Natco Pharma Ltd Directors Report.

Dear Members,

The Board is pleased to present the Thirty-Sixth Annual Report on the business and operations of the Company together with the Audited Financial Statements for the year ended 31st March, 2019.

Company Overview

Your company is a vertically integrated pharmaceutical company having presence in multiple speciality therapeutic segments. Over the years, the Company has developed an innate ability to deliver molecules, which are complex and hard to manufacture. The Company has constantly innovated and manufactured speciality medicines and niche pharmaceutical products. The Company has its corporate headquarters at Hyderabad.

Financial Results

A summary of the Companys financial results for the Financial Year 2018-19 is as under:

(Rs. in Million)
Standalone Consolidated
Year ended 31st March, 2019 Year ended 31st March, 2018 Year ended 31st March, 2019 Year ended 31st March, 2018
Net Revenue /Income 21,161 21,479 22,247 22,424
Gross profit before interest and depreciation 9,463 9,678 9,250 9,688
Finance Cost 188 147 193 154
Profit before depreciation and amortisation - (Cash Profit) 9,275 9,531 9,057 9,534
Depreciation and Amortisation 801 655 810 662
PBT before exceptional items 8,474 8,876 8,247 8,872
Exceptional items - - - -
Profit before Tax (PBT) 8,474 8,876 8,247 8,872
Provision for Tax Current 1,863 2,173 1,883 2,199
Provision for Tax Deferred (60) (279) (60) (279)
Profit after Tax 6,671 6,982 6,424 6,952
Other comprehensive income (OCI) (91) (47) (76) (52)
Total Comprehensive income for the period 6,580 6,935 6,348 6,900

Dividend

The Company declared three interim dividends for the FY 2018-2019, the details of which are as follows:

S. No. Date of Board Meeting Date of payment Interim Dividend Declared per equity share of face valueRs. 2/- each in
1. 8th August, 2018 20th August, 2018 1.50
2. 12th February, 2019 21th February, 2019 3.50
3. 27th May, 2019 On or before 14th June, 2019 1.25
Total 6.25

The dividend pay-out for the 1st and 2nd Interim dividend amounted toRs. 919 million and dividend distribution tax amounted to rs. 189 million. Thus the 1st and 2nd Interim dividend resulted in total pay-out of 16.61% of the standalone profit after tax of the Company for the year under review.

The two Interim Dividends have been paid to all eligible shareholders and the third interim dividend is declared on 27th May, 2019 which is due for payment on or before 14th June, 2019. The pay-out proposed for 3rd interim dividend amounts toRs. 227 million and dividend distribution tax ofRs. 47 million. The aggregate of three interim dividends amounts to rs. 1382 million including dividend distribution tax ofRs. 236 million and it results in a pay-out of 20.72% of Standalone Profit after tax of the company for F.Y. 2018-19.

Accordingly your Directors recommend that the above three interim dividends be treated as the final dividend the Company for the Financial Year 2018-19. The Dividend Distribution Policy of the company is annexed to this report as "Annexure VIII" and is also available on the Companys website www.natcopharma.co.in.

Transfer to Reserves

The Board has decided to retain the entire amount of profits in the profit and loss account for the year under review.

Share Capital

During the year under review, 2,68,735 equity shares were issued and allotted under Employee Stock Option Schemes (ESOP- NATSOP 2015, NATSOP 2016 & NATSOP 2017) and a total of 20,15,656 shares were bought back by the Company through open market route under the SEBI (Buy-back of Securities) Regulations, 2018, out of which 18,77,640 shares were extinguished before 31st March, 2019. Accordingly, the issued and subscribed share capital of the company as on 31st March, 2019 stood atRs. 365 million divided into 18,27,46,479 equity shares ofRs. 2/- each as againstRs. 369 million divided into 18,44,93,400 equity shares ofRs. 2/- each as on 31st March, 2018.

Buyback

During the year under review, the company announced buyback of shares commencing from 19th November 2018 for a sum ofRs. 250 crores through open market for a price not exceeding rs. 1000 per share. During the year ended 31st March 2019, the Company bought back 20,15,656 equity shares ofRs. 2 each for an aggregate purchase value of rs. 1,329 million, excluding transaction costs. Out of the total shares bought back, 18,77,640 equity shares ofRs. 2 each were extinguished before 31st March, 2019 and the balance 1,38,016 equity shares were extinguished in two tranches on 5th April, 2019 and 22nd April, 2019.

