SMS Lifesciences India Ltd Directors Report.

[For the year ended 31st March 2021]

TO THE MEMBERS,

The Directors of your Company have pleasure in presenting this 15th (Fifteenth) Directors Report along with the Audited Financial Statements (consolidated and standalone) for the year ended 31st March, 2021.

1. HIGHLIGHTS OF FINANCIAL PERFORMANCE

As per the requirements of Section 134 of the Companies Act, 2013 read with Rule 8(5) (i) of Companies (Accounts) Rules, 2014, your Companys financial performance during the year 2020-21, as compared to that of the previous year 2019-20, is summarized below: -

(Rs in Lakhs)

PARTICULARS

Standalone

Consolidated

2020-21 2019-20 2020-21 2019-20
Gross Sales 27,874.93 27,845.11 28,700.92 28,637.53
Net Sales 25,212.16 25,276.90 25,745.79 25,662.61
Other operating income 813.39 415.51 813.39 415.51
Net Revenue from operations 26,025.55 25,692.42 26,559.18 26,078.12
Other income 133.28 188.31 178.10 228.08
EBIDTA 3,106.79 2,567.04 3,195.83 2,766.67
Finance Cost 450.02 508.88 452.93 513.72
Depreciation 721.33 724.39 786.15 786.15
Profit before Tax (PBT) 1,935.44 1,333.77 1,956.75 1,466.80
Taxation 618.61 419.04 601.09 448.49
Profit after Tax (PAT) 1,316.83 914.73 1,355.66 1,018.31
EPS (Basic and Diluted) in Rs 43.56 30.26 44.84 33.68

Consolidated Financial Statements: The Consolidated Financial Statements of the Company are prepared in accordance with relevant Accounting Standards, form part of this Annual Report. This statement has been prepared on the basis of Audited Financial Statements received from Mahi Drugs Private Limited (Wholly-owned subsidiary) as approved by its Board of Directors on 18th June, 2021.

2. REVIEW OF OPERATIONS / STATE OF AFFAIRS OF THE COMPANY AND ITS SUBSIDIARIES:

STANDALONE:

Company is in the business of manufacturing of Active Pharmaceutical Ingredients (APIs) and its intermediates and sells its products in India as well as exports. Your Company continued to maintain a strong performance during the year 2020-21, with Revenue from Operations of Rs 260.25 crores during the year as compared to Rs 256.92 crores in the previous year and Profit Before Tax (PBT) has grown strongly by 45.11%.

CONSOLIDATED:

Your Company has only 1 (one) Subsidiary i.e., Mahi Drugs Private Limited (Wholly-owned Subsidiary). During the period under review, Consolidated net Income of the Company was Rs 265.59 crores during the year as compared to Rs 260.78 crores in the previous year. Profit after tax grew by 33.13% as compared to previous year, as a result, EPS has also increased to the same extend.

Mahi Drugs Private Limited had total Income of Rs 17.69 crores during the year as compared to Rs 22.99 crores in the previous year and reported Profit Before Tax (PBT) of Rs 8.65 lakhs during the period under review as compared to Rs 158.40 lakhs during the previous year 2019-20.

3. IMPACT OF COVID19 PANDEMIC:

The global outbreak of the pandemic has significantly impacted the economy. The management of your Company has considered internal and certain external sources of information and has used the principles of prudence in applying judgments, estimates and assumptions regarding the probable impact of the pandemic.

Your Company geared up and took charge of the situation from the start of the year, which helped in strong delivery. Going forward, your Company will stay on the growth path and will focus on growing existing business with continued focus on developing both export and domestic markets and will enhance its manufacturing capabilities to take advantage of the new emerging opportunities in the industry, your Company will continue to add new products for ensuring sustained business growth. Management has taken following steps during the year to ensure smooth functioning of the operations of the Company:

• Management in order to mitigate the covid risk has been providing a hygienic environment at working facilities i.e., providing Sanitizer, Mask and also sanitizing the facilities frequently.

• Taken health insurance against Covid19 under "Corona Kavach policy" for all the employees of the Company.

• Arranged vaccination drive for the employees of the Company and their relatives.

4. CHANGE IN THE NATURE OF BUSINESS

As per the requirements of Rule 8 (5) (ii) of Companies (Accounts) Rules, 2014, we would like to inform that there has been no change in the nature of business of your Company during the year under review.

5. DIVIDEND

As per the requirements of Section 134(3)(k) of the Companies Act, 2013, your Directors have recommended a dividend of 15% (Fifteen per cent) on the Equity Share Capital of your Company, i.e., Rs 1.50/- (Rupee One and Fifty Paise Only) per Equity Share of Face Value of Rs 10/- (Rupees Ten Only) each for the year ended 31st March, 2021, subject to approval of the Shareholders at the ensuing 15th (Fifteenth) Annual General Meeting of the Company.

