Morepen Laboratories Ltd Directors Report.

Dear Shareholders,

Your Directors have pleasure in presenting the 34th Annual Report on business, operations and achievements of the Company together with the audited financial statements for the financial year ended 31" March, 2019.

FINANCIAL HIGHLIGHTS

(Rs in Lakhs)

Particulars

Standalone

Consolidated

2018-19 2017-18 2018-19 2017-18
Sales 70,597.21 55,294.67 75,621.44 59,775.29
Other Operating Income 1,127.08 788.37 1,232.40 875.62
Other Income 367.18 354.01 367.18 372.27
Total Income 72,091.47 56,437.05 77,221.02 61,023.18
Operating Surplus 6,869.22 6,380.93 7,118.96 6,845.02
Finance cost 207.08 429.46 211.00 435.73
Cash Surplus 6,662.14 5,951.47 6,907.96 6,409.29
Non-Cash Items:
Depreciation & Amortisation 3,800.78 3,339.95 3,990.29 3,432.20
Profit before Tax 2,861.36 2,611.52 2,917.67 2,977.09
Tax (212.70) - (246.33) -
Tax credit entitlement 212.70 - 212.70 -
Profit before non-controlling interest 2,861.36 2,611.52 2,884.04 2,977.09
Less : Non - controlling interest - - (0.89) 17.95
Profit after non-controlling interest 2,861.36 2,611.52 2,884.93 2,959.14
Other Comprehensive Income (171.82) 10.95 (169.81) 8.87
Total Comprehensive Income 2,689.54 2,622.47 2,715.12 2,968.01
EPS (Basic/Diluted) 0.64 0.58 0.64 0.66

REVIEW OF PERFORMANCE

A significant topline growth of 22.43% has been recorded in Active Pharmaceutical Ingredients (API) business of the company. The Company has been able to sustain its growth momentum despite the fact that supplies of inputs particularly imported raw materials has been quite patchy during the current year. It also led to stress in margins in API business even though a part of increased costs were passed on to the customers. The Company continues to invest in new processes, capacities and systems with a view to remain competitive in its area of operations. Both domestic and exports markets have registered attractive growth.

The Formulation business with its current year sales revenues of Rs 153.17 Crores has posted a growth of 39% over previous year sales revenues. The Home Diagnostics business has been consistent in its annual growth trajectory with current year revenues scoring growth of 35% over previous year revenues. With 11% growth in OTC (over the counter) topline, the Company has recorded its highest ever sales revenues in each of its aforementioned businesses. On overall basis, total annual revenues are at Rs 77,221.02 Lakhs against Rs 61,023.18 Lakhs recorded during the previous financial year, a growth of 26.54%.

Financial Performance:

Sales

Current year consolidated sales revenues at Rs 75,621.44 Lakhs have recorded an incredible growth of 26.50% against previous year revenues of Rs 59,775.29 Lakhs. Current year total revenues of Rs 77,221.02 Lakhs are up by 26.54 % over previous year revenues. Export business has contributed around 41% of the consolidated sales revenues of the Company and registered a growth of 32% during the year.

On standalone basis, the Company registered sales revenues of Rs 70,597.21 Lakhs as compared to Rs 55,294.67 Lakhs during previous financial year, a growth of 27.67%.

Material Cost

Consolidated material cost, as a percentage of sales, has gone up to 65.65% as compared to 61.66% in the previous year, primarily because of hardening of raw material prices. Current year sales realizations have been better as part of the increased input costs have been passed on to the customers to maintain the margins.

Employee Cost

During the year under review, the employee strength of the Company has increased by around 11%. The current years consolidated employee cost is 12.61% of the sales revenue against 12.80% in the preceding year. The overall increase in employee cost for the current year is both on account of annual merit based increase as well as on account of increased manpower.

Other Expenses

Consolidated expenditure on manufacturing, sales & marketing and administrative activities has come down to 14.43% of sales revenues, against 16.17% recorded in the previous year. Despite recording tremendous growth in sales revenues, the Company has been able to keep in check on its spend on various administrative and sales & marketing activities.