Deposits

During FY 2018-19, the Company did not accept any fixed deposit within the meaning of Sections 73 and 74 of the Companies Act, 2013 read together with the Companies (Acceptance of Deposits) Rules, 2014 and therefore no amount of principal or interest was outstanding, as on the date of balance sheet.

Change in the nature of Business, if any

During the year, the company has taken approval from shareholders to venture into agro chemical business.

Subsidiaries

The Consolidated Financial Statements of the Company are prepared in accordance with relevant Indian Accounting Standards (Ind AS) issued by the Institute of Chartered

Accountants of India and forms an integral part of this Report.

During the period under review NATCO Life sciences Philippines Inc. was added as a subsidiary of the company

Pursuant to Section 129 (3) of the Companies Act, 2013 read with Rule 5 of the Companies (Accounts) Rules 2014, a statement containing the salient features of the financial statements of our Subsidiaries is given in Form AOC-1, which is attached as "Annexure I" to the Boards Report.

Particulars of Loans, Guarantees and Investments

The Company provides investments, loans and guarantees to its subsidiaries for its business purpose. Details of investments, loans, and guarantees covered under Section 186 of the Companies Act, 2013, form part of the notes to the financial statements provided in this annual report.

Corporate Governance and additional Share holders Information

Pursuant to the SEBI (Listing Obligation and Disclosure Requirements) Regulations, 2015 ("Listing Regulations"), a detailed report on the corporate governance systems and practices of the Company is given under Corporate Governance Report which is part of this Annual Report. Similarly, other detailed information for shareholders is provided in the chapter Additional Shareholders Information.

A certificate from CS P Renuka, Company Secretary in Practice (C.P.No. 3460) on the compliance with the conditions of corporate governance is part of the Corporate Governance Report. A certificate from her that none of the Directors on the Board of the company are disqualified from being appointed or continuing as a Directors of company by the Ministry of Corporate Affairs or any statutory authority is attached to this Annual Report.

Management Discussion and Analysis

A detailed report on the Management Discussion and Analysis is provided as a separate chapter in the annual report.

Board of Directors

In accordance with the provisions of the Companies Act, 2013, Mr Rajeev Nannapaneni (DIN: 00183872) is liable to retire by rotation and being eligible offers himself for reappointment at the ensuing Annual General Meeting of the Company.

Board in its meeting held on 23rd May, 2018 appointed Mr. Sridhar Sankararaman (DIN: 06794418) as an additional director and his appointment as a Non-Executive and

Non-Independent Director of the Company who is liable to retire by rotation was approved by the shareholders in their meeting held on 15th September, 2018. Mr. Vivek Chhachhi (DIN: 00496620) resigned as a Non-executive and Non-independent director w.e.f from 23rd May, 2018 due to his professional obligations and other pre-occupations.

Board Evaluation

As per provisions of the Companies Act, 2013 and the Listing Regulations as amended from time to time, an evaluation of the performance of the Board was undertaken. The contribution and impact of individual Directors were reviewed through a peer evaluation on parameters such as level of engagement and participation in board/committee meetings, flow of information, independence of judgment, conflicts resolution, managing relationships within the Board and their contribution in enhancing the Boards overall effectiveness. The feedback obtained from interventions was discussed in detail and, where required, independent and collective action points for improvement put in place.

Appointment of Directors and Remuneration Policy

The assessment and appointment of members to the Board is based on a combination of criterion that includes ethics, personal and professional stature, domain expertise, gender diversity and specific qualification required for position. The independent Board member is also assessed on the basis of independence criteria defined in Section 149(6) of the Companies Act, 2013 and Regulation 16(1)(b) of the Listing Regulations

In accordance with Section 178(3) of the Companies Act, 2013, and on recommendations of Nomination and Remuneration Committee, the Board adopted a remuneration policy for Directors, Key Management Personnel (KMPs) and Senior Management which is available on the website of the Company www.natcopharma.co.in.

Upon recommendation of the Nomination and Remuneration Committee, the Board of Directors at their meeting held on 27th May, 2019 approved the re-appointment of the following Independent Directors for a further term of five (5) years i.e up to 41st Annual general Meeting to be held in the Calendar year 2024 in terms of the provisions of the Companies Act, 2013, subject to the consent of the Members of the Company at their ensuing Annual General Meeting:

1. Mr. G.S. Murthy (DIN: 00122454)

2. Mr. D.G. Prasad (DIN: 00160408)

3. Mr. T.V. Rao (DIN: 05273533)

4. Dr. Mrs. Leela Digumarti (DIN: 06980440)

Declaration by Independent Directors

All Independent Directors of the Company have submitted requisite declarations confirming that they continue to meet the criteria of independence as prescribed under section 149(6) of the Companies Act, 2013 and Regulation . 16(1) (b) of the SEBI Listing Regulations. The Independent Directors have also confirmed that they have complied with the Companys Code of Conduct.