The Dividend will be paid to the Shareholders whose names appear in the Register of Members of the Company as on Tuesday, 21st September, 2021 and in respect of shares held in dematerialized form, it will be paid to Shareholders, whose names are furnished by National Securities Depository Limited (NSDL) and Central Depository Services (India) Limited (CDSL).

The Shareholders of your Company are requested to note that the Income Tax Act, 1961, as amended by the Finance Act, 2020, mandates that dividends paid or distributed by a Company after 1st April, 2020 shall be taxable in the hands of the Shareholders. The Company shall, therefore, be required to deduct Tax at Source (TDS) at the time of making payment of the dividend. In order to enable your Company to determine and deduct the appropriate TDS as applicable, the Shareholders are requested to read the instructions given in the Note no. 19 to the Notice convening the 15th (Fifteenth) Annual General Meeting of the Company, forming a part of this Annual Report.

Note: Dividend Distribution Policy pursuant to Regulation 43A of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 is not applicable to the Company.

6. DIRECTORS AND KEY MANAGERIAL PERSONNEL

As per the requirements of Rule 8(5)(iii) of Companies (Account) Rules, 2014, your Company is maintaining an optimum combination of Independent and Executive Directors in the Board, who have vast experience in Pharma and other relevant fields. (Details of the Board Members are provided in the Corporate Governance Report).

A. RETIREMENT BY ROTATION

In accordance with the provisions of Section 152(6) of the Companies Act, 2013 read with the Articles of Association of the Company, at least 2/3rd of the total number of Directors of a public company shall be liable to retire by rotation and 1/3rd of such Directors shall retire by rotation at every AGM, However, "Independent Directors" are out of the ambit of retiring by rotation.

Further, as Mr. Veeravenkata Satyanarayana Murthy Talluri was appointed by rotation in the 14th AGM, so Board has proposed Mr. Talluri Venkata Praveen as the Director to "Retire by rotation" in the 15th AGM.

Detailed information as required under Regulation 36(3) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, provided in Annexure I forming part of this Report.

B. APPOINTMENT AND CESSATION

During the year under review and until the approval of this Directors Report, there was following changes in Board composition:

Appointment / re-appointment:

Name Category DIN Event date
Mr. Talluri Venkata Praveen Executive Director 08772030 21.08.2020
Mr. Venkatasubbarao Potluri** Independent Director 00099066 12.02.2021
Mrs. Sudeepthi Gopineedi Executive Director 09102540 02.09.2021

**Appointed for the Second term of 5 (five) years as "Independent Director" w.e.f. 1st April, 2021.

Resignation:

Name Category DIN Event date
Mr. P. Ramesh Babu Non-Executive Director 00166381 18.06.2021
Dr. (Mrs.) T Neelaveni Independent Director 00065571 02.09.2021

Note: Appropriate resolutions for re-appointment of Mr. Venkatasubbarao Potluri for the second term as "Independent Director" and appointment of Mrs. Sudeepthi Gopineedi as "Executive Director" are being moved at the ensuing 15th (Fifteenth) AGM, which the Board of Directors recommends for your approval.

Your Company has obtained a certificate from Mr. C. Sudhir Babu, Company Secretary in Practice, Hyderabad (ICSI Membership no. 2724 and C.P. No. 7666) pursuant to the provisions of Regulation 34(3) read with Schedule V of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, is provided as Annexure II, certifying that none of the Directors of the Company have been debarred or disqualified from being appointed or continuing as Directors of companies by the Securities and Exchange Board of India (SEBI) or by the Ministry of Corporate Affairs (MCA) or by any such statutory authority.

C. EVALUATION OF THE BOARDS PERFORMANCE

The Board of Directors has carried out an Annual Performance Evaluation of its own performance, the Directors individually as well as the evaluation of its sub-committees.

A structured questionnaire was prepared after taking into consideration various aspects of the Boards functioning, composition of the Board and its Committees, culture, execution and performance of specific duties, obligations and governance. The performance evaluation of the "Executive Directors" were carried out by the Independent Directors. The confidential questionnaire was responded to by all the Directors and vital feedback was received from them on how the Board currently operates and how it might improve its effectiveness.

The Directors are overall satisfied with the evaluation results, which reflected the overall engagement of the Board and its Committees with the Company.

D. DECLARATION BY INDEPENDENT DIRECTORS

In accordance with Section 149(6) of the Companies Act, 2013 and Regulation 16(b) of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, each Independent Director has confirmed to the Company that they meet the criteria of independence as laid down in aforesaid provisions, and the same have been taken on record by the Board after undertaking due assessment of the veracity of the same.

Independent Directors have registered themselves with the Independent Directors databank maintained by the Indian Institute of Corporate Affairs (IICA), in terms of the provisions of Rule 6 of the Companies (Appointment and Qualification of Directors) Rules, 2019 and the Companies (Creation and Maintenance of Databank of Independent Directors) Rules, 2019.

