Marksans Pharma Ltd Directors Report.

The Directors take pleasure in presenting the Twenty Seventh (27) Annual Reports along with the financial statements for the year ended 31st March, 2019.

FINANCIAL HIGHLIGHTS (र in Lakh)
Particulars 2018-19 2017-18
Turnover 42,416.02 29,466.23
Profit before Depreciation & Amortization expenses, Non-recurring expenses and 6,469.84 2,890,.31
Tax expenses
Less: Depreciation & Amortization Expenses 868.72 1,225.07
Non-recurring expenses - -
Tax expenses 1,239.37 422.51
Profit after Tax 4,361.75 1,242.73

OPERATIONS/STATE OF AFFAIRS OF THE COMPANY

During the year 2018-19, your Company achieved turnover of र42,416.02 Lakh with net profit of र4,361.75 Lakh as compared to turnover of र29,466.23 Lakh with net profit of र1,242.73 Lakh in the previous year.

On consolidated basis, your Company achieved turnover of र1,00,006.92 Lakh with net profit of र8,043.71 Lakh as compared to turnover of र91,269.20 Lakh with net profit of र3,580.10 Lakh in the previous year. During the year, US and North America Formulation business reported growth of 10.76%, Australia and New Zealand formulation business reported growth of 21.05% and Rest of World business reported growth of 70.03%.

In compliance with the IND AS on Consolidated Financial Statements, this Annual Report also includes Consolidated Financial Statements for the financial year under review.

DIVIDEND

Your Directors have recommended a Dividend, subject to approval of the Members at the ensuing Annual General Meeting, of Re. 0.05/-(5%) per equity share of Re. 1/- each and dividend of र7/- (7%) per preference share of र100/- each for the financial year ended 31st March, 2019. Cash outflow on account of dividend payment will be र274.66 Lakh for the financial year ended 31st March, 2019. The Dividend will be paid in compliance with applicable regulations. Companys policy on the Dividend Distribution is available on the Companys website www.marksanspharma.com.

SUBSIDIARIES, JOINT VENTURES AND ASSOCIATE COMPANIES i. Performance of Marksans Pharma (UK) Limited, through step down subsidiaries Bell, Sons & Co. (Druggists) Limited and

Relonchem Limited which operates in the European markets, has been satisfactory considering the prevailing market scenario. The Directors foresee growth in the coming years.

ii. Marksans Pharma Inc., through step down subsidiary Time-Cap Laboratories Inc. which operates mainly in US and North America, has achieved sales of र41,149 Lakh as compared to sales of र37, 150 Lakh during previous year.

iii. Performance of Nova Pharmaceuticals Australasia Pty Ltd. (your company holds 60% of the share capital) which operates mainly in Australia and New Zealand has registered satisfactory growth.

Pursuant to a Central Governments Circular dated 8th February, 2011, the audited accounts together with Directors Report and Auditors Report of the subsidiaries namely Marksans Pharma (U.K.) Limited, Marksans Pharma Inc. and Nova Pharmaceuticals Australasia Pty Limited are not being appended to the Annual Report. However, a statement giving information in aggregate for each subsidiary including step down subsidiaries are attached to the Consolidated Balance Sheet. Statement on the highlight of performance of subsidiary companies and their contribution to the overall performance of the company are given in Note No. 40(a) of the consolidated financial statements and forms part of this report.

Your Company has no Joint Ventures and Associate Companies.

MANAGEMENT DISCUSSION AND ANALYSIS

A report on Management Discussion and Analysis covering industry structure and developments, financial and operational performance of the Company, risks, concerns, opportunities, threats and outlook forms a part of this Report.

RESERVES

Your Company has not transferred any amount out of the profit of the year to the General Reserve.

SHARE CAPITAL

During the year under review, there was no change in the Equity and Preference Share Capital of the Company.

The Company has not issued any equity shares with differential rights as to dividend, voting or otherwise, during the year under review.

The Company has not issued ESOP or sweat equity shares to Directors or employees, during the year under review.

DIRECTORS AND KEY MANAGERIAL PERSONNEL _KMP_

Your Companys Board comprises of 6 (Six) Directors, of which 3 (Three) are Non-Executives Independent and 3 (Three) Directors are Executives.

a. Appointment / resignations of Directors:

During the year under review, Dr. Vinay Gopal Nayak (DIN: 02577389) has resigned as Director & Whole-time Director with effect from 01.01.2019 and Mr. Varddhaman Vikramaditya Jain (DIN: 08338573) has been appointed as Whole-time Director in place of Dr. Viany Gopal Nayak.

