SMS Pharmaceuticals Ltd Directors Report

To

The Members of

SMS Pharmaceuticals Limited.

The Directors are pleased to present the 37th Annual Report of SMS Pharmaceuticals Limited (“The Company”) along with the Audited Financial Statements for the Financial Year ended 31st March, 2025. The Consolidated performance of the Company has been referred to wherever required.

FINANCIAL SUMMARY

The Audited Financial Statements of your Company as on 31st March, 2025, are prepared in accordance with the relevant applicable Indian Accounting Standards (“Ind AS”) and Regulation 33 of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (“SEBI Listing Regulations”) and the provisions of the Companies Act, 2013 (“Act”).

The summarized financial highlight is depicted below:

(INR in Lakhs)

	Standalone		Consolidated
Particulars	2024-25	2023-24	2024-25	2023-24
Gross Sales	82,392.24	73,406.91	82,392.24	73,406.91
Net Sales	77,191.14	69,232.52	77,191.14	69,232.52
Income from Services	736.26	1,413.13	736.26	1,413.13
Other Operating Income	347.41	280.69	347.41	280.69
Net Revenue from Operations	78,274.81	70,926.34	78,274.81	70,926.34
Other Income	622.44	445.97	622.44	445.97
EBIDTA	14619.87	12130.42	14,521.57	12,107.93
Finance Charges	1854.09	2345.68	1,854.09	2,345.68
Depreciation	3433.73	3151.57	3,433.73	3,151.57
Profit Before Tax	9332.05	6633.17	9233.75	6,610.68
Taxation	2493.93	1690.68	2,493.93	1,690.68
Profit After Tax	6838.12	4942.49	6913.50	4982.60
Earnings per share - Basic/Diluted(Rs)	8.07	5.84	8.16	5.89

STATEMENT OF AFFAIRS AND COMPANYS PERFORMANCE

Financial & Production Performance

During the FY 2024-25 the Company had achieved production of 3,097.24 M.T. of APIs and their Intermediates in comparison with 2,247.88 M.T. for the previous FY 2023-24.

During the FY 2024-25 the Company recorded the net sales of H 77,191.14 Lakhs as against H 69,232.52 Lakhs for the previous FY 2023-24. The Company has recorded EPS of H 8.07 in the FY 2024-25 as against H 5.84 for the previous FY 2023-24.

Subsidiaries and Associates

Your Company is having an Associate Company i.e., “VKT Pharma Private Limited”. Your Company holds 34.83% of equity shares in the said Associate Company during the Financial Year ended 31st March, 2025 and the share of profit for your Company for the Financial Year 2024-25 was H 173.68 lakhs.

Your Company is having a subsidiary Company i.e., “SMS Peptides Private Limited” incorporated on November 01, 2024. Your Company holds 93.00% equity shares in the said subsidiary Company during the Financial Year ended 31st March, 2025 and the share of Loss for your Company for the Financial Year 2024-25 was H 0.78 lakhs.

Your Company has incorporated a Joint Venture (JV) in Spain in the year 2021 with nomenclature of “CHEMO SMS ENTERPRISES SL” in the capital ratio of 55:45 with a share of 45% contributed by your Company.

There were no transactions during the reporting period, however, all the JV product sales were routed directly from your Company to the end customers during the reporting period as per JV manufacturing arrangement.

The consolidated financial statements had been prepared as per Accounting Standard (AS) 23 “Accounting for Investment in Associates in Consolidated Financial Statements” specified under Section 133 of Companies Act, 2013 for considering the financials of Associate Company. The required form, as per the provisions of the Sec. 129(3) read with Rule 5 of Companies (Accounts) Rules, 2014 i.e., Form AOC-1 forms part of the Report as Annexure 1.

CHANGE IN NATURE OF BUSINESS

As per the requirements of Rule 8 (5) (ii) of Companies (Accounts) Rules, 2014, your Board of Directors specify that, there is no significant change in the nature of business of the Company during the financial year under review.

TRANSFER TO RESERVES

During the year, Your Company has transferred an amount of H1000.00 Lakhs to General Reserve out of the amounts available for appropriations.

DIVIDEND

Your Directors have pleasure in recommending the dividend of Re. 0.40 (i.e. 40%) per equity share of Re. 1/- face value, aggregating to H3,54,60,812/- (Rupees Three Corers Fifty Four Lakhs Sixty Thousand Eight Hundred and Twelve only) which shall be paid within 30 days after the conclusion of the Annual General Meeting, subject to the approval of the shareholders of the Company. Payment of dividend to members will be subject to tax deduction at source (TDS) as per statutory requirement.

