nitta gelatin india ltd Directors report

To

THE MEMBERS OF

NITTA GELATIN INDIA LIMITED

Your Directors have pleasure in presenting the 47th Annual Report and audited financial statements of your Company for the year ended 31st March, 2023. The Statement of Accounts has been prepared in accordance with Indian Accounting Standards (IND AS) which are applicable to the Company w. e. f. 01st April, 2017 as per the Rules laid down in this regard.

SHARE CAPITAL

The Authorised Share Capital of your Company as on 31st March, 2023 was Rs8024.44 Lakhs comprising of 4,00,00,000 Equity Shares of 10/- each totaling to Rs 4000.00 Lakhs, 929,412 Optionally Convertible Non-Cumulative Preference Shares (OCPS) of Rs 170/- each totaling to Rs 1580.00 Lakhs, 2,00,00,000 Optionally Convertible Non- Cumulative Preference Shares ofRs 10/- each totaling to Rs 2000.00 Lakhs and 44,44,444 Redeemable Preference Shares of Rs 10/- each totaling toRs 444.44 Lakhs.

Redemption of Preference Shares: 9,29,412 Optionally Convertible Non-Cumulative Preference Shares of Rs 170/- each aggregating Rs 15,80,00,040/- redeemed on 17.05.2022.

PERFORMANCE

Record Profits & Turnover

The Company recorded the highest turnover and profits in its history during the financial year 2022-23 based on robust demand for all its products and the associated selling price that it could command. ThegrossrevenuefromoperationsofyourCompanyduring the year under review was Rs 486.75 Crores as compared to Rs 428.51 Crores in the previous year registering a growth of 13%. Profit before tax was Rs 78.08 Crores againstRs 37.61 Crores in the previous year, registering a growth of 108%. There was an increase in sales realisation per unit of Gelatin in line with the global prices with the growth in Gelatin demand worldwide as also the price of the byproduct Di Calcium Phosphate. The decrease in price of raw material Crushed Bone and Hydrochloric acid has also helped the Company to record higher profits.

Economic Scenario - Domestic and Global Market

The Indian Pharmaceutical industry plays a prominent role in the global market and ranks 3rd worldwide for production by volume and 14th by value. Indian pharmaceutical market size is expected to reach USD 65 Billion by 2024 and is estimated to touch USD 130 Billion in value by the end of 2030. The nation is the largest provider of generic medicines globally, occupying a 20% share in global supply by volume and is also the leading vaccine manufacturer globally. India also has the highest number of US-FDA compliant Pharma plants outside of USA and is home to more than 3,000 pharma companies with a strong network of over 10,500 manufacturing facilities as well as a highly skilled resource pool.

The global Gelatin market size was evaluated at USD 7.24 Billion in 2022 and is projected to attain around USD 16.93 Billion by 2032, growing at a CAGR of 8.87% during the forecast period 2023 to 2032. The gelatin market is segmented based on application into food & beverage, pharmaceuticals, and nutraceuticals. Among all, the food & beverage segment holds the largest revenue share of around 57% in 2022. Rapidly increasing use of gelatin in bakery products, jellies, marshmallows, yogurt, and other food products has propelled the growth of the food & beverage segment in the market. Growing consumption of health drinks such as meal replacements, protein shakes, and diet supplementary drinks is seen as a major driver for the growth of the global gelatin market. Gelatin is the popular excipient in capsule shells and softgel capsules. Capsules are the second most preferred delivery format after tablets and contributed 12.5% of dosage forms of the new drugs approved by FDA in 2021. The empty capsules market projections estimate the market to rise at a CAGR of 7% during the period 2019 to 2027. The global empty capsules market size is likely to attain valuation of USD 3.7 Bn by 2027, while the global softgel capsules market size was valued at USD 8.2 billion in 2022 & is estimated to grow to USD 14.73 billion by 2030, at a compound annual growth rate (CAGR) of 7.6% from 2022 to 2030 Softgels make up 25 percent of the total market for nutritional supplements and are the second most-prevalent dosage form behind tablets.

