Directors Report.

Dear Members,

Your Directors are pleased to present the 31st Annual Report and the Audited Financial Statements for the financial year ended 31st March, 2020.

1. Financial Highlights

A summary of the Companys financial results for the year ended 31st March, 2020 vis-a-vis financial results for the previous year ended 31st March, 2019, is as under :

(Rs. in lakhs)

Financial Year Financial Year
2019 - 20 2018 - 19
Revenue from operations 13107.36 13741.09
Other Income 442.14 88.03
Total Income 13549.50 13829.12
Expenditure 11583.69 12081.93
Depreciation and amortisation expense 438.62 413.50
Total Expense 12022.31 12495.43
Profit before finance costs and tax 1527.19 1333.69
Finance costs 318.05 358.04
Profit Before Tax (PBT) 1209.14 975.65
Tax Expense 364.424 289.47
Profit for the year 844.71 686.18
Other Comprehensive Income (Net of Tax) Nil Nil
Total Comprehensive Income for the year 844.71 686.18

2. Operational Performance and State of Companys Affairs

During the year under review, Net Sales & Other Income of the Company was Rs. 135.49 crore as compared to Rs. 138.29 crore in the previous year registering a decrease of 2.02% over the previous year.

However, the Profit After Tax (PAT) for the year is Rs. 844.71 Lakhs compared to Rs. 686.18 Lakhs in the previous year registering a growth of 23.1%. Improvement in profitability was due to decrease in raw material consumption and reduction in finance cost. A detailed overview has been provided under Management Discussion and Analysis Report.

We have been able to reduce our debtors by Rs. 11.81 crore viz. a decrease of 33% over the previous year. Our debtor days have reduced to 68 days from 98 days in the previous year. In addition, we have also reduced inventory by Rs. 5.59 crore i.e. 25% of our opening inventory. Our inventory days have reduced from 92 in the previous year to 75 days. Due to better working capital management, we have been able to reduce cash credit utilization by Rs. 11.5 crore reducing our total outstanding debt to only Rs. 13.7 crore at the end of FY 2019 - 20. Due to this, the total debt of the company reduced by 45% in just one year.

The company has incurred capital expenditure of Rs. 4.74 crore primarily for debottlenecking and upgradation of infrastructure. The entire capital expenditure was funded from internal accruals and there is no term loan or long term debt on the books.

The companys finance position is very healthy with very low debt and good cash flows. We believe the strength of our balance sheet will help us emerge stronger after the challenging situations emerging out of Covid - 19 are normalized.

3. Covid - 19

Financial Year 2020 - 21 has started on an uncertain note due to the lock-down on account of Covid - 19. Control of pandemic is dependent on availability of treatment developed by pharma companies based on R&D efforts currently undergoing in many countries.

The company experienced 2 weeks of total production loss due to nationwide lockdown in the first quarter of FY 2020 - 21. With the economy slowly opening up with the progressive lifting of lockdown, the company has also revived its operations in a phased manner as per government orders. Given majority of the companys products are in the chronic segment, the overall demand for the products should not be significantly affected by the Covid - 19 pandemic. However, predicting demand and growth outlook for your companys products during the current year may be difficult at present. The Company will continue to monitor such impact on future economic conditions and inform the members periodically.

4. Dividend

The Board of Directors recommend confirmation of interim dividend of Rs. 3/- (30%) per Equity Share of the face value of Rs. 10/- each paid in March, 2020 as final Dividend. However due to country wide lockdown, bank drafts for payment of dividend could not be sent out to the shareholders who had not provided their bank details for electronic transfer of funds. As soon as the position permits, arrangement shall be made to pay the dividend to the shareholders at the earliest.

5. Deposits

During the year under review, your Company neither accepted nor renewed any fixed deposits falling within the ambit under provisions of Section 73 of the Companies Act, 2013 and The Companies (Acceptance of Deposits) Rules, 2014. Outstanding amount of loan accepted by the company from its Directors: Rs. 134.97 Lakhs (Mr. E. Purushotham : Rs. 98.05 Lakhs and Mrs. E. Vaishnavi : Rs. 36.92 Lakhs). The company has also obtained a declaration from the said directors stating that the amount of loan is not being given out of funds acquired by them by borrowing or accepting loans or deposits from others.