Pursuant to Regulation 43A of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Board of Directors of the Company have adopted a Dividend Distribution Policy. The policy lays down a broad framework and factors which the Board considers for deciding the distribution of dividend to its shareholders. The said policy is available on the Companys website https://smspharma.com/wp-content/uploads/2022/08/ Dividend-Distribution-policy.pdf

DIRECTORS AND KEY MANAGERIAL PERSONNEL

During the year under review, the Company has key changes in its Directors and Key Managerial Personnel.

(i) Appointment:

During FY 2024-25, pursuant to the recommendation of the Nomination & Remuneration Committee and approval of the Board:

a. Dr. Suresh Kumar Gangavarapu (DIN: 00183128) was appointed as an Independent Director of the Company for a term of Five consecutive years from 12th August, 2024 to 11th August, 2029.

b. Mrs. Shanti Sree Bolleni (DIN: 07092258) was appointed as an Independent Director (Women Director) of the Company for a term of Five consecutive years from 12th August, 2024 to 11th August, 2029.

c. Mr. Trilok Potluri (DIN: 07634613) was appointed as a Non-Executive Non Independent Director of the Company w.e.f. 12th August, 2024.

d. Dr.SunkaraVenkataSatyaShivaPrasad(DIN:10404277) was appointed as a Non-Executive Non Independent Director of the Company w.e.f. 12th August, 2024.

The aforementioned appointments were further approved by the Shareholders at the Annual General Meeting held on 30th September, 2024.

(ii) Re-appointment:

On the recommendation of Nomination and Remuneration Committee, the Board of Directors at their meeting held on 1st July, 2025 has re-appointed Mr. Vamsi Krishna Potluri (DIN: 06956498) as a Whole-Time Director designated as Executive Director of the Company for a second term of Three Years (3) with effect from 1st July, 2025 to 30th June, 2028, subject to the approval of the members at the ensuing AGM.

(iii) Term Completion/ Retirement: a. Mr. Sarath Kumar Pakalapati (DIN: 01456746) has retired as an Independent Director of the Company on account of completion of his second and final term w.e.f. close of business hours on 11th August 2024.

b. Mrs. Neelaveni Thummala (DIN: 00065571), has retired as an Independent Director of the Company on account of completion of her second and final term w.e.f. close of business hours on 11th August 2024.

(iv) Retirement by rotation:

In accordance with the provisions of section 152(6) of the Act and in terms of the Articles of Association of the Company, Mr. Trilok Potluri (DIN: 07634613), Non-Executive Non Independent Director, will retire by rotation at the ensuing Annual General Meeting and being eligible, offers himself for re-appointment. The Board recommends his re-appointment.

(v) Declaration of Independence:

The Company has received declarations of independence from the Independent Directors as stipulated under Section 149 (7) of the Companies Act, 2013, that each Independent Director meets the criteria of Independence laid down in the Section 149 (6) of the Companies Act, 2013 and Regulation 16(1)(b) of SEBI (Listing Obligations and Disclosure Requirements), Regulations, 2015. All the Independent Directors of the Company have enrolled in the Independent Director databank maintained by Indian Institute of Corporate Affairs (IICA) as per Companies (Creation and Maintenance of databank of Independent Directors) Rules, 2019.

MANAGEMENT DISCUSSION & ANALYSIS

Pursuant to Regulation 34 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (‘Listing Regulations), the Management Discussion and Analysis is presented in a separate section forming part of this Annual Report for the year ended 31st March, 2025, as required under the provisions of the Listing Regulations.

SHARE CAPITAL

Equity Share Capital:

During the year under review, the authorized share capital remained unchanged at H 12,00,00,000/- divided into 12,00,00,000 equity shares of H 1/- each. However, the paid-up share capital changed from H8,46,520,300 to H 8,86,52,030/- comprising 8,86,52,030 equity shares of H 1/- each, consequent to the conversion of 40,00,000 warrants into 40,00,000 equity shares on 27th March, 2025. A report on the same i.e., ‘Equity Buildup Report forms part of this report as Annexure – 2.

Listing of shares: Equity shares of the Company are listed in National Stock Exchange of India (NSE) and BSE Limited (BSE) with effect from 28th February, 2007. [Listing fees has been paid for the year 2025-26 to both the Exchanges].

