SPARC Director Discussions


Dear Members,

Your Directors take pleasure in presenting the Companys 18th Annual Report and Audited Financial Statements for the financial year ended March 31, 2023.

FINANCIAL RESULTS

The Companys financial performance for the year ended March 31, 2023 is summarized below:

Particulars Year ended March 31, 2023 Year ended March 31, 2022
Total Income 24,965.75 14,409.35
Profit/(Loss) before Finance Cost, Depreciation & Tax (20,317.80) (17,990.48)
Finance Cost 763.47 1,332.87
Depreciation 1,177.08 1,016.19
Profit/ (Loss) before Tax (22,258.35) (20,339.54)
Tax Expense - -
Profit/ (Loss) after Tax (22,258.35) (20,339,54)
Other Comprehensive Income/ (Loss) 135.39 169.64
Total Comprehensive Income/ (Loss) (22,122.96) (20,169.90)
Balance brought forward from Previous Year (1,37,058.38) (1,16,888.48)
Balance carried to Balance Sheet (1,59,181.34) (1,37,058.38)

MATERIAL CHANGES AND COMMITMENTS AFFECTING THE FINANCIAL POSITION OF THE COMPANY, BETWEEN THE END OF THE FINANCIAL YEAR AND THE DATE OF THIS REPORT

There were no material changes and commitments, affecting the financial position of the Company, which have occurred between the end of the financial year ended March 31, 2023 and the date of this Report.

DIVIDEND

In view of loss incurred during the year, your Directors have not recommended any dividend for the year under review.

DIVIDEND DISTRIBUTION POLICY

In compliance with the requirements of Regulation 43A of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (hereinafter referred to as ‘Listing Regulations), the Board of Directors of the Company has, formulated a Dividend Distribution Policy, which is available on the website of the Company and may be accessed through the web link https://www.sparc.life/policies-and-codes.

ANNUAL RETURN

The Annual Return as required under subsection (3) of Section 92 of the Companies Act, 2013 (hereinafter referred to as ‘the Act) in form MGT-7 is made available on the website of the Company and can be accessed through the web link https://www.sparc. life/announcements-disclosures

SUBSIDIARY/ JOINT VENTURE/ ASSOCIATE COMPANY

The Company does not have any subsidiary, joint venture or associate company. On January 06, 2023 the Company had allotted 4,91,92,121 equity shares against the conversion of equal number of warrants issued on preferential basis. Consequent to the said allotment, Shanghvi Finance Private Limited (SFPL) has ceased to be the Companys Holding Company effective from the said date as its percentage shareholding along with its subsidiaries in the Company has reduced from 52.07% to 44.18%. The number of shares held by SFPL and its subsidiaries in the Company remain unchanged.

PREFERENTIAL ISSUE

Pursuant to the approval by the Board of Directors at its meeting held on May 12, 2021 and approval by the members of the Company at their Extra-Ordinary General Meeting held on June 08, 2021 (‘EGM), the Company, on July 08, 2021, has allotted 6,24,74,082 warrants, each convertible into one equity share, on preferential basis at an issue price of Rs. 178/- each, upon receipt of 25% of the issue price (i.e. Rs. 44.50 per warrant) as warrant subscription money. Balance 75% of the issue price (i.e. Rs. 133.50 per warrant) was payable within 18 months from the allotment date, at the time of exercising the option to apply for fully paid–up equity shares of Re. 1/- each of the Company, against each warrant held by the warrant holder ("Preferential Issue").

The Company has allotted fully paid up equity shares against conversion of equal no. of warrants upon receipt from the warrant holder(s), a written notice and balance 75% (at the rate of Rs. 133.50/- per warrant) payment for the warrants so opted by them, on various dates as detailed in the table herein below:

Financial Year Date of Allotment No. of equity shares allotted
2021-22 August 25, 2021 14,04,494
2021-22 March 21, 2022 84,26,966
2022-23 November 08, 2022 34,50,501
2022-23 January 06, 2023 4,91,92,121
Total 624,74,082

The details of utilization of funds so received under the Preferential Issue is given hereunder:

Particulars Rs. In Lakhs
Funds available for utilization as on April 01, 2022 (a) 1,260.49
Funds received during the year ended March 31, 2023 (b) 70,277.90
Funds available for utilization as on March 31, 2023 (c) = [(a) + (b)] 71,538.39
Funds utilized during the year ended March 31, 2023 (d) 16,847.19
Funds available for utilization as on March 31, 2023 (e) = [(c) - (d)] 54,691.21

There have been no deviation or variation in the use of proceeds from the objects stated in the Offer Document (Private Placement Offer cum Application Letter dated June 08, 2021) or explanatory statement to the EGM notice dated May 12, 2021.

