Morepen Laboratories Ltd Directors Report.

Dear Shareholders,

Your Directors have pleasure in presenting the 35 th Annual Report on business, operations and achievements of the company together with the audited financial statements for the financial year ended 31st March, 2020.

FINANCIAL HIGHLIGHTS

Particulars

Standalone

Consolidated

2019-20 2018-19 2019-20 2018-19
Sales 77,985.88 70,597.21 83,960.26 75,621.44
Other Operating Income 1,212.86 1,127.08 1,346.43 1,232.40
Other Income 941.72 367.18 948.35 367.18
Total Income 80,140.46 72,091.47 86,255.04 77,221.02
Operating Surplus 7,388.32 6,869.22 7,799.81 7,118.96
Finance cost 196.75 207.08 198.45 211.00
Cash Surplus 7,191.57 6,662.14 7,601.36 6,907.96
Non-Cash Items:
Depreciation & Amortisation 3,443.39 3,800.78 3,690.60 3,990.29
Profit before Tax 3,748.18 2,861.36 3,910.76 2,917.67
Tax - Current Year - (212.70) (37.40) (246.33)
Tax credit entitlement - 212.70 - 212.70
Tax (Earlier Years) (514.87) - (515.47) -
Profit before non-controlling interest 3,233.31 2,861.36 3,357.89 2,884.04
Less : Non - controlling interest - - (0.03) (0.89)
Profit after non-controlling interest 3,233.31 2,861.36 3,357.92 2,884.93
Other Comprehensive Income (Net of Tax) (254.28) (171.82) (261.09) (169.81)
Total Comprehensive Income 2,979.03 2,689.54 3,096.83 2,715.12
EPS (Basic/Diluted) 0.72 0.64 0.75 0.64

REVIEW OF PERFORMANCE

On the strength of substantial growth in revenues of Active Pharmaceutical Ingredients (API) business, Devices business, Branded Formulation business as well as OTC (over the counter) business of the company, a revenue growth of 12% was recorded at Rs 86,255.04 Lakhs during the current year against previous years revenues of Rs 77,221.02 Lakhs. The exports revenues jumped by 10% during the current year.

The Company was able to pass on some of the cost increase to its customers and maintain its margins. The addition to capacities and investment in new processes and systems was continued during the year.

API business with its current year revenues of Rs 47394.72 Lakhs registered a growth of 15% during the year and constitutes 61% of standalone revenue of the company whereas at consolidated level, it stands at 56% of the total revenues. The devices business continued to score new heights with current year revenues of Rs 16,834.79 Lakhs registering a growth of 20% over the previous year revenues of Rs 13,975.04 Lakhs. OTC business with current year revenues of Rs 6,462.64 Lakhs clocked a growth of 19% over previous year revenues of Rs 5,438.08. Though the branded formulations business recorded a growth of 19% at Rs 4,063.62 Lakhs, prescription business recorded a fall of 10% over last year revenues of Rs 15,317.43 Lakhs.

COVID-19: Response & Impact

COVID-19 pandemic advanced swiftly into a global crisis in the month of March, 2020, forcing the government authorities to enforce lockdown in the Country. Due to this, the Company had instantly shifted its focus on minimizing disruption to services for all our domestic and international customers and on the health and well-being of all employees. The workforce of the Company have settled into the new ways of working and the Company is also tracking employee welfare, productivity and product delivery progress through the use of various tools. We are collaborating with our customers for efficiently delivering our commitments.

The financials for the year ended 2019-20 were marginally affected due to the impact of novel Coronavirus and the consequential lockdown imposed by the Government of India. However, the positive momentum gained in the last quarter of financial year 2019-20, the strong balance sheet position, profitability and inherent resilience of the business model may allow the Company well to navigate the challenges ahead and gain market share.

Financial Performance:

Sales

The consolidated sales revenues for the current year at Rs 83,960.26 Lakhs have logged a handsome growth of 11.03% against previous year sales revenues of Rs 75,621.44 Lakhs. The current year total revenues of Rs 86,255.04 Lakhs are up by 11.70 % over the previous year revenues of Rs 77,221.02 Lakhs. The export business contributing over 41% of the consolidated sales revenues of the company have registered a growth of 10% during the current year.

On standalone basis, the company registered sales revenues of Rs 77,985.88 Lakhs as compared to Rs 70,597.21 Lakhs during previous financial year, a growth of 10.47%.