The impact of Ukraine war was significant to all industries across the spectrum. For the Indian Gelatin Industry this was favourable due to the drop in production, supply chain issues and the high energy cost in Europe. The increase in demand for many immunity-building products like nutritional supplements was also one of the growth drivers for the higher Gelatin demand all of which helped the Company achieve higher Gelatin unit sales realisation in 2022-23 compared to 2021-22 period.

Collagen Peptide - capacity utilization, new customer development

The global Collagen Peptide market size was valued at USD 897 Million in 2022 and is anticipated to expand at a compound annual growth rate (CAGR) of 5.7% from 2023 to 2028. This is attributable to the rising use of the product in various industries such as cosmetics, which is expected to propel market demand. Additionally, the demand is driven by increasing consumer investment in healthcare and well-being. Moreover, the rising importance of improving immunity post-Pandemic has further strengthened the industrys growth. The global socio-economic dynamics, along with the growing geriatric population, increased budgetary allocation to the healthcare sector, the growing popularity of a preventive approach to lifestyle diseases and the growing nutraceutical segment, have all been complementing the Collagen Peptide products demand. However, the onset of recession in the second half of 2022-23 impacted the global Collagen Peptide market causing the demand to drop in overseas market particularly North America and Asia though the Domestic and African markets were favourable. The lower sales realisation in these markets caused a decrease in overall sales quantity in 2022-23 period. The Company with its new innovative manufacturing process is trying to control the cost of production and thereby tap new markets for increasing the sales. Our major market segments will be beauty from within, joint health, sports nutrition, general wellness and other new functionalities. High functional Collagen Peptide, Diabetes management Peptides are the new products under development.

Plant utilisation at full capacity

During the year, the Company was able to achieve full capacity utilisation for the Gelatin Plant for the year and the Company has successfully executed de-bottlenecking operations to maximise production. The Company could not operate Collagen Peptide plant at its full capacity, particularly in the second half of 2022-23. The recession effect in North America and Asian markets caused a significant impact on the health supplement demand. Collagen Peptide being mostly sold as health supplement in these markets, its demand reduced more than 60% causing the lower sales in 2022-23. The Company has already formulated plans to revive Collagen Peptide sales by tapping new markets in South East Asia, Asia Pacific and Europe by offering Improved High functional products.

Raw Material availability

The availability of Crushed Bone (CB), the main raw material of the Company has been stable during the year, though it is still to come to the pre-Pandemic level. The price was under pressure during the financial year due to demand- supply gap of good quality CB. The following are noteworthy:

The availability of good quality CB at reasonable cost has been a challenge though. Effective sourcing measures with an eye on improving quality has helped to improve the quality of CB up to a certain extent during the year.

Company was able to reduce indigenously sourced CB prices by 3.2 % during the year; however the cost of indigenously sourced Gel bone and imported bones increased by 15% and 23% respectively due to strong global demand. The Company could source the required quantity through effective sourcing measures to ensure full utilization of Gelatin Capacity in spite of all these challenges. This has enabled the Company to post robust financial results in the year. Slow movement of Bone meal which is a byproduct of CB also led to a drop in CB processing in certain areas.

Import of Crushed Bone

In view of the deteriorating quality and the increase in price of indigenous Crushed Bone/ Gelbone Company has also been making efforts to import CB. The quality of Gelbone from France and New Zealand are at premium level because of the advanced technologies deployed in these Countries for pre-treatment and processing the material. Your Company imported 2000 MT premium quality Gelbone from France and New Zealand in 2022-23 and is also discussing with other Gelbone manufacturers in Brazil for imports this year.

With the intent of tapping other source markets, a request has been made to the Central Government for liberalizing import of CB from undetermined BSE risk countries as per OIE norm and the same is now under their consideration.

During the year, the Company took the initiative of partnering with Crushed Bone suppliers for improving the quality of the material by working in close association with them and providing the requisite technology to them for enabling them to supply good quality material. This project is expected to reduce the impurity and other unwanted material content in Crushed Bone to reinforce the supply chain. Once this partnership is successful, this will be replicated with other potential suppliers which will help the Company in improving overall productivity and reducing the cost.