Finance Cost & Depreciation

Consolidated annual finance cost at Rs 211.00 Lakhs has come down by around 52% against previous year cost of Rs 435.73 Lakhs. Depreciation & Amortisation cost for the year has been at Rs 3,990.29 Lakhs against Rs 3,432.20 Lakhs of previous year, an increase of 16.26%, mainly on account of increased amount of amortisation for the year and additional depreciation charge on assets discarded during the year.

Other Operating Income & Other Income

Consolidated other operating income represents export incentives, income from foreign operations & others. Current year export incentives are at Rs 1,093.59 Lakhs against Rs 777.32 Lakhs of last year. Others are up by 38.78% at Rs 138.81 Lakhs during the current year as against Rs 98.30 Lakhs in the previous year.

Consolidated other income representing currency fluctuations and interest income at Rs 367.18 Lakhs, is marginally down from previous year of Rs 372.27 Lakhs.

Profit after Tax

Consolidated Profit before interest, depreciation and tax is higher at Rs 7,118.96 Lakhs as against Rs 6,845.02 Lakhs in the previous year. Net profit after tax but before share of profit from non-controlling interest is at Rs 2,884.04 Lakhs against Rs 2,959.14 Lakhs in last financial year. Consolidated net profit, exclusive of minority share, is at Rs 2,884.93 Lakhs, marginally down by 2.5% over previous years profit. Total Comprehensive Income for the year is Rs 2,715.12 Lakhs vis- a-vis Rs 2,968.01 Lakhs of previous year.

On standalone basis, the Company has registered Net profits of Rs 2,861.36 Lakhs as against Rs 2,611.52 Lakhs during previous financial year. Total Comprehensive Income for the year stood at Rs 2,689.54 Lakhs vis-a-vis Rs 2,622.47 Lakhs of previous year.

Division wise Business Performance:

Active Pharmaceutical Ingredients (API)

API business with its current year annual sales revenues of Rs 41,304.70 Lakhs is up by 22.43% against preceding year revenues of Rs 33,738.91 Lakhs. There has been huge growth in exports business of the Company at around 32% and domestic business marginally grew by 1% in its annual revenues. The price realisation has been better during the year as compared to last financial year. However, volume growth has not kept pace with last year growth levels. Loratadine, Montelukast and Atorvastatin recorded excellent growth in their annual revenues at 28%, 33% and 25% respectively.

Finished APIs with current year annual revenues of Rs 35,809.40 Lakhs has recorded a growth of 19% during the year. The sales revenues for new molecules have increased by 15% at Rs 2,965.18 Lakhs. Intermediates with their annual sales revenues of Rs 2,530.12 Lakhs have recorded revenue growth of 33%.

With annual sales revenue of Rs 14,344.51 Lakhs, Loratadine continues to be leading revenue generator for the API business closely followed by Montelukast with sales revenue of Rs 12,075.43 Lakhs recorded during the current year. Atorvastatin with its annual revenues of Rs 7,201.25 Lakhs registered a growth of 25% during the current year. Rosuvastatin sales revenues, for the year under review, are at Rs 3,038.00 Lakhs against Rs 2,885.91 Lakhs of preceding year. Fexofenadine sales revenue for the current year is down at Rs 1,680.33 Lakhs against Rs 2,196.67 Lakhs of last year.

API business has recorded a compounded annual growth rate (CAGR) of 17.59% during last 5 years.

Home Diagnostics

The Home Diagnostics portfolio has recorded steadfast growth over last many years and has recorded a compounded annual growth rate (CAGR) of around 29% during last 5 years. Blood Gluco Monitoring business with current year revenues of Rs 9,284.67 Lakhs, has registered a CAGR of 41% during last 5 years. Gluco monitors installations during the current year have been 25% more than the previous year and expected to cross 3 million very soon. The glucose testing strips have registered a staggering growth of 52% during the current year.

Blood Pressure Monitors with current year Sales revenues of Rs 2,649.77 Lakhs has posted handsome growth of 22% over the previous year. It has recorded a CAGR of 35% during last 5 years.

Nebulisers with current year sales revenue of Rs 872.49 Lakhs also recorded a robust growth of around 49% in this fiscal, whereas Thermometers with current year sales revenue of Rs 564.95 Lakhs has gone up by 21%.