Further, Dr. (Mrs.) Neelaveni Thummala, Mr. Venkatasubbarao Potluri and Mr. P. Sarath Kumar, Independent Directors of the Company have served on the Board of Listed entities for more then 3 (three) years, Hence, are exempted from passing the online proficiency self-assessment test pursuant to first proviso of sub-rule 4 of Rule 6 of the Companies (Appointment and Qualification of Directors) Rules, 2019.

All Independent Directors maintained their limits of directorships as required under SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. The criteria for determining qualifications, terms of Appointment, roles, duties and responsibilities of Independent Directors are provided in the "Terms and Conditions of appointment of Independent Directors" which is available at the website of the Company (Weblink - (https://www.smslife.in/pdf/Terms%20S%20Conditions%20for%20Appointment%20 of%20Independent%20Director.pdf) and remuneration criteria of Non-executive Directors is provided in the website of the Company (Weblink - https://www.smslife.in/pdf/criteria-for-making-payment-to-non- executive-director.pdf).

All the Independent Directors of the Company have complied with the Code for Independent Directors as prescribed in Schedule IV to the Companies Act, 2013. The Company has put in place a system to familiarize its Independent Directors with the Company, their roles, rights S responsibilities in the Company, nature of the industry in which the Company operates, business model of the Company, etc. The details of such familiarization programmes are provided on the website of the Company and can be accessed at https:// www.smslife.in/pdf/familiarisation-program-forindependednt-directors-policy.pdf.

Meeting of the Independent Directors without the presence of Non- Independent Directors and members of management was duly held on 12th February, 2021, where the Independent Directors inter alia evaluated the performance of Non-Independent Directors and Board of Directors as a whole and discussed aspects relating to the quality, quantity and timeliness of the flow of information between the Company, Management and Board.

E. DIRECTORS RESPONSIBILITY STATEMENT

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(3)(c) of the Companies Act, 2013:

• in preparation of the financial statements for the year ended 31st March, 2021, the applicable accounting standards had been followed along with proper explanation relating to material departures;

• the Directors had selected such accounting policies as notified and modified by ICAI and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit and loss of the Company for that period;

• the Directors had 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;

• the Directors had prepared the annual accounts on a going concern basis;

• the Directors of the Company, have developed an effective mechanism for internal financial controls, which has been followed by Company consistently and that such internal financial controls are adequate and were operating effectively; and

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

7. MANAGEMENT DISCUSSION AND ANALYSIS REPORT

Management Discussion and Analysis Report for the year under review, as stipulated under Regulation 34(3) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015, forms part of the Annual Report as Annexure III.

8. SHARE CAPITAL AND LISTING

Authorized Share capital Rs. 3,50,00,000 divided into 35,00,000/- Equity shares of Rs. 10/- each
Subscribed, Issued and Paid-up Share capital Rs. 3,02,32,870 divided into 30,23,287 Equity shares of Rs. 10/- each

[as on 31st March, 2021]

During the year under review, there was no change in capital structure of the Company.

Listing of shares: Equity shares of the Company are listed in National Stock Exchange of India Limited (NSE) and BSE Limited (BSE) with effect from 17th August, 2017. [Listing fees has been paid for the year 2021-22 to both the Exchanges].

9. SUBSIDIARIES, JOINT VENTURES AND ASSOCIATE COMPANIES

Company has 1 (one) wholly-owned subsidiary i.e., Mahi Drugs Private Limited (CIN: U24233AP2012PTC084875) and no joint venture or Associate Companies as on 31st March, 2021 and Pursuant to Section 129(3) of the Companies Act, 2013, a statement containing salient features of the financial statements of the said subsidiary in the prescribed Form AOC-1 forms part of the Annual Report as Annexure IV.

Company has separately placed audited financial statements of wholly-owned subsidiary on the website of the Company (Weblink - https://www.smslife.in/financials.php) as per provisions of Section 136 of the Companies Act, 2013 and a copy of the same will be provided to the shareholders at their request. Policy for determining material subsidiaries in line with the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 has no relevance as Company has only one wholly-owned subsidiary.

No company has ceased to be a subsidiary/ associate/ joint venture of the Company during the year.

10. MARKET CAPITALIZATION [RANKING]

National Stock Exchange of India Limited and BSE Limited has released a list of ranking of the Companies as on 31st March, 2021 based on the market capitalization; ranking of your Company is as under:

Stock Exchange Rank as per Market Capitalization
National Stock Exchange of India Limited 1220
BSE Limited 1466

Note: Based on the aforesaid ranking, constitution of Risk Management Committee, adopting Dividend Distribution Policy and appointment of Women Independent Director, is not applicable to your Company.