The price of fish protein the raw material required for manufacture of Fish Collagen Peptide has decreased by 20% during the course of the year due to low demand of Collagen Peptide worldwide

Higher Di-Calcium Phosphate (DCP) Price Realisation

During the period 2022-23, the Poultry feed market, had both ups and downs. In the first half of 2022-23, due to the increase in cost of poultry feed components coupled with sluggish poultry demand, DCP prices were on a downward trend. During this period, the import of the substitute product Mono Calcium Phosphate (MCP) from China also was at its peak in the range of 6000 MT/month whereby DCP production exceeded market requirement, causing a drop in DCP prices until October. In the second half of 2022-23, the overall sales price realisation from DCP improved whereby we were able to surpass the level that prevailed in 2021-22.

Operations i) The Company could contract with overseas suppliers for quality Crushed Bones (CB) and this has resulted in maintaining the CB prices static during the year. Acid prices dropped by 140%, significantly reducing the cost of production. The per unit price realization has remained constant for Ossein/Limed Ossein and has gone up by 14% for Gelatin though there was a drop of 3% for Bovine Collagen Peptide in line with global trends for similar products. Prices for Fish Collagen Peptide increased by 7%. The price of raw material, fish protein for Fish Collagen Peptide has recorded an increase of 14%, significantly impacting the margins for Collagen Peptide sales. Price negotiations with raw material suppliers and finished product are on to protect the margins. The weakening of Rupee against USD during 2022-23 as compared to 2021-22 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 various reasons as described above. The Company could also achieve economies of scale due to higher volume of production of Ossein, Di Calcium Phosphate and Gelatin. The increased usage of low cost hide as the raw material in place of Crushed Bone helped the Company to control the raw material costs as well as have a better bargaining power with suppliers of CB. There was increase in power cost due to increase in tariff as well as higher production levels but the overall cost could be managed as a result of various cost control measures in both the 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. India has been affected by the Coal shortage consequent to events in China and Russia. The Companys efforts to create value from wastes by generating gas from residual sludge has further gained momentum during the year with the installation of Anaerobic Digester in Gelatin Division during the year. The operation of sludge dryer substantially reduced the volume of sludge for disposal. Availability and pricing of Coal at Reva Division is posing challenges to manage the costs which might also impact price of alternate fuels like firewood. Factory and Administration overheads increased marginally in line with the overall trend. ii) The Company could effectively leverage low cost foreign currency loans by negotiating with the Banks and bringing in Banks that provide working capital funds at competitive rates. Interest rates for USD denominated foreign currency loans has gone up with the new framework linked to the benchmark SOFR. The Company is evaluating foreign currency loans in alternate currencies such as JPY etc. to reduce the overall interest costs. iii) The products of your Company continued to enjoy robust market demand during the year under review. The entire sale of Ossein/Limed Ossein, 47% of the total sale of Gelatin and 60% 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 the NITTA Gelatin Group. iv) The Pollution Control Board has renewed the validity of the Consent to Operate for the Ossein Division upto 30th June 2023. Your Company is taking steps for the renewal of licence by 30th June, 2023 for both Ossein and Gelatin Divisions. Reva Divisions Consent to Operate issued by the Gujarat State Pollution Control Board has been renewed and is valid upto 23.05.2026.

Environmental Sustainability

Your Company has always prioritized environmental sustainability as an important indicator to reduce carbon foot print and has taken various measures in this regard. i) The Company is in the process of retrofitting its boiler at its Gelatin Division for optimizing its steam generating efficiency. ii) The Company is installing an Anaerobic Digestor for managing the effluent stream in view of the changes in operating parameters. iii) The Companys rain harvesting pond at its Ossein Division has helped to improve the water table in nearby areas in addition to de-risking the Company from any developments affecting water availability, though to a limited extent. iv) The Company maintains a Miyawaki forest, an eco system promoting thick growth of trees in a measured area as a part of its commitment to greening of the environment. v) The Company has installed high efficiency floating aerators in the aeration tank at its Ossein Division to improve aeration efficiency and to avoid settling. vi) The Company has installed Mixers in the conventional biogas tanks at its Ossein Division to improve biogas generation and to avoid settling of sludge. vii) The Company continues to develop green belts and has developed 4.09 hectares (42.16%) of green belt in and around the Ossein factory premises out of the 9.7 hectares of total industrial area with varieties of plant species.

