SMS Pharmaceuticals Ltd Directors Report

To

The Members of

SMS Pharmaceuticals Limited.

The Directors are pleased to present the 38 th Annual Report of SMS Pharmaceuticals Limited (The Company) along with the Audited Financial Statements for the Financial Year ended 31 st March, 2026. The Consolidated performance of the Company has been referred to wherever required.

FINANCIAL SUMMARY

The Audited Financial Statements of your Company as on 31 st March, 2026, 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	2025-26	2024-25	2025-26	2024-25
Gross Sales	94,989.68	82,392.24	94,989.68	82,392.24
Net Sales	86,643.29	77,191.14	86,643.29	77,191.14
Income from Services	1,679.89	736.26	1,679.89	736.26
Other Operating Income	363.92	347.41	363.92	347.41
Net Revenue from Operations	88,687.10	78,274.81	88,687.10	78,274.81
Other Income	835.38	622.44	835.37	622.44
EBIDTA	17926.61	14619.87	17963.25	14,521.57
Finance Charges	2307.56	1854.09	2307.56	1,854.09
Depreciation	3991.93	3433.73	3991.93	3,433.73
Profit Before Tax	11627.13	9332.05	11663.76	9,233.75
Taxation	2866.20	2493.93	2863.97	2,493.93
Profit After Tax	8760.93	6838.12	10198.91	6913.50
Earnings per share - Basic/Diluted(Rs)	9.58	8.07	11.15	8.16

STATEMENT OF AFFAIRS AND COMPANYS PERFORMANCE

Financial & Production Performance

During the FY 2025-26 the Company had achieved production of 3,600.67 M.T. of APIs and their Intermediates in comparison with replace with: 3,097.24 M.T for the previous FY 2024-25.

During the FY 2025-26 the Company recorded the net sales of Rs. 86,643.29 Lakhs as against Rs. 77,191.14 Lakhs for the previous FY 2024-25. The Company has recorded EPS of Rs. 9.58 in the FY 2025-26 as against Rs. 8.07 for the previous FY 2024-25.

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 31 st March, 2026 and the share of profit for your Company for the Financial Year 2025-26 was Rs. 1399.12lakhs.

Your Company is having a wholly owned subsidiary Company i.e., SMS Colab Private Limited incorporated on December 23, 2025.

Your Company holds 100% equity shares in the said wholly owned subsidiary Company during the Financial Year ended 31 st March, 2026 and the share of Loss for your Company for the Financial Year 2025-26 was Rs. 0.60 lakhs.

Your Company is having a subsidiary Company i.e., SMS Peptides Private Limited incorporated on November 01, 2024. Your Company holds 99.99% equity shares in the said subsidiary Company during the Financial Year ended 31 st March, 2026 and the share of Loss for your Company for the Financial Year 2025-26 was Rs. 15.10 lakhs.

The Company does not have any material subsidiaries. The Policy on determination of material subsidiaries is available on the Companys website at https://smspharma.com/corporate-governance/governance-documents-policies/

Your Company has a Joint Venture (JV) in Spain 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 Section 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 Rs. 1000.00 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 Rs. 3,74,60,812/- (Rupees Three Crores Seventy 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

SHIFTING OF REGISTERED OFFICE OF THE COMPANY

The Board of Directors of the Company in its meeting held on 22 nd May 2026 has approved shifting of its registered office from Plot No. 72, H.No. 8-2-334 / 3 & 4, Road No. 5, Opp. SBI Executive Enclave Banjara Hills, Hyderabad – 500034, Telangana, India to 8 th Floor, Trendset Jayabheri Connect, Kondapur, Serilingampally, Ranga Reddy Dist., Hyderabad-500084, Telangana, India with effect from 25 th May, 2026. Consequent thereof, all communications, correspondences, letters and writings should be made to the new Registered Office address of your Company.

DIRECTORS AND KEY MANAGERIAL PERSONNEL

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

(i) Re-appointment:

During FY 2025-26, based on the recommendation of the Nomination & Remuneration Committee and approval of the Board of Directors, Mr. Vamsi Krishna Potluri (DIN: 06956498) was re-appointed as a Whole-Time Director designated as Executive Director of the Company for a second term of Three Years (3) with effect from 1 st July, 2025 to 30 th June, 2028.

The said re-appointment was approved by the Members of the Company at the Annual General Meeting held on 29 th September, 2025.

On the recommendation of Nomination and Remuneration Committee, the Board of Directors at their meeting held on 31 st July, 2026 has re-appointed Mr. Ramesh Babu Potluri (DIN: 00166381) as a Chairman and Managing Director of the Company for a term of Five Years (5) with effect from 1 st October, 2026 to 30 th September, 2031, subject to the approval of the members at the ensuing AGM.