Number of Meetings of the Board and its Committees and other Committees

The Board currently has eight (8) committees, namely, Audit Committee, Stakeholders Relationship Committee, Nomination and Remuneration Committee, Compensation Committee, Allotment Committee, Corporate Social Responsibility Committee, Risk Management Committee and Buy back Committee. the

Other Committees

Other Committees includes Share Transfer Committee, Internal Complaints Committee and Land Committee.

A detailed update on the Board, its composition, detailed charter including terms of reference of various Board Committees, number of Board and Committee meetings held during FY 2018-19 and attendance of the Directors is provided in the Corporate Governance Report, which forms part of the Annual report.

All the recommendations made by the Committees of Board including the Audit Committee were accepted by the Board. During the year the Board constituted Buyback Committee comprising of the Chairman and Managing Director, Vice Officer, Chairman and Chief Executive Company Secretary and the Chief Financial Officer for the a purpose of Buyback.

Business Risk Management

The Company has a risk management mechanism in place to manage uncertainties through identification, analysis, assessment, implementing and monitoring to reduce the impact of risks to the business which is discussed in detail in the Management Discussion and Analysis section.

Material changes and commitments affecting financial position between end of financial year and date of report

No material changes and commitments have occurred after the close of the financial year till the date of this report which may affect the financial position of the Company.

Business Responsibility Report

As mandated by the Securities and Exchange Board of India (SEBI), the Business Responsibility Report (BRR) forms part of this Annual Report. The BRR contains a detailed report on business responsibilities vis-a-vis the nine principles of the National Voluntary Guidelines on Social, Environmental and Economic Responsibilities of Business framed by the Ministry of Corporate Affairs.

Internal Financial Controls

The Company has in place adequate Internal Financial Controls commensurate with the business operations of the Company which are operating effectively. Your Company has adopted policies and procedures for ensuring the orderly and efficient conduct of its business, including adherence to the Companys policies, the safeguarding of its assets, prevention and detection of frauds and errors, accuracy and completeness of the accounting records, and timely preparation of reliable financial disclosure.

Reporting of Frauds

There was no instance of 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 the Companies Act, 2013 and Rules framed thereunder.

Insurance

The Companys plant, property, equipment and stocks are adequately insured against all major risks. The Company also has appropriate liability insurance covers particularly for product liability and clinical trials. The Company has also taken Directors and Officers Liability Policy to provide coverage against the liabilities arising on them.

Directors Responsibility Statement

Pursuant to Section 134(3)(c) of the Companies Act, 2013 in relation to financial statements of the company for the year ended 31st March 2019, the board of directors state that:-

a) The applicable accounting standards have been followed in preparation of the financial statements and there are no material departures from the said standards.

b) Reasonable and prudent accounting policies have been used in preparation of the financial statements and that they have been consistently applied and that reasonable and prudent judgements and estimates have been made in respect of items not concluded by the year end, so as to give a true and fair view of the state of affairs of the company as at 31st March, 2019 and of the profit for the year ended on that date. sufficient

c) Proper and care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities.

d) The financial statements have been prepared on a going concern basis.

e) Proper internal financial controls were in place and were adequate and operating effectively and

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

Related Party Transactions

In accordance with Section 134(3)(h) of the Companies Act, 2013 and Rule 8(2) of the Companies (Accounts) Rules, 2014, the particulars of contract(s) or arrangement(s) entered into by the Company with related parties referred to in Section 188(1) in Form AOC-2 is attached as "Annexure II" to this Boards Report.

The details of related party disclosures form part of the notes to the financial statements provided in this Annual Report.

Vigil Mechanism/Whistle Blower Policy

The Company believes in upholding professional integrity and ethical behaviour in the conduct of its business. To uphold and promote these standards, the Company has a Vigil Mechanism / Whistle Blower Policy which serves as a mechanism for its Directors and employees to report genuine concerns about unethical behavior, actual or suspected fraud or violation of the Code of Conduct without fear of reprisal. The policy also provides employee(s) access to the Chairperson of the Audit Committee under certain circumstances. The details of the procedures are also available on the website of the Company www.natcopharma.co.in.

A brief note on the Whistle Blower Policy is also provided in the Report on Corporate Governance, which forms part of this Annual Report.