Conversion of Warrants into Equity Shares issued on a private placement basis

Pursuant to the approval accorded by the members, at their ExtraOrdinary General Meeting held on 06th March, 2023 the Securities Allotment Committee of Board of Directors passed resolution on 19th March, 2024 for allotment of 90,00,000 (Ninety Lakh) Convertible Warrants at an issue price of H127/- each Warrant aggregating up to H114,30,00,000/- to promoters/promoters group of the Company, upon receipt of upfront money of 25% of issue price i.e., H31.75/- per warrant aggregating to H28,57,50,000/-.

During the financial year, the Company received the balance 75% of the issue price (i.e., H95.25 per warrant) aggregating to H 38,10,00,000/- from two allottees holding 40,00,000 convertible warrants. On 27 March 2025, the Securities Allotment Committee converted these warrants into 40,00,000 equity shares of H1/- each, in accordance with SEBI (ICDR) Regulations, 2018.

The Company duly submitted the required filings with the Ministry of Corporate Affairs and submitted the documents for listing and trading approvals with both the National Stock Exchange of India Limited and BSE Limited.

On 17th June, 2025, the Company received trading approvals from the stock exchanges for the 40,00,000 equity shares.

As a result, 50,00,000 out of the original 90,00,000 convertible warrants (issued on 19 March 2024) remain pending for conversion.

MATERIAL CHANGES AND COMMITMENTS, AFFECTING THE FINANCIAL POSITION OF THE COMPANY:

There are no material changes and commitments which affect the financial position of the Company that have occurred between the end of the financial year to which the financial statements relate and the date of this report.

EVALUATION OF PERFORMANCE OF BOARD OF DIRECTORS:

The Company believes in creating value for its stakeholders through strong corporate governance practices. Pursuant to the provisions of the Companies Act, 2013 and the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the formal annual evaluation of the performance of the Board as well as non-independent directors was undertaken by the Nomination and Remuneration Committee. The performance of Board Committees and of individual independent directors was undertaken by the Board members.

The Board evaluation was conducted through a structured questionnaire designed based on the criteria for evaluation laid down by the Nomination and Remuneration Committee as per the Guidance Note on Board Evaluation issued by the Securities and Exchange Board of India.

Your Company had conducted two separate Meetings of Independent Directors during the year on 05th August, 2024 and 12th February, 2025 in which they had evaluated the Performance of Non Independent Directors and the Board as a whole, performance of the Chairperson of the company, taking into account the views of executive directors and non-executive directors. Further, at the Board meeting held on 12th February, 2025 the performance of the Board, its committees, and individual directors was also discussed. The evaluation had been made based on specified standards.

FAMILIARIZATION PROGRAMMES FOR INDEPENDENT DIRECTORS:

Your Company has a strong induction process that enables newly appointed Directors to familiarise them with the Company, management, operations and pharmaceutical industry. All the directors are made aware of their roles and duties at the time of their appointment/re-appointment through a formal letter of appointment which also stipulates other terms and conditions of their appointment. The Directors are provided with all the documents to enable them to have a better understanding of the Company, its various operations, and the industry in which it operates.

The Company has put in place a systematic familiarisation program to deepen Directors understanding of the Companys business, governance framework, strategic priorities, and risk landscape. Independent Directors, in particular, are introduced to their roles, rights, and responsibilities, the business model, operational context, and broader market environment. The Company also offers access to relevant external programs and workshops for further development.

The Board members are periodically updated in its meetings on topics such as industry trends, corporate performance, operational strategy, compliance frameworks, governance developments, and emerging risks and opportunities. These sessions encourage active discussion and gather Directors input on strategic directions and business initiatives.

The details of these familiarization programs have been placed on the Companys website at https://smspharma.com/investor-relations/download/

COMMITTEES OF THE BOARD:

The Board of Directors has the following Committees:

1. Audit Committee

2. Nomination and Remuneration Committee

3. Stakeholders Relationship Committee

4. Corporate Social Responsibility Committee

5. Risk Management Committee

6. Securities Allotment Committee

The details of all the above Committees (except for Risk Management Committee) along with their composition, number of meetings and attendance at the meetings are provided in detail in the Corporate Governance Report annexed to this Boards Report.

RISK MANAGEMENT POLICY:

The Risk Management Committee of the Company have the following Directors:

Mr. Ramesh Babu Potluri – Chairman Mr. Vamsi Krishna Potluri – Member Mr. Shravan Kudaravalli – Member.