11. RECOGNITION OF IN-HOUSE RESEARCH & DEVELOPMENT

Department of Scientific and Industrial Research (DSIR) of Government of India, Ministry of Science and Technology, New Delhi has accorded its recognition to in-house Research and development (R&D) unit of the Company located at Plot no. C-23, Industrial Estate, Sanathnagar, Hyderabad, Telangana. The said recognition will entitle R&D Unit of the Company to avail Customs / GST duty exemption on the purchase / import of equipment, instruments, and spares thereof, consumables etc., used for R&D activities.

12. INTER-SE TRANSFER(S)

During the period under review, the Promoter/ Promoter group have executed 2 (two) inter-se transfers pursuant to the exemption granted under Regulation 10 (1)(a)(ii) of SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2015.

Details of inter-se transfer:

Date: 08.12.2020 (Tranche 1)

Sl. No. Name of Promoter / Promoter group

Pre-holding

Change

Post-holding

No of shares %age Event No of shares %age No of shares %age
1 Annapurna Talluri 306,797 10.15% Buy 428787 14.18% 735,584 24.33%
2 TVVSN Murthy 293,821 9.72% Buy 87071 2.88% 380,892 12.60%
3 Hima Bindu Potluri 291,905 9.66% Sale 208572 6.90% 83,333 2.76%
4 Potluri Infra Projects LLP 194,213 6.42% Sale 87071 2.88% 107,142 3.54%
5 Ramesh Babu Potluri 460,405 15.23% Sale 220215 7.28% 240,190 7.94%

 

Sl. No. Name of Promoter / Promoter group

Pre-holding

Change

Post-holding

No of shares %age Event No of shares %age No of shares %age
1 TVVSN Murthy 380,892 12.60% Buy 99,142 3.28% 4,80,034 15.88%
2 Potluri Infra Projects LLP 107,142 3.54% Sale 99,142 3.28% 8,000 0.26%

The details of Promoter/ promoter group shareholding as on 31st March, 2021, is as mentioned below:

Name of Promoter / Promoter Group Promoter: Number of Shares % age
1) TVVSN Murthy 4,80,034 15.88%
2) Ramesh Babu Potluri 2,40,190 7.94%
3) TVVSN Murthy [HUF] 2,27,190 7.51%
Promoter Group:
4) Suresh Babu Potluri 5,151 0.17%
5) Hima Bindu Potluri 83,333 2.76%
6) Talluri Annapurna 7,35,584 24.33%
7) Rajeswara Rao Gopineedi 37 -
8) Venkata Praveen Talluri 46,262 1.53%
9) Hari Kishore Potluri 15,859 0.52%
10) Gopineedi Sudeepthi 62,500 2.07%
11) Sukumari Koneru 714 0.02%
12) Vamsi Krishna Potluri 73,234 2.42%
13) Trilok Potluri 78,141 2.58%
14) Satyavani Potluri (Lt) - -
15) M/s Potluri Laboratories Private Limited - -
16) M/s Potluri Infra Projects LLP 8,000 0.26%
17) M/s Pixalot Labs Private Limited 7,412 0.25%
Total 20,63,641 68.26%

List of top 10 shareholders of the Company as on 31s March, 2021 is provided separately in Annexure V.

13. RECLASSIFICATION OF PROMOTER / PROMOTER GROUP

Your Company has received request from some members of the Promoter / promoter group seeking reclassification into "Public" category vide their letter dated 7th August, 2021 pursuant to Regulation 31A of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the disclosure regarding the same is available in the website of the Company (Weblink - https://www.smslife.in/investors/Reclassification%20of%20 Promoters%20-%20request%20letter.pdf)

The Board of Directors in its meeting held on 13th August, 2021 considered the aforesaid request and subject to approval of Shareholders in the ensuring Annual General Meeting, Stock Exchanges and such other approval as may be required, based on the reasons and confirmations provided therein, has approved the reclassification of the following persons:

Sl No. Name of the persons No of Shares (%age)
1. Mr. Suresh Babu Potluri 2,539 (0.08%)
2. Mr. Hari Kishore Potluri 10,359 (0.34%)

Note: Appropriate resolutions for reclassification of the above mentioned persons into "Public category" are being moved at the ensuing 15th (Fifteenth) AGM, which the Board of Directors recommends for your approval.

14. TRANSFER TO RESERVES

During the period under review, your Board of Directors in its meeting held on 18th June, 2021 has approve to transfer Rs 100 lakhs to the general reserve. With such transfer the General Reserves of the Company stood at Rs 66.12 Crores as on 31st March, 2021.

15. DEPOSITS

The Company has not accepted any deposits falling under the ambit of Section 73 of the Companies Act, 2013 and the Rules framed thereunder during the year under review. Accordingly, no disclosure or reporting is required in respect of details relating to deposits.

16. CODE OF CONDUCT AND PREVENTION OF INSIDER TRADING

All Members of the Board and Senior Management personnel have affirmed the compliance with the Code as on 31st March, 2021 in compliance with Regulation 26(3) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015. The Company has framed and adopted Code of Conduct for Directors and Senior Management. The Code provides guidance on ethical conduct of business and compliance of law. The said code is available in the website of the Company (Weblink - https://www.smslife.in/pdf/code-of-conduct-for- board-and-senior-management.pdf).