FINANCIAL HIGHLIGHTS

The operations of the Company for the year 2022-23 have resulted in a pre-tax profit of 78.08 Crores (as against a pre-tax profit of 37.61 Crores during the year 2021-22). Details are as under:

(Amount in Crore)

Particulars	For the year ended	For the year ended
	31st March, 2023	31st March, 2022
Sales (including export incentives and net of GST)	486.75	428.51
Other Income	5.31	5.80
TOTAL	492.06	434.31
Net Profit before Depreciation	91.27	51.21
Deducting therefrom:
Depreciation	13.19	13.59
Provision for Tax -	-	-
- Current Tax	22.76	11.24
- Deferred Tax	(3.44)	(0.22)
Profit after Tax from continuing operations	58.76	26.60
Other comprehensive income/(loss) net of tax	0.09	(2.26)
Total comprehensive profit for the year	58.85	24.34
Profit brought forward from previous year	32.96	9.08
Balance Profit available for appropriation	58.76	26.60
Appropriations :
Final dividend on equity shares- paid	3.63	2.72
Total	3.63	2.72
Transfer to General Reserve/Other Reserves	15.80	-
Balance profit carried forward to next year	72.29	32.96
Earnings per share ()
Basic	64.72	29.29
Diluted	64.72	29.29

DIVIDEND

Considering the Companys performance, the Board has recommended a dividend of Rs 7.5 per share (75% on the face value of Rs 10/- per share) on the Equity Capital for the year ended 31st March, 2023. 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 till the date of repayment on 17.05.2022 (47 days) 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, 2023. 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 725.93 Lakhs (Rs 482.54 Lakhs in the financial year 2021-22) comprising of Rs 44.99 Lakhs on Preference Shares (Rs 119.37 Lakhs in the financial year 2021-22) and Rs 680.94 Lakhs on Equity Shares (Rs 363.17 Lakhs in the financial year 2021-22).

During the year, unclaimed dividend of Rs 2,96,177.50 pertaining to the year 2015-16 shall be transferred to the Investor Education & Protection Fund after giving due notice to the members.

RESERVES

The Company has transferred an amount of Rs 1580.00 Lakhs as capital redemption reserve upon repayment of the Convertible Preference Shares during the year as part of the requirements of the Companies Act, 2013. The Company has recognized capital reserves amounting to Rs 2,750.62 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 1,609 Lakhs) and other appropriate adjustments. Reserves as on 31.03.2023 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 79.00 Lakhs, General Reserve of Rs 7,836.64 Lakhs, Capital Redemption Reserve of Rs 1580 Lakhs, Retained earnings of Rs 7229.29 Lakhs, Capital Reserve of Rs 2,750.62 Lakhs and other comprehensive loss of Rs 269.48 Lakhs aggregating to Rs 23086.40 Lakhs.

PARTICULARS OF LOANS, GUARANTEES & INVESTMENTS

Details in respect of other loans, guarantees and investments covered under the provisions of Section 186 of the Companies Act, 2013 are given in the notes on accounts for the financial year ended 31st March, 2023 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 for Long Term Instruments and reaffirmed CRISIL A2+ rating for short term instruments.