The Committee created a Risk Management Policy to handle various risks faced during the companys daily operations. This policy details different types of risks and the measures the Board should take to lessen them. The company has strong internal controls and procedures to combat these risks. The Audit Committee and the Board of Directors review these risk management procedures every quarter when they examine the companys financial results.

Brief description of terms of reference of the Committee, inter alia, includes the following:

managing and monitoring the implementation of action plans developed to address material business risks within the Company and its business units, and regularly reviewing the progress of action plans;

setting up internal processes and systems to control the implementation of action plans;

regularly monitoring and evaluating the performance of management in managing risk;

providing management and employees with the necessary tools and resources to identify and manage risks;

regularly reviewing and updating the current list of material business risks;

regularly reporting to the Board on the status of material business risks;

review and monitor cyber security; and

Ensuring compliance with regulatory requirements and best practices with respect to risk management.

DIRECTORS RESPONSIBILITY STATEMENT

Pursuant to the provisions of Section 134(3)(c) of the Companies Act, 2013 as amended, the Board of Directors confirm that:

1. in the preparation of the Financial Statements for the year ended 31st March, 2025 the applicable accounting standards had been followed along with proper explanation relating to material departures, if any.

2. they had selected such accounting policies as notified & 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;

3. they had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013, as amended from time to time for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

4. the Annual Accounts had been prepared on going concern basis.

5. the Company has developed an effective mechanism for internal financial controls to be followed by the Company consistently and that such internal financial controls are adequate and operating effectively;

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

THE CRITERIA FOR APPOINTMENT OF DIRECTORS, KMP AND SENIOR MANAGEMENT

A person for appointment as Director, KMP or in senior management should possess adequate qualifications, expertise and experience for the position considered for appointment. The Nomination and Remuneration Committee decides whether qualification, expertise and experience possessed by a person are sufficient for the concerned position. The Committee ascertains the credentials and integrity of the person for appointment as Director, KMP or senior management level and recommends to the Board his/ her appointment.

The Committee, while identifying suitable persons for appointment to the Board, will consider candidates on merit against objective criteria and with due regard for the benefits of diversity on the Board.

The Nomination and Remuneration Committee shall assess the independence of directors at the time of appointment, reappointment and the Board shall assess the same annually. The Board shall re-assess determination of independence when any new interests or relationships are disclosed by a Director.

The criterion of independence is as prescribed in the Act and the listing regulations and the Independent Directors shall abide by the Code specified for them in Schedule IV of the Act.

The Nomination and Remuneration Committee has the criteria for appointing any Key Managerial Personnel (KMP) and nominating directors on the Board. The appointment of any KMP is made by the Nomination and Remuneration Committee based on the requirement of the position and experience and skill sets of the candidate.

COMPOSITION & NUMBER OF MEETINGS OF THE BOARD AND AUDIT COMMITTEE

During the year under review, four (4) Board Meetings and four (4) Audit Committee Meetings were duly convened and held. Detailed information regarding these meetings is provided in the Corporate Governance Report, which forms an integral part of this Report. The intervals between the meetings were in compliance with the timelines prescribed under the Companies Act, 2013, and the Listing Regulations.

ANNUAL RETURN

The Annual Return of the Company as on 31st March, 2025, in terms of the provisions of Section 92(3) and 134(3)(a) of the Act, 2013 is available on the Companys website: https://smspharma. com/annual-report/

CORPORATE GOVERNANCE

A separate section on Corporate Governance standards followed by your Company, as stipulated under Schedule V of the SEBI (LODR) Regulations, 2015, which is forming part of this report. The requisite certificate from M/s. Suryanarayana & Suresh, Chartered Accountants, confirming the compliance with the conditions of Corporate Governance is annexed to the Report on Corporate Governance.

BUSINESS RESPONSIBILITY AND SUSTAINABILITY REPORT (BRSR)

The ‘Business Responsibility and Sustainability Report (BRSR) of your Company for the year ended 31st March, 2025, forms part of this Annual Report as required under Regulation 34 (2) (f) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 is available as a separate section in this Annual Report.

VIGIL MECHANISM / WHISTLE BLOWER POLICY:

The Company has established a Vigil Mechanism and adopted a Whistle Blower Policy to enable Directors and employees to report concerns regarding unethical behavior, actual or suspected fraud, or any violation of the Companys Code of Conduct or Ethics Policy. The Policy ensures that all reported matters are investigated in a fair and unbiased manner, and appropriate corrective actions are taken to uphold the highest standards of ethical and professional conduct.

