Nitta Gelatin India Ltd Directors Report.

To

THE MEMBERS OF

NITTA GELATIN INDIA LIMITED

Your Directors have pleasure in presenting the 44th Annual Report and audited financial statements of your Company for the year ended 31st March, 2020.

Accordance with Indian Accounting Standards (Ind AS) The Statement of Accounts has been prepared in 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, 2020 was Rs.80,24,44,480/- (Rupees Eighty Crores Twenty Four lakhs Forty Four Thousand Four Hundred and Eighty only) comprising of four crore Equity Shares of Rs. 10/- each totaling to Rs. 40,00,00,000/-, 929,412 Optionally Convertible non-cumulative Preference Shares (OCPS) of Rs. 170/- each totaling to Rs. 15,80,00,040/- two crore Optionally Convertible non-cumulative Preference Shares of Rs. 10/- each totaling to Rs. 20,00,00,000/- and 44,44,444 Redeemable Preference Shares of Rs. 10/- each totaling to Rs. 4,44,44,440/-. Nitta Gelatin Inc., (NGI) Japan had not exercised the option to convert the OCPS shares of Rs. 170/- each into Equity Shares at the end of 18 months from date of its allotment as per terms of the issue.

ALLOTMENT OF PREFERENCE SHARES

The Company has allotted 44,44,444 Redeemable Preference Shares of Rs. 10/- each to M/s. Nitta Gelatin Inc., Japan on 27.11.2019 as consideration for their equity holding in the erstwhile Reva Proteins Ltd. as per the Scheme of Merger approved by the shareholders and the Honble NCLT during the year.

PERFORMANCE

The gross revenue from operations of your Company during the year under review was Rs. 297.47 crores as compared to Rs. 261.19 crores in the previous year. There was an increase in sales realisation per unit of Gelatin with the growth in Gelatin demand worldwide. Increased quality of sales and per unit sales price of Gelatin and significant increase in per unit sales price of Collagen Peptide has enabled the Company in terms of higher gross revenue from product sales. The Company was able to position Collagen Peptide in the premium segment in the Indian market resulting in better unit sales realization.

Crushed Bone availability was tight due to reduced slaughtering because of stricter enforcement of regulations particularly against unlicensed slaughtering, restrictions on transportation of cattle and non-availability of migrant labour due to the national elections in April / May 2019. The Crushed Bone price as a result has increased significantly by 17% during the year as the demand was higher than the supply. Quality of Crushed Bone also continued to be poor. Raw material availability, viz Crushed Bone (CB) which is a major concern for our capacity expansion was evaluated by M/s. Kantar IMRB, a reputed agency engaged in market research and consumer consulting. The study showed that there is a drop in the availability of Crushed Bone of around 3500~4000 MT/month in 2019 from 2015 level. The study also projected a growth of only 7~8% in CB availability by 2023-2024 if the current restrictions continue to exist. If the situation changes to the pre 2015 situation, the availability can increase to 22~23% by 2023-24. The Company continues to look for opportunities for importing CB and good quality Hide to supplement raw material availability.

The Company also produced and exported Limed Ossein using imported Crushed Bone from France. Limed Ossein production at Reva Division was initially affected due to stabilisation of ammoniacal nitrogen reduction in the effluent. Our efforts to stabilize the system have yielded positive results helping the Company in significantly reducing the chemical costs incurred for ammoniacal nitrogen treatment. Production was disrupted at Reva during the year due to problems faced with the discharge pipeline, on account of non-availability of water and power and due to scaling of the pipeline connecting our factory discharge point to the marine pipeline. Reva Division was able to achieve better capacity utilisation levels in the II half of the financial year with the arrest of the leakage in the effluent pipe line following intervention by Narmada Clean Tech, the Company responsible for managing the pipe line from the discharge outlet to the marine point.