AWARDS & ACCOLADES

During the year, NGIL received various recognitions as under:

a) Team from Ossein Division won the First prize under medium scale supervisory category in 7th Continuous improvement Kaizen competition 2022 by CII.

b) Team from Gelatin Division won Silver Recognition under medium scale supervisory category in 7th Continuous improvement Kaizen competition 2022 by CII.

c) Team from Ossein Division won First prize (Rhodium) Team from Gelatin Division won Gold Recognition )in 5th National Convention on Innovative Quality Circle organized by ASA Kerala

(Alumni Society of AOTS).

d) Two Silver recognitions under Restorative Category in 44th CII National Kaizen Competition.

e) Team from Gelatin Division won SILVER recognition in SEEM National Energy Management Award 2021.

f) Significant Achievement award from CII for TPM implementation in Gelatin and Ossein Divisions.

g) Special Recognition under Environment & Greenery category by KMA CSR Awards 2023.

h) Gold Recognition from CII for BE maturity assessment. 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 9001: 2015 for Quality Management System of the Company.

(e) FSSC 22000 V.5 Certification for Food Safety Management System for Gelatin Division. (f) FSSAI Certification for manufacturing, import/ export/retail/e commerce of Gelatin, Collagen Peptide, Collagen Peptide retail products.

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

(h) USDMF for Gelatin (Gelling & Non-gelling grade). (i) Chinese DMF for Gelatin. (j) Halal (MUI, IFANCA & JUM)/Kosher Certification for Gelatin and Collagen Peptide – JUM Halal for Ossein & Dicalcium Phosphate.

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

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

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

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

(o) Companys Gelatin Division & Ossein Division have passed the recent TPM Certification Assessment-2022 of SIGNIFICANT ACHIEVEMENT.

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

Health, Safety and Environment

Compliance with relevant regulations and effective management of related issues is integral to 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), each plant has a Safety Officer and Safety Committees comprising of workmen and executive representatives. 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 COVID19 protocol.

Surveillance audit of ISO 45001-2018 completed at both Ossein Division and Gelatin Division

Fire license renewed at Ossein and Gelatin Divisions Various training programs were conducted to improve employee safety and health awareness.

A free Counselling and Support Service is in place for Nitta family members.

Safety day/week celebrations were held at Ossein, Reva, and Gelatin Divisions.Mock drills were conducted for equipping the employees for handling emergencies at Ossein, Reva, and Gelatin Divisions.

As part of the TPM (SHE pillar), various safety improvement initiatives and their reviews were conducted at OD & GD.

External safety audit was conducted through M/s BVQ at both GD and OD.

An ergonomic study was conducted at some of the workstations and correction was initiated.

2. Environment

The Company continuously endeavors to enhance Environmental Management and 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 Boards. The emissions from the boilers and generator stacks are regularly monitored for compliance. Solid waste from operations is collected in a secure manner and disposed of in authorized locations. Ambient air quality is monitored on regular basis and its compliance ensured with the norms. 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. Action plans have been drawn up to reduce the consumption of water in the coming years. In the case of solid waste reduction, the 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 reducing the greenhouse effect, the Company is focusing on greenery development at all its locations. The following were the other initiatives taken in this regard:

Surveillance audit of ISO 14001-2015 completed for

Gelatin Division.

ISO 14001-2015 certification procedures were initiated in the Ossein division.

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

An anaerobic digester was installed in the Gelatin

Division in the effluent stream for converting effluent (biomass) to biogas reducing fossil fuel consumption and solid waste generation.

Boiler retrofitting was introduced in the GD boiler, to improve fuel efficiency and the work environment.

Discussion of converting sludge to biogas in Gelatin

Division was initiated to further reduce solid waste from plant operations.

Solar lighting installation is in progress.

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 CSR Policy can be accessed on the Companys website in the below link. h t t p s : / / g e l a t i n . i n / u p l o a d s / h o m e c o n t e n t / CSRPOLICY_20230210052849.pdf. The CSR projects undertaken by the Company, in accordance with Schedule VII of the Companies Act, 2013, are presented in

Annexure I.

The CSR expenditure of 58.02 Lakhs incurred by the Company during the year, was in compliance with the statutory requirement of 2% of the average profit for the last three years amounting to 46 Lakhs. The Annual Report on CSR activities is annexed herewith as Annexure I. The Company shall carry forward the excess amount of CSR spent amounting to 12.02 Lakhs to next year towards CSR expenses as per the provisions of Companies Act.

