Makers Laboratories Ltd Directors Report.

TO THE MEMBERS

Your Directors have pleasure in presenting the 36th Annual Report and Financial Statements for the year ended 31st March, 2021.

STANDALONE AND CONSOLIDATED FINANCIAL RESULTS

STANDALONE CONSOLIDATED
For the year ended 31.3.2021 For the year ended 31.3.2020 For the year ended 31.3.2021
(Rs Lacs) (Rs Lacs) (Rs Lacs)
Total Income 4482.54 5162.21 6959.73
Profit before finance cost, 371.07 293.96 906.64
depreciation and taxation
Less : Finance Cost 158.90 70.31 175.10
Depreciation & Amortisation 419.58 198.75 461.07
Profit before tax (207.41) 24.90 270.47
Provision for taxation (45.75) 37.28 135.61
Net Profit / (Loss) after Tax (161.66) (12.38) 134.86

TRANSFER TO RESERVES

The Company does not propose to transfer any amount to the general reserve.

FINANCIAL STATEMENTS

The financial statements are prepared in accordance with the Indian Accounting Standards (Ind-AS) as prescribed under Section 133 of the Companies Act, 2013 read with Rule 3 of the Companies (Indian Accounting Standards) Rules, 2015 and Companies (Indian Accounting Standards) Amendment Rules, 2016. During the year under report on 30th September,_2020, the Company acquired 52,50,000 Equity shares of Rs 10/- each of Resonance Specialties Limited (Resonance)firepresenting 45.48% of its voting rights. The open offer process under SEBI (SAST) Regulations was completed on 10th December, 2020. Your Company now has de-facto control over Resonance in accordance with Ind AS 110 - Consolidated Financial Statements under the Companies (Indian Accounting Standards) Rules, 2015. Accordingly, the Company has consolidated the financials of Resonance with itself from 11th December,_2020,_as a_subsidiary._

RESONANCE SPECIALTIES LTD.

During the year under report. Your Company acquired 52,50,000 equity shares of Rs 10/- each representing 45.48% of the paid-up equity share capital of M/s. Resonance Specialties Ltd. (Resonance), a listed entity. Post completion of the open offer formalities as required under SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011, your Company now is a major promoter shareholder with defacto control over the affairs of the said company. Resonance is engaged in the manufacturing and marketing of Active Pharmaceutical Ingredients (APIs) and Specialty Chemicals used in the agro-chemicals and pharmaceuticals industry. The acquisition of controlling shareholding in the said company will enable your Company to enter into lucrative specialty chemicals and APIs business which will complement your Companys existing generic formulations business.

CREDIT RATING

CARE Ratings has assigned the following ratings to the Companys long term bank facilities of Rs 12.00 crores - CARE BBB+; Stable (Triple B Plus; Outlook: Stable).

COVID –19 PANDEMIC

During the financial year 2020-21, the covid-19 continued as a global pandemic resulting in many governments declaring repetitive lockdowns forcing citizens to stay indoors and disruption of economic activities globally. Being manufacturers and marketers of generic pharmaceuticals and hence provider of essential services and exempted from lockdown, the manufacturing and marketing activities of your Company continued with initial challenges such as shortage of manpower, availability of raw materials, packing materials and disruptions in the logistics and supply chain. Your Company is continuously monitoring the situation closely and has taken/continue to take all the measures to comply with the guidelines issued by the local authorities, from time to time, to ensure the safety of its workforce at manufacturing plants and offices. However, the extent to which the Covid-19 pandemic may impact the Company, its operations and financials will depend on future developments in this regard which as on date are uncertain.

MANAGEMENT DISCUSSION AND ANALYSIS

(a) Financial Performance and Operations Review

Sales and other income for the financial year under report amounted to Rs 4482.54 lacs as compared with Rs 5162.21 lacs for the previous year, a de-growth of 13.17%.

Though the Profit before Interest, Depreciation and Taxation increased by 26.23% to Rs 371.07 lacs as compared to Rs 293.96 lacs in the previous year, the operations of the Company have resulted in a net loss of Rs 161.66 lacs as compared to a net loss of Rs 12.38 lacs in the previous financial year, due to higher depreciation and finance cost relating to new ophthalmic / eye drops manufacturing facility at GIDC, Naroda, Ahmedabad in the State of Gujarat which was commercialised in the financial year under report. On a consolidated basis, sales and other income for the financial year under report amounted to Rs 6959.73 lacs and Profit after tax amounted to Rs 134.86 lacs.