Debottlenecking of the sludge drier at Ossein Division is under progress and the Company could achieve a throughput of 400 Kg/hr against the earlier rate of 280 Kg/ hr. Further fine tuning will be carried out in the coming year in consultation with the equipment manufacturer which is expected to bring significant progress in augmenting the Companys sludge management and disposal systems. Quality of water in the river source of Companys Gelatin Division was affected in December 2019 due to delay in construction of the embankment to prevent ingress of saline water from the sea into the river. The Company managed the situation with minimal production disruption by purchase of fresh water from private parties in tankers.

The problem that would be created in terms of water availability 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.

USA has withdrawn the preferential system of tariffs with India which has resulted in 4% import duty for imports from India effective June 2019. This has impacted the per unit price realisation of Companys Gelatin exports to USA. With all the Gelatin plants (except the Ooty plant of Serling 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 30%,adversely impacting the cost of production. The per unit price realization has gone up by 5% for Ossein/Limed Ossein, 4% for Gelatin and 63% for Collagen Peptide due to robust demand. 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 2019-20 as compared to 2018-19 has also 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. There was significant reduction in power cost 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. Factory overheads witnessed cost increase due to the comprehensive annual shut down taken in Gelatin Division during the year and the disposal costs incurred for clearing the sludge. Administration overheads were maintained at last year levels through appropriate controls.

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 2.6% to 1.4% 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, 47.6% of the total sale of Gelatin and 44.1% 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 pro-active manner in line with the global standards of NITTA Group.

In a very significant judgement, the Panchayath Tribunal of Kerala has quashed the decision of the Kadukuttty Panchayat to reject the Companys application for the Factory License for Ossein Division and directed the Panchayat to issue the license to the Company. The Panchayat Secretary has issued the License to the Company for a period of 5 years in November 2019. This decision was however reversed by the Panchayath President subsequently. The Company had filed a case against the Panchayath 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 petition is now pending for adjudication by the High Court.

During the previous year, the Pollution Control Board has renewed the validity of the Consent to operate up to 30th June 2023 for the Ossein Division. Similarly for Gelatin Division, during the previous year the Company has renewed the Consent to operate up to 30th June 2023. Reva Divisions Consent to Operate issued by the Gujarat State Pollution Control Board is valid up to May 2021. Operational Excellence fairs were conducted at the Ossein and Gelatin Divisions of the Company with active involvement of the employees. Some of the members of the nearby Panchayats and also the Directors of the Company participated in the fair which showcased the various types of products offered and the initiatives pursued by the Company for business excellence.

FINANCIAL HIGHLIGHTS

The operations of the Company for the year 2019-20 have resulted in a pre-tax profit of Rs. 6.87 crores (as against a pre-tax loss of Rs. 3.67 crores during the year 2018-19).

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

Particulars For the year ended 31st March, 2020 For the year ended 31st March, 2019
Sales (including export incentives and net of Excise Duty & VAT) 294.47 261.19
Other Income 3.30 0.71
TOTAL 297.77 261.90
Gross Profit before Depreciation 21.83 10.68
Deducting therefrom:
Depreciation 14.95 14.35
Provision for Tax -
- Current Tax 1.18 -
- MAT Tax (1.18) -
- Deferred Tax 2.09 (1.03)
- Prior years (3.10) -
Profit/(Loss) after Tax from continuing operations 7.89 (2.64)
Other comprehensive income/(loss) (net of tax) (5.88) 1.13
Total comprehensive profit for the year 2.01 (1.51)
Profit brought forward from previous year (13.06) (7.69)
Balance Profit available for appropriation 7.89 (2.64)
Appropriations :
Final dividend on equity shares- paid 1.36 2.27
Tax on dividend 0.02 0.46
Total 1.38 2.73
Balance profit carried forward to next year (6.55) (13.06)
Earnings per share (Rs.)
Basic 8.70 (2.90)
Diluted 8.70 (2.90)

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

DIVIDEND

Considering the Companys performance the Board has recommended a dividend of Rs. 2.5 per share i.e. 25% of the face value of Rs. 10/- per share on the Equity Capital for the year ended 31st March, 2020. 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, 2020. 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. 346.15 lakhs (Rs. 221.55 lakhs in the financial year 2018-19) comprising of Rs. 119.17 lakhs on Preference Shares (Rs. 85.36 lakhs in the financial year 2018-19) and Rs. 226.98 lakhs on equity shares (Rs. 136.19 lakhs in the financial year 2018-19).