(ii) 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, Dr. Sunkara Venkata Satya Shiva Prasad (DIN: 10404277), 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.

(iii) 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 31 st March, 2026, 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 Rs. 12,00,00,000/- divided into 12,00,00,000 equity shares of Re. 1/- each. However, the paid-up share capital changed from Rs. 8,86,52,030/- to Rs. 9,36,52,030/- comprising 9,36,52,030, equity shares of Re. 1/- each, consequent to the conversion, of 50,00,000 warrants into 50,00,000 equity shares on 10 th September, 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 28 th February, 2007. [Listing fees has been paid for the year 2026-27 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 the ExtraOrdinary General Meeting held on 06 March 2023, the Securities Allotment Committee of the Board of Directors, at its meeting held on 19 March 2024, approved the allotment of 90,00,000 (Ninety Lakh) Convertible Warrants to the Promoter and Promoter Group of the Company at an issue price of 127 per warrant, aggregating up to 114.30 crore. In accordance with the applicable provisions of the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018, the allottees paid 25% of the issue price, being 31.75 per warrant, aggregating to 28.58 crore, at the time of allotment. The balance 75% of the issue price was payable upon exercise of the warrants.

During the previous financial year, on 27 March 2025, 40,00,000 Convertible Warrants were converted into 40,00,000 Equity Shares of Re.1 each upon receipt of the balance consideration of 38.10 crore, in accordance with the SEBI (ICDR) Regulations, 2018.

During the current financial year, the Company received the balance 75% of the issue price, being 95.25 per warrant, aggregating to 47.63 crore, from two allottees holding 50,00,000

Convertible Warrants. Accordingly, the Securities Allotment Committee, at its meeting held on 10 September 2025, approved the conversion of these 50,00,000 Convertible Warrants into 50,00,000 Equity Shares of Re.1 each, in accordance with the SEBI (ICDR) Regulations, 2018.

The Company completed all requisite filings with the Ministry of Corporate Affairs and submitted the necessary applications and documents to the National Stock Exchange of India Limited and BSE Limited for obtaining listing and trading approvals for the aforesaid equity shares. Subsequently, on 06 November 2025, the Company received trading approvals from the stock exchanges in respect of the said 50,00,000 Equity Shares.

Consequent to the above, the entire 90,00,000 Convertible Warrants allotted on 19 March 2024 stand fully converted into 90,00,000 Equity Shares of the Company.

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

There have been no material changes or commitments affecting the financial position of the Company 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 is committed to maintaining high standards of corporate governance and creating sustainable value for its stakeholders. In compliance with the provisions of the Companies Act, 2013 and the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, an annual evaluation of the performance of the Board, its Committees and individual Directors was carried out during the year.

The evaluation was conducted through a structured framework based on the criteria approved by the Nomination and Remuneration Committee and aligned with the Guidance Note on Board Evaluation issued by SEBI. The Nomination and Remuneration Committee evaluated the performance of the Board and Non-Independent Directors, while the Board assessed the performance of its Committees and Independent Directors.

The Independent Directors held separate meetings on 14 th June 2025 and 07 th February 2026 to evaluate the performance of the Non-Independent Directors, the Chairperson and the Board as a whole. Further, at the Board Meeting held on 07 th February 2026, the performance of the Board, its Committees and individual Directors was reviewed and discussed.

The evaluation process affirmed the effectiveness of the Board and its Committees in discharging their responsibilities and their continued commitment to strong governance practices.

FAMILIARIZATION PROGRAMMES FOR INDEPENDENT DIRECTORS:

The Company has in place a structured familiarisation programme for Directors to enhance their understanding of the Companys business, operations, governance framework, strategic priorities, and the pharmaceutical industry. Upon appointment or re-appointment, Directors are provided with a formal letter outlining their roles, responsibilities, and terms of appointment, along with relevant documents and information to facilitate a comprehensive understanding of the Companys business and operating environment.

Independent Directors are periodically familiarised with the Companys business model, operational and regulatory landscape, governance practices, and key risks and opportunities. They are also encouraged to participate in external programmes and workshops for continuous professional development.

The Board is regularly updated on business performance, industry developments, regulatory changes, strategic initiatives, and emerging risks. These interactions enable Directors to contribute effectively to Board deliberations and decision-making processes.

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 31 st March, 2026 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

The appointment of Directors, Key Managerial Personnel and Senior Management is based on the qualifications, expertise, experience, integrity, competence and other attributes required for the respective position. The Nomination and Remuneration Committee evaluates the suitability of candidates and recommends their appointment to the Board.