Your Company markets generic formulations which are mainly used by the dispensing doctors, nursing homes and hospitals. Due to repetitive lockdowns and other restrictions on movement of people imposed by several states as well as due to fear of getting infected with virus and conversion of several hospitals as dedicated covid-19 hospitals, the non-covid patient footfall reduced considerably at dispensaries, nursing homes and hospitals. Since medicines dispensed at these places is the main source of business for the Companys generics formulations, the reduced non-covid patient footfall at these places impacted the business of the Company throughout the financial year. Apart from this, there was also a substantial increase in the prices of several key active pharmaceutical ingredients used in the Companys major selling generic formulations such as Paracetamol. Due to the price control regime, the increased raw material cost could not be passed on by the Company to its customers for several of its formulations. This also contributed in the reduction of margins in several products during the financial year under report. During the year, the Company added few generic formulations in the market place as well as increased its geographical coverage through appointment of new distributors.

The Companys new ophthalmic / eye drops manufacturing facility at GIDC, Naroda, Ahmedabad in the State of Gujarat, set up at a capital outlay of about 15 crores, dispatched its first commercial consignment in the month of February 2021 after completing all the necessary qualifications and validations of the manufacturing facility and the product(s). The commercialisation of this new manufacturing facility during year also substantially increased the Companys depreciation charges as well as finance cost on the borrowings made to finance this manufacturing facility.

During the year under report, the Company has started commercially manufacturing only few ophthalmic eye drops from this new manufacturing facility and that few other ophthalmic formulations are currently in the development stage.

Key Financial Ratios
31st March, 2021 31st March, 2020
1. Debtors Turnover Ratio 6.16 6.80
2. Inventory Turnover Ratio 4.16 4.74
3. Interest Coverage Ratio 2.34 4.18
4. Current Ratio 1.09 1.23
5. Debt Equity Ratio 0.16 0.18
6. Operating Profit Margin (%) -2.26% 1.32%
7. Net Profit Margin (%) -3.61% -0.24%
8. Return on Net Worth -3.26% -0.28%

However, for the reasons stated hereinabove, during the financial year, there was impact on the overall business volume and sales as well as margins which resulted into net loss and deterioration in the most of the above key financial ratios.

(b) Opportunities, Threats, Risk and Concerns

The Indian generic formulations market is currently in the growth phase. It is expected that use of generic formulations will gradually increase in India. However, cut throat competition, quality issues of generics manufactured in the country and non existence of organised generic formulations distribution and retailing system are the few causes of concern that is hampering the growth of generic formulations market in the country.

During the year under report, there was no change in the nature of Companys business.

(c) Internal Control Systems

The Company has an adequate internal control system including suitable monitoring procedures commensurate with its size and the nature of the business. The internal control systems provide for all documented policies, guidelines, authorisation and approval procedures. The statutory auditors while conducting the statutory audit, review and evaluate the internal controls and their observations are discussed with the Audit Committee of the Board.

(d) Human Resources

Your Company continued to have cordial and harmonious relations with its employees at all levels. Your Company has adopted quality culture across the organisation in all line and staff functions at all the locations. The quality culture has helped your Company in achieving productivity improvement, cost reduction and waste elimination through employee involvement at all levels.

Your Company had 134 permanent employees as at 31st March, 2021.

(e) Cautionary Statement

Certain statements in the Management Discussion and Analysis may be forward looking within the meaning of applicable securities laws and regulations and actual results may differ materially from those expressed or implied. Factors that would make differences to Companys operations include competition, price realisation, changes in government policies and regulations, tax regimes and economic development within India.

MATERIAL CHANGES AND COMMITMENTS AFTER THE END OF THE FINANCIAL YEAR

No material changes or commitments affecting the financial position of the Company have occurred between the end of the financial year to which financial statements in this report relate and the date of this report.

SHARE CAPITAL

The paid-up equity share capital of the Company as at 31st March, 2021 is Rs 491.70 lacs. The Company currently has no outstanding shares issued with differential rights, sweat equity or ESOS.

SUBSIDIARY, JOINT VENTURE AND ASSOCIATE COMPANIES

During the year under report, your Company acquired 52,50,000 equity shares of Rs 10/- each representing 45.48% of the paid-up equity share capital of M/s. Resonance Specialties Ltd. (Resonance), a listed entity. Post completion of the open offer formalities as required under SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011, your Company has become a major promoter shareholder having defacto control over the affairs of the said company.

RESEARCH & DEVELOPMENT

During the year under report, the Company has spent an amount of Rs 34.02 lacs as R&D expenditure ( 0.75% of the turnover) as against Rs 43.78 lacs spent in the previous financial year (0.85% of the turnover).