During the year, unclaimed dividend of Rs. 2.62 lakhs pertaining to the year ended 31st March, 2012 was transferred on 13.08.2019 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. 2750.62lakhs 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

Reserves as on 31.03.2020 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, Debit Balance in the Profit and Loss Account of Rs. 654.79Lakhs, Capital Reserve of 2750.62 lakhs, Hedge Reserve of Rs. (408.56) lakhs and other comprehensive loss of Rs. 73.85 lakhs aggregating to Rs. 13409.39lakhs.

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, 2020and 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 was awarded:

a) Capexil Top Export Award for the FY 2015 – 16 & 2016-

b) National Institute of Personnel Managements Best Corporate Citizen Award 2019 for the various social welfare activities undertaken by the Company as part of its CSR initiatives.

c) 5S Excellence Award for Gelatin Division under the Medium scale, manufacturing category.

d) Kerala Management Associations All Kerala CSR Awards 2019 for Environment & Greenery – Private Sector

e) Three awards in CII Southern Region Kaizen competition 1. in medium scale process industry

f) Great Manager Institute (GMI) award. GMI, along with Forbes India, selected Nitta Gelatin India Ltd. as a Company having Great People Managers - one among the 50 Companies across India.

g) The National CSR Leadership Award for Best Environmental Sustainability for Companys efforts towards environmental sustainability in the areas around where the Companys factories are situated.

h) SAP award for operational excellence in Finance for SME sector

i) "Asias Most Trusted Companies Award 2019" in the Gelatin and Collagen Peptide category in Asia Pacific from India region, from IBC Info Media Pvt. Ltd., a Division of International Brand Consulting Corporation USA.

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 and Gelatin 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 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/Kosher Certification for Gelatin and Collagen Peptide

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

(k) OHSAS 18001:2007 Certification for Occupational, Health and Safety Standards for Gelatin Division and 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 (Safety) 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 programmes 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 OHSAS certification, which is a testimony to the Companys commitment in this area. The following are the major activities carried out during the year :-

• OHSAS 18001:2007- 2nd surveillance audit completed at Ossein division

• OHSAS 18001:2007 - Recertification audit completed at Gelatin division

• External safety audit completed at Reva Division

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

• Fire license renewed at Ossein and Gelatin Divisions

• Mock drills conducted at Ossein and Gelatin Divisions

• ISO14001:2015 recertification audit of Gelatin Division is planned in September 2020.

Ossein and Gelatin Divisions are planning to conduct an external Safety Audit by a suitable approved agency during the coming months.

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. Various energy saving measures and efficiency improvement activities were taken up last fiscal that reduced the consumption of fuels compared to previous years. Our ETP operations were reinforced with the introduction of new equipment and mixing tanks. Action plans have been drawn up to reduce consumption of water in the coming years. During the year, Central Pollution Control Board has stated that the Company fully meets the discharge measures in their report to the High Court.

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:

• Empowerment of the disadvantaged / weaker sections of the society through education, skill development etc.;

• Providing basic necessities like healthcare, drinking water & sanitation;

• Supporting environmental and ecological balance through afforestation, soil conservation, conservation of flora and similar programmes;

• Promotion of sports through training of sports persons;

• Rural development projects; etc Total CSR expenditure incurred by your Company during the year was Rs. 23.50 lakhs meeting the statutory requirement of 2% of the average profit for the last three years.

• A CSR Committee has been constituted to act 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 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. The Annual Report on CSR activities is annexed herewith as Annexure I.