The Board has formulated code of conduct for regulating, monitoring and reporting of trading of shares by Insiders. This code lays down guidelines, procedures to be followed and disclosures to be made by the insiders while dealing with shares of the Company and cautioning them on consequences of non-compliances. The said code is available in the website of the Company (Weblink - https://www.smslife.in/pdf/code-for-regulation-and- prohibition-of-insider-trading.pdf).

The Board has formulated a policy for determining practices and procedures for fair disclosure of Unpublished Price Sensitive Information for fair disclosure of events and occurrences that could impact price discovery in the market for the Companys securities and to maintain the uniformity, transparency and fairness in dealings with all stakeholders and ensure adherence to applicable laws and regulations. The said code is available in the website of the Company (Weblink - https://www.smslife.in/pdf/policy-for-determine-of-legitimate-purpose. pdf).

Board in its meeting dated 27th July, 2020 has authorized Mr. Trupti Ranjan Mohanty, Company Secretary of the Company to act as the Compliance Officer for setting forth the procedures and implementation of the aforesaid codes.

17. CORPORATE SOCIAL RESPONSIBILITY (CSR) INITIATIVES

The Board of Directors have reconstituted Corporate Social Responsibility (CSR) Committee in its meeting held on 18th June, 2021, in compliance with the requirements of Section 135 of the Companies Act, 2013, read with the Companies (Corporate Social Responsibility Policy) Rules, 2014, The details of the CSR Committee composition, meetings and the attendance of the Members at the meetings along with other details appear in the Report on Corporate Governance which forms part of this Annual Report.

The Annual Report on CSR initiatives undertaken during the year ended 31st March, 2021, in the prescribed format pursuant to the Companies (Corporate Social Responsibility Policy) Amendment Rules, 2021 dated 22nd January, 2021, is provided as Annexure VI to this Report.

The new CSR Policy as per the Companies (Corporate Social Responsibility Policy) Amendment Rules, 2021 dated 22nd January, 2021, is available on the website of the Company (Weblink - https://www.smslife.in/pdf/ Corporate%20Social%20Responsibility%20Policy.pdf)

18. NUMBER OF BOARD MEETING AND ATTENDANCE

As per the requirements Section 134 (3) (b) of the Companies Act, 2013, we want to inform you that, the Board of Directors met 4 [four] times during this year under review.

Sl. No. Date and time No. of Directors present
1. 27th July, 2020 [12.30 pm] 06
2. 21st August, 2020 [12.30 pm] 07
3. 13th November, 2020 [12.30 pm] 07
4. 12th February, 2021 [05.00 pm] 06

• Mr. Talluri Venkata Praveen was inducted on Board as "Additional Director" w.e.f. 21st August, 2020 and "Executive Director" w.e.f. 1st September, 2020.

• Mr. Shravan Kudaravalli was granted leave of absence on 12th February, 2021.

• The details of Board Meetings, Committee meetings and the attendance of the Directors thereat, are provided in the Corporate Governance Report.

• The Maximum interval between 2 [two] meetings did not exceed 120 days, as prescribed under Companies Act, 2013, except for the meeting held on 27th July, 2020 (previous meeting held on 14th February, 2020), in lieu of the extension granted by SEBI vide circular no. SEBI/H0/CFD/CMD1/CIR/P/2020/106 dated 24th June, 2020, due to the continuing impact of the Covid19 pandemic.

Sub-committees: Details of various committees constituted by the Board of Directors as per the provisions of the Companies Act, 2013 and SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015, are given in the Corporate Governance Report which forms part of this report.

19. VIGIL MECHANISM/WHISTLE BLOWER POLICY

The Company has adopted a Whistle Blower Policy for Vigil Mechanism for Directors and Employees to report to the Management instances of unethical behavior, fraud or violation of Companys code of conduct. The mechanism provides for adequate safeguards against victimization of employees and Directors who use such mechanism and makes provision for direct access to the Chairperson of the Audit Committee.

CONTACT DETAILS:

Mr. P. Sarath Kumar Mr. N. Rajendra Prasad

Chairman of Audit Committee Chief Financial Officer

Email: sarat9@gmail.com Email: rajendra@smslife.in

During the year under review, the Company has not received any instances of genuine concerns from Directors or employees under this mechanism. The Company also hosted the Whistle Blower Policy in-line with the provisions of the Companies Act, 2013 and the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 on the website of the Company (Weblink - https://www.smslife.in/pdf/whistle-blower-protection-policv-vieil- mechanism.pdf).

20. AUDITORS & AUDITORS REPORT

A. STATUTORY AUDITORS:

M/s. Rambabu & Co. (Firm Registration No. 002976S) were appointed as Statutory Auditors of your Company in the 11th Annual General Meeting (AGM) and will complete their present term at the end of the ensuing 15th AGM of the Company. The Auditors Report for the year ended 31st March, 2021, on the financial statements of the Company is provided along with financial statements forming part of this Report.

