019 was filed on 30.07.2019. There was an inadvertent delay in filing the same to stock exchange
6. Pursuant to Regulation 25(3), The company has convened Meeting of Independent directors but the same could not be held due to the COVID-19 pandemic. The Ministry of corporate affairs has vide General Circular No. 11 /2020 dated 24th March, 2020 given relaxation and declared misconduct of independent directors meeting as a no violation.

28. Transactions with related parties

None of the transactions with related parties are material in nature as per the Related Party Transactions policy adopted by the Company. Information on transactions with related parties are given in Annexure-III in Form AOC-2 and the same forms the part of this report.

29. Fixed Deposits

Your Company has not accepted any fixed deposits and as such no principal or interest was outstanding as on the date of the Balance Sheet.

30. Extract of Annual Return:

As provided under Section 92(3) of the Act, the extract of annual return is given in Annexure - IV in the prescribed Form MGT-9 which forms part of the report.

31. Directors Responsibility Statement

Pursuant to Section 134(5) of the Companies Act, 2013, the Board of Directors, to the best of their knowledge and ability, confirm that:

i) In the preparation of the annual accounts, the applicable accounting standards have been followed and there are no material departures;

ii) They have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a fair and true view of the state of affairs of the Company at the end of the financial year;

iii) They have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities.

iv) They have prepared the annual accounts on a going concern basis.

v) They have laid down internal financial controls to be followed by the Company and such internal financial controls are adequate and operating effectively.

vi) They have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

32. Disclosures relating to Subsidiaries, Associates and Joint Ventures

The company doesnt have any subsidiary companies, Associate Companies and Joint Ventures during the year under review.

33. Disclosure Requirements

As per SEBI Listing Regulations, Corporate Governance Report with Auditors Certificate thereon and Management Discussion and Analysis are attached, which form part of this report.

34. Prevention of Insider Trading

The Company has also adopted a code of conduct for prevention of insider trading. All directors, senior management employees and other employees who have access to the unpublished price sensitive information of the company are governed by the Code. During the year under report, there has been due compliance with the code of conduct for prevention of insider trading.

The said code is available in the companys website www.krebsbiochem.com.

35. Vigil Mechanism/Whistle Blower Policy

The Company has in place, whistle blower policy and no personnel have been denied access to the Chairman of the Audit Committee. The policy also provides for the safeguarding of whistle blowers. The whistle blower policy is available on website of the company www.krebsbiochem.com.

36. Energy conservation, technology absorption and foreign exchange earnings outgo.

The information on conservation of energy, technology absorption and foreign exchange earnings and outgo as stipulated under Section 134(3)(m) of the Companies Act, 2013 read with Rule 8 of the Companies (Accounts) Rules, 2014 is annexed herewith as "Annexure-V" to this report.

37. Safety, Environment and Health

The Company considers safety, environment and health as the management responsibility. The employees are provided training programs at regular intervals on manufacturing facilities on safety and environment.

38. Significant or material orders passed against the company.

During the year under review, there were no significant or material orders passed against the company by regulators/ Courts/Tribunals impacting the going concern status and operations of the company in future.

39. Disclosure on Corporate Insolvency Resolution Process initiated under the Insolvency and Bankruptcy Code (IBC).

A Case against the Company has been registered by RR innovative Pvt Ltd in the National company law Tribunal, Amaravathi Bench invoking the Insolvency proceedings, accordingly an order has been received against the Company from the tribunal on 22nd May, 2020 admitting the application of RR innovative Pvt Ltd and appointing an Insolvency Resolution Professional (IRP) Mr.Rajesh Chhaparia, Vizag. RR Innovative Private Limited have agreed to mutually settle the claimed debt due as per the order and accordingly a withdrawal petition has been filed by the IRP based on a settlement acknowlegment given by RR innovative Private Limited vide which the National Company Law Tribunal has passed an order on 11th June, 2020 suspending it earlier order dated 22nd May, 2020.

40. Disclosures pertaining to the Sexual Harassment of Women at the workplace (Prevention, Prohibition and Redressal) Act, 2013.

The Company has complied with the provision relating to the constitution of Internal Complaints Committee under the Sexual Harassment of Women at the Work place (Prevention, Prohibition and Redressal) Act, 2013. There are no complaints registered during the year under review.

41. Acknowledgments

Your Directors take this opportunity to express their sincere appreciation to the shareholders, customers, bankers, employees, suppliers and other business associates for the excellent support and co-operation extended by them.

Your Directors gratefully acknowledge the on-going cooperation and support provided by the Central and State Governments, Stock Exchanges and SEBI and other Regulatory Bodies.

For and on behalf of the Board of Krebs Biochemicals & Industries Limited

Sd/- Sd/-
Avinash Ravi Dr. R T Ravi
Managing Director Chairman & Director
(DIN-01616152) (DIN- 00272977)
Place : Hyderabad
Date : 07.08.2020