Nitta Gelatin India Ltd Directors Report.

To

THE MEMBERS OF

NITTA GELATIN INDIA LIMITED

Your Directors have pleasure in presenting the 45th Annual Report and audited financial statements of your Company for the year ended 31st March, 2021.

The Statement of Accounts has been prepared in accordance with Indian Accounting Standards (IND AS) which are applicable to the Company w.e.f. 1st April, 2017 as per the Rules laid down in this regard.

SHARE CAPITAL

The Authorised Share Capital of your Company as on 31st March, 2021 was Rs.8,024.44 Lakhs comprising of 4,00,00,000 Equity Shares of Rs.10/- each totalling to Rs.4,000.00 Lakhs, 929,412 Optionally Convertible Non Cumulative Preference Shares (OCPS) of Rs.170/- each totalling to Rs.1,580.00 Lakhs, 2,00,00,000 Optionally Convertible Non-Cumulative Preference Shares of Rs.10/- each totalling to Rs.2,000.00 Lakhs and 44,44,444 Redeemable Preference Shares of Rs.10/- each totalling to Rs.444.44 Lakhs.

PERFORMANCE

The gross revenue from operations of your Company during the year under review was Rs. 354.29 Crores as compared to Rs.294.47 Crores in the previous year. There was an increase in sales realisation per unit of Gelatin in line with global prices with the growth in Gelatin demand worldwide as also increased raw material cost. Increased quantity of sales, higher unit sales price of Gelatin and increase in volume of sales of Collagen Peptide have resulted in higher gross revenue for the year.

The availability of Crushed Bone (CB), the main raw material of your Company, was under pressure during the financial year following the lockdown declared by the Government owing to the pandemic, COVID-19. Non-availability of CB in the required quantity and at a reasonable price posed a big challenge to the Company as it depended to a large extent on opening up of restaurants and eateries which account for a large part of beef consumption and also increase in export of buffalo meat. Many regional localities were placed under lockdown and there was acute shortage of manpower as large number of migrant workmen returned to their home States. The closure of hotels & restaurants and strict restrictions in attendance in functions like weddings have worsened the scenario.

The following are noteworthy :

• It took about 3-4 months after the relaxation of the restrictions caused by the lockdown before normalcy could be restored. Demand side pull following the operation of all the Gelatin manufacturers to near full capacity and the limited availability of CB has taken the price of CB to all time high levels during the year, apart from its deteriorating quality. Your Company through effective sourcing measures was able to source the required quantity of CB to ensure full utilisation of the Gelatin production capacity despite all these challenges. This has enabled the Company to post robust financial results amidst the pandemic.

Though there was some respite in CB availability in Quarter 4 compared to the previous quarters, the situation continues to look challenging in the wake of the alarmingly high number of COVID-19 cases in Kerala and across the Country as a part of the second wave.

Your Company imported 500 MT premium quality gelbone from France in 2020-21 and has already contracted to import another 2100 MT. Your Company is also discussing with another gelbone manufacturer in Canada for import this year.

• Pilot plant production of Degreased Crushed Bone (DCB) - a better quality Crushed Bone, is progressing at one of the Companys associated bone mills and the Company expects to achieve significant mileage out of this initiative, to effectively address quality related issues. The request made to the Central Govt. for liberalizing import of CB, is now under their active consideration.

• Your Company has been producing Hide Gelatin regularly though in small quantity, as part of the initiative to establish a cheaper substitute for Crushed Bone and was able to develop a good supply chain to meet its requirement. Trial runs are continuing and efforts are on to optimise process engineering in consultation with Nitta Gelatin Inc., for producing Hide Gelatin meeting the requirements of various end use applications.

• The Company produced and exported Limed Ossein from Reva Division. The Reva Division continues to be beset with challenges to achieve capacity levels, owing to problems with the discharge pipeline, non availability of Crushed Bone and inadequate supply of water and power. Despite this, the Division was able to achieve better capacity utilisation levels for Limed Ossein in the financial year. Quality of Crushed Bone has deteriorated significantly during the year which has not only affected the through put and cost, but also has put the effluent treatment plant of the Company under severe strain. Achieving higher Limed Ossein production at Reva Division continues to pose challenge on the face of effluent parameters going out of the required specification. Your Company continues its efforts to plan the production requirements in accordance with the discharge norms without a major impact on the supply chain.

Installation of the new jet aerator at Reva Division has been completed. Its operation had displaced the settled sludge in the aerator leading to choking of some of the associated piping. This has been cleared. There was also an increase in the Ammoniacal Nitrogen and COD levels in the ETP which is being monitored for corrective action.

OPERATION DURING CHALLENGING TIMES

• The Government of India had announced a complete lockdown with effect from 24th March to 4th May, 2020 in view of the COVID-19 pandemic. The Local Governments ordered the Company to stop operations in all factories. The Company could convince the Government of Kerala on the relevance of the Companys produce in health management and that any disruption in Companys production will severely affect public health. Based on Companys representation, Government of Kerala classified its operations in the essential category in the interest of public health and gave permission to operate the Companys factories with effect from 26th March. This was followed by our efforts for achieving the said relaxation for the units in the States of Gujarat and Maharashtra from the concerned Govts. and operate its plants despite the lockdown condition.