6. Change in the Nature of Business

There has been no change in the nature of business during the year.

7. Material Changes And Commitments, If Any, Affecting The Financial Position Of The Company, Having Occurred Since The End Of The Year And Till The Date Of The Report

There have been no material changes and commitments affecting the financial position of the Company which have occurred between the end of the financial year of the Company to which the financial statements relate and the date of this Report.

8. Share Capital

The paid up Equity Share Capital as at 31 st March, 2020 stood at Rs 381.54 Lakhs. During the year under review, the Company did not issue any Equity Shares. Further, there has been no change in the capital structure of the Company during the year.

9. Human Resource Development (HRD) & Industrial Relations

In the 30th year of establishment, the company has taken several initiatives for its human resources with special emphasis on skill development. The companys new training program has resulted in improved quality of its human resources as well as reduced training and skill acquisition time for new recruits.

Your Directors place on record their appreciation for the commitment, dedication and hard work put in by the employees of the Company during the Covid - 19 pandemic and subsequent handling of operations after the lockdown was gradually lifted.

10. Quality & Regulatory Initiatives

The companys Laboratory Information Management System (LIMS) installed last year has been working well to enhance the quality control units operational capabilities particularly with respect to regulatory compliance. The company is working continuously to upgrade its systems to keep with global regulatory framework.

In FY 2019 - 20, the company has filed 6 and 4 Drug Master Files (DMF) for Amlodipine Besilate and Metformin respectively in 8 different countries such as Singapore, China, Indonesia, Malaysia, Uganda, Ethiopia, etc. The company plans to file several more DMF in the year 2020 - 21 for its products in various markets. All these registrations will support strong export growth in the coming years.

11. Research and Development (R&D)

The companys Hyderabad R&D unit completed a full year of operations in the current year. The R&D team has grown to 17 scientists and is expected to grow to 25 in FY

2020 - 21. The team has developed process for 3 molecules in chronic segments of hypertension and diabetes. In addition, several other cost optimization and quality improvement projects of existing products were also executed. The Process Development (PD) lab based at the manufacturing site has also contributed immensely by developing various cost cutting processes.

The companys R&D has developed 3 new API molecules at the lab scale in the current year. The commercialization of these molecules was postponed from the current year due to supply chain disruptions because of Covid - 19. These products along with others developed in FY 2020 - 21 will be commercialized in FY 2020 - 21.

12. Management Discussion and Analysis Companys Performance

The companys sales growth was muted in the current year on account of a few factors, which are discussed below:

1. India Pakistan Political Row: In retaliation to Balakot air strike, the government of Pakistan imposed ban on import of pharmaceutical products from India during FY 2019 - 20. Although the ban was subsequently lifted, significant export revenue from Pakistan was lost in the earlier part of the current year. The company is confident of making up this loss of revenue in FY 2020 - 21 as we have strong client base in Pakistan.

2. Fire Accident: Due to a fire accident in November 2019 at one of the finished goods warehouses, some finished goods were destroyed. These products could not be delivered on time and resulted in sales loss. The companys claim is in process with the Insurance company and the company expects to be reimbursed fully for the loss barring basic deductibles as per policy. The warehouse has been repaired and is operational again.

3. Covid - 19 : During the last quarter, raw material supply disruption from China caused delays in production. In addition, due to the nationwide lockdown in March, some quantities of finished goods stock of Rs. 4.75 crore could not be shipped. This has also reduced realizable sales of the company by a significant amount.

The management is continuously working to making its operations more efficient and reducing cost. We are glad to report that the efforts have started yielding good results. Despite muted growth in revenue, the company has done very well on profitability parameters. The companys EBITDA % has increased by 180 bps than previous year. This is mainly due to technological improvements in process, which resulted in lower raw material consumption.