Internal Complaints Committee

The Company has Internal Complaints Committees in place in all the units in line with the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. A brief note on the same is provided in the Report on Corporate Governance, which forms part of this Annual Report.

Auditors

Statutory Auditors

The members of the Company at their Annual General Meeting held on 27th September, 2014 appointed M/s Walker Chandiok & Co. LLP (Firm Registration No. 001076N/N500013) as the statutory auditors of the Company to act as such from the conclusion of the Annual General Meeting (AGM) held for the financial year 2013-14 till the conclusion of the AGM to be held for the Financial Year 2018-19. and/or Pursuant to Section 139 of the Companies Act, 2013 and the rules made thereunder, it is mandatory for the Company to rotate the current statutory auditors on completion of a maximum term of ten (10) years permitted thereunder. Accordingly, based on the recommendation of the Audit Committee of the Company, the Board of Directors of the Company have appointed M/s. B S R & Associates LLP (ICAI FRN: 116231W/W-100024) as the Statutory Auditors of the Company to hold office a period of five (5) years i.e. from the conclusion of the ensuing Annual General Meeting till the conclusion of the 41st Annual General Meeting of the Company to be held for the financial year 2023-2024 in the place of retiring auditors i.e. M/s.Walker Chandiok & Co. LLP (Firm Registration No.001076N/N500013), subject to the consent of the members of the company at the ensuing Annual General Meeting.

Secretarial Auditor

Pursuant to Section 204 of the Companies Act, 2013 read with Rule 9 of the Companies (Appointment & Remuneration of Managerial Personnel) Rules, 2014, CS No.Balachandra Sunku with Certificate 12745, a practicing Company Secretary conducted the secretarial audit of the Company for FY 2018-19. The Secretarial Audit Report in form No. MR-3 is attached as "Annexure III" to this Boards Report.

Upon recommendation of the Audit Committee, the Board has appointed CS B. Kiran Kumar (CP No. 15876), M/s BK Associates, a practicing Company Secretary as secretarial auditor of the Company for the FY 2019-2020.

Cost Auditors

Pursuant to Section 148 of the Companies Act, 2013 read with the Companies (Audit and Auditors) Rules, 2014 and the Companies (Cost Records and Audit) Amendment Rules, 2014, the Company maintains the cost audit records in respect of its pharmaceutical business. The Board has, on the recommendation of the Audit Committee, appointed M/s. S.S. Zanwar & Associates (Firm Registration No.:100283) as cost auditors of the Company for FY 2018-19. The provisions also require that the remuneration of the cost auditors be ratified by the shareholders and accordingly the same is put forward to the shareholders for their ratification in the ensuing AGM The cost audit report for the FY 2018-19 will be filed the Central Government within the stipulated timeline and the relevant cost audit reports for FY 2017-18 were filed within the due date to the Central Government.

Significant and Material Orders Passed by the Courts/Regulators

During FY 2018-19, there were no significant orders, passed by any Court or Regulator or Tribunal, which may impact the going concern status or the Companys operations in future.

Corporate Social Responsibility Initiatives

The Board formulated a Corporate Social Responsibility (CSR) Policy which is in full force and operation and is subject to monitoring by the CSR Committee of Directors from time to time.

The details about the CSR initiatives taken during the FY 2018-19 are discussed in a separate head which forms a part of this Annual Report.

The Annual Report on CSR activities of the Company is attached as "Annexure IV" to this Boards Report

Transfer of unpaid and unclaimed dividend amounts and shares to Investor Education and Protection Fund

Pursuant to the provisions of Section 124(5) & (6) of the Companies Act, 2013, the dividends which remained unclaimed for a continuous period of seven years and the shares pertaining to the shareholders who have not claimed dividend for a continuous period of seven years were transferred to the Investor Education and Protection Fund (IEPF) established by the Central Government. The details of which are disclosed in the Corporate Governance Report.

Employees Stock Option Scheme

Details pertaining to the Employee Stock Option Schemes are disclosed in the Corporate Governance Report which forms a part of this Annual Report.

Credit Rating

ICRA Limited has reaffirmedtheir rating "AA" (which means high degree of safety regarding timely servicing of financial obligations and has very low credit risk) for various banking facilities enabling your company to avail facilities from banks at attractive interest rates indicating a very strong degree of safety for timely payment of financial obligations such as payment of interest and repayment of principal, if any.

Particulars of Employees

The information as required under Section 197 of the Act read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are with given in Annexure V which forms part of this report.

