Natural Capsules Ltd Directors Report.

To The Members:

Your Directors have pleasure in presenting their 27th Twenty Seventh Annual Report together with the Audited Accounts of the company for the year ended 31st March 2020.

Financial results:

The Companys financial performance, for the year ended is 31st March 2020. Summarized below:

(Rs. In Lakhs) (Rs. In Lakhs)
Particulars 31s* March, 2020 31st March,2019
Gross Sales 7073.11 7107.25
Less : GST 917.62 1129.21
Net Sales 6155.49 5978.04
Other Income 95.30 113.72
Total 6250.79 6091.76
Profit before depreciation & taxation 549.14 526.59
Less : Depreciation 412.07 319.74
Less : Provision for taxation 65.73 79.49
Less: Prior period adjustment (Taxation) 0 0
Add: Deferred Tax withdrawn -14.41 -64.68
Profit after taxation 85.75 192.04
Add: Balance brought forward from previous year/Other Equity 4938.86 4926.18
Surplus available for appropriation 0 0
Appropriations 0 0
General Reserve 0 0
Proposed Dividend 37.40 62.33
Tax on Dividend 0 12.69
Additional depreciation on fixed asset as per Companies Act, 2013 0 0
Balance carried to Balance sheet 4938.86 4926.18
Total 4938.86 4926.18

The Change in the Nature of Business, if any:

There was no change in nature of business for the period under review. However the company is in process of setting up a facility for manufacture of steroids/API which will add value to the existing business.

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. 0.60 per equity share at the rate of 6 % subject to the approval of members. The dividend, if approved by the Members, will result in the out flow of Rs. 37.40 lakhs from the Company, Dividend if declared will be paid to the Members whose names appear in the Register of Members as on the record date as on 13th August 2020.

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 2012-13, will be transferred to the Investor Education and Protection Fund established by the Central Government, after the conclusion of 27th 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 in the name of Investor Education and Protection Fund (IEPF).

The unclaimed equity shares pertaining to financial year 2011-12 to 2017-18 has been transferred as per the provisions of the Act.

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. 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 2019-20.

COVID Impact:

The global economy is confronting with an unprecedented COVID- 19 pandemic which has a rippling effect on the real GDP business of all the affected countries. In Indian context, almost all the sectors are impacted due to lock down and the social distancing restrictions, resulting in contraction of demand for banking products /services. The resilience depends on the health & societal factors like disease progression, vaccine development, spending habits, timely availability of labour force etc. 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.

The management has assessed the potential impact on COVID-19 on the Company. Based on the current assessment the management is of the view that the impact of the COVID-19 on the operations of the Company and the carrying value of its assets and liabilities is not likely to be material. In assessing the recoverability of receivables, intangible assets, and Loans & advances, the Company has considered internal and external information upto the date of approval of financial results.

However the impact assessment of COVID-19 is a continuing process, given the uncertainties associated with its nature and duration. The Company will continue to monitor any material changes to future economic 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

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

Board Meeting No. Date of Board Meeting Board Strength No. of Directors Present
128th Thursday, 30th May 2019 9 8
129th Friday, 9th August 2019 10 8
130th Tuesday, 12th November 2019 8 7
131st Saturday, 21st December 2019 8 7
132nd Saturday, 8th February 2020 8 7

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 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, 2020.

(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 consolidated Financials of its subsidiary M/s Natural Phyto Pharma Private Limited (Formerly known as Natural Drug Discoveries Private Limited) for the quarter ended June 2019. The Company has since rectified deficiency and submitted the same to BSE on receipt of Notice and payment of levied fine.
Some of the Promoter 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 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 noncompliance.
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 is pending with ROC the companys application for adjudication of the default is pending disposal with ROC.

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 2020-21 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.


Shri. Laxminarayan Mundra and Smt. Jyoti Mundra, Directors retire by rotation and being eligible, offer themselves for re appointment.