SECRETARIAL STANDARDS

The Company is in compliance with the Secretarial Standards on Meetings of the Board of Directors (SS-1) and General Meetings (SS-2) issued by the Institute of Company Secretaries of India and approved by the Central Government.

DEPOSITS

The Company has neither accepted nor renewed any deposits during the financial year 2022-23.

DETAILS OF APPLICATION MADE OR ANY PROCEEDING PENDING UNDER THE INSOLVENCY AND BANKRUPTCY CODE, 2016 Neither an application made by the Company nor any proceeding pending under the Insolvency and Bankruptcy Code, 2016 during the year.

DETAILS OF SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS/ COURTS/TRIBUNALS IMPACTING THE GOING CONCERN STATUS AND THE COMPANYS OPERATIONS IN FUTURE

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

DETAILS OF DIFFERENCE BETWEEN AMOUNT OF THE VALUATION DONE AT THE TIME OF ONE TIME SETTLEMENT AND THE VALUATION DONE WHILE TAKING LOAN FROM THE BANKS OR FINANCIAL INSTITUTIONS

Not applicable

SUSTAINABILITY

Contributing to sustainable development has always been the core ethos of all the operations & business decisions of your Company and has become an even more important element of the overall corporate strategy. We stand committed to the path of Profitable, Sustainable, and Socially Responsible Growth, keeping in mind the interests of all our Stakeholders. We aim to grow and achieve higher Stakeholders returns and in the process, will ensure an increased positive impact on the environment and the society at large and constantly endeavor to enhance our performance and optimize efficiency across the environmental, social and governance aspects. We encourage involvement of all Stakeholders and ensure that our sustainability framework policies are well communicated, implemented, monitored, and reviewed regularly.

We are and will continue to be increasingly focused on sustainable and socially responsible corporate behavior in everything we do. Our approach mainly centers around the following pillars:

- Environmental Sustainability

Reduction in consumption of water, solid waste, power, fuel and plastic.

- People Sustainability

Employees safety, health, development, engagement, rewards and recognition.

- Social Sustainability

Corporate Social Responsibility (CSR): Education, training, health, women, sports, agriculture and waste management.

- Economic sustainability

Cost reduction, procurement practices and growth initiatives.

Our goal is to set an example for the Gelatin Industry in India in particular and industry in general for world-class sustainability practices. The raw material sources for Gelatin and Collagen Peptide are the by-products from the meat and farmed fish processing industries, which are generally considered as well managed, natural, and renewable resources. Collagen and its derived products are pure, natural proteins and contain neither preservatives nor other additives. They are thus natural and healthy food with a clean label that optimally meets consumer needs in terms of application and sustainability. As such, Gelatin can be considered as a product with a positive impact on overall sustainability since it is part of the circular economy of the Meat Industry.

Sustainable development is an integral part of our business strategy and we ensure that it is built into the complete business cycle-product development, new markets, capital projects, operational management and ultimately product end-use. Health and safety, social and governance issues are built into all stages of the asset life cycle, which help in serving our customers and all Stakeholders over a longer term, wherever they are across the world.

POLICY FOR DETERMINING MATERIAL SUBSIDIARIES

In accordance with the SEBI LODR Regulations, the Companys policy on materiality of Subsidiaries specifying the criteria for determining the Material Subsidiaries appears in the Company website www.gelatin.in. As per such criteria, the Companys Subsidiary - Bamni Proteins Limited is a Material Subsidiary as on 01st April, 2022.