DIVIDEND

In view of the losses incurred, the Board of Directors do not recommend dividend for the financial year under report.

INVESTORS EDUCATION AND PROTECTION FUND (IEPF)

During the year under report, the Company has transferred to the Investors Education and Protection Fund (IEPF) all the unpaid dividend amount required to be so transferred on or before the due date for such transfer. The Company has also transferred to IEPF, such of the Companys equity shares in respect of which the dividend declared has not been paid or claimed for seven consecutive years. The details of the unpaid / unclaimed dividend for the last seven financial years are available on the website of the Company (www.makerslabs.com). The Company has appointed the Company Secretary as its nodal officer under the provisions of IEPF.

DIRECTORS

Mr. Saahil Parikh retires as a director by rotation at the ensuing Annual General Meeting and, being eligible, offers himself for re-appointment.

Mr. P. M. Kathariya, Independent Director has resigned from the Board of Directors of the Company with effect from 24th September, 2020 due to his professional pre-occupation as well as personal reasons. The Board places on record its appreciation for the services rendered by Mr. Kathariya during his tenure as an Independent Director of the Company.

At the meeting of the Board of Directors of the Company held on 4th November, 2020, Mr. Vishal Jain was appointed as an Additional / Independent Director of the Company. He holds the office of directorship till the conclusion of the ensuing Annual General Meeting. Being eligible, he has offered himself for appointment as a Director / Independent Director of the Company for a period of consecutive 5 years with effect from 4th November, 2020. Necessary approval of the shareholders for his appointment as an Independent Director is being sought at the ensuing Annual General Meeting of the Company. At the meeting of the Board of Directors of the Company held on 4th November, 2020, Mr. Prashant Godha was appointed as an Additional, Non-Executive, Non-Independent Director of the Company liable to retire by rotation. He holds the office of directorship till the conclusion of the ensuing Annual General Meeting. Necessary approval of the shareholders for his appointment as a Director is being sought at the ensuing Annual General Meeting of the Company. Mr. R. K. P. Verma, Ms. Dipti Shah and Mr. Vishal Jain who are independent directors have submitted declaration that each of them meets the criteria of independence as provided in Section 149(6) of the Companies Act, 2013 and SEBI (LODR) Regulations and there has been no change in the circumstances which may affect their status as independent directors during the year. None of the directors of the Company are debarred from holding the office of Director by virtue of any SEBI order or order by any other competent authority.

In the opinion of the Board, the independent directors possess appropriate balance of skills, experience and knowledge, as required.

A brief note on Directors retiring by rotation and eligible for re-appointment as well as being appointed is furnished in the Report on Corporate Governance, annexed herewith.

KEY MANAGERIAL PERSONNEL (KMP)

During the financial year under report, the following persons are the Key Managerial Personnel: Mr. Saahil Parikh - Wholetime Director / CEO

Mr. Nilesh Jain - Wholetime Director

Mr. Sandeep Kadam - Sr. Manager – Accounts / CFO Ms. Khyati Danani - Company Secretary

There was no change in the KMP during the financial year under report.

POLICY ON DIRECTORS APPOINTMENT, REMUNERATION AND OTHER DETAILS

The Nomination and Remuneration Committee has laid down the criteria for Directors appointment and remuneration including criteria for determining qualifications, positive attributes and independence of a Director. The following attributes/criteria for selection have been laid by the Board on the recommendation of the Committee: the candidate should posses the positive attributes such as leadership, entrepreneurship, industrialist, business advisor or such other attributes which in the opinion of the Committee the candidate possess and are in the interest of the Company; the candidate should be free from any disqualifications as provided under Sections 164 and 167 of the Companies Act, 2013; the candidate should meet the conditions of being independent as stipulated under the Companies Act, 2013 and SEBI (LODR) Regulations, 2015 in case of appointment as an independent director; and the candidate should posses appropriate educational qualification, skills, experience and knowledge in one or more fields of finance, law, management, sales, marketing, administration, research, corporate governance, technical operations, infrastructure, medical, social service, professional teaching or such other areas or disciplines which are relevant for the Companys business.

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 various parameters like attendance and participation at meetings of the Board and Committees thereof, contribution to strategic decision making, review of risk assessment and risk mitigation, review of financial statements, business performance and contribution to the enhancement of brand image of the Company. The Board has carried out evaluation of its own performance as well as that of the Committees of the Board and all the Directors.

PROFICIENCY OF DIRECTORS

All the Independent Directors of the Company have registered their names in the database maintained by the Indian Institute of Corporate Affairs, Manesar. Those Independent Directors who are not otherwise exempted shall appear for the common proficiency test conducted by the said institute within the prescribed time.

