Natural Capsules Ltd Directors Report.

To

The Members:

Your Directors have pleasure in presenting their 28th Twenty Eight Annual Report together with the AuditedAccounts of the company for the year ended 31st March 2021.

Financial results:

The Companys financial performance, for the year ended is 31st March 2021. Summarized below:

(Rs. In Lakhs) (Rs. In Lakhs)
Particulars 31st March, 2021 31st March, 2020
Gross Sales 9711.68 7073.11
Less : GST 1760.34 917.62
Net Sales 7951.34 6155.49
Other Income 72.70 95.30
Total 8024.04 6250.79
Profit before depreciation & taxation 1349.64 549.14
Less : Depreciation 430.63 412.07
Less : Provision for taxation 222.16 65.73
Less: Prior period adjustment (Taxation) 0 0
Add: Deferred Tax withdrawn 2.14 -14.41
Profit after taxation 694.70 85.75
Add: Balance brought forward from previous year/Other Equity 5589.75 4938.86
Surplus available for appropriation 0 0
Appropriations 0 0
General Reserve 0 0
Proposed Dividend 62.33 37.40
Tax on Dividend 12.69 0
Additional depreciation on fixed asset as per Companies Act, 2013 0 0
Balance carried to Balance sheet 5589.75 4938.86
Total 5589.75 4938.86

The Change in the Nature of Business, if any:

There was no change in nature of business for the period under review.

Transfer to reserves:

The company does not propose to transfer any amount to the General Reserves.

Dividend:

Based on the performance of the Company and the need for conservation of internal accruals, while maintaining the dividend for the shareholders, your Directors are pleased to recommend a final dividend of Rs.1.00 per equity share at the rate of 10%subject to the approval of members. The dividend, if approved by the Members, will result in the out flow of rs.62.33 lakhs from the company in addition to Rs. 12.69 lakhs. Dividend if declared will be paid to the Members whose names appear in the Register of Members as on the record date as on 7th July 2021.

Transfer of Unclaimed Dividend to Investor Education and Protection Fund & Transfer of Shares

To Investor Education And Protection Fund

In terms of the Companies Act, any unclaimed or unpaid Dividend relating to the financial year 2013-14, will be transferred to the Investor Education and Protection Fund established by the Central Government, after the conclusion of 28th Annual General Meeting.

Pursuant to Section 124(6) of the Companies Act, 2013 all shares in respect of which Dividend has not been paid or claimed for seven consecutive years or more has been transferred to IEPF. Further shares required to be transferred to IEPF for the financial year 2013-14 to 2020-21 will be transferred as per the provisions of the Act.

The details of the said shares transferred are provided on the website of the Company at http://www.naturalcapsules.com/pages/bes-compliance.html

Share capital:

During the year under consideration, there was no change in the paid up capital. However, 62,500 stock options equity shares were issued to employee as per the statutory provisions, for which in-principle approval has been obtained from the exchange. The present share capital stands at Rs. 6,23,27,000 Comprising of 62,32,700 Equity Shares of Rs.10/- only each. Further, the company has not made any fresh issue of shares for the Financial Year 2020-21.

COVID Impact:

Indian economy as a whole has been severely affected due to the pandemic and as per estimates released by RBI Indian GDP might contract by 5% during financial year 2021. However, pharma and healthcare industry is supposed to be one of the few segments which have not been adversely affected, but for limited impact due to sudden lockdown, lack of availability of labour, drop in retail sales of medicines during initial phases of lockdown. At time pharma industry is expected to recover quickly with growth of around 5 to 6 % by the end of year.

Your Company was impacted during first week of lockdown due to non-availability of manpower & this lead to loss of production of about 2300 lakhs of capsules during March & April, which is almost 3% of Annual production capacity.

Status of Expansion-API Project: Inform about the Govt.

Approval received for Steroid.