SUBSIDIARY COMPANY BAMNI PROTEINS LIMITED

The annual production during the year in this Subsidiary Company was 2703 MT of Ossein and 6103 MT of Di-Calcium Phosphate as against 2652 MT of Ossein and 6018 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 2634.07 Lakhs (Rs 1452.30 Lakhs in the previous year), post-tax profit of Rs 2033.29 Lakhs (Rs 1091.69 Lakhs in the previous year) and other comprehensive loss of Rs 2.45 Lakhs (loss of Rs 7.81 Lakhs during the previous financial year). In accordance with Section 129(3) of the Companies Act, 2013, consolidated financial statements of the Company and its Subsidiary Company have 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 have 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 for inspection to the Shareholders of the Company and Subsidiary Company seeking such information at any point of time 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

Qualification on the internal audit systems in the Reva Division of the Company as referred to in the Consolidated Auditors Report has been properly addressed by the Company by appointing a reputed firm of Chartered Accountants having significant internal audit experience which is expected to cover the enhanced reporting requirements as envisaged.

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. Observations No.	Management Reply
1 On inspection of the 271st Board Minutes held on 05.08.2022, it is found that the Company has made direct political contributions to the tune of 5,000 during the FY 2022-23 and 7,500 during the FY 2021-22 not in compliance with Section 182 of the Companies Act, 2013. Further, indirect political contributions to the tune of 2,000 and 5,000 are also made during the FY 2022-23 and FY 2021-22 respectively not in compliance with Section 182 of the Act. The Company is advised:	The Board had approved the political contribution at its meeting held on 05.08.2022. In future, political contribution, if any, shall be made only with the approval of the Board of Directors. The amount has been recorded in the financial statements.
a. to carry out political contributions both direct and indirect only with the approval of the Board and
b. to report the total amount of 7,000 as political contribution under FY 2022-23 and 12,500 under FY 2021-22 in the Statement of Profit and Loss for the financial year ended 31st March, 2023 as envisaged under Section 182 of the Companies Act, 2013 .

 

2 There was 19 days of delay in redeeming the 929412 Optionally Convertible Preference Shares of 170 each allotted to Nitta Gelatin Inc, Japan, the promoter of the Company resulting in their continuance as Preference Shareholder after due date which has larger implication of inviting preferential rights. The Company is advised to redeem the preference shareholding in time in future.

This was due to the time taken for the completion of the necessary procedural formalities including certification from an independent professional and the time taken by the Authorised dealer bank for processing the documents required.

COLLABORATORS

The Collaborators of your Company continue to be the reliable source of support and guidance for the Company in its key initiatives. Their support in areas like technology, product development, marketing, quality improvement and training of personnel, apart has contributed significantly to the growth of the Company. Nitta Gelatin Inc., Japan has provided considerable support both by way of technical guidance and 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 Companies 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 the 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 management has not imposted 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 its 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

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/Audit Committee periodically. Accordingly, the management has constituted a Risk ManagementCommitteecomprisingofSeniorManagement personnel to develop and implement a Risk Management Policy including identification therein of elements of risks which in the opinion of the Management and 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 impactmoves of competitors water scarcity for operational requirements emergence of alternate substitutes for the products of the Companyadverse forex rate fluctuations risk of losing pricing premium commanded by the Company due to emergence of alternate Halal certifications sludge reductionPotential loss of fish CPT business in India due to non- availability of raw material within India

MATERIAL POST BALANCE SHEET EVENTS

There are no material post balance sheet events which require adjustments in accounts as per the provisions of the accounting standards.

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 records is required as per the above Rules.

PROCESS REVIEW/FORENSIC INVESTIGATION

The management has identified an alleged wrong doing by an employee in the stores section of the Company in connivance with vendor/vendors pertaining to weighment of the raw material-Crushed Bone. BDO India LLP was entrusted to do a forensic investigation, the scope of which inter alia was to examine the end to end process for sourcing of Crushed bone which is a raw material of the Company. During the course of inspection during 1^st April 2022 till 30^th September, 2022, the analysis of differences in the quantities of Crushed Bone- raw material received as per manual palletization sheets and the Avery/SAP Data indicated an estimated financial loss of 58.43 lakhs to the Company in respect of the transactions. During the period - March 2021 till March 2022, the total estimated loss in the absence of palletization sheets which has been arrived at on approximation (based on the data for the period from 1st April 2022 to 30th September, 2022) was 142.4 Lakhs. The quantification of the difference noted in the weighment for the period March 2021 to March 2022 was based on the invoices identified by the management as relating to the identified vendor for the said period. The loss has already been accounted as the Company account consumption based on the recorded quantity of receipt, due to which there will not be any revision in the approved Financial Statements of the Company. The Company will be continuing its efforts for the recovery of money from the delinquent employee and the Vendor with the assistance/guidance of police authorities/ other regulatory agencies and will be pursuing other legal proceedings in accordance with the advice of the lawyers. Additional validation procedures have been brought in to confirm the weighment quantity before the release of payment to the suppliers.