SAFETY PROTOCOLS

To address the risks posed by the COVID-19 infection, the Company implemented many precautionary measures. They were followed up with the below actions at the unit level at all locations of the Company during the period of lockdown.

• Stopping of fresh raw material (CB) charging at our Ossein factories

• Head count of permanent workers reduced by 50% in all shifts. Salary protected for workers not attending duty

• Employees allowed to work from home wherever possible

• Minimised use of contract workers and payment of 50% salary for regular contract workers even if they do not report for work

• Ban on visitor entry and if inescapable, to be met with at a makeshift visitors meeting room at the entry point and stopping all non-critical activities including 5S, landscaping etc.

• Key challenges faced by the Company include logistic issues for obtaining the raw materials and other inputs required for operation such as firewood etc. Outbound transport restrictions also affected customer side supply chain activities. The various guidelines stipulated by the Govt. and the Local Administration Authorities were impressed upon the employees such that the protocols were adhered strictly. They were provided reimbursement of transportation and food expenses. IT infrastructure was reinforced to support more employees working from home, as and when required.

Company also made significant contributions through its CSR fund for helping the people affected by the pandemic.

The Company debottle necked the sludge drier at Ossein Division and the Company could achieve a through put of 400 Kg/hr against the earlier rate of 280 Kg/hr after fine tuning the equipment in consultation with the equipment manufacturer. This has enabled the Company to record significant progress in augmenting the Companys sludge management and disposal systems.

The Company completed the work on the rain harvesting pond during the year at its Ossein Division. This is expected to improve the water table in nearby areas in addition to de-risking the Company from any sudden developments affecting water availability, though to a limited extent. Planting of saplings for creation of Miyawaki forest, a technique leading to thick growth of trees in a measured area, was also completed.

The problem that would be created in terms of nonavailability of water at Gelatin Division by the proposed relocation of the embankment due to the Water Metro boat service has been escalated to higher levels of the Government for a solution. The Kerala State Single Window Clearance Board took stock of the situation especially the joint representation made by affected parties in the neighbourhood, regarding possible solution in the form of relocation of drawal point of fresh water to a point upstream of new location of bund. It is expected that a solution would be found so that the industries in that belt are not adversely affected.

With all the Gelatin plants (except the Ooty plant of Sterling Biotech) in full scale operation during the year and the resultant high demand for Crushed Bone, Crushed Bone prices increased significantly. Acid prices have gone up by 17%, adversely impacting the cost of production. The per unit price realization has gone up by 16% for Ossein/ Limed Ossein, 13% for Gelatin and 13% for Bovine Collagen Peptide in line with global trends. Prices for Fish Collagen Peptide has declined by 30% due to lower demand in the high priced domestic market. Supply of the raw material, fish protein, on account of regulatory issues continued to pose a challenge for Collagen Peptide sales. The weakening of Rupee against USD during 2020-21 as compared to 2019-20 has contributed to better sales realisation on exports.

In the backdrop of this situation, your Company exercised close monitoring and strict control over each significant element of cost, and achieved appreciable savings notwithstanding the higher costs incurred due to higher production levels. The Company could achieve economies of scale due to higher volume of production of Gelatin and Ossein. There was significant reduction in power cost as a result of various cost control measures in both Divisions of the Company. Though the price of LNG, firewood and furnace oil has increased during the year, cost control measures helped the Company to keep costs under control. Factory and Administration overheads also decreased significantly on account of the various austerity measures taken by the Company in the wake of COVID-19 uncertainties.

With regard to finance cost, the Company could effectively leverage low cost foreign currency loans by negotiating with the Banks and introducing Banks that provide working capital funds at competitive rates. Interest rates for foreign currency loans have also dropped as LIBOR has gone down from 1.40% to 0.25% during the course of the year.

The products of your Company continued to enjoy robust market demand during the year under review. The entire sale of Ossein/Limed Ossein, 56% of the total sale of Gelatin and 80% of Collagen Peptide was through exports. Your Company has arrangement with its overseas promoter, Nitta Gelatin Inc., Japan to leverage their expertise and market insights in servicing its customers in a proactive manner in line with the global standards of

NITTA Group.

By way of a significant judgment, the Panchayat Tribunal of Kerala had quashed the decision of the Kadukutty Panchayat to reject the Companys application for the factory licence for Ossein Division and directed the Panchayat to issue the license to the Company. The licence once issued for 5 years in November 2019 by the Panchayat was reversed by the said local body at the instance of yet another authority in the said office. The Company filed a case against the Panchayat Presidents decision in the High Court and the Court stayed the Order of the President. The Court subsequently instructed the Central Pollution Control Board to study the assimilation capacity of Chalakudy river. In the report submitted by Central Pollution Control Board to High Court, they have stated that the Company fully meets the discharge norms and has also made some observations on operation of Effluent Treatment Systems. The status quo continues and the petition is now pending for adjudication by the High Court.