The company has worked closely with its clients to get better payment terms without losing revenue. This has resulted in reducing receivables by Rs. 11.8 crore viz. ~33% of receivables opening balance. In addition, the companys continued efforts in improving productivity in operations has resulted in a reduction in inventory of Rs. 5.6 crore viz. ~25% of inventory opening balance. In addition, the company has reinvested its profits primarily in repaying its short term borrowings. The company has reduced its cash credit utilization by Rs. 11.5 crore in this year alone viz. ~45% of cash credit utilization opening balance. The company does not have any long term borrowings and did not raise any long term debt in the current year. Consequently, finance cost has reduced significantly due to this reduction in working capital requirements. Thus, at the PBT level, the company has clocked a growth of 24.5% to achieve a PBT of Rs. 12.14 crore.


Majority of the companys products are in the chronic segment, such as diabetes and hypertension. As such, the overall demand for the companys products should not be significantly affected by the Covid - 19 pandemic as these products are consumed continuously. Predicting demand and growth outlook for your company during the current year may be difficult at present. However, the company is confident of achieving sales and profit better than FY 2019 - 20.

The company is very well placed financially with very low debt on the books. The company is taking a conservative approach for FY 2020 - 21 and not looking to increase its short and long term debt. The company is also not going for any capacity expansion in FY 2020 - 21. The company has adequate capacity to meet volume growth of its products and any new products launched in this year. Any capital investment that will be needed for normal operations shall be funded from internal accruals.

The company had increased its research and development expenditure in FY 2019 - 20, which is bearing fruit. The company shall be launching several products primarily in the diabetes and hypertension therapeutic category in FY 2020 - 21. Due to Covid-19, the product launches scheduled in the last quarter of FY 2019 - 20 were delayed. However, the company is aggressively trying to make up lost time and launch 5 - 6 products in FY 2020 - 21.

The company is preparing to start domestic branded generics marketing division in FY 2020 - 21. The company has identified diabetes and hypertension as focus therapeutic areas for its formulation division and is working on launching a basket of products in these categories. Several of the products identified contain the APIs manufactured by the company and hence will give the company a significant cost advantage.

Opportunities and Threats

The global realignment of supply chains, including that of pharmaceutical sector, has created unprecedented opportunities for Indian pharma companies. At a global level, pharmaceutical companies are evaluating and looking at developing new sources for API & KSM to reduce dependency in China. In addition, Government of Indias "Atma Nirbhar" mission has addressed a key issue of API & key starting material (KSM) self sufficiency at a national level through a new scheme aimed at building API & KSM capacity in the country.

The company is thus working on identifying products, particularly of KSM of API, to cater to these new industry requirements. In addition, the company believes that there is huge opportunity to promote its API to companies, who are currently dependent on a single source but want to build a diversified supply chain. The company is in the process of devising a comprehensive strategy to capitalize on the opportunities created due to the current geopolitical and Covid 19 situations both for API and KSM.

As new opportunities have been created so have new threats sprung up. The global economic slowdown unleashed due to Covid 19 could potentially create many unforeseen circumstances ranging from companies shutting down to slow down in demand.

There is a possibility that some companies may not be able to weather this slowdown and going under. In case of customers, it could mean loss of revenue stream or in a worse case, non recovery of dues. As such, the company is taking a measured and cautious approach when extending credit towards sales and trying its best to reduce exposure without losing business. In case of suppliers, disruption in supply of materials could cause delays in production or in a worse case, loss of revenue streams as customers procure from other sources. Hence, the company has already started working on developing alternate suppliers for some raw materials and developing internal manufacturing capabilities for other raw materials.

In general pharmaceutical industry does not get significantly impacted due to economic slowdowns, particularly in chronic therapeutic categories where drug consumption is necessary for patient wellbeing. Since majority of the revenue of the company is generated from the chronic therapeutic categories, we do not see any significant impact due to demand slow down in the medium to long term. However, in the short term, there could be some slowdown especially if the industry and our customers decide to reduce inventories in distribution channels. The company is of the firm belief that any such short term reduction in demand will be offset subsequently.