The information required under Rule 5(2) and (3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, is provided in an Annexure forming part of this Report. In terms of the second proviso to Section 136 of the Act, the Report and Accounts are being sent to the Members excluding the aforesaid Annexure. The said annexure is open for inspection at the Registered Office of the Company and any member interested obtaining the same may write to the Company Secretary at the Registered Office of the Company.

Conservation of Energy, Research and Development, Technology Absorption, Foreign Exchange Earnings and Outgo

The details of Energy Conservation, Research and Development, 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 is annexed to this report as "Annexure VI".

Extract of Annual Return

As required under Sections 92(3) and 134(3)(a) of the Companies Act, 2013 read with Rule 12 of Companies (Management and Administration) Rules, 2014, the extract of Annual Return in Form MGT-9 forms part of this report as "Annexure VII".

Compliance with Secretarial Standards

The Company has complied with Secretarial Standards issued by the Institute of Company Secretaries of India.

Acknowledgements

The Board wish to place on record their appreciation to shareholders, government authorities, banks, business partners, medical practitioners and other stakeholders for the assistance, co-operation and encouragement extended to the Company. The Board also commend the continuing commitment and dedication of the employees at all levels, which has been critical for the Companys success. The Board look forward to their continued unstinted support in future also.

For and on behalf of the Board of Directors
V.C. Nannapaneni
Place: Hyderabad Chairman and Managing Director
Date: 27th May, 2019 (DIN:00183315)

FORM NO. AOC-1

(Pursuant to first proviso to sub-section (3) of Section 129 read with Rule 5 of Companies (Accounts Rules, 2014)

Statement containing salient features of the financial statement of subsidiaries:

( in Millions)*
NATCO Pharma INC NATCO Canada Inc Time cap Overseas Ltd NATCO Do Brasil Ltda NATCO Pharma Asia PTE Ltd NATCO Pharma Australia Pty Ltd NATCO Life sciences Philippines Inc
Share Capital 41.85 146.55 819.38 710.52 88.95 48.97 13.66
Reserves & Surplus 233.12 123.23 (41.61) (629.93) (78.68) (48.78) (4.49)
Total Assets 402.93 520.62 1034.97 494.79 123.04 0.86 17.35
Total Liabilities 127.96 250.84 257.20 414.20 112.77 0.68 8.17
Investments - - 918.40 - - - -
Turnover - 959.80 - 314.89 12.55 - 0.79
Profit before taxation 3.34 69.38 (3.81) (266.15) (16.55) (7.11) (6.44)
Provision for taxation 1.07 18.42 - 39.91 - - 1.93
Profit after taxation 2.27 50.96 (3.81) (226.24) (16.55) (7.11) (4.51)
Proposed Dividend
Report Currency USD CAD USD BRL SGD AUD PESO
Closing exchange rate 69.32 51.91 69.32 17.66 51.13 49.20 1.31
Average exchange rate 69.76 53.15 69.76 18.48 51.34 50.84 1.32
% of Shareholding 100% 99.04% 90.36% 90.90% 99.73% 100% 100%**

* all amounts are in rupees millions except closing and average exchange rates

** Includes the shares held by the nominee shareholders of the subsidiaries on behalf of the Company.

Annexure-II to the Boards Report

Form No. AOC – 2

(Pursuant to Clause (h) of Sub-Section (3) of section 134 of the Act and Rule 8(2) of the companies (Accounts) Rules, 2014)

Disclosure of particular of contracts/arrangements entered into by the Company with related parties referred to in sub-section (1) of Section 188 of the Companies Act, 2013 including certain arms length transactions under third proviso thereto.

1. There are no contracts/arrangements/transactions entered into by the Company with related parties referred to in sub-section (1) of Section 188 of the Companies Act, 2013 which are not at arms length basis.

2. The following are the contracts/arrangements/transactions entered into by the Company with related parties referred to in sub-section (1) of Section 188 of the Companies Act, 2013 which are at arms length basis.