The Pollution Control Board has renewed the validity of the Consent to operate upto 30th June 2023 for the Ossein Division. Similarly for Gelatin Division, the Company has renewed the Consent to Operate upto 30th June 2023. Reva Divisions Consent to Operate issued by the Gujarat State Pollution Control Board is valid upto May 2021 and efforts are on to renew the same.

FINANCIAL HIGHLIGHTS

The operations of the Company for the year 2020-21 have resulted in a pre-tax profit of Rs. 24.33.Crores (as against a pre-tax profit of Rs.6.87 Crores during the year 2019-20. Details are as under:

(All amounts are in Rs.Crore, unless otherwise stated)

Particulars For the year ended 31st March, 2021 For the year ended 31st March, 2020
Sales (including export incentives and net of Excise Duty & VAT) 354.29 294.47
Other Income 4.62 3.30
TOTAL 358.91 297.77
Gross Profit before Depreciation 39.13 21.83
Deducting there from:
Depreciation 14.80 14.95
Provision for Tax -
- Current Tax 4.53 1.18
- MAT (2.03) (1.18)
- Deferred Tax 3.93 2.09
- Prior years - (3.10)
Profit/(Loss) after Tax from continuing operations 17.90 7.89
Other comprehensive income/(loss) (net of tax) 4.29 (5.88)
Total comprehensive profit for the year 22.19 2.01
Profit brought forward from previous year (6.55) (13.06)
Balance Profit available for appropriation 17.90 7.89
Appropriations :
Final dividend on equity shares - paid 2.27 1.36
Tax on dividend - 0.02
Total 2.27 1.38
Transfer to General Reserve
Balance profit carried forward to next year 9.08 (6.55)
Earnings per share
Basic 19.72 8.70
Diluted 19.72 8.70

Note: Dividend on Preference Shares is considered as finance costs.

DIVIDEND

Considering the Companys performance the Board has recommended a dividend of Rs. 3.0 per share i.e. 30% of the face value of Rs. 10/- per share on the Equity Capital for the year ended 31st March, 2021. The Board has also recommended dividend @ 5.4029% p.a. on the 929,412 Optionally Convertible Preference Shares of face value of Rs. 170/- each and a dividend @7.65063% on the 44,44,444 Redeemable Preference Shares of the face value of Rs. 10/- each for the year ended 31st March, 2021. This dividend payment is out of the current year profits of the Company and is subject to approval of the members at the ensuing Annual General Meeting.

The total outflow on account of dividend will be Rs.391.74 Lakhs (Rs.346.35 Lakhs in the financial year 2019-20) comprising of Rs.119.37 Lakhs on Preference Shares (Rs.119.37 Lakhs in the financial year 2019-20) and Rs. 272.37 Lakhs on equity shares (Rs. 226.98 Lakhs in the financial year 2019-20).

During the year, unclaimed dividend of Rs. 3,17,576/- pertaining to the year 2012-13 was transferred on to the Investor Education & Protection Fund after giving due notice to the members.

RESERVES

No amount is transferred to General Reserve during the year. The Company has recognized capital reserves amounting to Rs.2750.62 Lakhs on account of the merger (including deferred tax asset on the unabsorbed business loss of Reva Proteins Ltd. carried over from previous years as per tax books for an amount of Rs.1609 Lakhs and other appropriate adjustments).

Reserves as on 31.03.2021 comprises of Security Premium Reserve of Rs. 2895.90 Lakhs, equity contribution on External Commercial Borrowings and Preference Share Capital Rs. 984.43 Lakhs, Special Export Reserve of Rs.79 Lakhs, General Reserve of Rs. 7836.64 Lakhs, Retained earnings of Rs. 908.67 Lakhs, Capital Reserve of 2750.62 Lakhs, Hedge Reserve of Rs. 111.05 Lakhs and other comprehensive loss of Rs. 163.95 Lakhs aggregating to Rs. 15402.36 Lakhs.

PARTICULARS OF LOANS, GUARANTEES & INVESTMENTS

The Company has provided Corporate Guarantee on behalf of Bamni Proteins Ltd. (subsidiary Company) to the lenders towards its borrowings for working capital requirement to the extent of Rs. 750 Lakhs.

Details in respect of other loans, guarantees and investments covered under the provision of Section 186 of the Companies Act, 2013 are given in the notes on accounts for the financial year ended 31st March, 2021 and such loans, guarantees and investments are within limits prescribed under that Section.