SHARE CAPITAL

The paid-up share capital of the Company at the beginning of the financial year was Rs. 27,18,78,966/-. During the year the Company has allotted 5,26,42,622 equity shares of Re. 1/- each towards conversion of warrants issued on preferential basis. As a result, the paid-up capital of the Company as at the end of the financial year stood increased to Rs. 32,45,21,588/-.

DIRECTORS AND KEY MANAGERIAL PERSONNEL

Dr. Rajamannar Thennati (DIN: 01415412), retires by rotation at the ensuing 18th Annual General Meeting of the Company and being eligible has offered himself for re-appointment. The Board of Directors, on the recommendation of the Nomination and Remuneration Committee, has recommended his reappointment for the approval of the members at the ensuing 18th Annual General Meeting of the Company.

The members at their 16th Annual General Meeting of the Company held on September 29, 2021 has approved (i) the appointment of Mr. Anil Raghavan as the Manager and Whole-time Key Managerial Personnel of the Company, designated as Chief Executive O_icer (CEO) for a term of 5 (five) years effective from May 25, 2021 up to May 24, 2026; and (ii) maximum remuneration to be paid to Mr. Anil Raghavan for a period of 3 (three) years commencing from May 25, 2021 up to May 24, 2024.

On the recommendation of the Nomination and Remuneration Committee, the Board at its meeting held on May 22, 2023, has considered, approved and recommended to the members for their approval, a maximum remuneration of Rs. 8,00,00,000 p.a. (or its equivalent, in any other currency) to be paid to Mr. Anil Raghavan for a further period of 2 (two) years commencing from May 25, 2024 up to May 24, 2026, that is, up to the expiry of his present term of O_ice.

DECLARATION BY INDEPENDENT DIRECTORS

The Company has received declarations from all the Independent Directors of the Company confirming that they meet the criteria of independence as prescribed under the Act and the Listing Regulations. Further, in terms of Section 150 of the Act read with Rule 6 of the Companies (Appointment and Qualification of Directors) Rules, 2014, the Independent Directors have confirmed that they have included their names in the Independent Directors Databank maintained with the Indian Institute of Corporate Affairs (IICA).

In the opinion of the Board, the Independent Directors of the Company fulfil the conditions specified under the Act and Listing Regulations and are independent of the management.

POLICY ON DIRECTORS APPOINTMENT AND REMUNERATION

For the purpose of selection of any Director, the Nomination and Remuneration Committee identifies persons of integrity who possess relevant expertise, experience and leadership qualities required for the position and also takes into consideration recommendation received, if any, from a board member. The Committee also ensures that the incumbent fulfils such other criteria with regard to age and other qualifications as laid down under the Act or other applicable laws.

The Board, on the recommendation of the Nomination and Remuneration Committee, has framed a policy for selection, appointment and remuneration of directors. The summary of Remuneration Policy is disclosed in the Corporate Governance Report, which forms a part of this Report.

The Policy as approved by the Board is available on the website of the Company and can be accessed through the web link https://www.sparc.life/policies-and-codes.

FAMILIARIZATION PROGRAMME FOR THE INDEPENDENT DIRECTORS

The details of familiarization programme conducted for Independent Directors are disclosed in the Corporate Governance Report, which forms part of this Report.

MEETINGS OF THE BOARD

The Board of Directors of the Company have met five times during the year under review. The dates of the Board meetings and particulars of attendance of the Directors at the said meetings are detailed in the Corporate Governance Report which forms a part of this Report. The intervening gaps between the meetings were within the period prescribed under the Act and Listing Regulations.

EVALUATION OF PERFORMANCE OF THE BOARD, ITS COMMITTEES AND INDIVIDUAL DIRECTORS

In view of SEBI notification no. SEBI/HO/CFD/CMD/ CIR/P/2017/004 dated January 05, 2017 on ‘Guidance Note on Board Evaluation, on the recommendation of the Nomination and Remuneration Committee, the Board of Directors has adopted a set of criteria, aligned with the recommendations of SEBI, for evaluation of performance of the board, its committees and individual directors.