The mechanism also includes safeguards to protect whistleblowers from any form of retaliation or victimization and provides for direct access to the Chairman of the Audit Committee in exceptional circumstances.

During the year under review, the Company did not receive any complaints, disclosures, or concerns under the Vigil Mechanism. The Whistle Blower Policy is available on the Companys website at https://smspharma.com/company-announcements/downloads/

DEPOSITS

The Company has not accepted any deposits from the public within the purview of Chapter V of the Companies Act, 2013. Hence, no amount on account of principal or interest on public deposits was outstanding as on the date of the balance sheet.

LOANS, GUARANTEES AND INVESTMENTS

Particulars of Loans, guarantees and investments covered under Section 186 of the Companies Act, 2013 form part of the Notes to the Financial Statements provided in this Annual Report.

RELATED PARTY TRANSACTIONS

All related party transactions that were entered by the Company during the financial year 2024-25 with related parties were in the ordinary course of business and on an arms length basis and are in compliance with the provisions of the Companies Act, 2013 and the SEBI (Listing Obligations & Disclosure Requirements) Regulations, 2015. There are no materially significant related party transactions made by the Company with Promoters, Directors and Key Managerial Personnel, etc., which may have potential conflict with the interest of the Company. All related party transactions are presented to the Audit Committee on quarterly basis and were also placed before the Board.

A statement of all Related Party Transactions is being presented before the Audit Committee on Quarterly basis specifying the nature, value and terms and conditions of the transactions. A Policy on Related Party Transactions approved by the Board is uploaded on the Companys website at the web link https:// smspharma.com/wp-content/uploads/2024/11/updated-Policy-on-Related-Party-Transactions-08.11.2024.pdf

The particulars of contracts or arrangements entered into by the Company with related parties referred to in Section 188(1) are kept by the Company in Statutory Form AOC-2. Further details required to disclose as per Accounting Standard form part of the notes to the financial statements provided in the annual report. The Form AOC-2 is attached to the Report as Annexure - 3.

CORPORATE SOCIAL RESPONSIBILITY

Pursuant to the provisions of Section 135 of the Companies Act, 2013, read with the Companies (Corporate Social Responsibility Policy) Rules, 2014, the Company has duly constituted a Corporate Social Responsibility (CSR) Committee.

A brief overview of the Companys CSR Policy, details of the CSR Committee, and the initiatives undertaken by the Company during the financial year are provided in Annexure-4 to this Report, in the format prescribed under the Companies (Corporate Social Responsibility Policy) Rules, 2014.The CSR Policy of the Company is also available on the Companys website at: https:// smspharma.com/wp-content/uploads/2025/02/Corporate-Social-Responsibility-Policy.pdf

PARTICULARS OF EMPLOYEES

In accordance with the provisions of Section 197(12) of the Companies Act, 2013, read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the requisite disclosures pertaining to remuneration and other relevant details are provided in the Employees Remuneration Report, which forms an integral part of this Report and is annexed herewith as Annexure – 5.

Further, the statement containing particulars of employees as required under Section 197(12) of the Act, read with Rules 5(2) and 5(3) of the said Rules, has not been included in this Report. However, in terms of the provisions of Section 136 of the Act, the said statement is available for inspection by members. Any member desirous of obtaining a copy of the same may make a written request by sending an email to the Company Secretary at cs@smspharma.com

PREVENTION OF INSIDER TRADING

To ensure compliance with the SEBI (Prohibition of Insider Trading) Regulations, 2015, the Company has adopted a comprehensive Insider Trading Policy aimed at regulating, monitoring, and reporting trading activities by designated persons. This Policy encompasses detailed procedures for the fair disclosure of unpublished price-sensitive information, along with provisions for initial and continual disclosures, in accordance with the applicable regulatory framework. The Board periodically reviews the Policy, as and when required. The Policy is available on the Companys website at: https://smspharma.com/company-announcements/downloads/

The Company undertakes various initiatives to educate and sensitize its employees regarding the provisions of the Insider Trading Code. These include the periodic dissemination of informative communications on the prevention of insider trading, guidelines outlining Dos and Donts, notifications regarding the closure of trading windows, and timely clarifications provided to designated persons. Such initiatives have significantly enhanced awareness and understanding of insider trading compliance among the designated individuals.