In line with its commitment of delivering good health at home at affordable prices, the Company has also started in house manufacture of Blood Glucose Strips in May 2018 along with Blood Glucose Monitors. The Company has become self-reliant in the production of Glucometers. It has manufactured 8 Lakh Blood Glucose Monitors in the current year. This makes Morepen one of the largest Manufacturer of Blood Glucose Monitors in India and the SAARC region. The company has started adopting state of the art robotic technology in its production process of medical devices to improve quality and efficiency. Glucometer production has replaced import of around US$ 1.2 Million during the current year. The Company has plans to start production of Nebulizer & Thermometers in the near future. Home Diagnostics business has remarkable growth every year & will be achieving many more milestones in coming years.

The Company has also invested heavily in Glucometers placement in the market to expand the customer base by supplying these free or at the subsidized cost. The investment has helped the Company to expand its customer base for the glucose strips and is also expected to pay off in the coming years.

Finished Formulations

The current year sales revenue for the Finished Dosages at Rs 15,317.43 Lakhs is up by 39% over previous year revenues of Rs 11,045.84 Lakhs. It has been growing steadily over the years with last 5 years CAGR of 15%. The Branded Prescription (Rx) products with annual sales revenues of Rs 3,425.86 Lakhs have recorded massive growth of 33% during the period under review. Branded generics business has also recorded glittering performance during the year and has added Rs 11,891.57 Lakhs to the companys topline against Rs 8,473.98 Lakhs added last year. The top three therapeutic categories namely Antibiotics, Gastroenteritis and Vitamins contributed Rs 2,588.83 Lakhs to the topline of branded formulation business, against Rs 1,926.49 Lakhs added last year.

DIVIDEND

For the year under review, the Directors do not recommend any dividend due to absence of distributable surplus.

RESERVES

Standalone net profit after tax of Rs 2,861.36 Lakhs is carried forward to the Retained Earning. During the year under review, no amount was transferred to the General Reserve.

DEPOSITS

Your Company has not accepted any deposits from the public, during the year under review, within the meaning of Section 73 of the Companies Act, 2013 (the Act) read with the Companies (Acceptance of Deposits) Rules, 2014, and no amount of principal or interest on deposits from the public was outstanding as on the date of Balance Sheet.

During the financial year ended 31" March, 2010, the Company had allotted 9,24,90,413 Equity Shares to the fixed deposit holders in settlement of their dues pursuant to the Scheme of Arrangement & Compromise under Section 391 of the Companies Act, 1956, approved by the Honble High Court of Himanchal Pradesh, Shimla vide its order dated 4th August, 2009. In an appeal preferred by the Central Government before Division Bench of Honble High Court of Himachal Pradesh at Shimla, the Division Bench vide its order dated 14th September, 2010 set aside the order of the Honble Single Judge dated 4th August, 2009 and remanded the case back to the Honble Single Judge to decide the petition afresh after hearing all the parties and considering the representation of the Central Government.

On the constitution of National Company Law Tribunal (NCLT), this petition under Section 391 of the Companies Act, 1956, was later transferred to the Chandigarh Bench of NCLT. The Honble NCLT, Chandigarh, on 12th March, 2018, dismissed the Companys petition seeking approval of the Scheme of arrangement with the Fixed Deposit holders. The Honble NCLT directed the Company to cancel the shares issued, under the aforesaid scheme, which have not yet been transferred by original allottees (FD holders) and payment of dues, as per Company Law Board order within 3 months from the date of receipt of the certified copy of the judgment.

Aggrieved by the aforesaid judgement of Honble NCLT, the Company had filed an appeal before the Honble NCLAT, New Delhi, praying, inter-alia, for setting aside of the order passed by the Honble NCLT, Chandigarh and approve the Scheme of arrangement with Fixed Deposit (FD) holders.

The Honble NCLAT, New Delhi, vide its judgement dated 23id July, 2019 has upheld the impugned judgement passed by the Honble NCLT, Chandigarh, dated 12th March, 2018.

The company is seeking advice for evaluating remedies available under the law, including filing of appeal in the higher courts. After evaluating the advice so received, the Company will take such necessary steps as may be required concerning the finality of the order of the Court.

FINANCES

The management is working towards improvement in performance of the Company so as to be able to derive maximum value to its investors. All the business segments are given due attention so that capital is preserved and long term growth can be sustained.