The Board of Directors have carried out an annual evaluation of its own performance, its various committees and individual directors pursuant to the provisions of the Act and the Listing Regulations.

The performance of the Board was evaluated by the Board after seeking inputs from all the directors on the basis of various criteria such as competency and experience of the Directors, meetings of the Board, roles and responsibilities of the Board, professional development, etc.

The performance of each committee of the board was evaluated by the board after seeking inputs from the committee members on the basis of criteria such as mandate and composition, effectiveness of the Committee, independence of the Committee from the Board, contribution to decisions of the Board etc.

The Board reviewed the performance of the individual Non-Independent Directors on the basis of criteria such as qualifications, experience, knowledge & competency, fulfilment of functions, ability to function as a team, initiative, availability and attendance, commitment (as a Director) and contribution. The performance of each individual Independent Director was reviewed, based on the additional criteria of independence and independent views & judgment. Similarly, the performance of the Chairman was evaluated based on additional criteria such as effectiveness of leadership and ability to steer the meetings, impartiality, commitment (as Chairman) and ability to keep shareholders interests in mind.

In a separate meeting of Independent Directors, performance of non-independent directors, performance of the Chairman and performance of the Board as a whole was evaluated.

Performance evaluation of the Board, its various Committees and individual Directors including Independent Directors and Chairman was found satisfactory. The Board also assessed the fulfillment of the independence criteria as specified in Listing Regulations, by the Independent Directors of the Company and their independence from the management.

HUMAN RESOURCES

The Company is a close-knit family of 407 dedicated individuals – 85% of which are highly qualified and experienced scientists in various fields. Last year, the Company has expanded its footprints into large molecules, and hired some top-quality scientific talent, including the ones from large molecule background.

The Company also invested in international conferences and scientific collaborations for continuous knowledge up-gradation. The Company has also strengthened its learning & development initiatives and initiated the succession planning for its critical positions. Your Directors recognize the teams valuable support during the year and place on record their appreciation for the Team SPARC.

Information as per Section 197(12) of the Act, read with rule 5(1) of the Companies (Appointment and Remuneration of

Managerial Personnel) Rules 2014 is annexed as Annexure 1 to this Report. Further, pursuant to section 136 (1) of the Act, the Annual Report and the accounts are being sent to the members excluding the information under rule 5(2) & 5(3) of the aforesaid rules. In terms of section 136 of the Act, the said information is available for inspection at the Registered O_ice of the Company. Any shareholder interested in obtaining a copy of the same may write to the Company Secretary of the Company either at the Registered/ Corporate O_ice address or by email to secretarial@ sparcmail.com

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

The Company strongly believes in gender neutrality and also encourages hiring from all genders. It becomes more & more important for us to focus on providing a safe & harassment-free workplace for all employees through various interventions and practices. This cannot be achieved without the Company making sure that the environment at SPARC is free from discrimination and harassment, including sexual harassment.

During the financial year ended March 31, 2023, there was no complaint received for sexual harassment. Also, there are no complains pending as at the end of the financial year.

The Company has complied with provisions relating to the constitution of Internal Complaints Committee under the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013.

AUDITORS

Statutory Auditors

The shareholders at their 17th Annual General Meeting of the Company had approved the appointment of S R B C & Co. LLP, Chartered Accountants, (Firms Regn. No. 324982E/E300003), as the Statutory Auditors of the Company for a second term of five years, to hold office up to the conclusion of the 22nd Annual General Meeting of the Company.

The Auditors Report for the financial year ended March 31, 2023, issued by the Statutory Auditors, does not contain any qualification, reservation, adverse remark or disclaimer and no frauds were reported by the Auditors to the Audit Committee or the Board, in terms of section 143(12) of the Act.

Secretarial Auditors

Pursuant to the provisions of Section 204 of the Act, and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Board had appointed KJB & Co. LLP, Company Secretaries to undertake the Secretarial Audit of the Company for the financial year 2022-23.