CREDIT RATING

During the year, rating agency CRISIL has reaffirmed the rating of "CRISIL A-" and revised its rating outlook as "Stable" from "Negative" for Long Term Instruments and reaffirmed "CRISIL A2+" rating for short term instruments

AWARDS & ACCOLADES

During the year, your Company received the following awards:

a) Company has won 2 awards in CII Southern Region Kaizen competition in medium scale process industry held online from 18-20th August 2020 in Supervisory and Operator category

b) Company has achieved Gold Recognition for CIIs Business Excellence Maturity Assessment 2020.

c) Companys Ossein Division has been selected to receive Safety Awards in Medium Factories Category by the Department of Factories & Boilers.

d) Gelatin Division & Ossein Division have successfully achieved the TPM Certification Assessment of STRONG COMMITMENT conducted by CII.

The following prestigious certifications are retained by your Company:

(a) European Directorate for the Quality of Medicines & Health (EDQM) Certificate for Gelatin Division

(b) CAPEXIL plant approval certificate for Ossein Division, Gelatin Division and Reva Division for the export of Ossein, Gelatin and Collagen Peptide.

(c) HACCP Certificate for Ossein Division for food safety.

(d) ISO 14001:2015 for Gelatin Division for Environment Management System

(e) ISO 9001:2015 for Quality Management System of the Company.

(f) FSSC 22000 V.5 Certification for Food Safety Management System for Gelatin Division.

(g) FSSAI Certification for manufacturing, import/export of Gelatin & Collagen Peptide

(h) WHO GMP Certification as per World Health Organisation/Codex for manufacture of Gelatin & Collagen Peptide

(i) Halal (MUI, IFANCA & JUM)/Kosher Certification for Gelatin and Collagen Peptide - JUM Halal for Ossein & Dicalcium Phosphate

(j) NABL Accreditation for in-house laboratory of Gelatin Division.

(k) ISO 45001:2018 Certification for Occupational, Health and Safety Standards for Gelatin Division and Ossein Division

(l) ISO 50001:2018 Certification for Energy management system for Gelatin Division & Ossein Division.

HEALTH, SAFETY AND ENVIRONMENT

Compliance with relevant regulations and effective management of the related issues is an integral part of the Companys philosophy.

1. Health and Safety

The Company is committed to protecting the health and safety of its employees. In addition to the Head (Health Safety & Environment) for the Company, each plant has a Safety Officer and Safety Committees which include representation from workmen and executives. The Committees meet regularly to review issues impacting plant safety and employee health. Regular health checkup of the employees is carried out through tie-up with reputed hospitals. Various training programs are conducted at the plant on health and safety issues including emergency preparedness, work safety, first-aid, etc. Both Ossein and Gelatin factories have received the ISO 45001-2018 certification, which is a testimony to the Companys commitment in this area.

The following were the major activities carried out during the year :-

• Plant operations of all units are being done as per government guidelines strictly adhering to COVID-19 protocol Migration audit to ISO 450012018 completed at both Ossein division and Gelatin Division

• Integration of ISO 14001-2015 certification audit completed at Gelatin division.

• External safety audit completed at Ossein and Gelatin Divisions.

• Action points identified based on experience at other factories of Nitta Gelatin Inc., Japan completed.

• Fire license renewed at Ossein and Gelatin Divisions

• Fire and safety audit have been conducted at Reva Division by the Safety officer of the Gujarat Government

• Mock drills conducted at Ossein, Reva and Gelatin Divisions.

• Safety day and Environmental day celebrations conducted at Ossein, Reva and Gelatin Divisions.

• TPM Certification Assessment-2021 of Strong Commitment by CII has been successfully completed by both Ossein and Gelatin Divisions.

2. Environment

The Company continuously endeavors to enhance Environmental Management and through all activities demonstrates its commitment to protect the environment. The factories of the Company are equipped with modern effluent treatment plants for treating and discharging treated water with parameters well within the norms laid down by the respective State Pollution Control Board. The emissions from the boilers and generator stacks are regularly monitored for compliance. Solid waste from operations is collected in a secured manner and disposed in authorized locations. Ambient air quality is monitored on regular basis and ensured for its compliance. Our ETP operations have been reinforced with the introduction of new equipment and technologies. Various energy saving measures and efficiency improvement activities were taken up during the year that reduced the consumption of fuels compared to previous years. Action plans have been drawn up to reduce consumption of water in the coming years. In the case of solid waste reduction, Company follows a structured action plan. A polymer house based facility using solar energy has been developed at the Companys Gelatin Division for drying the sludge emanating out of the operations leading to lower operating costs and carbon print. With a view to reduce the greenhouse effect, Company is focusing on greenery development at all its locations.

CORPORATE SOCIAL RESPONSIBILITY (CSR)

Your Company has formulated a well-structured Policy aimed at providing focus and direction to the various activities on CSR. The Company is committed to identifying and supporting programmes aimed at such of the sectors, a brief indication of which has been outlined in Annexure II forming part of this report. The CSR Policy can be accessed on the Companys website www.gelatin.in. The CSR projects undertaken by the Company are in accordance with Schedule VII of the Companies Act, 2013 which is given in the aforesaid annexure.