During the year Company has installed 2 high speed Capsule making machine at Bangalore Unit, resulting in increase of installed capacity from 7.8 Billion to 10.8 Billion Capsules per Annum. API project of the Company is being implemented by its fully owned Subsidiary Company M/s Natural Biogenex Pvt Ltd. Construction work on this project had started and trial production are likely to start by 1st Quarter of FY 2022-23. M/s Natural Biogenex Pvt Ltd was selected by Government of India under PLI Scheme for bulk drugs for production of Prednisolone, Dexamethasone and Betamethasone. Under this scheme M/s Natural Biogenex Pvt Ltd is likely to receive subsidies of around 65crores over a period of 6years starting from Financial Year 2023-24, subject to fulfillment of approval conditions.

Extract of Annual Return:

Pursuant to Section 92(3) and Section 134(3)(a) of the Act read with Rule 12(1) of the Companies (Management and Administration) Rules, 2014, an extract of the Annual Return is attached and marked as Annexure 7 to this report and also uploaded on the website of the Company web link www.naturalcapsules.com

Board Meetings and Its Committees Conducted During The Period Under Review:

Board Meeting No. Date of Board Meeting Board Strength No. of Directors Present
133rd Friday, 5th day of June, 2020 8 8
134th Friday, 7th day of August, 2020 8 8
135th Thursday, 27th day of August, 2020 8 8
136th Saturday, 7th day of November, 2020 8 8
137th Monday, 25th day of January, 2021 8 8

Further details of the same have been enumerated in the Corporate Governance Report annexed in Annexure-5 to this report.

Fixed Deposits:

Company has not accepted any deposits within the meaning of Section 73 of the Companies Act, 2013 and the Companies (Acceptance of Deposits) Rules, 2014.

Particulars of Loans, Guarantees or Investments:

The company has not given any loans or guarantees covered under the provisions of section 186 of the Companies Act, 2013. The details of the investments made by company are given in the notes to the financial statements.

Internal control systems and their adequacy:

Internal financial controls means the policies and procedures adopted by the company for ensuring the orderly and efficient conduct of its business, including adherence to companys policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial information; The Company has adequate internal control systems to monitor business processes, financial reporting and compliance with applicable regulations.

The systems are periodically reviewed for identification of control deficiencies and formulation of time bound action plans to improve efficiency at all the levels. The Audit Committee of the Board constantly reviews internal control systems and their adequacy, significant risk areas, observations made by the internal auditors on control mechanism and the operations of the Company and recommendations made for corrective action through the internal audit reports. The Committee reviews the statutory auditors report, internal audit reports, secretarial audit reports, project repots, quarterly budgets, significant processes and accounting policies and other key issues from time to time.

Directors Responsibility Statement

The Directors confirm that

(a) In the preparation of the annual accounts, the applicable accounting standards have been followed and there are no material departures from those standards.

(b) They 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 of theCompany for that period;

(c) They have taken proper and sufficient care for maintenance of adequate accounting records in accordance with the provisions of the Companies Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

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

(e) The directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such system were adequate and operating effectively. Based on the framework of internal financial controls established and maintained by the Company, work performed by the Internal, Statutory and Secretarial Auditors, reviews performed by the management and the relevant Board Committees, the Board, in concurrence with the Audit Committee, is of the opinion that the Companys internal financial controls were adequate and effective as on March 31, 2021.

(f) They have duly complied with Secretarial Standards issued by Institute of Company Secretaries of India (ICSI) from time to time.

Information Pertaining to Auditors and Other Allied Matters:-

Details In Respect Of Frauds Reported By Auditors under Section 143(12) Other Than Those Which Are Reportable To the Central Government

There were no instances of frauds identified or reported by the Statutory Auditors during the course of their audit pursuant to Section 143(12) of the Companies Act, 2013.