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 2385 MT of Ossein and 5440 MT of Di-Calcium Phosphate as against 2193 MT of Ossein and 5240 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. 848.75 lakhs (Rs. 1165.78lakhs in the previous year) post-tax profit of Rs. 627.82 Lakhs (Rs. 822.17 lakhs in the previous year) and other comprehensive loss of Rs. 92.76 lakhs (Profit of Rs. 18.51 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

Emphasis of Matter on the accounts of the Company referred to in the Auditors Report is explained in detail in Notes forming part of accounts for the year and hence no further comments are considered necessary.

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. Observation No. Our explanation
1. 86th Audit Committee Meeting of the Company was held on 6th May, 2019 and the same was adjourned to 9th May, 2019 since financial statements were not ready by the time. On the next day i.e., 7th May, 2019, 87th meeting of the Audit Committee of the Company was held. 87th meeting of the Audit Committee was held in between the 86th original meeting and adjourned meeting is on 7th May, 2019. It is pertinent to note that 87th Audit Committee meeting was held without completion of the 86th Audit Committee meeting since the adjourned meeting held on 9th May is the continuation of the original meeting. Company is advised to conduct the meetings in seriatim to avoid possible conflict in decision making The adjourned 86th meeting was held on May 9 with a single agenda- finalisation of accounts. The 87th meeting considered all other points. There was therefore no lack of continuity or potential conflict.
2. As the provisions of Foreign Exchange Management Act, ECB return has to be filed by the Company every month within 7 working days of the end of each month. On scrutiny of ECB returns filed during FY 2019-20, it is found that the following delay occurred in filing of the same: As the ECB return to be filed requires acknowledgment by the Bank, there occurred a few days delay. This delay noted is with reference to the bank endorsement date with seal, whereas, the Returns were all filed with Bank within the stipulated time.
Month Filing Date Delay
April 2019 08.05.2019 1 day
June 2019 08.07.2019 1 day
September 10.10.2019 3 days 2019
Company is advised to file ECB return in time in future.

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 review 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 lock down conditions without disruption etc.

MATERIAL POST BALANCE SHEET EVENTS

During the month of March 2020, World Health Organisation declared COVID -19 to be a global pandemic. The spread of COVID-19 has impacted the normal operations of businesses in many countries including India. The country has witnessed several disruptions in normal operations due to lockdowns imposed by the Government in the form of restrictions to movement of people, transportation and supply chain along with other stringent measures to contain COVID-19 spread.

The Company has made an assessment of the business situation and has evaluated the possible impact of the outbreak of COVID-19 on its business. Though the Government has classified the Companys operations as part of "essential services" and has exempted the Company from lockdown restrictions, the Companys operations have been impacted due to inadequate availability of raw materials and other necessary items. Though the Company has partially restarted the operations, the impact on future operations would to a large extent depend on how the pandemic develops and the resultant impact on businesses.

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, 2020, 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 2020 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 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

Dr. Sharmila Mary Joseph, IAS ceased to be Nominee Director on 26.09.2019 upon withdrawal of the nomination by KSIDC,where after, Mr. M. G. Rajamanickam, IAS was appointed as Nominee Director on 12.12.2019 by KSIDC. Mr. A.K. Nair ceased to hold office on 02.08.2019 on completion of his tenure as Independent Director. Retd. Justice M. Jaichandren was appointed as Additional Director qualifying as an Independent Director by the Board of Directors on 04.11.2019.

The Board of Directors has constituted a Nomination and Remuneration Committee (NRC) consisting of the following Directors:-1. Dr. K. Cherian Varghese, Chairman 2. Mr. E. Nandakumar, Member 3. Mr. Yoichiro Sakuma, Member 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 year, the NRC has met Four times on 04.05.2019, 06.05.2019 adjourned to 09.05.2019, 20.09.2019 and 07.02.2020.

KEY MANAGERIAL PERSONNEL

Rule 8(5)(iii) of Companies (Accounts) Rules, 2014prescribes 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 07.02.2020 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 5 (Five) times during the financial year 2019-20. 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 has 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. 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 while in possession of 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 2019. Hence no specific item regarding the appointment is put up for transaction at the forthcoming 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. 22601), 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. 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
Chairman
DIN: 05272476 Kochi
08.06.2020