The total CSR expenditure incurred by the Company during the year of Rs. 15.45 Lakhs was in compliance with the statutory requirement of 2% of the average profit for the last three years. A CSR Committee of the Board had during the course of the year been replaced by a Committee of Executives in line with relaxation introduced in the Companys Act, which acts in an advisory capacity with respect to policies and strategies that affect the Companys role as a socially responsible organization. The CSR Committee monitors the progress of the projects and ensures that the implementation of the projects is in compliance with the CSR objectives and Policy of the Company. The Annual Report on CSR activities is annexed herewith as Annexure I which in effect is the newly introduced Annexure II to the amended CSR Rules w.e.f. 01.04.2020.

POLICY FOR DETERMINING MATERIAL SUBSIDIARIES

In accordance with SEBI LODR Regulations, the Companys policy on materiality of subsidiaries specifying the criteria for determining the Material Subsidiaries is available in the Company website, www.gelatin.in. As per such criteria, the Company has no material subsidiary as of 1st April, 2020.

SUBSIDIARY COMPANY

BAMNI PROTEINS LIMITED

The annual production during the year in this subsidiary Company was 2201 MT of Ossein and 5090 MT of Di Calcium Phosphate as against 2385 MT of Ossein and 5440 MT of Di Calcium Phosphate during the previous year.

The operation of this subsidiary for the year under review has resulted in a pre-tax profit of Rs. 394.22 Lakhs (Rs. 848.75 Lakhs in the previous year), post-tax profit of Rs. 307.47 Lakhs (Rs. 627.82 Lakhs in the previous year) and other comprehensive income of Rs. 33.35 Lakhs (loss of Rs. 92.76 Lakhs) during the previous financial year.

In accordance with Section 129(3) of the Companies Act, 2013, a consolidated financial statement of the Company and its subsidiary Company has been prepared, which is forming part of the Annual Report.

The statement containing the salient features of the financial statement of the subsidiary under first proviso to Sub-Section (3) of Section 129 of the Act in Form AOC I is attached as Annexure II.

In accordance with fourth proviso of Section 136(1) of the Companies Act, 2013, the Annual Report of the Company containing therein its standalone and consolidated financial statements has been uploaded on the website of the Company, www.gelatin.in. Further as per the fourth proviso of the said section, the annual accounts of the Subsidiary Company and the related detailed information have also been uploaded on the website of the Company, www.gelatin.in.

Annual accounts of the Subsidiary Company and related

detailed information shall be made available to the Shareholders of the Company and Subsidiary Company seeking such information at any point of time. The annual accounts of the Subsidiary Company shall also be made available for inspection by any Shareholder at the Registered Office of the Company and Subsidiary Company concerned. Hard copy of details of accounts of Subsidiary shall be furnished to any Shareholder on demand. Further, pursuant to Indian Accounting Standard Ind AS 110 issued by the Institute of Chartered Accountants of India, consolidated financial statements presented by the Company include the financial information of its Subsidiary.

STATUTORY AUDITORS REPORT

The delay in remittance of undisputed statutory dues as pointed out by the Statutory Auditors in their report was within the extended time as permitted by the Employees Provident Fund organisation following the COVID-19 lockdown restrictions. Payment delay with respect to Water cess (Statutory dues outstanding for more than six months) was due to pendency of Order of assesment under the Water (Prevention Control of Pollution) Cess Act, 1977.

SECRETARIAL AUDITORS REPORT - EXPLANATION TO OBSERVATIONS OF AUDIT

As prescribed under Section 204(1) of the Act, the Company has received the Secretarial Audit Report. The observations made therein and the corresponding explanations are given below:

Sl. No. Observation Management Reply
1. As per Regulation 17(1) (b) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 , 50% of the Board of Directors of Nitta Gelatin India shall be Independent Directors There was one short of the required number of Independent Directors on the Board for the limited period between 19.03.21 to 31.03.21 consequent to the retirement of Dr. K. Cherian Varghese, Independent Director on 18.03.2021. In the wake of the vacancy arising in the position of an Independent Director, the Company has time till the immediate next meeting of the Board or 3 months from the date of the vacancy whichever is later for conforming to such requirement of minimum no. of Independent Directors.
The Company is advised to maintain the composition of Board of Directors at all point of time. That being the case, the Board of Directors shall have opportunity at their Accounts meeting to consider a proposal from Nomination & Remuneration Committee and approve the appointment of an Independent Director for filling the vacancy.
2. Considering the retirement of Dr. K. Cherian Varghese on 18.03.21 and as a proactive measure, the Board of Directors at their meeting held on 29.01.21 had reconstituted the Stakeholders Relationship Committee (SRC) and Nomination and Remuneration Committee (NRC) with sufficient number of directors. However, Audit Committee (AC) has not been reconstituted with sufficient number of directors on the day. Though the law prescribes a minimum no. of 3 Directors for the Audit Committee to be properly constituted, any interim vacancy need only to be filled before the Audit Committee meets again in a formal meeting.
Hence, for the limited period between 19.03.21 to 31.03.21, the number of required ID in the Audit Committee was one short of the minimum required as per SEBI LODR. To that extent the Company shall be ensuring that the Audit Committee is properly constituted with the addition of a member, before the succeeding meeting.