Internal Control Systems

The Company has adequate internal control procedures commensurate with the size of the company and the nature of its business with regard to purchases of inventory, fixed assets and with regard to the sale of goods. Due to tight control over internal systems, the company was able to better its working capital management and reduce debt in the current year. To improve these systems further, the company has implemented a suitable ERP system in FY 2019 - 2020.

The company would like to bring to the notice of the members of two key financial ratios that have improved significantly (i.e. change of more than 25% compared to previous financial year) in comparison to previous financial year:

PAT: PAT grew by more than 27% Y-o-Y primarily because of lower raw material consumption and reduced financial cost over the previous year. The explanation for improvement in each of the parameters has been covered in the previous sections.

Interest Coverage Ratio: Interest coverage ratio has improved from 4.8 to 6.0 viz. 26% improvement. The reason for this improvement is that EBIT has improved significantly while interest cost has reduced due to significant reduction in cash credit utilization. The reasons for improvement in EBIT and reduction of debt has been address in previous sections.

Cautionary Statement

Statements in this Management Discussion and Analysis section of this report describing the Companys objectives, estimates and expectations may be "forward looking statements" within the meaning of the applicable laws and regulations. Actual results might differ materially from those either expressed or implied.

13. Directors Responsibility Statement

As stipulated under the provisions contained in Section 134(3) (c) read with Section 134(5) of the Companies Act, 2013 ("Act"), the Board of Directors, to the best of its knowledge and belief and according to the information and explanations obtained by it, hereby states that 1. in the preparation of the annual accounts, the applicable accounting standards have been followed and there are no material departures

2. the directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company for that period

3. the directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Act, for safe guarding the assets of the Company and for preventing and detecting fraud and other irregularities

4. the directors have prepared the annual accounts of the Company on a going concern basis

5. the directors have laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and are operating effectively; and

6. the directors have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems are adequate and operating effectively.

14. Directors and Key Managerial Personnel

The Board of Directors is chaired by Executive Promoter Chairman and has an optimum combination of Executive, Non - Executive and Independent Directors.

Mr. Swapnil Eaga (DIN: 01241535) is retiring by rotation and being eligible offers himself for reappointment. You are requested to appoint him.

None of the Directors are disqualified from being appointed as Directors, as specified in Section 164 of the Companies Act, 2013.

The composition of the Board, meetings of the Board held during the year and the attendance of the Directors thereat have been mentioned in the Report on Corporate Governance in the Annual Report.

The Company has Code of Conduct for Directors and senior management personnel. All the Directors and senior management personnel have confirmed compliance with the said code.

In terms of Section 203 of the Act, the Company has the following Key Managerial Personnel : Mr. Swapnil Eaga: Chief Financial Officer and Ms. Urvashi Khanna: Company Secretary.

15. Declaration of Independence

Your Company has received declarations from all the Independent Directors confirming that they meet the criteria of independence as prescribed under the provisions of the Companies Act, 2013 read with the Schedules and Rules issued thereunder as well as Regulation 16(1) (b) of Listing Regulations (including any statutory modification(s) or re-enactment(s) for the time being in force.)

16. Board Evaluation

In terms of the applicable provisions of the Act, the SEBI Listing Regulations, Nomination and Remuneration Committee and the Board of Directors have approved a framework, which lays down a structured approach, guidelines and processes to be adopted for carrying out an evaluation of the performance of all the Directors, the Board as a whole and its Committees. The evaluation process has been separately explained in this Annual Report, as a part of the Report on Corporate Governance.

For the year under review, the Board carried out the evaluation of its own performance and that of its Committees and the individual Directors and the evaluation results, as collated and presented, were noted by the Board.

17. Meetings of the Board

The Board met 5 (Five) times during the financial year. The meeting details are provided in the Report on Corporate Governance that forms part of this Annual Report.

