Natural Capsules Ltd Directors Report.


Your Directors have pleasure in presenting their 26th Twenty Sixth Annual Report together with the Audited Accounts of the company for the year ended 31st March 2019. Financial results:

The Companys financial performance, for the year ended is 31st March 2019. Summarized below:

Particulars (Rs. In Lakhs) (Rs. In Lakhs)
31st March, 2019 31st March,2018
Gross Sales 7107.25 6460.69
Less : Excise duty & GST 1129.21 985.17
Net Sales 5978.04 5475.52
Other Income 113.72 81.48
Total 6091.76 5557.01
Profit before depreciation & taxation 526.59 601.47
Less : Depreciation 319.74 433.25
Less : Provision for taxation 79.49 84.84
Less: Prior period adjustment (Taxation) 0 0
Add: Deferred Tax withdrawn -64.68 -27.72
Profit after taxation 192.04 111.11
Add: Balance brought forward from previous year/Other Equity 4926.18 4809.11
Surplus available for appropriation
Appropriations 0 0
General Reserve 0 0
Proposed Dividend 62.33 62.33
Tax on Dividend 12.69 12.69
Additional depreciation on fixed asset as per Companies Act, 2013 0 0
Balance carried to Balance sheet 4926.18 4809.11
Total 4926.18 4884.13

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.


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 per equity share at the rate of 10 % subject to the approval of members. The dividend, if approved by the Members, will result in an out flow of Rs.62.33 lakhs from the company in addition to Rs. 12.69 lakhs by way of dividend distribution tax. Dividend if declared will be paid to the Members whose names appear in the Register of Members as on the record date as on 14th August 2019 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 2011-12, will be transferred to the Investor Education and Protection Fund established by the Central Government, after the conclusion of 26th 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 shall be transferred by the company in the name of Investor Education and Protection Fund ("IEPF"). The unclaimed Equity Shares pertaining to financial year 2010-2011 to 2016-17 will be transferred to IEPF A/c by 30th Sep 2019 and the details of the said shares transferred are provided on the website of the Company at

Share capital:

During the year under consideration, there was no change in the paid up capital. 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 2018-19.

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

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

Board Meeting No. Date of Board Meeting Board Strength No. of Directors Present
124th Friday, 18th May 2018 8 8
125th Monday, 30th July 2018 8 8
126th Saturday, 10th November 2018 9 8
127th Saturday, 09th February 2019 9 9

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 the Company 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 theInternal, 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, 2019. (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 Auditor: Companys Response/Explanations:
The Company has not spent the amount as prescribed under sec. 135 of the Companies Act 2013 and the rules framed thereunder, relating to Corporate Social Responsibility. The Company in the process of identifying proper areas of CSR.
The Company has not consolidated Financials of its subsidiary M/s Natural Drug Discovery Pvt Ltd incorporated on 29/09/2018 for the quarter ended 31/12/2018. As per SEBI LODR guidelines, the quarterly consolidation is not mandatory hence company has opted for yearly consolidation of accounts.
Some of the promoters physical shares to the extent of 3800 equity shares are yet to be Dematerialized The Company is in the process of dematerializing the shares of the said promoters
There were few instances of delays in filing of E forms with the Registrar of Companies with additional fees. The said delay was due to inadvertence and the forms have been filed with additional fees and there were no instance of non-compliance. the company has filed a reply as well as an application for adjudication of the default with ROC.
The company received notice from ROC 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

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 2019-20 and thereafter, hence, no resolution is proposed for ratification of the appointment of Auditors, who were appointed at the Annual General Meeting, held on 29th August 2017.

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. Parthasarathi, 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.


Shri. Sushil Kumar Mundra and Shri. Satyanarayan Mundra, Directors retire by rotation and being eligible, offer themselves for re appointment. 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 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
Mr. Laxminarayana mundra
Mr. Sathyanarayana mundra
Mr. Sushil kumar mundra
Mrs. Jyothi mundra

(B) (i) Related Party Transactions:

Amount Outstanding at the end of year
Name of Related Party Nature of Transaction Amount of Transaction Credit (Rs.) Current Year \(Previous Year) 2018-19 Debit (Rs.) Current Year\ (Previous Year) 2017-18
Mr. Sunil Laxminarayana Mundra Directors Remuneration 42,60,000 2,36,340 2,67,500
Mr. Laxminarayana Mundra Directors Remuneration 30,00,000 1,73,370 1,52,340
Mr. Sathyanarayana Mundra Directors Remuneration 30,00,000 1,73,450 1,75,930
Mr. Prasanna Junnarkar Salaries 10,07,145 63,526 67,227
Mr. Skandan p. Jain Salaries 4,27,567 28,790 29,553
Mr. Sushil Kumar Mundra Sitting Fees 60,000 - -
Mrs. Jyothi Mundra Sitting Fees 60,000 - -
M/s. Mundra Enterprises Operating 1,62,000 - 58,320
M/s.Natural Drug Discoveries Pvt. Ltd Investment In Equity Shares 75,000 75,000 -

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 2019 and till the date of 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 Board has constituted a CSR Committee comprising of Shri Dr. C.M.Gurumurthy, 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 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 received from any employee during the financial year 2018 - 19.

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:

A subsidiary company in the name of M/s Natural Drug Discoveries Private Limited has been incorporated on 29-09-2018 with the objective for conducting Research and Development.

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. 5978.04 lakhs and your Company could make Net Profit of Rs.192.04 Lakhs after tax.