ENVIRONMENT, HEALTH AND SAFETY ENVIRONMENT

The Company continuously monitors its energy consumption, regulates emissions, and manages waste generation to minimize its environmental footprint. We are committed to adopting responsible water usage practices and continuously seek innovative ways to reduce resource consumption. Our dedication to environmental protection and occupational health and safety is firmly embedded in our corporate policies and guides all our operational decisions.

To ensure a safe and healthy workplace, the Company regularly conducts comprehensive training programmes and mock drills that enhance employee awareness, preparedness, and response capabilities. We proactively identify high-risk areas and invest in advanced technological solutions, such as automation and real-time monitoring systems, to mitigate potential hazards. Awareness campaigns and safety workshops are conducted regularly to foster a strong safety culture across all levels of the organization.

In addition, the Company has implemented ergonomic assessments to optimize workplace design and reduce strain-related injuries. To support employee well-being beyond the workplace, free health check-up programmes are organized periodically, alongside mental health awareness sessions and wellness initiatives such as fitness challenges and stress management workshops.

Our ongoing efforts to improve environmental sustainability and employee safety are reinforced through continuous feedback mechanisms and audits, ensuring that we adapt and enhance our practices to meet evolving standards and best practices.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION

The information required under Section 134(3)(m) of the Companies Act, 2013 read with the applicable Rules forms part of this report as Annexure-6.

FOREIGN EXCHANGE EARNINGS AND OUTGO

( H in Lakhs)

		( H in Lakhs)
Particulars	2024-25	2023-24
Earnings
FOB Value of Exports	31,268.18	30,245.53
Outgo
Sales Commission	687.27	17.25
Travelling Expenses	-	-
CIF Value of Imports
Raw Materials	9342.98	10,553.87
Capital Goods	239.80	414.15

AUDITORS APPOINTMENT AND THEIR REPORTS

Statutory Auditors

The Company appointed M/s. Suranarayana & Suresh, Chartered Accountants, (Firm Registration No. 006631S), Hyderabad as Statutory Auditors of the Company at the Annual General Meeting held on 30th September, 2022 for a second term of five (5) years i.e., from the conclusion 34th AGM till the conclusion of 39th Annual General Meeting to be held in the year 2027.

Further, the report of the Statutory Auditors along with notes to accounts forms part of the Annual Report. There has been no other qualification, reservation, adverse remark or disclaimer given by the Auditors in their Report.

Internal Auditor

The Board has appointed M/s. Adusumilli and Associates, Chartered Accountants, as an Internal Auditors of the Company for a period of one year from 01.04.2025 to 31.03.2026 under Section 138 of the Companies Act, 2013, in accordance with the scope as defined by the Audit Committee.

Secretarial Auditor

As per Section 204 of the Companies Act, 2013 and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 the Company has appointed M/s. SVVS Associates Company Secretaries LLP to undertake Secretarial Audit of the Company for the Financial Year ended on 2024-2025. Secretarial Audit Report in Form MR-3 for the financial year 2024-2025 forms part of this report as Annexure – 7.

There has been no qualification, reservation, adverse remark or disclaimer given by the Auditors in their Report. However, an observation related that under Regulation 19(1)(c) of SEBI (LODR) Regulations, 2015 to Non-compliance pertaining to the composition of Nomination and Remuneration Committee of the Board for the period from 12th August, 2024 to 07th November, 2024. This was brought to the notice of the Board and the management has clarified that the Company has complied with the said provision w.e.f. 7th November, 2024 and a fine of H 2,000/- per day by each stock exchange from 12th August 2024 to 7th November, 2024 was paid. However, during the said period the company has not conducted any Nomination and Remuneration Committee Meetings. It was an inadvertent and isolated oversight and unintentional nature prompt corrective action was taken immediately.

The Board on recommendations of the Audit Committee has approved and recommended to the members the appointment of M/s. SVVS Associates Company Secretaries LLP, as Secretarial Auditor of the Company for a period of five consecutive years from financial year 2025-26 to 2029-30.

Brief details as required under the Listing Regulations, are provided in the Notice of 37th AGM. The Directors recommend the same for approval by the Members.

Annual Secretarial Compliance Report

As per Regulation 24A of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Company has obtained the Annual Secretarial Compliance Report which forms part of this Report as Annexure-B from Mr. C. Sudhir Babu, Practicing Company Secretary (Proprietor, CSB Associates) and submitted the same to the Stock Exchanges where the shares of the Company are listed.