COLLABORATORS

The Collaborators of your Company continue to be the relentless source of support and guidance for the Company in each of its key initiatives. Their patronage in areas of financial support, product development, marketing, quality improvement and training of personnel has contributed significantly to the growth of the Company. Nitta Gelatin Inc., Japan has provided guidance and considerable financial support for the scheme of revival of its Reva Division. Kerala State Industrial Development Corporation Ltd., the other promoter is equally supportive for development of your Company.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO

The information as required under Section 134(3) (m) of the Companies Act, 2013, read with Rule 8(3) of the Companies (Accounts) Rules, 2014 is attached as Annexure III.

PARTICULARS OF EMPLOYEES AND RELATED DISCLOSURES

Disclosures pertaining to remuneration and other details as required under section 197(12) of the Act read with Rule 5(1) of The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are provided in the Annual Report as Annexure IV to this report.

The Annual Report excluding the details of employees receiving remuneration in excess of the limits prescribed under Section 197 of the Act 2013 read with Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is being sent to the shareholders of the Company in terms of first proviso to Section 136(1) of the Act 2013. The annexure is available for inspection at the Registered Office of the Company during business hours and any Shareholder interested in obtaining a copy of the said annexure may write to the Company Secretary at the Registered Office of the Company.

INTERNAL CONTROL SYSTEM

ADEQUACY OF INTERNAL CONTROL SYSTEMS

The Company has in place well defined and adequate internal controls commensurate with the size of the Company and the same were operating effectively throughout the year. The internal control systems operate through well documented Standard Operating Procedures, policies and process guidelines. These are designed to ensure that transactions are conducted and authorized within defined authority limit commensurate with the level of responsibility for each functional area. The Companys accounting and reporting guidelines ensure that transactions are recorded and reported in conformity with the generally accepted accounting principles.

The Company has engaged a professional firm of Accountants with long years of experience to carry out the internal audit function. The Company has not placed any limitation on the scope and authority of the internal audit function. The internal audit function evaluates the efficacy and adequacy of internal control systems, its compliance with operating systems and policies of the Company and accounting procedures at all locations of the Company. To maintain its objectivity, effectiveness and independence, internal audit is being carried out on a quarterly basis and reports thereon, along with the remarks of the process owners on each of the observations of audit are placed before the Audit Committee of the Board. The Audit Committee reviews each of the internal audit reports as a separate item of agenda along with the internal/statutory auditors and the management representatives wherein the Committee gives their advice/suggestions on the audit points. Based on the report of the internal audit as well as the observations of the Audit Committee the process owners undertake requisite corrective action in their respective areas thereby further strengthening the control systems. Action Taken Reports are also reviewed by the Audit Committee for each actionable item. The minutes of the Audit Committee are reviewed by the Board of Directors.

INTERNAL CONTROLS OF FINANCIAL REPORTING

The Company has in place adequate financial controls commensurate with the size, scale and complexity of its operations. During the year, such controls were tested by the management and no reportable material weakness in the design or operations was observed. The Company has policies and procedures in place for ensuring proper and efficient conduct of its business, safeguarding of its assets, prevention and detection of frauds and errors, accuracy and completeness of the accounting records and timely preparation of reliable financial information.

The Company has adopted accounting policies which are in line with the Accounting Standards and the Companies Act and with the generally accepted accounting principles in India. Changes in policies, if required, are made in consultation with the auditors and are approved by the Audit Committee.

The Board is of the view that appropriate procedures and controls are operating effectively and monitoring procedures are in place.

RISK MANAGEMENT POLICY

The Board of Directors of the Company has entrusted the management of the Company to evaluate and manage various risks faced by the Company and appropriately apprise the Board periodically. Accordingly, the management has constituted a Risk Management Committee comprising of Senior Management Personnel to develop and implement a Risk Management Policy including identification therein of elements of risks which in the opinion of the Board may impact the operations of the Company. The Board of Directors reviews the evaluation of risks and the mitigation measures taken by the Company in managing such risks to sustain the operations of the Company for the foreseeable future. Some of the key risk areas identified for mitigation and corrective action include

• Crushed Bone availability and pricing patterns,

• impact of the high cost of Crushed Bone on the cost of production,

• safety and security policies of the Company,

• succession planning for key executives,

• impact of the National Green Tribunals Orders,

• significant litigation against the Company having material financial impacts,

• moves of competitors,

• water scarcity for operational requirements,

• emergence of alternate substitutes for the products of the Company,

• adverse forex rate fluctuations,

• risk of losing pricing premium commanded by the Company due to emergence of alternate Halal certifications

• sustaining operations in lockdown conditions with minimal disruption etc.

