Krebs Biochemicals & Industries Ltd Directors Report.

To,

The Members,

The directors submit the 30th annual report of Krebs Biochemicals & Industries Limited (the Company) along with the audited financial statements for the financial year ended 31st March 2022.

1. Financial Summary

(Rs. in lacs)

Particulars 2021-22 2020-21
Net Sales 5294.06 3860.64
Other Income 791.83 1571.53
Total Income 6085.89 5432.17
Expenditure 9369.80 7127.73
P(L)BDIT (3283.92) (1696.56)
PBDIT(After Extra Ordinary Items) (3283.92) (1696.56)
Finance Charges 539.10 627.90
Depreciation 629.67 512.40
Profit/(Loss) Before Tax (4452.68) (2835.86)
Net profit/(Loss) after Tax (4452.68) (2835.86)
Other Comprehensive Income (34.64) 17.26
Total comprehensive income for the period (comprising Profit/(loss) and other comprehensive income for the year) (4487.32) (2818.60)
Add: balance brought Forward (18124.26) (15305.67)
Add: Transferred from Profit & Loss Account (4487.32) (2818.60)
Balance Carried to Balance Sheet (22611.60) (18124.26)

3. Financial Performance

During the year under review, the Company has posted net sales of Rs. 5,294.06 lakhs and Rs. 791.83 lakhs as other income. For the FY 2021-22 the company has incurred a loss of Rs. (4,452.68) lakhs as against loss of Rs. (2,835.86) lakhs of the previous year ended 31st March 2021. Detailed Performance of the Company is given in the Management and Discussion analysis forming part of the Corporate Governance report.

It was operationally a difficulty financial year for the Company. As a aftermath of covid pandemic and ongoing geo political conflict, the availability as well as prices of key starting materials of the APIs being manufactured by your Company drastically increased and the Company could not pass on the increased cost to its customers and thereby severely impacted the position of the Company to continue to manufacture those APIs. The multifold increase in the coal prices further restricted the ability of Company to continue to operate the fermentation based manufacturing facilities at its Vizag manufacturing facility, which further impacted the viability of APIs being manufactured. Coal cost is a major overhead cost and the Companys manufacturing plant needed huge quantity of coal to continue to operate its fermentors. The Vizag manufacturing facility of your Company has since started manufacturing few drug intermediates having good

volumes on job work basis so that the manufacturing operations can be sustained. Manufacturing process of these drug intermediates does not need operation of fermentors. At the same time, your Company is also in discussion with its potential customers for manufacturing tie up for fermentation based products so as to optimally utilise the Companys Vizag manufacturing unit. The Nellore manufacturing unit of the Company is currently manufaturing and selling an API having good volume and is slowly moving towards stabilizing its operations and recovering costs. Few more products are also currently under various stages of development.

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 incurred during the year, no dividend is proposed to be declared for the financial year 2021-22.

1. Material changes and commitments affecting the financial position of the Company:

a. Covid-19

In the FY 2021-22, the COVID-19 pandemic has continued to contribute to the global crisis, forcing many governments to enforce lock-downs in between thereby stalling of economic activity many countries. The Company continued its manufacturing operations through out the pandemic with due regard to the health and wellbeing of all employees at work place. There were issues relating to availiability of materials which are imported as well as logistic problems during some part of the financial year under report. These issues are now slowly getting resolved.

b. Issue of Preference shares

The Company has issued and allotted Redeemable NonConvertible Non-Cumulative Preference Shares to IpcA Laboratories Limited, to the extent of Rs. 100 crores divided into 1, 00, 00, 000/- (One Crore ) Preference shares of Rs. 100/- (Rupees One Hundred) each, forming part of the authorised capital of the company. These shares are not listed on the stock exchange(s).

8. Share Capital

a. Conversion of Warrants:

Pursuant to the exercise of conversion option by Ipca Laboratories Ltd. and upon receipt of the balance application money, the Board of directors of the Company at their meeting held on 6th April, 2021 have converted 19, 40, 000 warrants and allotted 19, 40, 000 (Nineteen Lakhs Forty Thousand) Equity shares of Rs. 10/- each of the Company at a price of Rs. 86/- per Equity Share, including premium of Rs. 76/- per share, to M/s Ipca Laboratories Limited, the entity forming part of the promoter group.

b. Increase of Authorised Share Capital:

The Authorised Share capital of the Company has been increased from Rs. 53 crores divided into 2, 30, 00, 000 (Two Crore Thirty Lakhs) Equity Shares of Rs. 10 each and 30, 00, 000 (Thirty Lakh) Preference Shares of Rs. 100 each, to Rs. 153, 00, 00, 000 (Rupees One Hundred Fifty- Three Crore only), comprising of Rs.23,00,00,000 (Rupees Twenty-Three Crore) equity share capital divided into 2, 30, 00, 000 (Two Crore thirty Lakh ) Equity Shares of Rs. 10/- each and Rs.130,00,00,000 (Rupees One Hundred Thirty Crore only) preference share capital divided into 1, 30, 00, 000 (One crore thirty Lakhs ) Preference Shares of Rs. 100/- each after obtaining the approval of the members in the EGM held on 29th November, 2021.

c. Issue of Preference shares:

The Company has issued and allotted Redeemable NonConvertible Non-Cumulative Preference Shares (RNNCPS) to Ipca Laboratories Limited, to the extent of Rs. 100 crores divided into 1,00,00,000(One Crore ) Preference shares of Rs. 100/- (Rupees One Hundred) each. These shares are not listed on the stock exchange(s).

Consequent to the aforesaid allotments the authorised, subscribed issued and paid up capital of the company stands as follows:

Authorised Share Capital Rs. 153, 00, 00, 000 (Rupees One Hundred Fifty-Three Crore) comprising of Rs. 23, 00, 00, 000 (Rupees Twenty-Three Crore) equity share capital divided into 2.30.00. 000 (Two Crore thirty Lakh ) Equity Shares of Rs. 10/ - each and Rs.130,00,00,000 (Rupees One Hundred Thirty Crore) preference share capital divided into 1.30.00. 000 (One crore thirty Lakhs) Preference Shares of Rs. 100/- each
Issued Capital Subscribed Capital Paid up Capital Rs. 151,56,05,860 (Rupees One Hundred Fifty one crore Fifty Six Lakhs Five Thousand Eight Hundred Sixty only) comprising of equity share capital of Rs.21,56,05,860 (Rupees Twenty One crore Fifty Six Lakh Five Thousand Eight Hundred Sixty ) divided into 2,15,60,586 (Two crore Fifteen Lakh Sixty Thousand Five Hundred Eighty Six ) Equity Shares of Rs.10/- each and Rs.130,00,00,000 (Rupees One Hundred Thirty Crore ) preference share capital divided into 1,30,00,000 (One crore thirty Lakhs ) 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.

EXPLANATION OR COMMENTS ON QUALIFICATIONS, RESERVATIONS OR ADVERSE REMARKS OR DISCLAIMERS MADE BY THE AUDITORS

Qualification raised by the Auditors in the Main Report: Managements Reply:
We draw your attention to note no. 2.21.2 to the financial statements, which states that the Company has incurred loss before tax of Rs. 1131.39 lakhs for the quarter ended 31st March 2022 and Rs. 4,452.68 lakhs for the year ending 31st March 2022. As of 31 st March 2022, the total liabilities exceeded its total assets by Rs. 7,509.32 lakhs as compared to Rs. 4273.29 lakhs as at 31st March 2021. These factors indicate that material uncertainty exists that may cast significant doubt on the Companys ability to continue as going concern and, therefore, the Company may be unable to realise its assets and discharge its liabilities in the normal course of business. The Companys management has carried out an assessment of the Companys financial performance and has obtained a confirmation providing comfort of financial support from the Promoter Company, if required to meet its obligations. There has been continued improvement in production during the current year. During the FY 2021-22, the Company has prepared strategic plan for next five years. Pursuant to the said plan, the Company continues to focus on various initiatives including cost optimisation through operational efficiency, improvement initiatives, rationalisation of existing operations and increase in sales volumes from the existing and new customers. With continued efforts, the Company expects to address the material uncertainty in future. The company is confident of having full scale operations on three new products to be launched, which are under testing.

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 2022 - 23 at their meeting held on 23rd May, 2022.

The internal auditors submitted 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.

Appointments:

a) During the year under review, Mr. Jitendra Shah, has been appointed an an additional Director by the Board on 9th November, 2021, liable to retire by rotation and subject to approval of shareholders at the ensuing Annual general meeting.

b) During the year under review Mr. Pabitra Kumar Kalipada Bhattacharya has been appointed as the Director as well as the Managing Director of the company at its Board meeting held on 30th July, 2021 w.e.f 1st August, 2021.

Re-appointments:

a) During the year under review, Mr. E J Babu (holding DIN-06759124), has retired by rotation and being eligible for re-appointment, at the 29th Annual General Meeting held on 23rd September 2021 he has been re-appointed as the Director on the Board of the company

Change in Designation:

Mr. Avinash Ravi, has ceased to be the Managing Director on the Board of the company of the company w.e.f 31st July, 2021. However, he continue to be a Director of the Company.