Mr. Ajay Shivram Joshi (DIN: 00947684), an Independent Director has resigned due to personal reason with effect from 01.04.2019. There is no other material reasons for his resignation. Mr. Abhinna Sundar Mohanty (DIN: 0007995) has been appointed as an additional independent Director with effect from 11.07.2019 in place of Mr. Ajay Shivram Joshi.

b. Retirement of Director by rotation:

In terms of Section 152 of the Companies Act, 2013, Mrs. Sandra Saldanha (DIN: 00021023) will retire by rotation at the ensuing Annual General Meeting and being eligible, offers herself for re-appointment.

c. Appointment / resignation of Key Managerial Personnel:

During the year under review, there is no change in the Key Managerial Personnel of the Company except as stated above.

NUMBER OF MEETINGS OF THE BOARD

During the financial year 2018-19, the Board met 6 (Six) times on 30.05.2018, 06.08.2018, 25.08.2018, 13.11.2018, 24.01.2019 and 08.02.2019.

POLICY ON DIRECTORS APPOINTMENT AND REMUNERATION

Your Company has in place a policy relating to nomination and remuneration of directors as well as key managerial personnel and other employees formulated by the Nomination and Remuneration

Committee. The Nomination and Remuneration Policy, inter alia, provides for the following:

The Committee shall identify and ascertain the integrity, qualification, expertise and experience of the person for appointment as Director in terms of Diversity Policy of the Board and recommend to the Board his / her appointment.

For the appointment of KMP (other than Managing / Whole-time Director) or Senior Management, a person should possess adequate qualification, expertise and experience for the position he / she is considered for the appointment. For administrative convenience, the Managing Director is authorised to identify and appoint a suitable person for the position of KMP (other than Managing / Whole-time Director) and Senior Management.

The remuneration / compensation / commission, etc., as the case may be, to the Managing / Whole-time Director is determined by the Nomination and Remuneration Committee and recommended to the Board for approval. Such remuneration / compensation / commission, etc., as the case may be, is subject to approval of the shareholders of the Company and is in accordance with the provisions of the Companies Act, 2013 and Rules made thereunder. Remuneration of KMP (other than Managing / Whole-time Director) and Senior Management is decided by the Managing Director based on the standard market practice and prevailing HR policies of the Company.

The remuneration / commission / sitting fees, as the case may be, to the Non-Executive / Independent Director, is in accordance with the provisions of the Companies Act, 2013 and the Rules made thereunder for the time being in force or as may be decided by the Committee / Board / shareholders.

An Independent Director is not entitled to stock option of the Company.

EVALUATION OF PERFORMANCE OF BOARD, COMMITTEE AND DIRECTORS

Performance evaluation of the Board as a whole, the Committees of Directors and all individual Directors including Independent Directors has been carried out for the year under review in accordance with the criteria framed pursuant to the provisions of the Companies Act, 2013, SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 and Guidance Notes issued by SEBI.

Performance Evaluation of each individual director including independent director

A questionnaire containing performance evaluation criteria was circulated to each Director including Independent Directors. The Directors filled-up the questionnaire pertaining to other Directors

(except for himself/herself ) and submitted the same to the Chairman of the Board for review.

The Nomination and Remuneration Committee also carried out performance evaluation of each director of the Company for the year 2018-19. The evaluation of each director was done by all the other directors (other than the director being evaluated) in accordance with the performance criteria suggested by the Committee and applicable SEBI Guidance Note.

Performance Evaluation of the Board and Committees of Directors

The Board reviewed a questionnaire containing performance criteria for the Board and the Committees of Directors. For the evaluation, the Board took into consideration composition of the Board and Committees of Directors, frequency of the meetings, attendance of each directors at the Board and respective Committee Meetings, discharge of key functions and responsibilities prescribed under law, effectiveness of corporate governance practices in the Company, integrity of the Companys accounting/auditing and financial reporting/control systems, etc.

All the independent directors of your Company also had a separate meeting without the attendance of executive directors and management personnel and reviewed the performance of the Board of Directors as a whole, the Chairman of the Board and the executive non-independent directors during the year 2018-19. The independent directors have also reviewed the quality, quantity and timeliness of flow of information between the Company management and the directors that was necessary for the directors to effectively and reasonably perform their duties.