Cost Auditor

As per Section 148 of the Companies Act, 2013 read with the Companies (Audit and Auditors) Rules, 2014, and the Companies (Cost Records & Audit) Amendment Rules, 2014, the Company maintains Cost Records. Your Board has, upon the recommendations of the Audit Committee, appointed M/s. Harshitha Annapragada & Co., Cost Accountants (Firm Registration No. 006031 and Membership No. 39895) as Cost Auditor of the Company for the financial year 2024-2025.

The Board of Directors on the recommendations of the Audit Committee, appointed M/s. Harshitha Annapragada & Co., Cost Accountants (Firm Registration No. 006031 and Membership No. 39895) as Cost Auditors of the Company for the financial year 2025-2026. As required under the Act and Rules made thereunder, the remuneration payable to the Cost Auditors is required to be placed before the Members at a general meeting for ratification. Accordingly, a resolution seeking ratification of the remuneration payable to M/s. Harshitha Annapragada & Co., Cost Accountants, by the members is included in the Notice convening 37th Annual General Meeting.

FINANCIAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Company has implemented a comprehensive system of internal financial controls tailored to its operational scale and complexity, ensuring the integrity of financial reporting, protection of assets, and compliance with applicable accounting standards, regulations, and corporate policies. These have been designed to provide reasonable assurance with regard to recording and providing reliable financial and operational information, complying with applicable accounting standards and relevant statutes, safeguarding assets from unauthorised use, executing transactions with proper authorisation and ensuring compliance of corporate policies. The Company uses an established Tally to record day-today transactions for accounting and financial reporting.

Assurance on the effectiveness of internal financial controls is obtained through management reviews, continuous monitoring by functional owners as well as testing of the internal financial control systems by the internal auditors during the course of their audits. We believe that these systems provide reasonable assurance that our internal financial controls are designed effectively and are operating as intended.

The Company actively reinforces its control environment through routine audits, updates, and enhancements, thereby ensuring that its internal controls remain resilient, responsive, and aligned with evolving risks and compliance obligations.

POLICIES

Company has following policies in place pursuant to applicable provisions of the Act and SEBI Listing Regulations and the same are published on the official website of the Company (www.smspharma.com):

Code of Business Conduct & Ethics for Other Stake Holders	Code of Regulation & Prohibition of Insider Trading
Code of Conduct for Board of Directors & Senior Management	Remuneration Criteria for Non-Executive Directors policy
Corporate Social Responsibility Policy	Document preservation policy
Familiarization program of Independent Director	Policy for evaluation performance of the Board of Directors
Policy for related party transactions	Policy on prevention, prohibition and redressal of sexual harassment of women at workplace
Vigil Mechanism (Whistle blower policy )	Staff advances policy
Dividend Distribution Policy	Risk Management Policy
Code of Practices and procedures for Fair Disclosure Policy on Determining material subsidiary	Policy for Determination of Materiality for Disclosure

HUMAN RESOURCES / INDUSTRIAL RELATIONS

Your Company believes that employees are its most valuable assets, and it is the responsibility of the Company to provide support and care to all its employees. It strives to create an environment conducive to employees development. Through ongoing learning, development initiatives, and collaborative experiences, we foster a culture of continuous improvement, teamwork, and shared success that drives both individual potential and the sustained performance of our organization.

SHARE TRANSFER SYSTEM

Pursuant to Regulation 40(1) of SEBI (LODR) Regulations, 2015, as amended from time to time, transfer, transmission and transposition of securities shall be effected only in dematerialised form.

SEBI vide its circular no. SEBI/HO/MIRSD/MIRSD_RTAMB/P/ CIR/2022/8 dated 25th January, 2022, has made it mandatory for listed companies to issue shares only in demat form while processing investor service requests viz., issue of duplicate securities certificate, claim from Unclaimed Suspense Account, renewal / exchange of securities certificate, endorsement, subdivision / splitting of securities certificate, consolidation of securities certificates / folios, transmission and transposition. Listed entities/ RTAs are now required to issue a ‘Letter of Confirmation in lieu of the share certificate while processing any of the aforesaid investor service requests.

In cases where the securities holder / claimant fails to submit the demat request to the depository participant within a period of 120 days from the date of issuance of the Letter of Confirmation from RTA / listed companies, the said securities are credited to ‘Suspense Escrow Demat Account. Securities which are moved to ‘Suspense Escrow Demat Account may be claimed by the security holder / claimant by submitting a duly executed Form ISR- 4 and self-attested KYC documents.