Cessation:

a) Mr. E. J. Babu ceased to be a Director on the Board of the company w.e.f 9th November, 2021.

b) Mr. Manish Jain ceased to be a Director of the Board of the Company with effect from 31 st July, 2021.

The Board places on record its appreciation for the services rendered by both the Directors during their association with the Company.

Key Managerial Personnel

The Board of Directors at its meeting held on 30th July, 2021 appointed Mr. Pabitrakumar Kalipada Bhattacharya as the Managing Director and Key Managerial Personnel of the Company.

Mr. Avinash Ravi ceased to be the Managing Director of the company and his designation has been changed to Non-Executive Director (Promoter group) w.e.f 31st July, 2021.

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 (ceased w.e.f 31st July, 2021)

Mr. Pabitrakumar Kalipada Bhattacharya-Managing Director (w.e.f 1st August, 2021)

Mr. R. Ravi Babu - Chief Financial Officer Ms. Taruni Banda - Company Secretary

Ms. Taruni Banda has resigned as Company Secretary and Compliance officer with effect from 6th August, 2022 due to her personal reasons. The Company is in the process of appointing a new Company Secretary and compliance officer.

13.1

Retire by Rotation

Dr. R T Ravi, retires by rotation as a Director and he offers himself for re-appointment at the ensuing 30th Annual General Meeting.

Mr. Avinash Ravi retires by rotation as a Director and he offers himself for re-appointment at the ensuing 30th Annual General Meeting.

13.2 Declaration of Independence

The Company has received the declarations under Section149 (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 2021-22, Seven (7) meetings of the Board were held. Details of the meetings of the board and attendance of the Directors have been 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 voluntarily contributed towards some welfare measures for 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 of the products manufactured. We maintain mutual and beneficial relationship with the Suppliers, Vendors and Customers.

We provide continual training to all the employees working in the plants for upgrading their knowledge of cGMP practices. Your Company continuously 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 EDQM, Europe. Many customers have audited Unit-I Nellore plant and have approved the plant 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 customer requirements 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.

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. 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.

23. Nomination and Remuneration Committee

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

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.

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. 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.

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 2022.

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

The statement containing particulars of employees as required under Section 197(12) of the Act read with Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, is provided in a separate annexure forming part of this report. Further, the report and the accounts are being sent to the members excluding the aforesaid annexure. In terms of Section 136 of the Act, the said annexure is open for inspection at the Registered Office of the Company. Any shareholder interested in obtaining a copy of the same may write to the Company Secretary.

27. Cost Audit and Cost records:

The provisions of Cost Audit is applicable to your Company from the financial year 2022 - 2003. Accordingly the Board of Directors, based on the recommendations of the Audit Committee, approved the appointment of BOJANAPALLI & ASSOCIATES, Cost Accountants (Firm

Registration No. 100849) as the Cost Auditors. The provisions relating to maintenance of cost records are already applicable to your company and your company is in compliance with the said provisions.

28. 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. Observations in No Secretarial Audit Report Boards explanation/ comments
1 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.
2 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.
3 There was delay in Intimating the Closure of Trading window for the Quarter ending 30thJune 2021 There was an inadvertent delay due to the then covid restrictions.
4. Pursuant to Regulation 47, Audited financial results for the Quarter and year ending 31st March 2021 were not published in the newspapers. Non publication of the financial results in the news paper was inadvertently missed out in view of the then covid restrictions.

29. Annual Secretarial Compliance Report

The Company has undertaken an audit for the financial year 2021-22 for all applicable compliances as per Securities and Exchange Board of India Regulations and Circulars/Guidelines issued thereunder. The Annual Secretarial Compliance Report issue by M/s. DSMR & Associates, Prop. Mr. DSM Ram, Company Secretary in Whole time Practice, Hyderabad has been submitted to the Stock Exchanges within the specified time and same is annexed herewith as Annexure - III

30. Transactions with related parties

Information on transactions with related parties are given in Annexure-IV in Form AOC-2 and the same forms the part of this report.

31. 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.

32. Extract of Annual Return:

Pursuant to Section 92(3) read with Section 134(3)(a) of the Act, the Annual Return as on March 31, 2022 is available on the Companys website- www.krebsbiochem.com

33. 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.

34. Disclosures relating to Subsidiaries, Associates and Joint Ventures

The company doesnt have any subsidiary companies or Joint Ventures during the year under review.

35. 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.

36. 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.

37. 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.

38. 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.

39. 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.

40. 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.

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

During the year under review, there were no IBC proceedings initiated against the company.

42. 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 in this matter during the year under review.

43. 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/-
Dr. R T Ravi
Chairman
(DIN- 00272977)
Place: Hyderabad
Date: 01-08-2022