REMUNERATION POLICY

The objective and broad framework of the Companys Remuneration Policy is to consider and determine the remuneration, based on the fundamental principles of payment for performance, potential and growth. The Remuneration Policy reflects on certain guiding principles of the Company such as aligning remuneration with the longer term interests of the Company and its shareholders, promoting a culture of meritocracy and creating a linkage to corporate and individual performance and emphasising on line expertise and market competitiveness so as to attract the talent. The Nomination and Remuneration Committee recommends the remuneration of Directors and Key Managerial Personnel, which is approved by the Board of Directors, subject to the approval of shareholders, where necessary. The level and composition of remuneration shall be reasonable and sufficient to attract, retain and motivate the directors, key managerial personnel and other employees of the quality required to run the Company successfully. The relationship of remuneration to performance should be clear and meet appropriate performance benchmarks. The remuneration to directors, key managerial personnel and senior management personnel should also involve a balance between fixed and incentive pay reflecting short and long term performance objectives appropriate to the working of the Company and its goals. The Remuneration Policy is placed on the Companys website www.makerslabs.com. Information about elements of remuneration package of individual directors is provided in the Annual Return as provided under Section 92(3) of the Companies Act, 2013 which is placed on the website of the Company.

FAMILIARISATION PROGRAM FOR INDEPENDENT DIRECTORS

Details of the familiarisation program of independent directors are disclosed on the website of the Company www.makerslabs.com.

MEETINGS OF THE BOARD AND COMMITTEES THEREOF

This information has been furnished under Report on Corporate Governance, which is annexed.

DIRECTORS RESPONSIBILITY STATEMENT

Your Directors confirm: i) that in the preparation of the annual accounts, the applicable accounting standards have been followed alongwith proper explanation relating to material departures; ii) that your Directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year March 31, 2021 and of the loss of the Company for the financial year; iii) that your Directors 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) that your Directors have prepared the annual accounts on a going concern basis; v) that your Directors 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 vi) that your Directors have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

CORPORATE GOVERNANCE

As per the requirements of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Company has complied with the requirements of Corporate Governance in all material aspects. A report on Corporate Governance (Annexure 1) together with a certificate of its compliance from the Practising Company Secretary, forms part of this report.

FIXED DEPOSITS

Your Company has not accepted any deposits from the public during the year under review and as such no amount of principal or interest on deposits from public was outstanding as on the date of the balance sheet.

AUDIT COMMITTEE

Details of the Audit Committee along with its constitution and other details are provided in the Report on Corporate Governance.

AUDITORS, AUDIT REPORT AND AUDITED ACCOUNTS

M/s. Natvarlal Vepari & Co., Chartered Accountants (Firm Registration No. 106971W) were appointed as the Statutory Auditors at the 32nd Annual General Meeting (AGM) of the Company for a term of 5 (Five) years i.e. till the conclusion of 37th AGM and this appointment was ratified by the shareholders of the Company at the 33rd Annual General Meeting of the Company held on 2nd August, 2018.

The Auditors Report read with the notes to the accounts referred to therein are self-explanatory and therefore, do not call for any further comments. There are no qualifications, reservations or adverse remarks made by the Auditors.

COST AUDIT

Pursuant to the provisions of Section 148 of the Companies Act, 2013, M/s. Kale & Associates, Cost Accountants (Firm Registration. No. 001819) were appointed as the Cost Auditors to conduct audit of cost records of the Company for the financial year 2020-21.

The Cost Audit Report for the financial year 2019-20, which was due to be filed with the Ministry of Corporate Affairs by 23rd October, 2020 was filed on the due date.

The Company has maintained the cost accounts and cost records as specified by the Central Government under sub-section (1) of Section 148 of the Companies Act, 2013.

SECRETARIAL AUDIT

Pursuant to the provisions of Section 204 and other applicable provisions, if any, of the Companies Act, 2013, M/s. Parikh & Associates, Practising Company Secretaries were appointed as the Secretarial Auditors for auditing the secretarial records of the Company for the financial year 2020-21.

The Secretarial Auditors Report is annexed hereto. There are no qualifications, reservations or adverse remarks made by the Secretarial Auditors.

CORPORATE SOCIAL RESPONSIBILITY (CSR)

The provisions of Section 135 of the Companies Act, 2013 pertaining to Corporate Social Responsibility (CSR) is not applicable to the Company.

SAFETY, ENVIRONMENT AND HEALTH

The Company considers safety, environment and health as the management responsibility. Regular employee training programmes are carried out in the manufacturing facility on safety and environment.