Material Cost

Consolidated material cost, as a percentage of sales, is up at 66.39% against to 65.66% in the previous year, on account of various reasons including change of product mix and product markets, firming up of raw material prices & others. The current year sales realizations have taken care part of the increased input costs to maintain the product margins.

Employee Cost

During the year under review, the employee strength of the company has increased by 13.01%. The current years consolidated employee cost is 13.09% of the sales revenue against 12.61% in the last financial 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

The consolidated expenditure on manufacturing, sales & marketing and the administrative activities is at 13.96% of sales revenues, against 14.43% recorded in the preceding financial year. The company has been able to keep under control amount of spend on various administrative and sales & marketing activities.

Finance Cost & Depreciation

The annual consolidated finance cost at Rs 198.45 Lakhs is down by around 6% against previous year cost of Rs 211.00 Lakhs. Annual consolidated depreciation & amortisation charge has come down to Rs 3,690.60 Lakhs against Rs 3,990.29 Lakhs of previous year.

Other Operating Income & Other Income

The consolidated other operating income represents export incentives, income from foreign operations & others. The export incentives for the current year at Rs 1,212.86 Lakhs are up by 11% against preceding year incentives at Rs 1,093.59 Lakhs. Others - income from foreign operations, at Rs 133.57 Lakhs are down by 4% during the current year as against Rs 138.81 Lakhs in the previous year. Consolidated other income representing currency fluctuations and interest income at Rs 948.35 Lakhs, is up from previous year of Rs 367.18 Lakhs.

Profit after Tax

The consolidated Profit before interest, depreciation and tax is higher at Rs 7,799.81 Lakhs as against Rs 7,118.96 Lakhs in the previous year. Net profit after tax but before share of profit from non-controlling interest is at Rs 3,357.89 Lakhs against Rs 2,884.04 Lakhs in last financial year. The consolidated net profit, exclusive of minority share, at Rs 3,357.92 Lakhs, is up by 16.40% over previous years profit. Total Comprehensive Income for the year is Rs 3096.83 Lakhs vis-a-vis Rs 2,715.12 Lakhs of previous year, a growth of 14.06% over preceding year.

On standalone basis, the Net Profits after tax for the year are at Rs 3,233.31 Lakhs as against Rs 2,861.36 Lakhs during previous financial year, a growth of 13%. Total Comprehensive Income for the year is at Rs 2,979.03 Lakhs vis-a-vis Rs 2,689.54 Lakhs of the preceding year, a growth of 10.76%.

Division wise Business Performance:

Active Pharmaceutical Ingredients (API)

API business during the current year has recorded revenue of Rs 47,394.72 Lakhs against Rs 41,304.70 Lakhs of last year, a growth of 15%. The export business forming 72% of API business has recorded a growth of 10% during the current financial year. In most of the products, the company has been able to maintain better price realisation and the volume growth as well. All the top selling products namely Loratadine, Montelukast Atorvastatin and Rosuvastatin have recorded excellent growth in their annual revenues in the range of 15-24%.

The Finished APIs with current year revenues of Rs 41439.17 Lakhs has recorded a growth of 14% during the year. Intermediates with their annual sales revenues of Rs 3,150.10 Lakhs are up by 24%.The sales revenues for new molecules have increased by 23% at Rs 2,806.18 Lakhs.

Loratadine having registered annual sales revenue of Rs 16,558.36 Lakhs continues to be leading revenue generator for the API business closely followed by Montelukast with sales revenue of Rs 14,246.52 Lakhs recorded during the current year. Atorvastatin with its annual revenues of Rs 8,341.06 Lakhs registered a growth of 16% during the current year. Rosuvastatin sales revenues, at Rs 3,775.23 Lakhs have taken a quantum jump of 24% during the year. The current year Fexofenadine revenue at Rs 1,680.33 Lakhs is down by around 15% against previous year revenues of Rs 1,680.33 Lakhs.

API business has recorded a compounded annual growth rate (CAGR) of 13.50% during last 5 years.

The Ministry of Environment, Forest and Climate Change vide notification dated 27* March, 2020, inter-alia, expedite the prior environment clearance so as to ensure drug availability or production to reduce the impact of COVID - 19 thereby considered necessary that all projects or activities in respect of bulk drugs and intermediates manufacturing to address ailments such as COVID-19 and those with similar symptoms are categorized as Rs B2 for a period up to the 30th September 2020, as an interim measure. The company had applied for and received in-principle approval from Directorate of Industries(DOI) Govt. of Himachal Pradesh on 24th July, 2020.