Explanation and Comments on Auditor Reports:

The reports of the Statutory Auditors (annexed elsewhere in the Annual Report) and that of the Secretarial Auditors (annexed hereto as Annexure 2) and the explanations on the observations of Secretarial Audit Report is given below:

Comments/Observations of the Secretarial Companyfs Response/Explanations:
Auditor:
Few Shareholders holding 3600 equity share belonging to promoters group is yet to demat his share/s The Company is in the process of dematerializing the shares of the said promoter.
There were instances of delays in filing of no,of E forms with the Registrar of Companies during the FY 2020-21. The said delay was due to inadvertence and people working from home due to covid impact during most par of the year under consideration. Relating to delayed filings, the Company has sought immunity under CFSS scheme and obtained Immunity Certificate for the delayed filings upto Dec.2020
The adjudication for default U/s 203(1) read with Rule 8A of Companies (Appointment and Remuneration of Managerial personnel) Rules 2014 regarding Non Appointment of whole time Company Secretary for the earlier period 01/04/2014 to 25/03/2015 was converted into Compounding of offences with RD, Hyderabad which has since been Compounded. is pending with ROC The Company & its executive directors have paid Rs. 4,00,000/- compounding fee after hearing oin 24.02.2021) with Regional Director, Hyderabad and accordingly the default has been compounded..

Statutory Auditors:

M/s P. Chandrasekar LLP, Chartered Accountants, were appointed as the Statutory Auditors of the Company for a term of five consecutive years at the 24th Annual General Meeting held on 29th August 2017 subject to annual ratification by shareholders. However with the advent of Companies (Amendment) Act, 2017 the requirement of annual ratification of the appointment of the Statutory Auditors of the Company by the shareholders at the Annual General meeting has been done away with. Accordingly, M/s P. Chandrasekar LLP, Chartered Accountants will continue to be the Statutory Auditors of the Company for the FY 2021-22 and for the remaining tenure.

Secretarial Auditors:

Pursuant to the provisions of Section 204 of the Companies Act, 2013 and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 (as amended from time to time) the Company has appointed Shri R. Parthasarathy, Company Secretary in practice to undertake the Secretarial Audit of the Company. The Secretarial Audit report is annexed herewith as Annexure - 2.

Cost Auditors

The provisions of Section 148 of the Companies Act, 2013 read with the Companies (Cost Records and Audit) Amendment Rules, 2014(as amended from time to time) is currently not applicable to the company.

Significant and Material Orders Passed By the Regulators or Courts:

There are no significant material orders passed by the Regulators / Courts which would impact the going concern status of the Company and its future operations.

Declaration of Independent Directors:

The Company has received declarations from all the Independent Directors of the Company confirming that they meet the criteria of independence as stipulated in Section 149(6) of the Companies Act, 2013 so as to qualify themselves to act as Independent Directors under the provisions of the Companies Act, 2013 and the relevant rules.

Directors:

Shri. Sushil Kumar Mundra and Mr.Satyanarayana Mundra. Directors retire by rotation and being eligible, offer themselves for re appointment.

Mr. Laxminarayana Mundraf was re-appointed as Whole-time Director period of 3 years.

All independent directors have given declarations that they meet the criteria of independence as laid down under section 149 (6) of the Companies Act, 2013 and Regulation 25(3) of SEBI (Listing Obligations and Disclosure Requirement) Regulations, 2015. All Directors have given declaration relating to compliance with code of conduct.

Nomination and Remuneration &Compensation Committee and Policy:

As per the requirements of the provisions of the Companies Act, 2013, a Nomination and Remuneration & Compensation Committee of Directors was constituted by the Board of Directors and the details of the Members of the Committee are disclosed elsewhere in this Annual Report. The Board has, on the recommendation of the Nomination and Remuneration Committee framed a policy on Directors appointment and remuneration including criteria for determining qualification, positive attributes, independence of a Director and other matters provided under sub-section (3) of Section 178. The said Policy is available on the website of the Company, various web links of the companys policy is detailed under the head Policy.

Related Party Transactions:

All transactions of the Company with the related parties were in the ordinary course of business and on an arms length pricing basis. There were no material significant related party transactions having potential conflict with the interest of company.

The Policy on Related Party Transactions (including the revised policy applicable for related party transactions effective April 01, 2019), is available on the Companys website and can be accessed at http://www.naturalcapsules.com/pdf/policy-on-related-party-transactions.pdf

As prescribed by Section 134(3)(h) of the Companies Act, 2013 read with Rule 8(2) of the Companies (Accounts) Rules, 2014, particulars of contracts/arrangements with related parties are given in Form AOC-2, annexed as Annexure - 1 to this report.