In view of the above and to eliminate risk associated with physical shares and to avail various benefits of dematerialisation, shareholders are advised to dematerialize their shares held in physical form.

The Stakeholders Relationship Committee meets as often as required to approve share transfers and to attend to any grievances or complaints received from the members.

GENERAL DISCLOSURE

Your Directors state that no disclosure or reporting is required in respect of the following items as there were no transactions on these items during the year under review:

a) No material changes and commitments affecting the financial position of the Company between the financial year ended 31st March, 2025 and the date of this report.

b) No fraud has been reported by the Auditors to the Audit Committee or to the Board.

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

d) Company has complied with the requirements of the Secretarial Standards issued by Institute of Company Secretaries of India.

e) There are no instances where the Board has not accepted the recommendation of Audit Committee.

f) Cost records are maintained as per the requirements of Section 148 of the Act.

g) The extract of Annual Return is disclosed on the Companys website.

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

Your Company is dedicated to maintaining a workplace free from sexual harassment and has implemented a comprehensive policy aimed at preventing, prohibiting, and addressing any incidents of sexual harassment in accordance with the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013, along with its applicable rules. The Company upholds a strict zero-tolerance stance towards any form of sexual harassment within the work environment.

In compliance with Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013, statement of complaints for the financial year ended March 31, 2025, is as follows:

Particulars	Number
Number of complaints pending as on beginning of the financial year	Nil
Number of complaints filed during the financial year	Nil
Number of complaints disposed of during the financial year	Nil
Number of complaints pending as on end of financial year	Nil

COMPLIANCE WITH SECRETARIAL STANDARDS

During the year under review, the Company has complied with the Secretarial Standards issued by the Institute of Company Secretaries of India.

MATERNITY BENEFIT ACT, 1961

The Company affirms that it has duly complied with all provisions of the Maternity Benefit Act, 1961, and has extended all statutory benefits to eligible women employees during the year.

INSURANCE:

The Companys plant, properties, equipment and stocks are adequately insured against all major risks. The Parent Company has taken Directors and Officers Liability Policy to provide coverage against the liabilities arising on them, which includes the Directors of the Company also.

RATING

CARE Rating Limited has assigned its rating of ‘CARE A; ‘Stable (Single A; Outlook Stable) on the Long Term Bank Facilities of the Company and ‘CARE A2+ on the Short Term Bank Facilities of the Company

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

During the year under review, there were no significant material orders passed by the Regulators / Courts which would impact the going concern status of the Company and its future operations.

DISCLOSURE OF CERTAIN TYPES OF AGREEMENTS BINDING ON THE COMPANY:

During the period under the review the Company does not enter into any agreement(s) which were falling under clause 5A of para A of part A of schedule III of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

APPLICATION MADE OR ANY PROCEEDING PENDING UNDER THE INSOLVENCY AND BANKRUPTCY CODE:

During the year M/s. Sai Sreyas Pharmaceutical Pvt Ltd (Petitioner), an Operational Creditor has filed a petition under Section 9 of the Insolvency and Bankruptcy Code, 2016, before the National Company Law Tribunal (NCLT), Hyderabad Bench seeking initiation of Corporate Insolvency Resolution Process against the Company alleges default in the payment of unpaid operational debt amounting to 3.02 Crores. The Company has previously raised concerns regarding the quality of materials supplied by the aforementioned Operational Creditor and had requested them to take back the disputed material. In spite of this, the petitioner filed an application under IBC and the

Company has received a communication from the Honble NCLT, Hyderabad in relation to the above registration of the said petition. The Company is taking necessary legal steps against the Operational Creditor.

ACKNOWLEDGEMENTS:

Your Directors wish to place on record their sincere appreciation for the continued cooperation and support extended to the Company by the Banks & Financial Institutions. The Board also takes this opportunity to thank all Shareholders, Analysts, Business Partners, Government and Regulatory Authorities, Distributors, Suppliers, Business Associates, Medical professionals, and Customers for their invaluable guidance, encouragement, and unwavering support.

The Board of Directors further expresses its deep sense of gratitude for the dedicated and committed services rendered by the Companys executives, staff, and workers.

The Directors also wish to convey their heartfelt thanks to the investors for the confidence and trust they have continued to repose in the Company.

	By the order of the Board
	Ramesh Babu Potluri
Place: Hyderabad	Chairman and Managing Director
Date: 09.08.2025	(DIN:00166381)