During the year under consideration, Mr, Sunil L Mundra and Mr. Satyanarayana Mundra were reappointed as MD and WTD respectively for a period of 5 years and 3 years.

Mr. Laxminarayana Mundras tenure as Whole time director is ending on 31.08.2020. Considering his immense contribution to the progress of the company as a promoter and executive director since inception, the Board recommends his reappointment for a further 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 SCompensation 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- Partner
Mr. Laxminarayana Mundra-His wife is a Partner
Mr. Sathyanarayana 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 Year\(Previous Year) 201920 Debit (Rs.) Current Year\(Previous Year) 2018-19
Mr. Sunil Laxminarayana Mundra Directors Remuneration 44,40,000 2,27,110 236,340
Mr. Laxminarayana Mundra Directors Remuneration 31,80,000 1,56,270 1,73,370
Mr. Sathyanarayana Mundra Directors Remuneration 31.80,000 1,80,420 1,73,450
Mr. Prasanna Junnarkar Salaries 10,47,774 65,177 63,526
Mr. Skandan p. Jain Salaries 2,77,481 0.0 28,790
Mrs. Shilpa Burman Salaries 2,34,234 37,250 0.0
Mr. Sushil Kumar Mundra Sitting Fees 75,000 - -
Mrs. Jyothi Mundra Sitting Fees 60,000 - -
M/s. Mundra Enterprises Operating 0.0 0.0
M/S Natural Phyto Pharma Private Limited (Formerly known as Natural Drug Discoveries Private Limited) Investment in Equity Shares 0.0 0.0 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 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 CSR Committee was reconstituted due to retirement of Dr. CM Gurumurthy. The present Committee members are Shri Anjan Kumar Roy, Shri Sunil L Mundra and Shri Sushil Kumar Mundra. In view of profits being less than the prescribed limits as per section 135 of the Companies Act, 2013, CSR provisions are not applicable to the Company.

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 Audit Committee was reconstituted due to retirement of Dr. CM Gurumurthy. 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 2019-20.

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:

The name of subsidiary company has since been changed from M/s Natural Drug Discoveries Private Limited to M/S Natural Phyto Pharma Private Limited and its main objects has been amended to include new objects for diversification of business such as manufacture of chemical intermediates and API (Active Pharmaceuticals Ingredients)

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:



HO 21 0 21 HO 22 0 22
UNIT-1 34 0 34 UNIT-1 32 0 32
UNIT-2 86 1 87 UNIT-2 75 9 84
UNIT-3* 8 4 12 - 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 around 9%. In domestic market, the industry is expected to grow at around 12%. At the same time, the exports are likely to grow at the rate of 8 to 10%. Your company during the Financial Year 2019-20 had a gross turnover of Rs. 7,073.11 Lakhs as against Rs. 7,107.25 Lakhs in the previous year, a marginal growth declined of 0.48 %. Profit before depreciation and taxation was Rs.549.14 Lakhs as against Rs.526.59 lakhs in the previous year. The net profit of the Company for the year under review was placed at Rs. 85.75 Lakhs as against Rs. 192.04 Lakhs previous year. Post COVID-19 Indian Pharma industry is expected to get boost and will perform better than earlier years.

Opportunities and threats:

a). Opportunities

1. Opening of export opportunities for Gelatine capsules in various countries, due to lesser competition from china.

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.

b). Threats:

1. General slow down in international business due to COVID-19.

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.

d). Outlook:

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. 7073.11 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 companys 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. 6,155.48 Lakhs and your company could make Net Profit of Rs. 87.81 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 1.97
(ii) Inventory Turnover 4.74
(iii) Interest Coverage Ratio 2.78
(iv) Current Ratio 2.10
(v) Debt Equity Ratio 1.23
(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
(i) 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/-
Sunil L Mundra Satyanarayan Mundra
Place : Bengaluru Managing Director Whole Time Director
Date : 05th June 2020