No. of Employees:

31-03-2019 31-03-2018
HO 22 0 22 HO 22 0 22
UNIT-1 32 0 32 UNIT-1 29 0 29
UNIT-2 75 9 84 UNIT-2 73 10 83
UNIT-3 4 5 9 - - - -

*Unit 3 is established for the proposed API Project

Management Discussion and Analysis Report: 1.Industry structure and developments:

During the year under review, Indian Pharma Industry has grown by 9.4%. In domestic market, the growth has been achieved mainly due to increase in value for price controlled products, but very less due to volume. At the same time, despite various challenges the exports have increased by 11.46%, hence demand for hard gelatin capsules will continue to remain robust in the domestic market. Demand in export front has been impacted by currency availability, currency depreciation as in many of the emerging market. Your company during the Financial Year 2018-19 had a gross turnover of Rs. 7107.25 Lakhs as against Rs. 6460.69 Lakhs in the previous year, a marginal growth of 10.01 %. Profit before depreciation and taxation was Rs.526.59 Lakhs as against Rs.601.47 lakhs in the previous year. The net profit of the Company for the year under review was placed at Rs. 192.04 Lakhs as against Rs. 111.11 Lakhs previous year. Due to continuing challenges on export front and pricing pressure in domestic front and increase in other input costs, margins remained in lower percentages. Despite these challenges Profit after tax has increased by 72.83 % during the year under review.

Opportunities and threats:


1. Opening of export opportunities for HPMC capsules in various countries.

2. Increase in demand for capsules within the country due to JAN AUSHADHI Programme of the Government.

3. New dosage formulations using hard capsules.

4. Company‘ new API project will market products which are currently being imported and hence will have good demand and margins.


1. Aggressive expansion & price competition from Chinese suppliers.

2.Increase in prices of raw material due to short supply in domestic market and higher import costs due to devaluation of Indian currency.

3. Slowdown in exports due to challenges in international economy.

c).Segment –wise or product wise performance is not relevant in view of the company having single product.


Based on the companys performance up to the date of this report, orders on hand and realizing the incremental capacity post up gradation of machines, your company is hopeful of achieving a turnover of around Rs. 7107.25 Lakhs in the current year. However due to increase in input costs, company may still earn lower margins as compared to earlier years. New API project once commissioned will give a big boost to company‘s revenue and profits.

e). Risks & Concerns

Risk of competition and exchange fluctuations may have an adverse impact on the projections. Risk of delay in receiving payments for both local & international customers can lead to higher finance cost. Risk of short supplies of raw material can cause loss of business to some extent.

f). Discussions on financial performance with respect to operational performance:

The Net Sales During the year was Rs.5978.04 Lakhs and your company could make Net Profit of Rs. 192.04 Lakhs after tax.

2. Disclosure of Accounting in case of different from the prescribed Accounting Standards: No deviation

Management Discussion and Analysis: (in Lakhs except % Rate)
(h) Material developments in Human Resources / Industrial Relations front, including number of people employed. N.A
(i) details of significant changes (i.e. change of 25% or more as compared to the immediately previous financial year) in key financial ratios, along with detailed explanations therefor, including: N/A
(i) Debtors Turnover 2.01
(ii) Inventory Turnover 9.46
(iii) Interest Coverage Ratio 6.53
(iv) Current Ratio 3.31
(v) Debt Equity Ratio 0.37
(vi) Operating Profit Margin (%) 3.15
(vii) Net Profit Margin (%)or sector-specific equivalent ratios, as applicable. 3.21
(j) details of any change in Return on Net Worth as compared to the immediately previous financial year along with a detailed explanation thereof NIL
(j) the amounts, if any, which it proposes to carry to any reserves; NIL
Other Disclosures:
(k) total fees for all services paid by the listed entity and its subsidiaries, on a consolidated basis, to the statutory auditor and all entities in the network firm/network entity of which the statutory auditor is a part.] 3,00,000


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/-
Place : Bengaluru Sunil L Mundra Satyanarayan Mundra
Date : 30th May 2019 Managing Director Whole Time Director

Annexure - 1

Form 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] Form for disclosure of particulars 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. Details of contracts or arrangements or transactions not at arms length basis: N.A

2. Details of material contracts or arrangement or transactions at arms length basis

a) Name(s) of the related party and nature of relationship M/s Mundra Enterprises, Entity in which Director or KMP is related :Shri.Sunil L Mundra Shri. Laxminarayan Mundra
Shri.Sathyanaraya Mundra
b) Nature of contracts/arrangements/transactions Operating Lease Rental Payments
c). Duration of the contracts/ arrangements/transactions Transaction during the year ended March 31, 2019
d) Date on which the special resolution was passed in general meeting as required under first proviso to section 188 N.A

Form 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/associate companies/joint ventures FINANCIAL YEAR 2018-19 Subsidiaries

SL.NO Particulars Details
1 Name of Subsidiary Natural Drug Discoveries (P) Ltd
2 Reporting period for the subsidiary concerned, if different FY 2018-19
3 Reporting currency and exchange rate as on the laste date of the relevant finacial year incase of of subsidiaries INR
4 Share capital 1,00,000
5 Reserves & surplus 0
6 Total assets 138186
7 Total Liabilities 138186
8 Investments 0
9 Turnover 0
10 Profit /(Loss) before taxation 0
11 Provision for taxation 0
12 Other comprehensive income for the period 0
13 Profit /(Loss) after taxation 0
14 Proposed Dividend 0
15 % of shareholding 75%
16 Names of subsidiaries which are yet to commence operations : Natural Drug Discoveries (P) Ltd
17 Names of subsidiaries which have been liquidated or sold during the year : N.A