The results of the above performance evaluations are satisfactory and adequate and meet the requirement of the Company.

DECLARATION FROM INDEPENDENT DIRECTORS

The Company has received necessary declaration from all the Independent Directors under Section 149(7) of the Companies Act, 2013 confirming that they meet the criteria of independence laid down in Section 149(6) of the Companies Act, 2013 and Regulation 25 of SEBI (LODR) Regulations, 2015. In the opinion of the Board, the independent directors fulfilled the conditions specified in the above Act and Regulations and are independent of the management.

FAMILIARIZATION PROGRAMME FOR INDEPENDENT DIRECTORS

The Company proactively keeps its Directors informed of the activities of the Company, its management and operations and provides an overall industry perspective as well as issues being faced by the industry. Companys policy on the familiarization program for the independent directors as well as details of familiarization programmes imparted during the year is available on the Companys website www.marksanspharma.com.

COMMITTEES OF THE COMPANY

Currently, the Company has five committees; The Audit Committee, The Nomination and Remuneration Committee, The Stakeholders Relationship Committee, The Corporate Social Responsibility Committee and The Risk Management Committee. Details of the composition of these committees are given in the Corporate Governance Report section of this Annual Report.

POLICIES

Your Company always strives to promote and follow the highest level of ethical standards in all its business transactions. SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 mandated formulation of certain policies for all listed companies. All the policies adopted by your Company are available on the website www.marksanspharma.com. These policies are reviewed periodically by the Board and updated based on need and new compliance requirement. Key policies that have been adopted by the Company are as follows:

Name of the Policy Brief Description
Code of Conduct for Directors & Employees The Code envisages directors and employees of the Company to observe in day to day operations of the Company
Code of Conduct to Regulate, Monitor and Report Trading in securities The Code provides framework for dealing with securities of the Company by directors and employees of the Company
Policy on Related Party Transactions The Policy regulates all transactions between the Company and its related parties
Corporate Social Responsibility (CSR) Policy The Policy outlines Companys strategy to bring about a positive impact on society
Whistle Blower Policy (Vigil Mechanism) The Policy provides for directors and employees to report concerns about unethical behavior, actual or suspected fraud or violation of the Companys codes of conduct and ethics
Code of Practice and Procedure for Fair Disclosure of Unpublished Price Sensitive Information The Code envisages fair disclosure of events and occurrences that could impact price discovery in the market for the Companys securities.
Dividend Distribution Policy The Policy envisages criteria for distribution of dividend.

DETAILS RELATING TO DEPOSITS, COVERED UNDER CHAPTER V OF THE COMPANIES ACT, 2013

The Company has not accepted any public deposits and as such, no amount on account of principal or interest on public deposits was outstanding as on the date of the Balance Sheet.

LOANS, GUARANTEES OR INVESTMENTS

Details of Loans, Guarantees and Investments covered under the provisions of Section 186 of the Companies Act, 2013 are given in the notes to the Financial Statements.

RESEARCH AND DEVELOPMENT _R&D_

Your Company is committed to continuously fund its R&D capabilities. One of the Companys biggest strength lies in vibrant and productive R&D function that has continuously placed your Company ahead through consistent development of niche technology, processes and products. Your Company will continue to invest in R&D to keep pace with the changing domestic and global scenario.

Your Company has set up a New Research & Development Centre at Navi Mumbai, Maharashtra with a view to foray into new segments, respond to globally unmet therapeutic needs, enhance the Companys opportunity responsiveness and file a larger number of ANDAs.

REGULATORY COMPLIANCES

Your Companys facilities in UK and USA are approved by UK MHRA and US FDA respectively. The Goa facility has also gone through successful GMP audit by US FDA, UK MHRA and Australian TGA Authorities.

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

As required under section 134(3)(m) of the Companies Act, 2013 read with Rule 8(3) of the Companies (Accounts) Rules, 2014, the relevant information and data are annexed to this report as Annexure - A.