On 31st August, 2020, the Board of Directors of the company approved the expansion of APIs (bulk drugs) i.e., increase in manufacturing capacity by 2000 MT per annum in addition to existing capacity of 3000 MT. The expanded capacity is likely to commence commercial production over the next 3 years.

Home Diagnostics - Device Business

The Diagnostics Devices business of the company has been growing steadily over last many years and has recorded a compounded annual growth rate (CAGR) of around 28% during last 5 years. Blood Gluco Monitoring business with current year revenues of Rs 11,954.30 Lakhs, has registered a CAGR of 38% during last 5 years. Gluco monitors installations during the current year have been 26% more than the previous year and have cross 3.3 million. The glucose testing strips have registered a staggering growth of 30% during the current year and over 425 million glucose testing strips have been sold till date.

Blood Pressure Monitors with current year Sales revenues of Rs 2,906.01 Lakhs has posted decent growth of 10% over the previous year. It has recorded a CAGR of 32% during last 5 years.

Nebulisers with current year sales revenue of Rs 1,256.13 Lakhs recorded a robust growth of around 44% in current year, whereas current year sales revenue for other product category is at of Rs 718.35 Lakhs against Rs 1,160.67 lakhs in the preceding year.

In line with its commitment of delivering good health at home at affordable prices, the company has also started in house manufacturing of Stethoscope along with Blood Glucose Monitors and strips. The company has become selfreliant in the production of glucometers and strips. It has manufactured around 1 million Blood Glucose Monitors and around 125 million Gluco strips 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. The company has also started production of Thermometers and Pulse Oximeter and also plans to start production of Nebulizers in the near future. Home Diagnostics business has made remarkable growth every year and is fully geared up to achieve many more milestones in the coming years.

The company continue to invest in Glucometers placements in the market in the current year to expand the customer base. The investment has paid off well in expanding its customer base for the glucose strips and is also expected to continue in the coming years.

Finished Formulations

The current year sales revenue for the Finished Dosages at Rs 13,756.36 Lakhs is down by 10% over previous year revenues of Rs 15,317.43 Lakhs due to slow pick up in contract manufacturing and generics business of the company though the branded formulation business continued to show uptrend over the years. Some of sales were lost on account of restriction imposed due to COVID- 19. The Branded Prescription (Rx) products with annual sales revenues of Rs 4,063.62 Lakhs have recorded handsome revenue growth of 19% during the period under review. Under the Branded Prescription (Rx) product category, the top three therapeutic categories namely Antibiotics, Gastroenteritis and Vitamins contributed Rs 3,110.32 Lakhs to branded formulation business, against Rs 2,588.83 Lakhs added in previous 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 3,233.31 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 31st March, 2010, the company had allotted 9,24,90,413 Equity Shares to the fixed deposit holders in settlement of their fixed deposit dues pursuant to the Scheme of Arrangement & Compromise under Section 391 of the Companies Act, 1956, approved by the Honble High Court of Himachal Pradesh, Shimla vide its order dated 4th August, 2009.

The Central Government filed an appeal against the aforesaid order of the single judge, before Division Bench of Himachal Pradesh High Court, at Shimla which vide its order dated 14.09.2010 allowed the appeal, inter-alia, set aside the order passed by the single judge dated 04.08.2009 and remanded the matter back to the single judge for deciding the petition afresh.

The company filed a civil appeal in the Honble Supreme Court of India against the order of the Honble High Court dated 14.09.2010. The Honble Supreme Court disposed of the aforesaid appeal on 14.01.2011 and remitted the matter to the single judge for adjudication and requested the single judge to decide the matters within two months.

In the meantime, pursuant to Rule 3 of the Companies (Transfer of Pending Proceedings) Rules, 2016, the matter was transferred from Honble High Court of Himachal Pradesh to the National Company Law Tribunal (NCLT), Chandigarh.

After hearing the matter, the NCLT, Chandigarh, vide its judgment dated 12.03.2018, ordered the cancellation of Equity Shares allotted to the fixed deposit (FD) holders (except to those FD holders who have since traded/ transferred their shares) and pay the outstanding fixed deposit dues to such FD holders.

An appeal filed by the company before Honble National Company Law Appellate Tribunal (NCLAT), New Delhi against the aforesaid NCLT order, was set aside, which vide its order dated 23.07.2019 upheld the impugned NCLT, order dated 12 th March, 2018.