Balance restructured debt, as per Corporate Debt Restructuring Scheme approved in the July 2006 has been paid and cleared in full during the current year, on the terms as approved by lenders of the Company. From now onwards all the internal accruals will be available for all round growth of all business verticals of the Company.

Under the provisions of the Act past accumulated losses restricts the ability of the Company to redeem Preference Shares issued to lenders under the Corporate Debt Restructuring (CDR) Scheme and also to other entities as per CDR terms. As a result, the Company has not been able to redeem these Preference Shares, although they had become due for redemption. The Company in consultation and approval of all the stakeholders will work out a scheme which is in the interest of all the stakeholders.

SHARE CAPITAL

During the year under review, there was no change in the paid-up equity share capital of the Company which as on 31" March, 2019, was Rs 8,995.86 Lakhs.

The Equity Shares issued by the Company are listed at following Stock Exchanges as on 31" March, 2019:

1. National Stock Exchange of India Limited (NSE)

2. BSE Limited (BSE)

Annual listing fee for the financial year 2019-20 has been paid to both the Stock Exchanges. The Equity Shares continue to be listed on both NSE and BSE.

The provisions of the Act have placed statutory restriction on the Company, having accumulated losses, from payment of dividends on Preference Shares. As a result, dividends on Preference Shares have not been paid for more than two years, thereby making the holders of these shares entitled to vote on all resolutions placed before the Company. The proportion of voting rights of Equity Shareholders to the voting rights of Preference Shareholders shall be in proportion to their paid up capital.

SUBSIDIARIES / JOINT VENTURES / ASSOCIATES

The Company has three subsidiaries as on 31" March, 2019, namely:

1. Dr. Morepen Ltd.

2. Total Care Ltd. (subsidiary of Dr. Morepen Ltd.)

3. Morepen Inc., USA Dr. Morepen Limited

The consumer business of the Company being promoted under brand Dr. Morepen and carried under wholly owned subsidiary Dr. Morepen Limited, is growing steadily with a CAGR of 12% during last 5 years. On standalone basis the company has recorded a topline of Rs 5438.08 Lakhs as against Rs 4,890.71 Lakhs recorded in the preceding year, growth of 11%. The management expects to put more focus post completion of debt servicing.

The Companys primary brands like Burnol (Burn Cream), Lemolate (Cough & Cold) and Fiber-X (Sat Isabgol) have registered a modest growth of 2% over last year revenues of Rs 1,990.94 Lakhs. Other small distribution and reach based brands with sales revenue of Rs 552.32 Lakhs have also recorded huge growth of 73% during the year.

The Company expects to continue its growth in the OTC and Brand Sharing business with the continuous focus on new product addition, entering new markets and increasing product reach and availability.

The Grooming business, launched few years back, has registered growth of 45% in its annual revenues at Rs 939.82 Lakhs. The company expects considerable rise in both topline as well bottom line for the business in the years to come.

Total Care Limited

The Company is dealing in OTC & Health Care products. The scale of Companys operations continues to be minimal since past few years with no operating revenue recorded during the year.

Morepen Inc.

Morepen Inc. is the marketing and distribution interface of the Company in USA for its API business, various OTC & other products. During the year under review, the Company recorded a growth of 21% with revenue at Rs 105.32 Lakhs ($153409) as against Rs 87.25 Lakhs ($134,606) in the previous year. The company has recorded a profit of Rs 18.97 Lakhs against loss of Rs 31.65 Lakhs in the preceding year.

CONSOLIDATED FINANCIAL STATEMENTS

The consolidated financial statements for the year ended 31" March, 2019 has been prepared in accordance with Indian Accounting Standards (Ind AS) notified under the Companies (Indian Accounting Standards) Rules, 2015 together with the comparative period data as at and for the previous year ended 31" March, 2019.

In accordance with the Companies Act, 2013 and Indian

Accounting Standards (Ind AS) 110 on Consolidated Financial Statements read with Ind AS 112 on Disclosure of Interest in other entities, the Audited Consolidated Financial Statements is provided in the Annual Report.