The Auditors Report for the year ended 31st March, 2021, does not contain any qualification, adverse remark, reservation or disclaimer and therefore, does not call for any further explanation or comments from the Board under Section 134(3) of the Companies Act, 2013.

The Board of Directors, on the recommendation of the Audit Committee, in their meeting held on 18th June, 2021, have re-appointed M/s. Rambabu & Co. Chartered Accountant, Hyderabad, (Firms Registration No. 002976S), as the Statutory Auditors of the Company for the period of 5 (five) consecutive years, subject to approval of the Shareholders at the ensuing Annual General Meeting. They have confirmed their eligibility and qualification required under section 139, 141 and other applicable provisions of the Companies Act, 2013 (including any statutory modification (s) or re-enactment(s) thereof for the time being in force).

B. COST AUDITOR:

The cost records are required to be maintained by your Company and the same are required to be audited, pursuant to Section 148 of the Companies Act, 2013 read with the Companies (Audit and Auditors) Rules, 2014 and the Companies (Cost Records and Audit) Rules, 2014. Company accordingly maintains the required cost accounts and records as per the requirements of Section 148 of the Companies Act, 2013.

The Board of Directors had, on recommendation of the Audit Committee, at its Meeting held on 27th July, 2020, appointed Mr. KSN Sarma, Cost Accountant, Hyderabad (Registration No. 102145 and Membership no. 6875), as the "Cost Auditor" of the Company for the year 2020-21. In respect to that the Cost Auditor has submitted the report to the Company as specified under Section 148 (5) and the same shall be reported to the Central Government by the Company pursuant to Section 148(6) of the Companies Act, 2013.

The Board has, on the recommendations made by the Audit Committee in their meeting held on 18th June, 2021, re-appointed Mr. KSN Sarma, Cost Accountant, Hyderabad (Registration No. 102145 and Membership no. 6875), as Cost Auditor of the Company for conducting the cost audit for the year 2021-22, subject to approval of their remuneration at the ensuing 15th (Fifteenth) Annual General Meeting.

C. SECRETARIAL AUDITOR:

The Board of Directors had, upon recommendation of the Audit Committee, at its Meeting held on 27th July, 2020, appointed M/s. SVVS & Associates, a firm of Company Secretaries in Practice to undertake the Secretarial Audit of your Company for the year 2020-21 pursuant to the provisions of Section 204 of the Companies Act, 2013 and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014. The Secretarial Audit Report issued by M/s. SVVS & Associates, Secretarial Auditors for the year ended 31st March, 2021, which is an unqualified report, is annexed herewith as Annexure VII.

The Board of Directors has, upon recommendation of the Audit Committee, at its Meeting held on 18th June, 2021, re-appointed M/s. SVVS & Associates, Company Secretaries LLP, as the "Secretarial Auditors" of your Company for the year 2021-22. Further, Company has received consent from M/s SVVS & Associates, Company Secretaries LLP to act as the auditor for conducting audit of the secretarial records for the year ending 31st March, 2022.

• Annual Secretarial Compliance report:

Company has obtained Annual Secretarial Compliance Report from Mr. C. Sudhir Babu, Practicing Company Secretary (Proprietor, CSB Associates) on 18th June, 2021, pursuant to SEBI circular no. CIR/CFD/ CMD1/27/2019 dated 8th February, 2019; forms part of this Report as Annexure VIII and the same was also submitted to the Stock Exchange(s) on 24th June, 2021.

The aforesaid Report do not contain any qualification, reservation or adverse remarks.

21. RELATED PARTY TRANSACTIONS

All Related Party Transactions that were entered into during the year under review were in the ordinary course of business and are at arms length basis and were in compliance with the applicable provisions of the Companies Act, 2013 read with rules made there under. Material significant Related Party Transactions entered into by the Company during the year under review as mentioned below:

[Rs in Crores]

Name of related party Nature of Transactions Threshold Limit* Transaction Amount
SMS Pharmaceuticals Limited Sales 26.30 51.18

*10% of consolidated turnover of the Company for the year 2019-20.

The Board of Directors in the meeting held on 18th June, 2021 has approved the same, subject to ratification of the Shareholders in the ensuing Annual General Meeting.

Policy on Related Party Transactions as reviewed and modified by the Board of Directors in its meeting held on 13th November, 2020, is uploaded on the Companys website (Weblink - https://www.smslife.in/pdf/Policy%20 on%20materiality%20of%20Related%20Party%20Transactions%20and%20dealing%20with%20Related%20 Party%20Transactions.pdf) and the particulars of contracts or arrangements entered by the Company with related parties referred to in Section 188(1) are furnished under Form AOC-2 as Annexure IX.