PARTICULARS OF LOANS, GUARANTEES AND INVESTMENTS

The Company has not given any loans or guarantees or made investments in contravention of the provisions of the Section 186 of the Companies Act, 2013. The details of the loans and guarantees given and investments made by the Company are provided in the notes to the financial statements.

RELATED PARTY TRANSACTIONS

All related party transactions that were entered into during the financial year were on arms length basis and were in the ordinary course of Companys business.

The Board has approved a policy for related party transactions which has been uploaded on the website of the Company https://makerslabs.com/pdf/Corporate_Policy/Related_Party_Transactions.pdf.

All the related party transactions are placed before the Audit Committee as well as the Board for approval on a quarterly basis. Omnibus approval was also obtained from the Audit Committee on an annual basis for repetitive transactions. Approval of the shareholders is also obtained, wherever necessary, in this regard. Related party transactions are disclosed in the notes to the financial statements. Prescribed Form No. AOC-2 pursuant to clause (h) of sub-section (3) of Section 134 of the Act and Rule 8(2) of the Companies (Accounts) Rules, 2014 is furnished as Annexure 2 to this report.

PARTICULARS OF EMPLOYEES

The information required pursuant to Section 197 read with Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, a statement showing the names and other particulars of the employees drawing remuneration and other details as set out in the said rules are provided as an Annexure 3 in this annual report. The Company had no employee drawing remuneration in excess of the amount as mentioned under Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014. The necessary information in respect of top 10 employees of the Company in terms of remuneration drawn is furnished in Annexure. However, having regard to the provisions of the first proviso to Section 136(1) of the Act and as advised, the Annual Report excluding the aforesaid information under Explanation (2) to the above Rule is being sent to the members of the Company. The said information is available for inspection at the registered office of the Company during working hours excluding Saturdays and any member interested in obtaining such information may write to the Company Secretary and the same will be furnished on request. The full Annual Report including the aforesaid information is available on the Companys website www.makerslabs.com.

CODE OF CONDUCT

The Board has laid down a code of conduct for Board members and senior management personnel of the Company. The code also incorporates the duties of independent directors as laid down in the Companies Act, 2013. The said code of conduct is posted on Companys website www.makerslabs.com. The Board members and senior management personnel have affirmed compliance with the said code of conduct. A declaration signed by the Wholetime Director / CEO is given at the end of this Report.

WHISTLE BLOWER POLICY / VIGIL MECHANISM

There is a Whistle Blower Policy in the Company and no personnel has been denied access to the Chairman of the Audit Committee. The policy provides for adequate safeguards against victimization of persons who use vigil mechanism. The Whistle Blowing Policy is posted on the website of the Company www.makerslabs.com.

PREVENTION OF INSIDER TRADING

The Board has adopted a Code of Prevention of Insider Trading based on the SEBI (Prohibition of Insider Trading) Regulations, 2015. The same has been placed on the website of the Company www.makerslabs.com. All the Directors, senior management employees and other employees who have access to the unpublished price sensitive information of the Company are governed by this code. During the year under Report, there has been due compliance with the said code of conduct for prevention of insider trading.

CONSTITUTION OF COMMITTEE UNDER SEXUAL HARRASSMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION AND REDRESSAL) ACT, 2013

The Company has adopted a policy in line with the requirements of Prevention of Sexual Harassment of Women at the Workplace and a Committee has been set-up to redress sexual harassment complaints received, if any.

BUSINESS RISK MANAGEMENT

Pursuant to the provisions of Section 134 of the Companies Act, 2013, the Company has constituted a Risk Management Committee. The details of the Committee and its terms of reference are provided in the Report on Corporate Governance, which is annexed.

SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS

There are no significant or material orders passed by any regulator, tribunal or court that would impact the going concern status of the Company and its future operations.

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

In accordance with the requirements of Section 134 of the Companies Act, 2013, statement showing particulars with respect to conservation of energy, technology absorption and foreign exchange earnings and outgo is furnished as Annexure 4 to this report.

ANNUAL RETURN

In accordance with the requirements of Section 92 (3) of the Companies Act, 2013 and Rule 12 (1) of the Companies (Management and Administration) Rules, 2014, copy of Annual Return in Form MGT-7 is placed on the website of the Company.

SECRETARIAL STANDARDS

The Company has complied with all the applicable Secretarial Standards.

ACKNOWLEDGEMENT

Your Directors place on record their appreciation for the co-operation and support extended to the Company by its bankers. Your Directors also place on record their appreciation of the continued hard work put in by employees at all levels.

For and on behalf of the Board
Mumbai R. K. P. Verma
10th June, 2021 Chairman