MATERIAL POST BALANCE SHEET EVENTS

There is no significant material post balance sheet event.

APPLICABILITY OF COST AUDIT REQUIREMENTS

As per the Companys (Cost Records and Audit) Rules 2014, the Companys products are not covered under Cost Audit and the Company maintains the relevant cost records for the products for which the maintenance of cost record is required as per the above Rules.

RESPONSIBILITY STATEMENT OF DIRECTORS

To the best of their knowledge and belief and according to the information and explanations obtained by them, your Directors make the following statements in terms of Section 134 of the Companies Act, 2013:

a) that in the preparation of the annual accounts for the year ended 31st March, 2021, the applicable Indian Accounting Standards have been followed along with proper explanation relating to material departures, if any;

b) that they had selected such accounting policies as mentioned in Note 1 of the notes to the Financial Statements 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 as at 31st March 2021 and of the profit of the Company for the year ended on that date;

c) that they have taken proper and sufficient care 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) that they had prepared the annual accounts on a going concern basis;

e) that proper internal financial controls laid down by the Directors were followed by the Company and such internal financial controls are adequate and were operating effectively; and

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

RELATED PARTY TRANSACTIONS

The Company has formulated a policy on Related Party Transactions which is in line with the relevant provisions of the Companies Act and as well as SEBI (LODR) Regulations. The said policy as approved by the Board is available in the Company website www.gelatin.in. As per the said policy, prior omnibus approval of the Audit Committee is obtained on a quarterly basis for all the Related Party Transactions which are of a foreseen and repetitive nature. All Related Party Transactions actually that have taken place are subsequently reviewed by the Audit Committee on a quarterly basis in comparison with the conditions of omnibus approval and are recommended to the Board for approval. Additionally, Material Related Party Transactions foreseen in the year ahead were approved by the members. Particulars of contracts of arrangements with Related Parties referred to in sub section 1 of Section 188 read with Rule 8(2) of the (Companies Accounts) Rules, 2014 are attached in Form No. AOC 2 as Annexure V.

MANAGEMENT DISCUSSION AND ANALYSIS REPORT

Management Discussion and Analysis Report for the year under review as stipulated under SEBI (LODR) Regulations is presented in a separate section forming part of this Annual Report.

CORPORATE GOVERNANCE

The Company has complied with the corporate governance requirements under the Companies Act, 2013, and as stipulated under the SEBI (LODR) Regulations. A separate section on corporate governance under the Regulation, along with a certificate from the auditors confirming the compliance, is annexed and forms part of the Annual Report.

CONSOLIDATED FINANCIAL STATEMENTS

The Consolidated Financial Statements have been prepared in accordance with the provisions of Schedule III of the Companies Act, 2013 and Indian Accounting Standards IND AS 110 and other applicable Accounting Standards issued by the Institute of Chartered Accountants of India and the provisions of the SEBI (LODR) Regulations and form part of the Annual Report.

DIRECTORS

Mr. M. G. Rajamanickam IAS ceased to be Nominee Director on 28.05.2020 upon withdrawal of his nomination by KSIDC. Whereafter, Mr. S. Harikishore IAS was appointed as Nominee Director on 28.05.2020 by KSIDC. On 19.10.2020, Mr. S. Harikishore IAS ceased to be Nominee Director and was succeeded by Mr. M. G. Rajamanickam IAS as Nominee Director of KSIDC.

Dr. K. Cherian Varghese ceased to hold office on 18.03.2021 on completion of his tenure as Independent Director.

The Board of Directors had constituted a Nomination and Remuneration Committee (NRC) consisting of three Directors which until vacation of office by Dr. K. Cherian Varghese comprised besides him, Mr. E. Nandakumar and Mr. Yoichiro Sakuma. In the wake of retirement of Dr. K. Cherian Varghese, the Board at the meeting dated 29.01.2021 reconstituted the NRC by induction of Mrs. Radha Unni as an additional member. Accordingly, the said Committee as on date, has the following members:

1. Mr. E. Nandakumar

2. Mr. Yoichiro Sakuma

3. Mrs. Radha Unni

The terms of reference of the NRC are as follows:-

1. The NRC shall identify persons who are qualified to become Directors and who may be appointed in senior management in accordance with the criteria laid down, recommend to the Board their appointment and removal and shall carry out evaluation of every Directors performance.

2. The NRC formulates the criteria for determining qualifications, positive attributes and independence of a Director for recommending to the Board and also a policy relating to the remuneration for the Directors, Key Managerial Personnel and senior management personnel meaning thereby employees of the Company who are members of core management excluding Board of Directors. This would comprise all members of management one level below the Executive Directors, including all functional heads.