All related party transactions are placed before the Audit Committee for prior approval of the Audit Committee, which are repetitive in nature and a statement of all Related Party Transactions is placed before the Audit committee for its review, on quarterly basis.

Your Directors draw attention of the members to Notes No. 46 to the standalone financial statement, forming part of the Annual Report, which sets out related party disclosures.

22. CREDIT RATING

Company has received Credit rating from CARE Ratings Limited (CARE) vide letter no. CARE/HRO/RL/2020-21/2061 dated 24th February, 2021. CARE has assigned the following Credit rating in respect of Bank facilities:

(Rs in Crores)

Facilities/Instruments Amount Ratings
Long Term Bank Facilities 19.25 (Reduced from 20.00) CARE BBB+; Stable (Triple B Plus; Outlook: Stable)
Long Term / Short Term Bank Facilities** 30.00 CARE BBB+; Stable / CARE A2 (Triple B Plus; Outlook: Stable/ A Two)
Short Term Bank Facilities 0.32 CARE A2 (A Two)
Total Bank Facilities 49.57

**Term Loan availed from EXIM Bank has been paid-off and form for Charge Satisfaction has been filed by the Company with MCA.

23. PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS

The details of Loans, Investments and Guarantees covered under Section 186 of the Companies Act, 2013 read with the Companies (Meetings of Board and its Powers) Rules, 2014, is provided in Note no. 7 to the standalone financial statements.

24. MANAGERIAL REMUNERATION AND PARTICULARS OF EMPLOYEES

The information required under Section 197(12) of the Companies Act, 2013 read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are provided in separate annexure forming part of this report as Annexure X. It is hereby confirmed that the remuneration paid to Directors, Key Managerial Personnel and other employees of the Company during the year 2020-21 was in conformity with the Nomination and Remuneration Policy of the Company.

The disclosure as per Section 197(12) of the Companies Act, 2013 read with Rule 5 (2) and Rule 5 (3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, as amended, forms part of this report as Annexure XA.

25. INTERNAL FINANCIAL CONTROL SYSTEMS

The Company has in place adequate internal financial controls in order to ensure that the financial statements of the Company depict a true and fair position of the business of the Company. The Company continuously monitors and looks for possible gaps in its processes and it devices and adopts improved controls wherever necessary.

26. HUMAN RESOURCE/INDUSTRIAL RELATIONS

Company continues to have amicable employee relations at all units (i.e., corporate office, manufacturing units and R&D unit) and would like to place on record its sincere appreciation for the unstinted support it continues to receive from all its employees especially during this ongoing pandemic times; Company drives interventions to enhance the workforce productivity in the business and also makes concrete efforts to improve the employee engagement and connect.

The Company is committed to building and maintaining a safe and healthy workplace. There are several policies formulated for the benefit of employees, which promote equal opportunity, prevention of sexual harassment, safety and health of employees and ensures that all the employees are aware of personnel policies. Your Company constantly makes concerted efforts towards creating learning and development opportunities on a non-discriminatory basis, that continually enhance the employee value in line with the organizational objectives. Besides all these, the Company places highest emphasis on professional etiquette required of every employee.

27. SEXUAL HARASSMENT AT WORKPLACE

The Company is committed for creating and maintaining an atmosphere in which employees can work together without fear of sexual harassment, exploitation or intimidation. The Board of Directors of the Company has constituted an Internal Complaints Committee (ICC) for redressal of complaints related to sexual harassment as per Section 4 of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 and rules made thereunder, comprising of the following Members as on 31st March, 2021:

Name of Committee Member Designation
Corporate Office
Mrs. G. Sudeepthi Presiding Officer
Mrs. T. Naga Deepthi Member
Mrs. Sardhar Nagamani Member
Mrs. K. Naveena Member
Unit-I Kazipally
Mrs. G. Sudeepthi Presiding Officer
Mrs. T. Naga Deepthi Member
Mrs. P D Varna Member
Mrs. P Pushpanjali Member
Unit-4 Jeedimetla
Mrs. G. Sudeepthi Presiding Officer
Mrs. T. Naga Deepthi Member
Mrs. V. Sunitha Lakshmi Member
Mrs. S. Bujji Member
R&D Sanath Nagar
Mrs. G. Sudeepthi Presiding Officer
Mrs. T. Naga Deepthi Member
Mrs. Y. Amrutha Bindu Member
Mrs. V Sreedevi Member

Contact No. & Email Address of the members of the ICC has been internally circulated with all the respective departments.

The Company has formulated and circulated to all the employees, a Policy on Prevention of Sexual Harassment at Workplace, which provides for a proper mechanism for redressal of complaints of sexual harassment and the same can be accessed at the website of the Company (Weblink - https://www.smslife.in/pdf/policy-on- prevention-of-sexual-harrasment.pdf) .