In compliance of the Honble NCLT, Chandigarh, order dated 12.03.2018, the company informed all the eligible shareholders (erstwhile FD holders), holding the Equity Shares as originally allotted to them under the 391 Scheme for surrendering their shares for the cancellation and payment of fixed deposit dues as per the aforesaid NCLT order.

In response to the individual notice sent to each eligible fixed deposit holder, advertisements placed in the newspapers and notice being placed on the website of the company, for tendering of their equity shares with the company, for the cancellation and payment of FD dues in lieu thereof.

Out of 31,109 fixed deposit holders holding 3,85,65,081 Equity Shares, 228 fixed deposit holders holding 2,66,413 Equity Shares, approached the company for the cancellation of equity shares and payment of FD dues in lieu thereof.

After verifying the documents submitted by these FD holders, the company paid all these FD holders, their fixed deposit dues and has approached the stock exchanges and depositaries for the cancellation of these shares, against which payments has been done till 31st March, 2020.

Though, the Honble Tribunal had granted three months time to complete aforesaid process, however, the Board of Directors (the Board) of the company taking a lenient view has granted a period over ten months for the completion of the process of cancellation of equity shares and refund of FD dues.

Additionally, keeping in view of interest of those FD holders, who are eligible for cancellation of equity shares issued and refund of their FD dues along-with interest due thereon and has not yet surrendered their shares for cancellation, the Board of Directors of the Company, in order to conclude the process by 30.09.2020, has decided to give another opportunity to those eligible FD holders by sending individual letters to FD holders by registered post/ speed post and send letters on their registered e-mail address. In this regard, a general notice was also published in two newspapers i.e., in vernacular and English language on 27.07.2020.

FINANCES

The management team is working diligently for the profitable growth of the company so that all its stakeholders are suitably rewarded. The efforts are on to judiciously and consistently focus on all the business streams by each business looked after by different business heads.

Post debt servicing, the internal accruals are increasingly being put to fire the growth engines for all the business segments.

However, the preference shares are pending for redemption due to unavailability of distributable profits in terms of

Section 55(2) (a) read-with Section 123 of Companies Act, 2013 and its rules made thereunder. The company is exploring suitable options to deal with the matter of redemption of outstanding preference shares including issuance of equity shares subject to necessary statutory approvals including approvals of preference shareholders. The majority of preference shareholders comprising of banks and financial institutions, who were issued the preference shares, in satisfaction of their outstanding debt under Corporate Debt Restructuring (CDR) Scheme are agreeable to the companys aforesaid proposal.

SHARE CAPITAL

During the year under review, there was no change in the paid-up equity share capital of the Company which as on 31st March, 2020, was Rs 8,995.86 Lakhs.

The Equity Shares issued by the Company are listed at following Stock Exchanges as on 31st March, 2020:

1. National Stock Exchange of India Limited (NSE)

2. BSE Limited (BSE)

Annual listing fee for the financial year 2020-21 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 & Preference Shareholders shall be in proportion to their paid up capital in the total share capital of the company.

SUBSIDIARIES / JOINT VENTURES / ASSOCIATES

The Company has three subsidiaries as on 31st March, 2020, namely:

1. Dr. Morepen Limited

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

3. Morepen Inc., USA

Dr. Morepen Limited

The Over the Counter (OTC) business of the company promoted under brand Rs Dr. Morepen and carried under wholly owned subsidiary viz., Dr. Morepen Limited, is getting traction year after year. It has recorded a CAGR of 17% during last 5 years. On standalone basis the company has recorded a topline of Rs 6,462.64 Lakhs as against Rs 5,438.08 Lakhs recorded in the preceding year, growth of 19%. The OTC business has recorded amazing growth despite loss of sales of regular products in the month of March 2020 due to lockdown imposed because of COVID-19.

Many new products were launched in the nutritional and preventive healthcare segment during the year i.e. Active Smile (Mouthwash), Dr. Morepen Daily (Health Supplement), MTP Kit (Contraception Pills), VCalci (Calcium Tab), Clean & Pure (Intimate Hygiene Wash), Liv Healthy (Liver Tonic), Head-X (Relief from Headache), Dr. Morepen Aid (Adhesive First Aid Dressing), Dr. Morepen Buds (Ear cleaning cotton bud), Cold-EX (Relief from Cold & Cough), Paachan-Arishta (Ayurvedic Digestive Tonic) and Adult Nasal Spray.