3. The NRC formulates the Remuneration policy to ensure that:- the level and composition of remuneration is reasonable and sufficient to attract, retain and motivate personnel as are herein referred at (2) above of the quality required to run the Company successfully; relationship of remuneration to performance is clear and meets appropriate performance benchmarks; and remuneration to Whole-time Directors, key managerial personnel and senior management involves a balance between fixed and incentive pay reflecting short and long-term performance objectives appropriate to the working of the Company and its goals.

During the financial year, the Nomination and Remuneration Committee met on 27.01.2021 adjourned and held on 28.01.2021.

KEY MANAGERIAL PERSONNEL Rule 8(5)(iii) of Companies (Accounts) Rules, 2014 prescribes that Report of Directors should contain details of Directors and Key Managerial Personnel. Therefore, in addition to the details of Directors herein above given, it is brought to the notice of shareholders that Mr. P. Sahasranaman and Mr. G. Rajesh Kurup continue as Chief Financial Officer (CFO) and Company Secretary (CS) respectively.

BOARD EVALUATION

The Companies Amendment Act, 2015 prescribes that there shall be a meeting of Independent Directors during each of the financial years. Accordingly, the Independent Directors who met on 29.01.2021 evaluated the performance of the Directors other than themselves which are followed by an evaluation made by the Board in the presence of the Chairman at their Meeting held on that date. The evaluation found each of the Directors to have requisite qualification, expertise and track record for performance of their duties as envisaged by law. MEETINGS

The Board of Directors met 4 (Four) times during the financial year 2020-21. The details of the Board meetings and the attendance of the Directors are provided in the Corporate Governance Report. The intervening time gap between the two consecutive meetings was within the period prescribed under the Companies Act, 2013. COMPOSITION OF AUDIT COMMITTEE The Audit Committee had during the year Mrs. Radha Unni as Chairperson, with Dr. K. Cherian Varghese and Mr. E. Nandakumar as members More details on the Committee are given in the Corporate Governance Report.

VIGIL MECHANISM

The Company has established a vigil mechanism for Directors and employees to report genuine concerns, while providing for adequate safeguards against victimization, providing direct access to chairperson of Audit Committee, the details regarding which have also been given in the Companys official website.

DISCLOSURE UNDER SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION AND REDRESSAL) ACT, 2013

Your Company has always believed in providing a safe and harassment free workplace for every individual working and associating with the Company, through various interventions and practices. The Company always endeavors to create and provide an environment that is free from discrimination and harassment including sexual harassment. A four member Internal Complaints Committee (ICC) is constituted with three lady employees and one lady NGO member. ICC is responsible for redressal of complaints relating to sexual harassment, as envisaged under the provisions of Act and Rules. Hither to no complaints were received by ICC.

PREVENTION OF INSIDER TRADING

The Company has adopted a Code of Conduct for Prevention of Insider Trading with a view to regulate trading in securities by the Directors and designated employees of the Company and other Connected Persons with in the meaning of the concerned SEBI Regulation. The Code requires pre-clearance for dealing in the Companys shares and prohibits the purchase or sale of Company shares by the Directors and the designated employees who have access to unpublished price sensitive information in relation to the Company and during the period when the Trading Window is closed. The Board is responsible for implementation of the Code.

STATUTORY AUDITORS

M/s. Walker Chandiok & Co. LLP (WCC LLP) Chartered Accountants (Firm Registration No. 001076N/N500013) who were appointed as Statutory Auditors of the Company for a 5 year term at the Annual General Meeting in the year 2017 continues to hold office, while such appointment for the remaining period for the 5 year term, were ratified at the Annual General Meeting in the year 2020. Hence no specific item regarding the appointment is put up for transaction at the forth coming Annual General Meeting and the Notice for the Meeting makes no such mention as part of Ordinary Business.

SECRETARIAL AUDIT

Pursuant to the provisions of the Section 204 of the Companies Act, 2013 and The Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014, the Company has appointed Mr. Abhilash Nediyalil Abraham. (CP No. 14524, M.No. F10876), Company Secretary-in-practice to undertake the Secretarial Audit of the Company. The Secretarial Audit Report is annexed herewith as Annexure VI.

ANNUAL RETURN

The Company has a website https://www.gelatin.in where the annual return of the Company will be published complying with the provisions of Section134 (3) (a) of the Companies Act 2013.

ACKNOWLEDGMENT

Your Directors are thankful to the esteemed Shareholders for their continued patronage and the confidence reposed on the Company and its management. Your Directors place on record its sincere appreciation for the support and assistance extended by the State Government and The Kerala State Industrial Development Corporation Ltd. The Board takes this opportunity to extend their whole hearted gratitude to M/s. Nitta Gelatin Inc., Japan, for their timely and valuable guidance and inspiration. Your Board places on record its sincere appreciation for the significant contributions made by employees across the Company through their dedication and commitment during a very challenging year. On this occasion, your Board thanks all the customers, suppliers, bankers and other associates for their unstinted co-operation.

For and on behalf of the Board of Directors

Dr. K. Ellangovan IAS
Kochi Chairman
07.05.2021 DIN: 05272476