The details of complaints with the ICC during the year 2020-21 are as follows:

Complaints outstanding at the beginning of the year Complaints received during the year Complaints resolved during the Year Complaints outstanding at the closure of the year
Nil Nil Nil Nil

28. POLICIES OF THE COMPANY

The Companies Act, 2013, the Rules framed thereunder and the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, have mandated the formulation of certain policies for all listed companies. All our Corporate Governance Policies are available on the Companys website (Weblink - https://www.smslife.in/ policies.php), The Policies are reviewed periodically by the Board and its Committees and are updated based on the need and new compliance requirement.

• Documents Preservation Policy • Familiarization Program For Independent Directors Policy
• Criteria For Making Payment To Non-Executive Director • Policy for evaluation of the performance of the Board of Directors
• Corporate Social Responsibility Policy • Policy on materiality of Related Party Transactions and dealing with Related Party Transactions
• Code of Conduct For Board and Senior Management • Policy on Disclosure of Material Events Information
• Code for Regulation and Prohibition of Insider Trading • Policy on Prevention of Sexual Harassment
• Code of Business Conduct And Ethics For Other Stake Holders • Whistle Blower Protection Policy Vigil Mechanism
• Policy to determine of legitimate purpose. • Terms & Conditions for Appointment of Independent Directors
• Working policy during covid19
• Staffs advance policy
• Policy on leakage of UPSI

29. CORPORATE GOVERNANCE REPORT

A detailed Report on Corporate Governance is included in the Annual Report as stipulated under provisions of Regulation 34 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015, is separately given and forms part of this Annual Report as Annexure XI. M/s. Rambabu & Co., Statutory Auditors have certified the said report in compliance with the requirements of Regulation 34 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 and the Compliance Certificate is annexed to the Corporate Governance Report as Annexure XIA.

30. COMPLIANCE CERTIFICATION

A certificate of the Managing Director and Chief Financial Officer of the Company on financial statements and applicable internal controls as stipulated under Regulation 17(8) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, is enclosed as Annexure XII to this report.

31. CONSERVATION OF ENERGY, RESEARCH & DEVELOPMENT, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO

The information on conservation of energy, technology absorption and foreign exchange earnings and outgo stipulated under Section 134(3)(m) of the Companies Act, 2013 read with Rule 8 of the Companies (Accounts) Rules, 2014 is annexed herewith as Annexure XIII.

32. MATERIAL CHANGES AND COMMITMENTS AFFECTING THE FINANCIAL POSITION

There are no material changes and commitments affecting the financial position of the Company which have occurred between the end of the year 2020-21 to which the financial statements relate and the date of the Directors Report (i.e., from 1st April, 2021 up to 2nd September, 2021).

33. SECRETARIAL STANDARDS

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

34. ANNUAL RETURN AND EXTRACT THEREOF

The Annual Return for the year ended 31st March, 2021 in form MGT 7, is placed on the website of the Company (Weblink- https://www.smslife.in/financials.php) pursuant to Section 92(3) read with Section 134(3)(a) of the Companies Act, 2013 as amended by Companies (Amendment) Act, 2017 w.e.f. 28th August 2020.

35. GENERAL DISCLOSURE

Your Directors state that no disclosure or reporting is required in respect of the following matters under the Companies Act, 2013, and SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015, either on account of absence of any transaction or the inapplicability of the provisions:

a) No material and significant orders passed by the regulators or courts or tribunals impacting the going concern status and the Companys operations in future.

b) There have been no instances of frauds reported by the Auditors under Section 143(12) of the Companies Act, 2013 and the Rules framed thereunder, either to the Company or to the Central Government

c) There are no instances where the Board has not accepted the recommendation of Audit Committee/ Nomination and remuneration Committee.

d) No receipt of any remuneration or commission from the Wholly-owned Subsidiary Company by the Managing Director or the Whole-time Directors of the Company, as per section 197(14) of the Companies Act, 2013.

e) No transactions, with person(s) or entity(ies) belonging to the Promoter / Promoter Group which hold(s) 10% or more shareholding in the Company, as per Schedule V (2A) of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, during the period under review.

f) The Business Responsibility Reporting as required by Regulation 34(2) of the SEBI (Listing Obligations & Disclosure Requirements) Regulations, 2015, is not applicable to your Company for the year ending 31st March, 2021.

The additional information required to be given under the Companies Act, 2013 and the Rules made thereunder, has been laid out in the Notes attached to and forming part of the Financial Statements.

36. APPRECIATION

Your Directors wish to place on record their sincere appreciation for the continued cooperation, guidance, support and assistance extended during the year under report by the Companys bankers, customers, suppliers, shareholders and the Government agencies. The Board of Directors wishes to express its appreciation for the valuable contribution made by the employees and workmen at all levels during the year under report.

By Order of the Board
For SMS Lifesciences India Limited
TVVSN Murthy
DIN: 00465198 Managing Director
TV Praveen
DIN: 08772030
Executive Director
Date: 02.09.2021
Place: Hyderabad