In its fight against COVID-19, new product categories were introduced which included - range of hand sanitisers, hand rubs, hand wash, anti-bacterial sprays, disinfectant solutions, masks, gloves, Vitamin-C gummies for kids to fight COVID-19 at ground level .

The sale of newly added COVID-19 products compensated loss of sale of regular products during the month March 2020. The companys primary brands like Burnol (Burn Cream), Lemolate (Cough & Cold) and Fiber-X (Sat Isabgol) with combined sales revenues of Rs 1,703.65 Lakhs registered a drop of 14% in its annual revenues. Other small distribution and reach based brands with sales revenue of Rs 1,349.76 Lakhs have recorded massive growth of 144% during the year.

The grooming business, launched in July 2015, carried on under the brand name Rs GUBB recorded sales revenue of Rs 1,482.41 Lakhs against previous revenues of Rs 939.82 Lakhs, registering a magnificent growth of 58% over the preceding year. The company is confident of the growth potential for this business in the coming years keeping in view the prominence being gained over its 5 years of its launch.

The company is expecting of many fold growth in its revenue in the coming years as it invests more in this business with the continuous focus on new product additions, entering new markets and increasing product reach and availability.

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 has recorded revenue of Rs 133.57 Lakhs ($177,155) as against Rs 105.32 Lakhs ($153,409) of previous year, a growth of 21%. The company, during the year, has recorded a profit of Rs 74.46 Lakhs against profit of Rs 18.97 Lakhs recorded in the preceding year.

CONSOLIDATED FINANCIAL STATEMENTS

The consolidated financial statements for the year ended 31st March, 2020 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 31st March, 2020.

In accordance with the Companies Act, 2013 and Indian Accounting Standards (Ind AS) 110 on Rs Consolidated Financial Statements read with Ind AS 112 on Rs Disclosure

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 Rs A to this Report in the prescribed form, AOC-1.

DIRECTORS & KEY MANAGERIAL PERSONNEL Changes in Directors & Key Managerial Personnel

The members at 34th Annual General Meeting (AGM) of the Company held on 13th September, 2019 approved the:

I. Re-appointment of Mrs. Anju Suri, 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 Director of the Company.

II. Appointment of Mr. Sanjay Suri as a Whole Time Director of the Company, liable to retire by rotation, for a period of three (3) years commencing from 13th August, 2019 to 12th August, 2022.

III. Appointment of Mr. Praveen Kumar Dutt as an Independent Director, not liable to retire by rotation, for a term of 5 years commencing from 13 th August, 2019 to 12th August, 2024.

IV. Re-appointment of Mr. Arun Kumar Sinha as a Whole Time Director (i.e., Executive Director), for a term of 3 years commencing from 1st April 2019 to 31st March, 2022.

V. Re-appointment of Mr. Bhupender Raj Wadhwa, Mr. Sukhcharan Singh and Mr. Manoj Joshi, the Non-Executive Independent Directors of the Company for a second term of 5 years commencing from 13th September, 2019 to 12 th September , 2024.

Dr. Arun Kumar Sinha, Wholetime 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 his consent and being eligible offered himself for re-appointment, in the 35th Annual General Meeting.

Pursuant to proviso of Regulation 17(1)(a) of SEBI (LODR) Regulations, 2015, as amended, hereinafter "Listing Regulations" the company falling under the category of top 1000 listed entities, on the basis of market capitalisation as on 31st March, 2020, the Board of Directors has appointed Dr. Savita (DIN: 08764773) as Additional Director categorised as Independent Woman Director with effect from 22n June, 2020 and subject to approval of members of the company for a term of 5 consecutive years till 21st June, 2025. In this regard, Dr. Savita (DIN: 08764773), has given her consent to act as an Independent Director of the Company pursuant to Section 149, 152 of Companies Act, 2013, read with Rule 8 of Companies (Appointment and Qualification of Directors) Rules, 2014, for a term of 5 (five) consecutive years commencing from 22nd June, 2020 to 21st June, 2025. Your directors recommended her appointment as Independent Director 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 35 th 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. 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 Rs Corporate Governance Report.

Familiarization Programme for Independent Directors

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

Meetings of Board of Directors

The Board of Directors met Seven (7) times during the year under review, to transact the business of the Company, the details of which are given in Rs Corporate Governance Report.