In accordance with the provisions of Section 129(3) of the Act, read with the Companies (Accounts) Rules, 2014, a report on the performance and financial position of each of the subsidiaries is attached as ANNEXURE A to this Report in the prescribed form, AOC-1.

DIRECTORS & KEY MANAGERIAL PERSONNEL

Changes in Directors & Key Managerial Personnel

The members at the 33rd Annual General Meeting (AGM) of the Company held on 21st September, 2018 approved the re-appointment of Mr. Sushil Suri, Chairman and Managing Director of the Company, who was liable to retire by rotation pursuant to the provisions of Section 152 and other applicable provisions of the Act read with Companies (Appointment and Qualification of Directors) Rules, 2014, as amended or re-enacted from time to time.

The members also approved the re-appointment of Mr. Sushil Suri, Chairman & Managing Director of the Company, who holds office up to 19th October, 2018 and being eligible, has offered himself for re-appointment pursuant to the provisions of Section 196, 197, 198, 203, Schedule V and other applicable provisions of the Companies Act, 2013 and read with Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, as amended or re-enacted from time to time as the Chairman & Managing Director of the Company, for another term of 5 years w.e.f., 20th October, 2018.

During the year under review, Mr. Thomas P. Joshua, Company Secretary and Key Managerial Personnel, has been resigned from the said position w.e.f., 24th September, 2018 and Mr. Vipul Kumar Srivastava is appointed by the Board of Directors as Company Secretary and Key Managerial Personnel w.e.f., 12th November, 2018.

Mrs. Anju Suri, Director of the Company, who is liable to retire by rotation pursuant to the provisions of Section 152 and other applicable provisions of the Act read with Companies (Appointment and Qualification of Directors) Rules, 2014, as amended or re-enacted from time to time, has given her consent and being eligible has offered herself for re-appointment, in the 34th Annual General Meeting.

Your Directors also recommend the re-appointment of Mr. Arun Kumar Sinha, Whole-Time Director of the Company, who holds office up to 31st March, 2019 and being eligible, has offered himself for re-appointment pursuant to the provisions of Section 196, 197, 198, 203, and other applicable provisions of the Companies Act, 2013 and read with Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, as amended or re-enacted from time to time as the Whole-Time Director of the Company, for another term of 3 years w.e.f., 1st April, 2019, at 34th Annual General Meeting.

Mr. Manoj Joshi (DIN: 00036546), Mr. Sukhcharan Singh (DIN: 00041987) and Mr. B.R. Wadhwa (DIN: 00012096), have given their consent to act as an Independent Director of the Company pursuant to Section 152 of Companies Act, 2013, read with Rule 8 of Companies (Appointment and Qualification of Directors) Rules, 2014 and have offered themselves to be re-appointed for an another term of 5 (five) consecutive years commencing from 19th September, 2019 to 18th September, 2024. Your directors recommend their re-appointment as Independent Directors on the Board, in accordance with the provisions of Section 149 of Companies Act, 2013, read with Companies (Appointment and Qualification of Directors) Rules, 2014, as amended from time to time, in the ensuing Annual General Meeting.

Declaration by Independent Director(s)

Pursuant to the provisions of Section 149 of the Act, the independent directors have submitted declarations that each of them meet the criteria of independence as provided in Section 149(6) of the Act along with Rules framed thereunder and Regulation 16(1)(b) of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 ("SEBI Listing Regulations"). There has been no change in the circumstances affecting their status as independent directors of the Company.

Evaluation of Board, Committees and Directors

Pursuant to the provisions of the Act and Regulation 17 of Listing Regulations, the Board has carried out its own performance evaluation, that of the Committees and the individual performance of its Directors. The manner in which the evaluation has been carried out has been provided in the Corporate Governance Report.

Familiarization Programme for Independent Directors

The details pertaining to Familiarization Programme for Independent Directors has been incorporated in Corporate Governance Report.

Meetings of Board of Directors

The Board of Directors met 5 (five) times during the year under review, to transact the business of the Company, the details of which are given in Corporate Governance Report.

Independent Directors Meeting

During the year under review, a separate meeting of the Independent Directors of the Company was held on 04th February, 2019, without the presence of Non-Independent Directors and members of the Management. The Independent Directors reviewed the performance of NonIndependent Directors and the Board as a whole, performance of Chairperson of the Company and assessed the quality, quantity and timelines of flow of information between the Company Management and the Board. All the Independent Directors of the Company were present in the meeting.