INTERNAL FINANCIAL CONTROL SYSTEMS AND THEIR ADEQUACY

Your Company has in place adequate system of internal control and management information systems which covers all financial and operating functions. These systems are designed in a manner which provides assurance with regard to maintenance of strict accounting control, optimum efficiency in operations and utilization of resources as well as financial reporting, protection of Companys tangible and intangible assets and compliance with policies, applicable laws, rules and regulations. Your Company has in place a mechanism to identify, assess, monitor and mitigate various risks to key business objectives. The Audit Committee has a process for timely check for compliance with the operating systems, accounting procedures and policies. Major risks identified by the Company are systematically addressed through mitigating action on continuing basis.

INFORMATION TECHNOLOGY

Your Company continues to make required investments in the Information Technology area to cope up with the growing information needs necessary to manage operations efficiently. Your Company has implemented state-of-the-art IT applications in automating the processes in Quality, Manufacturing and R & D. Your Company has also invested significant amount of resources to build IT platform to de-risk manufacturing process and to adopt best practices in the industry. The implementations spread across Lab automation, instrument integration and manufacturing execution systems. Your Companys virtually every aspect of the business operations is carried out through SAP (Systems Applications and Products in Data Processing) Enterprise Resource Planning.

HEALTH, SAFETY & ENVIRONMENT

Your Company is committed to ensure Safety and sound Health of the employees at the work place. Your Company is also committed to strengthen pollution prevention and waste management practices for a safe and healthy environment. The Companys Plants are environment regulations compliant.

RELATED PARTY TRANSACTIONS

Your Company has not entered into any transaction during the year with any related parties which are not at arms length basis. Further your Company has not entered into any material transaction with any related parties during the year.

All Related Party Transactions (with the subsidiaries) that were entered into during the financial year were in the ordinary course of business on arms length basis and repetitive in nature. These transactions were placed before the Audit Committee for information and entered in the Register maintained under Section 189 of the Companies Act, 2013. The Audit Committee has granted omnibus (ad hoc) approval for Related Party Transactions as per the provisions and restrictions contained in the policy framed under Regulation 23 of the SEBI (LODR) Regulations, 2015. Companys Policy on Related Party Transactions is available on the Companys website www.marksanspharma.com. Particulars of related party transactions entered into during the FY 2018-19 have been disclosed under Note No. 37 of the Notes to the Financial Statement.

WHISTLE BLOWER POLICY/VIGIL MECHANISM

Your Company has in place a Whistle Blower Policy to deal with instance of fraud and mismanagement, if any. Under the policy, an effective vigil mechanism for directors and employees has been established to report their genuine concerns, actual or suspected fraud or violation of the Companys codes of conduct. Details of the Whistle Blower Policy are available on the Companys website www. marksanspharma.com.

The said mechanism also provides for adequate safeguards against victimisation of the persons who use such mechanism and makes provision for direct access to the chairperson of the Audit Committee. We confirm that during the financial year 2018-19, no employee of the Company was denied access to the Audit Committee. During the financial year 2018-19, there were no instances of any unethical behavior, actual or suspicious fraud or violation in the Companys operational policies.

RISK MANAGEMENT SYSTEM

Your directors are aware of the risks associated with the Companys business. Your Company makes timely and regular analyses of various risks associated with the Companys business and takes corrective actions for managing/mitigating the same. Your Company has institutionalized the policy/process for identifying, minimizing and mitigating risks under the supervision of the Risk Management Committee of the Company. The key risks and mitigation measures are also reviewed by the Audit Committee. There is no element of risk which in the opinion of the Board may threaten the existence of the Company.

CORPORATE SOCIAL RESPONSIBILITY

During the financial year 2018-19, your Company has not spent any amount towards CSR. Your Company understands its responsibility towards the Society, Community and Environment and committed to spend sensibly after identifying right avenues for the purpose. The CSR Committee had been meeting and discussing with number of NGOs to actively support and channelize the Companys CSR activities as per the Companys CSR Policy. However, the Company could not identify right avenues for the purpose. The Company is continuing its efforts in identifying right activities as per its CSR Policy to achieve CSR objectives.

The particulars required to be disclosed pursuant to the Companies (Corporate Social Responsibility Policy) Rules, 2014 are given in Annexure - B annexed to this Report.