The maximum interval between any two meetings did not exceed 120 days, as prescribed in the Act and the SEBI Listing Regulations.

18. Internal Financial Control Systems and Their Adequacy

The details in respect of internal financial control and their adequacy are included in the Management Discussion and Analysis, which is a part of this report.

19. Auditors

Pursuant to the provisions of Section 139 of the Companies Act, 2013 read with Companies (Audit and Auditors) Rules, 2014, in the 28th Annual General Meeting M/s. N. R. Waghchaure & Associates., Chartered Accountants, Solapur (Reg.No.: 114999W) were appointed as the Statutory Auditors of the Company for a term of five years. Company has however obtained confirmation from the said Auditors about their eligibility to continue to hold the office during the current financial year.

20. Auditors Report And Secretarial Audit Report

The Statutory Auditors report and the Secretarial Audit report do not contain any qualifications, reservations, or adverse remarks or disclaimer. The Secretarial Audit Report submitted by the Secretarial Auditor Mr. H. R. Thakur, Practicing Company Secretary, Mumbai, in the prescribed form MR-3 is attached as "Annexure - I" and forms part of this report. Observations and suggestions of the Secretarial Auditor have been considered by the management of the company.

Further, in terms of the provisions of the Circular No. CIR/CFD/CMD1/27/2019 dated 8th February, 2019 issued by Securities and

Exchange Board of India, the Company has obtained the Annual Secretarial Compliance Report for the financial year ended 31st March, 2020, there by confirming compliance of the applicable SEBI Regulations and circulars / guidelines issued thereunder, on behalf of the Company.

21. Cost Audit

For Financial Year 2020-2021, the Company has re-appointed M/s. Shrinivas Diddi and Associates, Cost Accountants, Solapur for conducting cost audit of its cost records pertaining to the products falling under the product categories - Drugs and pharmaceuticals. M/s. Shrinivas Diddi and Associates are appointed on a remuneration of Rs 55,000/- plus GST and out of pocket expenses.

The Company is seeking the ratification of the Shareholders for the remuneration to be paid to the cost auditors vide Resolution No. 4 of the Notice of the ensuing Annual General Meeting.

22. Conservation of Energy, Technology Absorption & Foreign Exchange

The statement giving the particulars relating to conservation of energy, technology absorption and foreign exchange earnings and outgo, as required in terms of Section134(3)(m) of the Act read with Rule 8(3) of the Companies (Accounts) Rules, 2014, is annexed to this Report as "Annexure-II".

23. General Shareholder Information

General Shareholder Information is given as Item No. 9 of the Report on Corporate Governance forming part of this Annual Report.

24. Particular Regarding Employees Remuneration

Disclosure comprising particulars with respect to the remuneration of directors and employees, as required to be disclosed in terms of the provisions of Section197(12) of the Act and Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, is annexed to this Report as "Annexure III".

25. Particulars of Loans, Guarantees or Investments

Company did not give any loans, guarantees and make any Investment covered under the provisions of Section 186 of the Companies Act, 2013.

26. Related Party Transactions

Related Party Transactions entered into during the year under review were approved by the Audit Committee and the Board of Directors, from time to time and the same are disclosed in the Financial Statements of the Company for the year under review. Further, pursuant to the provisions of the Act and the SEBI Listing Regulations, the Board of Directors has, on recommendation of its Audit Committee, adopted a Policy on Related Party Transactions and the said policy is available on the website of the Company

In terms of the provisions of Section 188(1) of the Actread with the Companies (Meetings of Board and its Powers) Rules, 2014 and Regulation 23 of the SEBI Listing Regulations, all contracts/ arrangements/ transactions entered into by the Company with its related parties, during the year under review, were in the ordinary course of business of the Company and on an arms length basis.

There were no material Related Party transactions during the year.

27. Corporate Governance

The Company is in full compliance with the requirements and disclosures that have to be made in terms of the requirements of Corporate Governance specified in SEBI

Listing Regulations.