While identifying candidates for appointment to the Board, the Committee considers merit and competence, while ensuring an appropriate balance of skills, experience, knowledge and diversity.

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, Six (6) Board Meetings and five (5) 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 31 st March, 2026, 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 31 st March, 2026, 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 through its Whistle Blower Policy to provide Directors and employees with a mechanism to report genuine concerns relating to unethical conduct, actual or suspected fraud, or violations of the Companys Code of Conduct and applicable policies.

The Policy provides for fair, transparent and confidential investigation of all reported concerns and ensures that appropriate corrective actions are taken wherever necessary. It also provides adequate safeguards against victimization of whistleblowers and enables direct access to the Chairman of the Audit Committee in appropriate and exceptional cases.

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.

The Company has not accepted any deposits from the public within the meaning of Chapter V of the Companies Act, 2013. Accordingly, no amount towards 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 2025-26 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

As per the 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

Pursuant to 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 prescribed 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

The Company has adopted a Code of Conduct for Prevention of Insider Trading in accordance with the provisions of the SEBI (Prohibition of Insider Trading) Regulations, 2015. The Code provides a framework for regulating, monitoring and reporting trading by designated persons and includes procedures for the handling and fair disclosure of Unpublished Price Sensitive Information (UPSI), as well as the requisite disclosures under the applicable regulations. 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 remains committed to minimizing its environmental footprint by continuously monitoring energy consumption, regulating emissions, and ensuring the responsible management of waste. It also promotes efficient water conservation practices and continually explores opportunities to optimize the use of natural resources. Environmental protection, occupational health, and safety are integral to the Companys policies and are embedded in its operational and business practices.

The Company places significant emphasis on providing a safe and healthy working environment for its employees. Regular safety training programmes, awareness sessions, and mock drills are conducted to enhance preparedness and strengthen the safety culture across the organization. High-risk areas are identified through periodic assessments, and appropriate preventive measures, including the adoption of automation and real-time monitoring systems, are implemented to mitigate operational risks.

To further promote employee well-being, the Company undertakes ergonomic assessments to improve workplace conditions and minimize the risk of strain-related injuries. Periodic health checkup programmes, health awareness initiatives, and employee wellness activities, including fitness and stress management programmes, are also organized to encourage the overall well-being of employees.

The Company remains committed to the continuous improvement of its environmental, health, and safety practices through periodic reviews, audits, and feedback mechanisms, ensuring alignment with applicable regulatory requirements, industry standards, and evolving 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

(Rs. in Lakhs)

Particulars	2025-26	2024-25
Earnings
FOB Value of Exports	26,552.02	31,268.18
Outgo
Sales Commission	13.70	687.27
Traveling Expenses	-	-
CIF Value of Imports
Raw Materials	7,645.87	9,342.98
Capital Goods	128.41	239.80

AUDITORS APPOINTMENT AND THEIR REPORTS

Statutory Auditors

M/s. Suranarayana & Suresh, Chartered Accountants, (Firm Registration No. 006631S), Hyderabad appointed as Statutory Auditors of the Company at the Annual General Meeting held on 30 th September, 2022 for a second term of five (5) years i.e., from the conclusion 34 th AGM till the conclusion of 39 th 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. The Statutory Audit Report do not contain any qualifications, reservations, adverse remarks or disclaimer given by the Auditors in their Report.

Internal Auditor

The Board has re-appointed M/s. Adusumilli and Associates, Chartered Accountants (FRN: 006983S), as an Internal Auditors of the Company for a period of one year from 01.04.2026 to 31.03.2027 under Section 138 of the Companies Act, 2013, in accordance with the scope as defined by the Audit Committee.

Secretarial Auditor

Members of the Company at the AGM held on 29 th September, 2025, approved the appointment of M/s. SVVS Associates Company Secretaries LLP, Practicing Company Secretaries (Peer Review No. 6514/2025), as the secretarial auditors of the Company to carry out the secretarial audit of the Company for a term of 5 years commencing from the conclusion of the 37 th AGM held on 29 th September, 2025 until the conclusion of 42 nd AGM of the Company to be held in the year 2030.

Secretarial Audit Report in Form MR-3 for the financial year 2025-26 forms part of this report as Annexure – 7 .

The Secretarial Audit Report do not contain any qualifications, reservations, adverse remarks or disclaimer given by the Auditors in their Report.

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, re-appointed M/s. Annapragada & Co., (Formerly: 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 2026-27.