(A). Name of the related party and nature of relationship where control exists:

Name of Related Party Nature of Relationship
M/s. Mundra enterprises Entity in which Director or KMP is related:
Mr. Sunil Laxminarayana Mundra- Partner
Mr. Laxminarayana Mundra-His wife is a Partner
Mr. Satyanarayana Mundra- Partner
Mr. Sushil Kumar Mundra- Partner
Mrs. Jyothi Mundra- Her husband is partner

(B) (i) Related Party Transactions:

Name of Related Party Nature of Transaction Amount of Transaction Amount Outstanding at the end of year
Credit (Rs.) Current Debit (Rs.) Current Year\(Previous Year) 2019-20
Year\(Previous Year) 2020- 21
Mr. Sunil Laxminarayana Mundra Directors 44,40,000 2,50,210 2,27,110
Remuneration Directors 31,80,000 1,83,470 1,56,270
Mr. Laxminarayana Mundra Remuneration Directors 31,80,000 1,86,820 1,80,420
Mr. Satyanarayana Mundra Remuneration
Mr. Prasanna Junnarkar Salaries 10,68,396 74,766 65,177
Mrs. Shilpa Salaries 4,96,515 42,353 37,250
Mr. Sushil Kumar Mundra Sitting Fees 75,000 - -
Mrs. Jyothi Mundra Sitting Fees 75,000 - -
M/s. Mundra Enterprises Operating 0.0 - -
M/s Natural Drug Discoveries Pvt. Ltd Investment In Equity Shares 0.0 0.0 75,000
M/s. Natural Biogenex Pvt Ltd. Investment In Equity Shares 1,00,000 0.0 0.0

Material Changes and Commitments Affecting the Financial Position of the Company:

There is no material change or commitments after the closure of the financial year as on 31st March 2020 and till the date of this report, except COVID Impact on the performance of the Company has already been mentioned in this report.

Conservation Of Energy, Technology Absorption, Foreign Exchange Earnings and Outgo:

The information pertaining to conservation of energy, technology absorption, 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 (as amended from time to time) is attached herewith as Annexure - 3 to this report.

Risk Management:

The Company follows a comprehensive and integrated risk management process. The risk management process is designed to safeguard the organization from various risks through adequate and timely actions. It is designed to anticipate, evaluate and mitigate risks in order to minimize its impact on the business. The potential risks are inventoried and integrated with the management process such that they receive the necessary consideration during decision making and are periodically reviewed and revised by the Board of Directors.

Corporate Social Responsibility:

The present Committee members are Shri Anjan Kumar Roy, Shri Sunil L Mundra and Shri Sushil Kumar Mundra.

The Annual Report on Companys CSR activities of the Company is furnished in the prescribed format as Annexure - 4 and attached to this report.

Board Evaluation:

The Companies Act, 2013 states that a formal annual evaluation needs to be made by the Board of its own performance and that of its committees and individual directors. Schedule IV of the Companies act, 2013, states that the performance evaluation of independent directors shall be done by the entire Board of Directors, excluding the director being evaluated. Pursuant to the provisions of the Act, the Board has carried out an annual evaluation of its own performance, the individual Directors (including the Chairman) as well as an evaluation of the working of all Board Committees. The performance evaluation was carried out on the basis of inputs received from all the Directors / Members of the Committees, as the case may be.

The Independent Directors of the Company have also convened a separate meeting for this purpose. All the results of evaluation have been communicated to the Chairman of the Board of Directors.

SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, mandates that the Board shall monitor and review the Board evaluation framework. The framework includes the evaluation of directors on various parameters such as:

• Board dynamics and relationships

• Information flows

• Decision-making

• Relationship with stakeholders

• Company performance and strategy

• Tracking Board and committees effectiveness

• Peer evaluation

The evaluation process has been explained in the corporate governance report. The Board approved the evaluation results as collated by the nomination and remuneration committee.

Corporate Governance:

Pursuant to Regulation 34 of the SEBI (LODR) Regulations, 2015, Report on Corporate Governance, Management Discussion and Analysis Report and Auditors Certificate regarding compliance of conditions of Corporate Governance provided in Annexure - 5 in this Report and the same forms part of the Directors Report.