Corporate Governance Report is enclosed as a part of the Annual Report along with the certificate from the Statutory Auditors, M/s. N. R. Waghchaure & Associates, Chartered Accountants, Solapur confirming compliance of the code of Corporate Governance as stipulated Para E of schedule V of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015.

28. Audit Committee

The Company has an Audit Committee in place in terms of the provisions of Regulation 18 of SEBI Listing Regulations read with Section 177 of the Companies Act, 2013.

The recommendations made by the Audit Committee to the Board, from time to time during the year under review, have accepted by the Board. Other details with respect to the Audit Committee such as its terms of reference, the meetings of the Audit Committee and attendance thereat of the members of the Committee, are separately provided in this Annual Report, as a part of the Report on Corporate Governance.

Further, detailed information with respect to the other Committees of the Board is also provided in this Annual Report, as a part of the Report on Corporate Governance.

29. Remuneration Policy

The policy on remuneration and other matters provided in Section 178(3) of the Act has been disclosed in the Corporate Governance Report, which is a part of this report and is also available on website of the company

30. Vigil Mechanism - Whistle Blower Policy

The Company has a Whistle Blower Policy to report genuine concerns and grievances. The policy provides adequate safeguards against victimisation of persons who use the Whistle Blower mechanism. Details with respect to implementation of the Whistle Blower Policy are separately disclosed in this Annual Report, as a part of the Report on Corporate Governance. The same is also available on the website of the Company at

31. Prevention of Sexual Harassment at workplace

During the financial year under review, the Company did not receive any complaints of sexual harassment and no cases were filed under the POSH Act. As per the provisions of the Act the Company has formed Internal Complaints Committees to redress the grievances of women employees under the Act.

32. Risk Management Policy

The Company is aware of the risks associated with the business. It regularly analyses and takes corrective actions for managing / mitigating the same. The requirements of Regulation 21 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, with regard to the constitution of a Risk Management Committee are not applicable to our Company.

33. Corporate Social Responsibility (CSR)

The Board of Directors has constituted a Corporate Social Responsibility ("CSR") Committee in terms of the provisions of Section 135 of the Act.

The Annual Report on CSR activities as required under Companies (Corporate Social Responsibility) Rules, 2014, including a brief outline of the Companys CSR Policy, is annexed to this Report as "Annexure IV". For other details regarding the CSR Committee, please refer to the Corporate Governance Report, which is a part of this report. The CSR policy is available on the website of the company

There was one meeting of the CSR

Committee held on 29th July, 2019, which was attended by all members of the Committee.

34. Extract of Annual Return

An Extract of the Annual Return in Form No. MGT-9, as required in terms of the provisions of Section 92(3) of the Act and the Companies (Management and Administration) Rules, 2014, is annexed to this Report as "Annexure V" and in terms of the provisions of Section 134(3)(a) of the Act. The same is also available on the website of the Company i.e.

35. Investor Education and Protection Fund (IEPF)

The Company had transferred a sum of Rs 1,46,724/- during the financial year to the Investor Education and Protection Fund established by the Central Government (IEPF). The said amount represents Unclaimed Dividend for the year 2011-2012 with the Company for a period of 7 years from their respective due dates of payment.

36. Nodal Officer

The Company has appointed Ms. Urvashi Khanna, Company Secretary as the Nodal Officer for the purpose of verification of claims filed with the Company in terms of IEPF Rules and for co-ordination with the IEPF


37. Compliance with Secretarial Standards

The Company has complied with the applicable Secretarial Standards issued by the Institute of Company Secretaries of India.

38. Acknowledgements

Your Directors wish to express their grateful appreciation for the co-operation and continued support received from customers, parent company, collaborators, vendors, investors, shareholders, financial institutions, banks, regulatory authorities and the society at large during the year. We also place on record our appreciation for the contribution made by our employees at all levels and for their commitment, hard work and support in driving the growth of the Company.

For and on behalf of the Board
Purushotham Eaga
Place : Solapur Chairman & Managing Director
Date : 29 th June 2020