DISCLOSURE UNDER SEXUAL HARASSMENT OF WOMAN AT WORKPLACE _PREVENTION, PROHIBITION AND REDRESSAL_ ACT, 2013

Your Company is fully committed to uphold and maintain dignity of women working in the Company and has zero tolerance towards any actions which may fall under the ambit of sexual harassment at work place. The Company has in place a Prevention of Sexual Harassment Policy in line with the requirements of the Sexual Harassment of Women at the Workplace (Prevention, Prohibition and Redressal) Act, 2013. Internal Complaints Committees have been set up to redress complaints regarding sexual harassment at Mumbai office, Goa plant and R & D Centre at Navi Mumbai. All employees (permanent, contractual, temporary, trainees) are covered under this policy. During the year under review, the Company has not received any complaints related to sexual harassment at any of the sites.

SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS OR TRIBUNALS

There are no orders passed by the Regulators/Courts/tribunal which would impact the going concern status of the Company and its future operations. During the year under review, securities of the

Company were not suspended from trading in the stock exchanges in which they are listed.

CHANGE IN THE NATURE OF BUSINESS

During the year under review, there is no change in the nature of Business of the Company.

MATERIAL CHANGES & COMMITMENT IF ANY, AFFECTING FINANCIAL POSITION OF THE COMPANY FROM THE END OF FINANCIAL YEAR TILL THE DATE OF THE REPORT

There have been no material changes and commitments, affecting the financial position of the Company between the end of the financial year of the Company to which the Financial Statements relate and the date of this Report.

REPORTING OF FRAUDS

There was no instance of any fraud during the year under review which required the Statutory Auditors to report to the Audit Committee and / or Board under Section 143(12) of Act and Rules framed thereunder.

CORPORATE GOVERNANCE

Corporate Governance is an ethical business process to create and enhance value of stakeholders and reputation of an organization. Your directors function as trustee of the shareholders and ensure long term economic value for its stakeholders. Pursuant to Schedule V of SEBI (LODR) Regulations, 2015, a detailed report on Corporate Governance and a certificate from the Auditors regarding compliance with the conditions of Corporate Governance is annexed to this report as Annexure - C.

EXTRACT OF ANNUAL RETURN

The Extract of Annual Return as provided under Section 92(3) of the Companies Act, 2013 and as prescribed in Form No. MGT-9 of the Companies (Management and Administration) Rules, 2014 is annexed to this report as Annexure - D.

EMPLOYEES

The ratio of the remuneration of each Director to the median employees remuneration and other details in terms of Section 197(12) of the Companies Act, 2013 read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, is annexed to this report as Annexure - E. The statement showing particulars of employees as required under Section 197(12) of the Companies Act, 2013 read with Rule 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is annexed to this report as

Annexure - F.

HUMAN RESOURCES DEVELOPMENT AND INDUSTRIAL RELATIONS

The guiding principle of HR Policy at your Company is that the "Intellectual Capital" and dedication of employees will help the

- proper internal finance controls were in place and that the financial controls were adequate and were operating effectively;

- had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

AUDIT & AUDITORS

Statutory Audit

The Auditors, M/s. Bhuta Shah & Co. LLP, Chartered Accountants (Firm Registration No. W100100) were appointed as Statutory Auditors at the 26th Annual General Meeting held on Thursday, 27th September, 2018 for a term of five (5) years i.e. till the conclusion of the 31st Annual General Meeting of the Company.

The Auditors report for the financial year 2018-19 does not contain any qualification, reservation or adverse remark.

Secretarial Audit:

Pursuant to Section 204 of the Companies Act, 2013, the Board of Directors has appointed Ms. Khushboo Bakul Gopani, a Practicing Company Secretary (Membership No.29194, Certificate of Practice No. 10560) as Secretarial Auditor to undertake Secretarial Audit of the Company. The report of the Secretarial Auditor is annexed to this report as Annexure - G.

The Secretarial Audit Report does not contain any qualification, reservation or adverse remark except one observation which is explained under Corporate Social Responsibility hereinabove in this report.

Cost Audit:

As specified under section 148(1) of the Companies Act, 2013, your Company maintains cost accounting records. However your Company is a 100% export oriented unit and therefore, it is exempted from audit of its cost accounting records.

APPRECIATION:

The directors place on record their appreciation for the contribution made by the employees at all levels enabling the Company to achieve the performance during the year under review.

The directors also appreciate the valuable co-operation and continued support extended by Companys Bankers, Medical Professionals, Business Associates and Investors who have put their faith in the Company.

For and on behalf of the Board of Directors of
Marksans Pharma Limited
Mark Saldanha
Mumbai

Chairman & Managing Director

Dated: 9th August, 2019 DIN: 00020983