DIRECTORS RESPONSIBILITY STATEMENT

As required under Section 134(3)(c) of the Act, your Directors, to the best of their knowledge and belief and according to the information and explanations obtained by them, confirm that:

a) in the preparation of annual accounts, the applicable accounting standards have been followed, along with proper explanation relating to material departures, wherever applicable;

b) 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 and of the profit and loss of the Company for that period;

c) 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 prevention and detecting of fraud and other irregularities;

d) the annual accounts have been prepared on a going concern basis;

e) internal financial controls to be followed by the Company have been laid down and such internal financial controls are adequate and were operating effectively; and

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

MANAGERIAL REMUNERATION AND OTHER DISCLOSURES

Disclosure pursuant to Section 197 of the Act read with Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014:

a) Ratio of the remuneration of each Director to the median remuneration of the employees (MRE) and other details pursuant to Section 197 (12) of the Act read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is annexed and forms part of this report as ANNEXURE B.

b) The Statement containing the particulars of employees as required under section 197(12) of the Companies Act 2013 read with Rule 5(2) and other applicable Rules (if any) 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 Companies Act, 2013 the said annexure is open for inspection at the Registered and Corporate office of the Company during the working hours. Any member interested in obtaining a copy of the same may write to the Company and obtain the copy within statutory prescribed timeline.

c) No Director of the Company, including its Managing Director or Whole-Time Director, is in receipt of any commission from the Company or its Subsidiary Company.

AUDIT COMMITTEE

Your Company has an Audit Committee in compliance of the provisions of Section 177 of the Act and Regulation 18 of Listing Regulations. The complete details with respect to Audit Committee, as required to be given under the aforesaid provisions, is given in the Corporate Governance Report.

WHISTLE BLOWER POLICY / VIGIL MECHANISM

The Company has established a Whistle Blower Policy/Vigil Mechanism through which its Directors, Employees and Stakeholders can report their genuine concern about unethical behaviors, actual or suspected fraud or violation of the Companys Code of Conduct or Ethics Policy. The said policy provides for adequate safeguard against victimization and also direct access to the higher level of superiors including Chairman of the Audit Committee in exceptional cases. The same is reviewed by the Audit Committee from time to time.

RISK MANAGEMENT

The Company has in place a mechanism to inform the Board about the risk assessment and minimisation procedures and periodical review to ensure that management controls risk through means of a properly defined framework.

The Company has formulated and adopted Risk Management Policy to prescribe risk assessment, management, reporting and disclosure requirements of the Company.

NOMINATION AND REMUNERATION COMMITTEE

Your Company has a Nomination and Remuneration Committee in compliance to the provisions of Section 178 of the Act and Regulation 18 of Listing Regulations. The complete details with respect to the salient features of Nomination and Remuneration Committee, as required to be given under the aforesaid provisions, is given in the Corporate Governance Report.

The Company has adopted a Nomination and Remuneration Policy for Directors, Key Managerial Personnel (KMP) and other employees of the Company as formulated by Nomination and Remuneration Committee, pursuant to provisions of Section 178 of the Act and Para A of Part D of Schedule II of Listing Regulations, which acts as a guideline for determining, inter-alia, qualifications, positive attributes and independence of a Director, matters relating to the remuneration, appointment, removal and evaluation of performance of the Directors, Key Managerial Personnel, Senior Management and other employees.

The Company has made the requisite changes in accordance of the Companies Act, 2013, as amended, and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, as amended. The detailed policy formulated by Nomination and Remuneration Committee can be accessed at http://www.morepen.com/pdf/Nomination-and- Remuneration-Policy.pdf

STATUTORY AUDITORS

M/s. Satinder Goyal & Co. (Chartered Accountants FRN: 027334N), the Statutory Auditors of the Company, were appointed by the shareholders in the AGM held on 22nd September, 2017, pursuant to provisions of Section 139, 141, 142 and other applicable provisions, if any, of the Act, read with the Companies (Audit and Auditors) Rules, 2014 (including any statutory modification(s) or re-enactment thereof, for the time being in force) and subject to all the applicable laws and regulations for a term of five (5) consecutive years to hold office from the conclusion of the 32nd Annual General Meeting until the conclusion of 37th Annual General Meeting, to be held in the year 2022, subject to ratification of appointment by the members at every Annual General Meeting.