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, 2023, 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 No. 2 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 2023 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 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 that have taken place actually 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 2015 and form part of the Annual Report.

DIRECTORS

Mr. Philip Chacko M was appointed as Managing Director of the Company on 01.04.2022 in place of Mr. Sajiv K. Menon whose term of office has expired on 31.03.2022. Mr. Sajiv K. Menon was appointed as Non-Executive Non-Independent Director on 06.05.2022 to make use of his wide experience across industries and also his experience in the Company. Prof. Dr. M.K. Chandrasekharan Nair was appointed as an Independent Director on 06.05.2022. The Board is of the opinion that Dr. MKC Nair possess integrity, relevant expertise and experience which will benefit the Company in the long run. Mr. M. G Rajamanickam IAS ceased to be Nominee Director on 04.08.2022 upon withdrawal of his nomination by KSIDC. Whereafter, Mr. S. Harikishore IAS was appointed as Nominee Director on 04.08.2022 by KSIDC. The Board of Directors had constituted a Nomination and Remuneration Committee (NRC), which has the following members as on date:-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 who may be appointed 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 relatingtotheremunerationfortheDirectors,KeyManagerial 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 capability 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 variable pay reflecting short and long-term performance objectives appropriate to the working of the Company and its goals.

The policy has been disseminated in the Company website: https://gelatin.in/uploads/homecontent/ NOMINATION%20AND%20REMUNERATIOJN%20 POLICY_20221128064418.pdf

AUDIT COMMITTEE

The Company has an Audit Committee consisting of the following members: 1. Mr. V. Ranganathan (Chairman) 2. Mrs. Radha Unni 3. Mr. E. Nandakumar There were no instances where the Board had not accepted any recommendation of this Committee.

More details on the committee are given in the Corporate Governance Report.

INDEPENDENT DIRECTORS

Independent Directors of the Company had given declaration stating that they conform to the criteria prescribed for an Independent Director as mandated by the relevant regulatory prescription viz, Section 149(7) of the Companies Act and Regulation 25 of the SEBI LODR Regulations, 2015.

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 hereinabove given, it is brought to the notice of shareholders that Mr. P. Sahasranaman continues as Chief Financial Officer (CFO). Mr. G Rajesh Kurup retired from service on 31.05.2022, whereafter, Mr. Vinod Mohan was appointed as Company Secretary on 01.06.2022.

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 15.03.2023, evaluated the performance of the Non-Independent Directors and the Board as a whole, followed by the review of the performance of the Chairman. The evaluation found that the Non–Independent Directors are playing an active role in the Committee and the Board deliberations.

MEETINGS

The Board of Directors met 5 (Five) times during the financial year 2022-23 on 06.05.2022, 05.08.2022, 09.11.2022, 02.01.2023 and 08.02.2023. 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.

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. Hitherto 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. 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/500013) who were appointed as Statutory Auditors of the Company for a 5 year term at the Annual General Meeting in the year 2017 were reappointed by the Board of Directors at its meeting held on 07.02.2022 on the basis of recommendation of Audit Committee and shall hold office from the conclusion of the 46th Annual General Meeting till the conclusion of the 51st Annual General Meeting of the Company to be held for the Financial Year ended March 31, 2027 subject to the approval of the members at the General Meeting. The item regarding the reappointment of Statutory Auditors is put up for transaction at the forthcoming Annual General Meeting and the Notice for the Meeting makes a reference of the same 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 Section 134 (3) (a) of the Companies Act 2013.

ACKNOWLEDGEMENT

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 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