Composition of Audit Committee and Vigil Mechanism / Whistle Blower Policy:

The present Committee members are Mr. CP Rangachar, Mr. Pramod Kasat, Mr. Anjan Kumar Roy & Mr. Sunil L Mundra. The Board has constituted an Audit Committee, details of which are enumerated in the Corporate Governance Report. The Company has devised a vigil mechanism in the form of a Whistle Blower Policy in pursuance of provisions of Section 177(10) of the Companies Act, 2013 and the policy is explained in corporate governance report. During the year under review, there were no complaints received under this mechanism.

Disclosure under the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013:

The Company has in place a policy on Sexual Harassment of Women at Workplace in line with the requirements of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. An Internal Complaint Committee has been set up to redress complaints received. All employees (permanent, contractual, temporary, trainees) are covered under this policy. There were no complaints from any employee pending resolution during the financial year 2020 - 21. Other Disclosure:

a) details of establishment of vigil mechanism, whistle blower policy, and affirmation that no personnel has been denied access to the audit committee;

b) details of compliance with mandatory requirements and adoption of the non-mandatory requirements;

c) web link where policy for determining ‘material subsidiaries is disclosed;

d) web link where policy on dealing with related party transactions;

e) a certificate from a company secretary in practice that none of the directors on the board of the company have been debarred or disqualified from being appointed or continuing as directors of companies by the Board/Ministry of Corporate Affairs or any such statutory authority.

Particulars of Employees:

Disclosures with respect to the remuneration of Directors and employees as required under Section 197 of Companies Act, 2013 and Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 has been appended as Annexure - 6 to this Report.

Employee Stock Option Schemes

Pursuant to Rule 12(9) of the Companies (Share Capital and Debentures) Rules, 2014 read with Regulation 14 of the SEBI (Share Based Employee Benefits) Regulations, 2014 The Company has implemented ESOP Scheme 2018, to reward and retain the qualified and skilled employees and to give them an opportunity to participate in the growth of the Company. These Schemes are administered by the Nomination, Remuneration and Compensation Committee of the Company has been appended as Annexure - 7 to this Report

Subsidiaries, Joint Ventures and Associate Companies:

Apart from Natural Phyto, A wholly owned subsidiary company M/S Natural Biogenex Private Limited was incorporated on 23.08.2020. The Details of Subsidiaries are given in Annexure-AOC-1

Internal Control Systems and Their Adequacy:

The Company has an adequate Internal Control System commensurate with its size and operations. Management has overall responsibility for the Companys Internal Control System to safeguard the assets and to ensure reliability of financial records. Audit Committee reviews all financial statements and ensures adequacy of internal control systems.

The Company has engaged the services of an Independent Chartered Accountant to carry out the internal audit and ensure that recording and reporting are adequate and proper, the internal controls exist in the system and that sufficient measures are taken to update the internal control system. The system also ensures that all transaction are appropriately authorized, recorded and reported.

Exercises for safeguarding assets and protection against unauthorized use are undertaken from time to time. The company has also installed an extensive CCTV Surveillance system to cover the entire factory premises. All these measures are continuously reviewed by the management and as and when necessary improvements are affected.

Discussions on financial performance with respect to operational performance:

The Net Sales during the year was Rs. 7951.34 lakhs and your Company could make Net Profit of Rs.694.70Lakhs after tax.

No. of Employees:

PLACE REGULAR TRANIEE TOTAL PLACE REGULAR TRANIEE TOTAL
HO 23 0 23 HO 21 0 21
UNIT-1 33 0 33 UNIT-1 34 0 34
UNIT-2 79 1 80 UNIT-2 86 1 87
UNIT-3* 11 0 11 UNIT-3 8 4 12

Acknowledgement;

The Board acknowledges the continued assistance from the Bankers, State Governments, Local Bodies, Customers, Suppliers, Executives, Staffs, workers at all levels and the Shareholders for their continuous cooperation and assistance.

For and on Behalf of the Board
Sd/- Sd/-
Sunil L Mundra Satyanarayan Mundra
Managing Director Whole Time Director
Place : Bengaluru
Date : 18.06.2021