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 7th May, 2018. Accordingly, no resolution is being proposed for ratification of appointment of Statutory Auditors at the ensuing Annual General Meeting.

EXPLANATION TO AUDITORS REPORT

The Auditors vide Para (vii)(a) of the Annexure-A to the Auditors Report have commented on delay in deposit of Employees State Insurance (ESI), Provident Fund (PF), Income Tax and GST dues. The Company has however, deposited all the dues in respect of ESI, PF, GST and Income Tax (TDS) for the year under review. The Company is taking requisite steps for timely deposit of above noted dues.

SECRETARIAL AUDIT

Pursuant to the provisions of Section 204 of the Act read with Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, Mr. Praveen Dua, Company Secretary, Proprietor of M/s. PD and Associates, Company Secretaries, was appointed by Board of Directors of the Company as Secretarial Auditors of the Company for the financial year 2018-19. The Secretarial Audit Report is annexed and forms part of this report as ANNEXURE C.

EXPLANATION TO SECRETARIAL AUDIT REPORT

The Secretarial Auditor has observed that the Company has not redeemed the Preference Shares due for redemption. The reasons for not redeeming the Preference Shares have been explained in Note No. 18 to the Financial Statements for the year ended 31st March, 2019.

SECRETARIAL STANDARDS

The Company has devised proper systems to ensure compliance with the provisions of all applicable Secretarial Standards issued by the Institute of Company Secretaries of India and that such systems are adequate and operating effectively.

COST AUDIT

Pursuant to Section 148 of the Act, read with the Companies (Cost Records and Audit) Rules, 2014, the Cost Accounting Records maintained by the Company in respect of its Bulk Drugs and Formulations activity are required to be audited by Cost Auditors. The Board of Directors of the Company has, on the recommendation of the Audit Committee, appointed M/s. Vijender Sharma & Co., Cost Accountants, as the Cost Auditor of the Company for the financial year ended 31st March, 2020, at a remuneration of Rs 2.00 Lakhs, subject to the ratification of their remuneration by the shareholders in the ensuing Annual General Meeting.

INTERNAL FINANCIAL CONTROLS

The Company has an Internal Control System, commensurate with the size, scale and complexity of its operations. The internal financial controls are adequate and are operating effectively so as to ensure orderly and efficient conduct of business operations. The Companys internal financial control procedures ensure that Companys financial statements are reliable and prepared in accordance with the applicable laws.

To maintain its objectivity and independence, the Internal

Audit Team reports to the Chairman of the Audit Committee of the Board. Based on the internal audit report, process owners undertake corrective action in their respective areas and thereby strengthening the controls. Significant audit observations and corrective actions thereon are presented to the Audit Committee of the Board. Team engaged in internal audit carries out extensive audits throughout the year across all functional areas, and submits its reports from time to time to the Audit Committee of the Board of Directors.

CORPORATE SOCIAL RESPONSIBILITY

The Corporate Social Responsibility (CSR) Committee of the Company was constituted by the Board on 10th May, 2016 to monitor implementation of CSR activities by the Company in accordance with Section 135 read with Schedule VII of the Act. Based on the recommendation of the CSR Committee, your Board has adopted a CSR Policy indicating the activities to be undertaken by the Company as specified in Schedule VII.

The Report on CSR Activities with details of the composition of CSR Committee, CSR Policy, CSR initiatives and activities during the year is annexed and forms part of this report as ANNEXURE D.

DISCLOSURE UNDER THE SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION AND REDRESSAL) ACT, 2013

The Company has in place a policy on Prevention, Prohibition and Redressal of Sexual Harassment of Women at Workplace pursuant to the requirements of The Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. An Internal Complaints Committee (ICC) has been set up to redress complaints received regarding sexual harassment. The policy has set guidelines on the redressal and enquiry process that is to be followed by complainants and the ICC, while dealing with issues related to sexual harassment at the work place. All women employees whether permanent, temporary, contractual and trainees are covered under this policy. The Company has not received any complaint during the year.