The Board of Directors on the recommendations of the Audit Committee, re-appointed M/s. Annapragada & Co., (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 2026-27. 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. Annapragada & Co., (M/s. Harshitha Annapragada & Co.), Cost Accountants, by the members is included in the Notice convening 38 th Annual General Meeting.

FINANCIAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Company has established and maintained an adequate system of internal financial controls commensurate with the nature, size, and complexity of its business operations. These controls are designed to ensure the orderly and efficient conduct of business, safeguard the Companys assets, maintain the accuracy and completeness of accounting records, and ensure the reliability of financial reporting.

The internal financial control framework provides reasonable assurance that transactions are authorised, recorded, and reported appropriately in accordance with applicable accounting standards, statutory requirements, and the Companys internal policies. The controls also support compliance with applicable laws and regulations, prevent unauthorised use or disposition of assets, and facilitate timely preparation of reliable financial and operational information.

Assurance regarding the effectiveness of internal financial controls is obtained through periodic management reviews, continuous monitoring by functional owners, and evaluation and testing of the internal financial control framework by the Internal Auditors as part of their audit activities. The Company believes that these systems provide reasonable assurance that internal financial controls are appropriately designed and operating effectively.

The Company continuously strengthens its control environment through regular audits, periodic reviews, and ongoing enhancements to processes and systems. These measures ensure that the internal control framework remains robust, adaptive, and aligned with emerging risks, business requirements, and evolving 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 for Determination of Materiality for Disclosure
Policy on Determining material subsidiary

HUMAN RESOURCES / INDUSTRIAL RELATIONS

The Company recognizes its employees as its most valuable assets and is committed to providing a supportive, inclusive, and caring workplace environment. We strive to foster an atmosphere that encourages continuous growth, development, and collaboration, enabling employees to enhance their capabilities and achieve their full potential.

Through ongoing learning opportunities, development initiatives, and collaborative experiences, the Company continues to strengthen a work culture built on capability development, inclusion, employee wellbeing, and responsible people practices.

Our focus remains on developing effective leadership, enhancing employee skills and capabilities, promoting diversity and inclusion, supporting employee wellbeing, these efforts reinforce our commitment to building a future-ready workforce and a workplace where employees can thrive.

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.

Pursuant to Securities and Exchange Board of India (SEBI) vide its Master Circular no. HO/38/13/(4)2026-MIRSD-POD/I/4298/2026 dated 6 th February, 2026, it is 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, sub-division / splitting of securities certificate, consolidation of securities certificates / folios, transmission and transposition. Further, SEBI has substituted the earlier requirement of issuance of a physical Letter of Confirmation (LOC) in lieu of duplicate share certificates and the Listed entities/ RTAs are now required to directly credit the shares to the demat account in lieu of the share certificate while processing any of the aforesaid investor service requests.

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 consider/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 31 st March, 2026 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:

The Company is committed to maintaining a safe, secure, and respectful 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, 2026, 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; Positive (Single A ; Outlook Positive) on the Long Term Bank Facilities of the Company and CARE A1 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:

M/s. Sai Sreyas Pharmaceutical Pvt. Ltd., an Operational Creditor, has filed a petition under Section 9 of the Insolvency and Bankruptcy Code, 2016 before the Honble National Company Law Tribunal (NCLT), Hyderabad Bench, seeking initiation of the Corporate Insolvency Resolution Process (CIRP) against the Company, alleging a default in payment of operational debt amounting to 3.02 crore. The Company has disputed the claim on the ground that the materials supplied by the Operational Creditor were defective and had requested the supplier to take back the disputed material. The Company has filed its counter before the Honble NCLT, to which the Operational Creditor has filed a rejoinder. The matter is pending before the Honble NCLT, Hyderabad Bench. The Company is taking all necessary legal steps to protect its interests.

ACKNOWLEDGEMENTS:

Your Directors place on record their sincere appreciation for the continued trust, cooperation, and support extended to the Company by its Banks, Financial Institutions, Shareholders, Analysts, Business Partners, Government and Regulatory Authorities, Distributors, Suppliers, Business Associates, Medical Professionals, and Customers. Their continued confidence and association have been instrumental in the Companys growth and progress.

The Board of Directors also expresses its heartfelt appreciation to the Companys executives, employees, and workmen for their dedication, commitment, and valuable contributions, which have played a significant role in the Companys performance during the year.

The Directors further extend their gratitude to all investors for the confidence and faith they have consistently reposed in the Company and look forward to their continued support in the years ahead.

	By the order of the Board
	Ramesh Babu Potluri
Place: Hyderabad	Chairman and Managing Director
Date: 31.07.2026	(DIN:00166381)