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 2019.

1. Financial Summary

(Rs. in lacs)
Particulars 2018-19 2017-18
Net Sales 3713.27 2538.24
Other Income 1095.59 860.28
Total Income 4808.86 3398.52
Expenditure 5757.07 4128.09
P(L)BDIT (948.21) (729.57)
Loss on sale of Assets Nil Nil
PBDIT (After Extra Ordinary Items) (948.21) (729.57)
Finance Charges 623.80 516.52
Depreciation 440.23 414.97
Profit/(Loss) Before Tax (2012.24) (1661.06)
Exceptional Items 11.09 (121.43)
Deferred Tax Asset Nil Nil
Taxes of earlier years Nil Nil
Net profit/(Loss) after Tax (2001.15) (1782.49)
Other Comprehensive Income (132.06) (143.12)
Total comprehensive income for the period (comprising Profit/(loss) and other comprehensive income for the year) (2133.22) (1925.41)
Add: balance brought Forward (10158.60) (8233.19)
Less: Depreciation Nil Nil
Add: Transferred from Profit & Loss Account (2133.22) (1925.41)
Balance Carried to Balance Sheet (12291.82) (10158.60)

2. Financial Performance

During the year under review, the Company has posted net sales of Rs.3713.27 lakhs and Rs. 1095.59 lakhs as other income. For the FY 2018-19 the company has incurred a loss of Rs. 2133.22 lakhs as against loss of Rs. 1925.41 lakhs of the previous year ended 31st March 2018. Detailed Performance of the Company is given in the Management and Discussion analysis forming part of the Corporate Governance report.

3. Change in nature of business

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

4. Dividend

On account of losses during the year, no dividend is proposed to be declared for the financial year 2018-19.

5. Operations (Subject to revision)

During the FY 2018-19, one new product got commercialized and was released into the market. A total of four products were being produced in our plant which include Phenylephrine HCl, Simvastatin, Serratiopeptidase and RSS."

Modernization works are under progress in the FY 2018-19 to meet the latest pollution control norms and safety regulations. All relevant licenses were renewed. All the pending statutory requirements were addressed.

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

During the year under review, there were no material changes occurred and commitments made, that affect the financial position of the company.

The Company had received stop production order from the Andhra Pradesh Pollution Control Board citing "Non-compliance of Board directions and consent Order directions". The Company believes in following the directions of the Board and all the necessary steps have been taken by the management of the company to comply with the observations made by the Board. The revocation order from the Pollution Board has been received by the Company on 1st August, 2019 and the Company has started production accordingly.

7. Rights Issue :

At the 145th Meeting held on 30th July 2018 the Board of Directors has approved the proposal of raising of funds by way of offer and issue of equity shares to the members of the Company on rights basis (Rights Issue) for an amount of upto Rs. 25 crores. Further, at the 148th meeting held on 11th January 2019, the Board of Directors approved the issue of 28,86,300 Equity Shares at Rs. 86/- each (including premium of Rs. 76/- per share) and subsequently the necessary approvals/consents under the provisions of SEBI (ICDR) Regulations, 2009, SEBI (LODR) Regulations, 2015 and the Companies Act, 2013 were obtained.

8. Issue of Equity Shares

During the year under review, the company has issued and allotted 28,86,300 equity shares of Rs. 10/- each at a premium of Rs. 76/- per share under Rights Issue. As on 31st March 2019, the paid up equity share capital of the Company is Rs. 16,63,05,860/- comprising of 1,66,30,586 equity shares of Rs. 10/- each.

Apart from the above, the Company has not issued and allotted any other shares.

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 21st Annual General Meeting held on 31st December 2014, the members of the Company approved the appointment of M/s Pavuluri & Co., Chartered Accountants (Firm Registration No. 012194S) Hyderabad as the Statutory Auditors of the Company to hold office till the conclusion of the 27th Annual General Meeting pursuant to Sec139 of the Companies Act, 2013 as they have completed 10 (ten) years term.

The term of office of Statutory Auditors M/s Pavuluri & Co., comes to an end at the conclusion of the ensuing Annual General Meeting.

The Board of Directors based on the recommendation of the Audit Committee, at their meeting held on 20th May 2019 has appointed M/s Bhavani& Co., Chartered Accountants (Firm Registration No. 012139S) as Statutory Auditors for a period of five years, subject to the approval of members of the Company at the ensuing Annual General Meeting.