LEGAL & CORPORATE MATTERS

The Company had allotted 75,17,540 Equity Shares as per Corporate Debt Restructuring (CDR) Scheme approved by the CDR Cell. These shares were allotted on preferential basis to the Banks/ Financial Institutions. Out of total issued Equity Shares, the listing approval for 3,75,750 Equity Shares w.r.t., two allottees is pending from Stock Exchanges. As advised by the Stock Exchanges, the Company has approached SEBI for grant of exemption, which is still awaited.

In the matter of cross appeals filed by the Company and Central Government before Honble Supreme Court of India against the impugned judgement of the Honble High Court of Himachal Pradesh appointing two government nominees on the board of the company for 3 years under provisions of erstwhile Companies Act, 1956, the Honble Supreme Court vide its Order dated 9th July, 2019, has held that no interference in the aforesaid decision of Honble High Court is called for. It further held that it would be open for the Company to agitate the subsequent events before the concerned forum. The company is seeking the legal advice for approaching jurisdictional National Company Law Tribunal (NCLT) for placing on record the subsequent events, inter-alia, payment to the creditors post the Orders passed by the Honble High Court of Himachal Pradesh and to adjudicate in the light of the present facts and circumstances.

In the matter of prosecutions filed by the Registrar of Companies/Central Government against the Company and its Directors pursuant to Section 235 of the erstwhile Companies Act, 1956, the Company is defending against the said prosecutions before the Court and the matter is under adjudication.

EXTRACT OF ANNUAL RETURN

The detailed extract of Annual Return in Form MGT-9 as required under Section 134(3)(a) of the Act is annexed and forms part of this report as ANNEXURE E. The same is available at the website of the Company at http://www.morepen.com/pdf/Annual-Return.pdf

MATERIAL CHANGES AND COMMITMENTS AFFECTING THE FINANCIAL POSITION OF THE COMPANY

Except from the liabilities which may arise in respect of payment to FD holders as per the order of Honble NCLAT, dated 23id July, 2019 which has upheld the order of NCLT dated 12th March, 2018, there have been no material changes and commitments, affecting the financial position of the Company, which have occurred between the end of the financial year of the Company and the date of this report.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS ANDOUTGO

The information relating to Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and outgo, as required under Section 134(3)(m) of the Act read with the Companies (Accounts) Rules, 2014 is annexed and forms part of this report as ANNEXURE F.

PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS

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

PARTICULARS OF CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES

All the related party transactions that were entered into during the financial year were on arms length basis and in the ordinary course of business. During the year under review there were no materially significant related party transactions, including arms length transactions; hence, disclosure in Form AOC - 2 is not required.

The complete details with respect to contracts or arrangements with related parties as required to be given under the Act and Part C of Schedule V of Listing Regulations is given in the Corporate Governance Report.

MANAGEMENT DISCUSSION AND ANALYSIS REPORT

A detailed review of the operations and performance of the Company is set out in the Management Discussion and Analysis Report pursuant to Part B of Schedule V of Listing Regulations which forms part of the Annual Report for the year under review as ANNEXURE G.

HUMAN RESOURCES

A detailed review of Human Resources of the Company is set out in the Management Discussion and Analysis Report.

CORPORATE GOVERNANCE

A Report on Corporate Governance along with a certificate from the Practicing Company Secretary regarding compliance with conditions of Corporate Governance as stipulated in Part E of Schedule V of Listing Regulations forms part of this report and is annexed as ANNEXURE H.

ACKNOWLEDGEMENTS

Your Directors place on record their gratitude to the Central Government, State Government, Drug Control Authorities, Companys Bankers, GMP Consultants, Auditors, Medical & Legal Professionals and business partners/for the assistance, co-operation and encouragement they extended to the Company. Your Directors also wish to place on record their sincere thanks and appreciation for the continuing support and unstinting efforts of investors, vendors, dealers, business associates and employees in ensuring an excellent all around operational performance.

Your Directors look forward to your continued support in our efforts to grow together and enhance health through delivery of quality products.

For and on behalf of Board of Directors
Sushil Suri
Place: New Delhi (Chairman & Managing Director)
Date: 27th July, 2019 DIN:00012028