Sl. No. Name(s) of the related party and nature of relationship Nature of Contract / arrangements / transaction Duration of the contracts / arrangements/ transactions Salient terms of the contracts or arrangements or transactions including the value, if any in million Date(s) of approval by the Board if any: Amount paid as advances, if any in
1. Mr. V.C. Nannapaneni, Chairman & Managing Director Renewal of Lease Agreement 2 years To locate western India Marketing Office and accommodation to Senior Executives visiting Mumbai Rent payableRs. 2.1 million p.a. 6th February, 2018 Nil
2. Mr. Rajeev Nannapaneni, Vice Chairman & CEO Renewal of Lease Agreement 2 years To locate Chennai Marketing Office and Guest House Rent payable rs. 1.2 million p.a. 6th February, 2018 Nil
3. Mr. Rajeev Nannapaneni, Vice Chairman & CEO Renewal of Lease Agreement 2 years To locate Chemical Division, Chennai city office Rent payable - 0.12 million p.a. 6th February, 2018 Nil
4. M/s. Time Cap Pharma Labs Ltd Shareholding of Mr. V. C. Nannapaneni Renewal of Lease Agreement 2 years To locate Delhi office and Guest house Rent payable- 2.1 million p.a. 6th February, 2018 Nil
5. M/s. Time Cap Pharma Labs Ltd Shareholding of Mr. V. C. Nannapaneni Renewal of Lease Agreement 2 years To locate godown at Kothur, Rangareddy Dist. Rent payable - rs. 1.2 million p.a. 23rd May, 2018 Nil
6. M/s. Time Cap Pharma Labs Ltd Shareholding Of Mr. V. C. Nannapaneni Renewal of Lease Agreement 2 years To locate Companys Solar Panel Production at Kothur, Rangareddy Dist. Rent payable - rs. 1.2 million p.a. 23rd May, 2018 Nil
7. M/s. Time Cap Pharma Labs Ltd. Shareholding of Mr. V.C. Nannapaneni Lease agreement 2 year To locate Time Cap Pharma Labs Ltd C & F office at Sanathnagar Rent receivedRs. 0.18 million* 23rd May, 2018 Nil
8. M/s. Time Cap Pharma Labs Ltd. Shareholding of Mr. V.C. Nannapaneni Sale of raw- materials 1 year Sale of raw materials to Time Cap Pharma Labs Ltd.Rs. 0.07 million 6th February, 2018 Nil
9. Natco Pharma (Canada) Inc. Subsidiary Sales 1 year To sell finished goods to Natco Pharma (Canada) Inc. rs. 150 million 6th February, 2018 Nil
10. Natco Pharma Asia Pte. Ltd. Subsidiary Sales 1 year To sell finished goods to Natco Pharma Asia Pte Ltd.Rs. 7 million 6th February, 2018 Nil
11. NatcoFarma Do Brasil Step-down Subsidiary Sales 1 year To sell finished goods to Natco Pharma Do Brasil LtdaRs. 48 million 6th February, 2018 Nil
12. Time Cap Pharma Labs Ltd. Shareholding of Mr.V.C. Nannapaneni Purchase of land One time Purchase of 23,232 sq. yards industrial land from M/s. Time Cap Pharma Limited forRs. 49 million including registration charges 23rd May,2018 Nil
13. Time Cap Pharma Labs Ltd. Shareholding of Mr. V.C. Nannapaneni Commission and expenses reimbursement 1 year To pay commission and reimburse expenses related to C&F services provided by M/s. Time Cap Pharma LimitedRs. 6 million* 6th February, 2018 Nil

Note: *Company terminated w.e.f. January, 2019, the Clearing & Forwarding Agreement with Time Cap Pharma Labs Limited and accordingly the transactions pertaining to payment of commission and reimbursement of expenses to Time Cap Pharma Labs Limited and payment of rent by Time Cap Pharma Labs Limited for its C&F warehouse located in the Companys premises, reported earlier, were not entered into by the Company.

All the above transactions were entered by the Company with Related Parties in the ordinary course of business at prevailing market rates.

Annexure-V to the Boards Report

Information required under Section 197 (12) of the Companies Act, 2013 read with Rule 5 (1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014)

(i) The ratio of the remuneration of each director to the median remuneration of the employees of the Company, the percentage increase in remuneration of each director, CEO, CFO and CS, for FY 2018-19 and comparison of the remuneration of each Key Managerial Personnel (KMP) against the performance of the Company:

Name Designation Ratio of Remuneration of each Director/KMP to the median remuneration of employees % increase in remuneration during FY2019
Mr. V. C. Nannapaneni Chairman and Managing Director 52 0
Mr. Rajeev Nannapaneni Vice Chairman and CEO 47 0
Mr. P.S.R.K Prasad Whole Time Director 41 7
Dr. D Linga Rao Whole Time Director 41 7
Mr. M. Adinarayana Company Secretary 12 11
Mr. S.V.V.N Apparao Chief Financial Officer 16 10

Mr. T.V. Rao, Mr. G.S. Murthy, Mr. D.G. Prasad, Dr. Leela Digumarthi and Dr. M.U.R. Naidu, Independent Directors were paid only sitting fees for attending the Board / Committee Meetings.