Independent Directors Meeting

During the year under review, a separate meeting of the Independent Directors of the Company was held on 14th February, 2020, without the presence of NonIndependent Directors and members of the Management. The Independent Directors reviewed the performance of Non-Independent 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; within statutory prescribed timeline.

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;

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 Rs 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 Rs 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 behaviours, 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 with the provisions of Section 178 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 Rs 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 22n 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 reenactment 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 32n Annual General Meeting until the conclusion of 37* 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 7 th 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 Income Tax (FBT) dues. The said dues, even though, are being adjusted by the income tax department against credit of TDS available to the company; it shall take necessary steps to liquidate the entire dues.

Further, vide Para (viii) of the aforesaid annexure, the auditors has observed that the company has not redeemed the Preference Shares which have been due for redemption since past many years. The grounds for not redeeming the said preference shares have been explained in Note No. 18 to the Financial Statements for the year ended 31st March, 2020.

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 2019-20. The Secretarial Audit Report is annexed and forms part of this report as ANNEXURE Rs C.

EXPLANATION TO SECRETARIAL AUDIT REPORT

The explanation to the observation of the Secretarial Auditor in its report are as under:

1. The company has filed an appeal before Honble Securities Appellate Tribunal (SAT), which is pending for adjudication.

2. In respect of cancellation of shares, the Company has filed requisite application with Stock Exchanges and the Registrar of Companies.

3. In respect of compliance of directions received from Central Government for appointment of 2 nominee directors, necessary explanation is given under Rs Legal & Corporate matter section of this report.

4. In respect of redemption of Preference Shares due for redemption, the grounds for not redeeming the said Shares have been explained in Note No. 18 to the Financial Statements for the year ended 31st March, 2020.

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 10 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 Rs 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

In the matter of Section 408 r/w Section 397/398 of the erstwhile Companies Act, 1956, the Company has received a direction from Central Government i.e., Ministry of Corporate Affairs (MCA) on 30.07.2019 for the appointment of two nominee directors on the Board of Directors of the Company, pursuant to the Order passed by the Company Law Board dated 01.07.2005 read-with order passed by Honble High Court of Himachal Pradesh at Shimla dated 16.04.2007 and Order of Honble Supreme Court of India dated 09.07.2019.

However, liberty was granted by Honble Supreme Court while passing the Order dated 09.07.2019 to place the subsequent developments that have taken place post passing of Order by Honble CLB before the appropriate forum. In terms of the liberty so granted, the Company has filed an application before the Honble National Company Law Tribunal (NCLT), Chandigarh placing the subsequent developments in the Company with a prayer that the appointment of two Government nominee directors is not required in light of these developments. The Company also sought an ex-parte ad-interim stay on the appointment of government directors. During the year, the Central Government has also filed a contempt petition before Honble NCLT, Chandigarh for non-compliance of CLB Order dated 1.7.2005. The matter is pending adjudication.

The Company is defending various prosecutions filed by the Registrar of Companies/Central Government against the Company and its directors before the Court under erstwhile Companies Act, 1956 and other laws, and the matter is sub judice.

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 Rs E. The same is available at the website of the Company at http://www.morepen.com/pdf/AR2020.pdf

MATERIAL CHANGES AND COMMITMENTS AFFECTING THE FINANCIAL POSITION OF THE COMPANY

Except from minor liabilities which may arise in respect of payment to FD holders as per 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 ANT OUTGO

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 Rs 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 Rs 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 Rs G.

BUSINESS RESPONSIBILITY REPORT

Business Responsibility Report In compliance with Regulation 34(2)(f) of the Listing Regulations, the Business Responsibility Report forms part of this Annual Report for the year under review as ANNEXURE Rs H.

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 Rs I.

ACKNOWLEDGEMENTS

The directors of the company place on record their gratitude to the central government, state governments, drug control authorities, companys bankers, GMP consultants, auditors, medical & legal professionals and business partners for the support, co-operation and encouragement they have extended to the company. Your directors also wish to place on record, their sincere thanks and appreciation for the continuing backing and unwavering efforts of investors, vendors, dealers, business associates and employees in helping the company to march on growth path year after year.

Your directors look forward to your continued support, in their efforts, to grow together and promote health through delivery of quality products at affordable price.

For and on behalf of Board of Directors
Sushil Suri
Place: New Delhi (Chairman & Managing Director)
Date: 31st August, 2020 DIN:00012028