The Statutory Auditors have confirmed their compliance with the provisions of the Companies Act, 2013.

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, Mr. E J Babu has retired by rotation and being eligible for re-appointment, at the 26th Annual General Meeting held on 10th September 2018 he had been re-appointed as Director.

During the year under review, Mr. Avinash Ravi has been re-appointed as Managing Director for a period of 3 years at the 26th Annual General Meeting held on 10th September 2018.

Key Managerial Personnel

During the year under review, Mr. C V R S N Kumar was retired and ceased to be Chief Financial Officer of the Company and the Board of Directors at their meeting held on 25th May 2018 had approved his resignation pursuant to attaining the age of retirement as per the superannuation rules of the Company.

The Board of Directors at its meeting held on 10th September 2018 appointed Mr. S. Phani Srinath 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 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 as on the date of this report are-

Mr. Avinash Ravi - Managing Director,

Mr. Phani Srinath - CFO

Ms. Taruni Banda - Company Secretary

Retire by Rotation

Dr R T Ravi retires by rotation as Director and he offers himself for re-appointment at the ensuing 27th Annual General Meeting to be held on 25th September 2019.

12.2 Re-appointment of Independent Directors

Mr. G V L Prasad was appointed as Independent Director for a period of 5 years at the 22nd Annual General Meeting held on 31st December 2014 and Dr Tangirala Malati was appointed as Independent Director for a period of 5 years at the EGM held on 11th March 2015. Their term as Independent Directors expires on 31st December 2019 and 11th March 2020 respectively.

Mr. Satish Khivsara was appointed as an Independent Director for a period of 5 years at the 23rd Annual General Meeting held on 29th September 2015. His terms as Independent Director expires on 31st March 2020.

The Nomination and Remuneration Committee of the Board of Directors, on the basis of the performance evaluation of Independent Directors has recommended the re-appointment of Mr. G V L Prasad, Dr Tangirala Malati and Mr. Satish Khivsara as Independent Directors for a further period of five (5) years on the Board of the Company w.e.f. 1st January 2020 and 12th March 2020 and 1st April 2020.

The Board based on the performance evaluation of Independent Directors and as per recommendations of the Nomination and Remuneration Committee, considered that given the background and experience and contributions made by Mr. G V L Prasad, Dr Tangirala Malati and Mr. Satish Khivsara during their tenure, the continued association of Mr. G V L Prasad, Dr Tangirala Malati and Mr. Satish Khivsara would be beneficial to the Company and it is desirable to continue and avail their services as Independent Directors. Accordingly, it is proposed to re-appoint Mr. G V L Prasad, Dr. Tangirala Malati and Mr. Satish Khivsara as Independent Directors of the Company, not liable to retire by rotation, for a second term of 5 (five) years on the Board of the Company.

12.3 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.

13. Board Meetings

During the financial year 2018-19, 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.

14. 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.

15. 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.

16. 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.

17. 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 is done by the Nomination and Remuneration Committee.

The performance evaluation of non-independent directors, the Board as a whole and the Chairman is done by a separate meeting of Independent directors after taking inputs from the Executive directors.

18. Familiarisation program for Independent Directors

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

19. 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.

20. Secretarial Standards

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

21. 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. Satish Khivsara - Member
c) Mrs. Malati Tangirala - 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.

22. Nomination and Remuneration Committee

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

a) Mr. Satish Khivsara - Chairman
b) Mr. G V L Prasad - Member
c) Mrs. Malati Tangirala - 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.

23. 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. Satish Khivsara - 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.

24. 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.

25. 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 2019.

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

26. 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.
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.

27. 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.

28. 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.

29. 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.

30. 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.

31. 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.

32. 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.

33. 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.

34. 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.

35. 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.

36. 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.

37. Significant or material orders passed against the company.

Several creditors have filed winding up petitions with the High Court of Andhra Pradesh and Telangana. However, they dont have a significant impact on the on-going activities and operations of 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.

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

No corporate insolvency resolution process was initiated under the Insolvency and Bankruptcy Code (IBC) during the year under review.

39. 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 Workplace (Prevention, Prohibition and Redressal) Act, 2013.

There are no complaints registered during the year under review.

40. 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 : 09.08.2019