(ii) The median remuneration of employees increased by 14.07% in FY 2018-19.

(iii) The number of permanent employees on the rolls of Company as on 31st March 2019 is 4957.

(iv) The average increase in remuneration paid to employees is 15.67 % for FY 2018-19 compared to 2017-18.

Compared to FY 2017-18, the standalone revenue in FY 2018-19 fell by 1.50% and profit before tax fell by 4.52 % (v) It is hereby affirmed that the remuneration paid during FY 2018-19 is as per the remuneration policy of the company

Annexure-VI to the Boards Report

Conservation of Energy, Research and Development, Technology Absorption, Foreign Exchange Earnings and Outgo Conservation of Energy, Technology Absorption

A) Conservation of Energy – a) During the year, the Company has implemented energy conservation projects across its various business units. A few of the key initiatives include:

1. Installation of Energy efficient equipment & optimization of processes consuming energy: Major projects in this category:

saving of Utility equipment during the last fiscal and achieved significant efficiency

a) Installed new high INR 1 million in various utility areas.

b) Conversion of CFL based lighting to LED lighting has been taken up during FY 2018-19 and completed the replacement at continuous use area.

2. Identifying cheaper power sources both in-house and external and Utilizing the alternate sources of energy:

a) Installed 1.15 Mw Solar plant at Chemical Division, Mekaguda, which lead to savings of approximately INR 0.3 million for part of the year since installation. Expected saving per annum is approximately INR 10 million.

b) Installed 2.1 MW wind mill at Anantapur, for captive power use for Vizag plant. Expected saving for FY 2019-20 is INR 20 million.

3. Steps in progress for increasing the utilization of alternate renewable sources of energy:

a) Feasibility studies for Wind Power Generation for captive power utilization at Chemical Division, Mekaguda has been completed and as per data evaluated by consultant there is low potential for commercial installation of wind mill in this area.

(B) Technology Absorption

Efforts made towards technology absorption: As part of the technology absorption, the Company engages in in-house development of bulk drugs & formulations, conducts pilot studies for potential scale-up so as to improve efficiency both in terms of time and productivity of products is positive and can be installed at Chemical plant Mekaguda.

Disclosure of particulars with respect to conservation of energy.
For the year ended 31.03.2019 For the year ended 31.03.2018
A: Power and Fuel Consumption
1. Electricity
a) Purchased Units 67600362 61998529
Total amount ( million) 401.12 361.89
Rate / Unit (Rs.) 5.93 5.84
b) Own Generation:
i) Through Diesel
Generator Units 1637558 1463650
Units / ltr. Of Diesel Oil 3.51 3.52
Cost / Unit ( ) 20.28 17.77
ii) Through Windmill
Generator Units 4050102 3605733
Total Cost Per Year ( million) 7.03 7.04
Cost / per Unit (Rs.) 1.74 1.95
iii) Through Solar
Generator Units 4940174 1559907
Total Cost Per Year ( million) 7.42 7.62
Cost / per Unit (Rs.) 1.50 4.88
2. Coal D/C grade
Quantity (Tonnes) 5368 5511
Total amount ( million) 42.02 49.46
Average rate per tonne (Rs.) 7828 8975
3. Furnace Oil
Quantity (Ltr) 2275037 726798
Total amount ( million) 94.15 20.35
Average rate per Ltr (Rs.) 41.38 27.99

 

(B) Expenditure on R&D

Amount (Rs. in Million)

For the year ended 31.03.2019 For the year ended 31.03.2018
a) R&D Expenditure 1976 1665
b) Total R&D Expenditure as percentage of Net Revenue from Operations (Including capital expenditure) 9.34% 7.75%

(C) Foreign Exchange Earnings and Outgo

The Company earned foreign exchange amounting to rs. 11536 million and used foreign exchange amounting toRs. 2939 million during the year ended 31st March, 2019

Annexure VIII to the Boards Report

NATCO Dividend Distribution Policy

The Board of Directors (the "Board") of NATCO Pharma Limited (the "Company") has adopted the NATCO Dividend Distribution Policy (the "Policy") of the Company as required in terms of Regulation 43A of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (the "Listing Regulations") in its meeting held on 11 November 2016.

Effective Date

The Policy shall become effective from the date of its adoption by the Board i.e. 11 November 2016.

Purpose

To help the investors in taking well informed investment decisions.

Definitions

Any term used in this policy shall have the meaning ascribed to it in the Companies Act, 2013 or Rules made thereunder, SEBI Act, 1992 or Rules and Regulations made thereunder or any other relevant legislation/law applicable to the Company

Statutory Provisions:

Chapter VIII of the Companies Act, 2013 and rules made there under contain the provisions pertaining to declaration and payment of dividend. The following points set out the statutory obligations of a Company with respect to declaration / payment of dividend:

• Company shall declare or pay dividend, for any financial year, only out of the profits of the Company for that financial year.

• Such profits shallbe after providing for depreciation in accordance with the provisions of the law.

• In case of inadequacy or absence of profits in any year, a maximum of 10% of paid-up capital can be declared as dividend, subject to other provisions contained in the Companies (Declaration and Payment of Dividend) Rules, 2014.

The SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 also specify certain conditions as to declaration of dividend such as prior intimation to the stock exchanges, record date etc.

A. General Policy of the Company and other Considerations as Regards Dividend

The Board shall consider the following, while taking decisions of a dividend pay-out during a particular year

1. Statutory requirements

The Company shall observe the relevant statutory requirements which may be applicable to the Company at the time of taking decision with regard to dividend declaration or retention of profit.

2. Prudential requirements

Prior to declaration / recommendation of any dividend as per this policy, the Company may consider any applicable covenants / conditions or restrictions imposed by any lenders, JV partners of the Company or its subsidiaries. The Company may decide to retain earnings in entirety for a particular year(s) for its growth / expansion, consequently resulting in shareholders wealth creation.

3. Extent of realized profits as a part of the IND AS profits of the Company

The extent of realized profits out of its profits calculated as per IND AS, affects the Boards decision of determination of dividend for a particular year. The Board is required to consider such factors before taking any dividend or retention decision.

4. Expectations of stakeholders, including small shareholders

The Board, while considering the decision of dividend pay-out or retention of a certain amount or entire profits of the Company, shall, as far as possible, consider the expectations of the stakeholders including the small shareholders of the Company who generally expects for a regular dividend payout.

B. Other Financial Parameters

In addition to the aforesaid parameters such as realised profits and proposed major capital expenditures, the decision of dividend payout or retention of profits shall also be based the following-

1) Current earnings of the Company

2) Operating cash flow of the Company

3) Dividend History

4) Repayment/Pre-payment of Borrowings

5) Future Earnings Expectation

6) Capital Expenditure Requirements requiring ploughing back of profits i.e. future capital expenditure program including

• Market expansion plan;

• Product expansion plan;

• Increase in production capacity;

• Modernization plan;

• Diversification of business;

• Long-term strategic plans;

• Acquiring new businesses/products

7) Crystallization of contingent liabilities, if any

8) Exchange Risk

9) Sale of businesses

10) Economic / Geo-political factors / risks

11) Regulatory requirements

C. Interim/Final Dividend Payout

Pursuant to the provisions of applicable laws and the Policy, interim dividend approved by the Board of Directors will be confirmed by the shareholders and final dividend, if any, recommended by the Board of Directors, will be subject to shareholders approval, at the relevant Annual General Meeting of the Company. The Company shall ensure compliance of provisions of Applicable Laws and this Policy in relation to Dividend declared by the Company.

D. Classes of Shares

At present, the issued and paid-up share capital of the Company comprises only of equity shares. As and when the Company issues any other class(es) of shares, the Board of Directors may suitably declare dividend on such class(es) in accordance with the provisions of the Companies Act, 2013 and this policy.

E. Disclosures

Company is required to disclose this policy on its website and also in the Annual Report of the Company. The Company shall make other appropriate disclosures pertaining to declaration of dividend as required under the Companies Act, 2013 and the rules made thereunder, the SEBI Act, 1992 or the rules and regulations made thereunder and any other law applicable.

F. Amendment

The Board shall have the power to amend any of the provisions of this Policy, substitute any of the provisions with a new provision or replace this Policy entirely with a new Policy in conformity with the provisions of Companies Act, 2013 and the rules made thereunder, the SEBI Act, 1992 or the rules and regulations made thereunder and any other law applicable.

G. Declaration of Dividend on Parameters not Mentioned in the Policy

If the Company proposes to declare dividend on the basis of parameters in addition to those mentioned in the policy it shall disclose such changes along with the rationale for the same in its annual report and on its website.

H. Limitations

The Policy shall not apply to:

• Special dividend, if any, to be outside the scope of this policy but would be governed by the provisions under the Companies Act, 2013.

• Distribution of dividend in kind, i.e. by issue of fully or partly paid bonus shares or other securities, subject to applicable law.

• Buyback of equity shares.