The Secretarial Audit Report in the Form No. MR-3 for the year ended March 31, 2023 is annexed as Annexure 2. The Secretarial Audit Report does not contain any qualification, reservation, adverse remark or disclaimer and no frauds were reported by the Auditors to the Audit Committee or the Board, in terms of section 143(12) of the Act.

The Annual Secretarial Compliance Report for the financial year 2022-23 is being obtained from the Secretarial Auditor of the Company and the said Report will be submitted to the stock exchanges within the time prescribed under the Listing Regulations.

SECRETARIAL STANDARDS

The Company has complied with the applicable Secretarial Standards as amended from time to time.

LOANS, GUARANTEES & INVESTMENTS

The particulars of loans, guarantees and investments have been disclosed in the financial statements.

RELATED PARTY TRANSACTIONS

All contracts/arrangements entered by the Company during the year with the related parties were in the ‘Ordinary Course of Business and on an ‘Arms Length Basis.

As required under Section 134(3)(h) of the Act, details of transactions entered with related parties under the Act exceeding ten percent of the annual turnover as per the last audited financial statements are given in Form AOC-2 provided as Annexure 3.

The policy on Related Party Transactions as approved by the Board is available on the website of the Company and may be accessed through the web link https://www.sparc.life/policies-and-codes.

COMMITTEES OF THE BOARD

As on March 31, 2023, the Board has 7(seven) Committees, namely, Audit Committee, Stakeholders Relationship Committee, Nomination and Remuneration Committee, Corporate Social Responsibility Committee, Risk Management Committee, Fund Management Committee, and Securities Allotment Committee. The details pertaining to the meetings and composition of the Committees of the Board are included in the Corporate Governance Report, which forms a part of this Report.

During the year under review, all recommendations made by the Committees (including Audit Committee) were accepted by the Board.

RISK MANAGEMENT

The Board of Directors has developed and implemented a comprehensive Risk Management Policy, which lays down the procedure to identify, monitor and mitigate the key elements of risks that threaten the existence of the Company. Further, in compliance with the requirements of Regulation 21 of the Listing Regulations as amended from time to time, the Board of Directors of the Company has constituted a Risk Management Committee to oversee risk mitigation measures in the Company. The details of composition of Risk Management Committee are included in the Corporate Governance Report which forms a part of this Report.

The Risk Management Committee reviews, at regular intervals, the status of key risks and steps taken by the Company, to mitigate such risks.

IT Security Incident

In March 2023, the Company experienced an IT Security Incident that impacted some of the Companys IT assets and operations. Based on the Companys investigation, the Company currently believes that the incidents effects on its IT system include a breach of certain file systems and the theft of Company data and personal data. As part of the Companys containment and remediation efforts, the Company has taken various measures to strengthen its cybersecurity infrastructure to safeguard against such risks in the future. The details on the IT Security Incident are also provided in Note 49 of the financial statements.

INTERNAL FINANCIAL CONTROLS

The Company has in place a well-defined organizational structure and adequate internal controls for e_icient operations which is cognizant of applicable laws and regulations, particularly those related to protection of intellectual properties, resources, assets, and the accurate reporting of financial transactions in the financial statements. The Company upgrades these systems on continuous basis.

CORPORATE SOCIAL RESPONSIBILITY

In compliance with the requirements of Section 135 of the Act read with the Companies (Corporate Social Responsibility Policy) Rules, 2014, the Board of Directors has constituted a Corporate Social Responsibility Committee. The details of membership of the Committee and the meeting(s) of the Committee held during the year are given in the Corporate Governance Report which forms a part of this Report.

The CSR Policy of the Company as approved by the Board on the recommendation of the Corporate Social Responsibility Committee is available on the website of the Company and may be accessed through the web link https://www.sparc.life/ policies-and-codes

Since the Company has incurred losses during the three immediately preceding financial years, the Company was not required to spend on CSR activities during the financial year ended March 31, 2023. However, in compliance with the requirements of Companies (Corporate Social Responsibility Policy) Rules, 2014, the Annual Report on ‘CSR Activities as per prescribed format, is annexed as Annexure 4.

PUBLIC DEPOSITS

The Company has not accepted any public deposit during the year, under the provisions of the Act and the rules framed thereunder.

CREDIT RATING

Acuite Ratings & Research Ltd. has assigned the rating of ACUITE AA/Stable for the long term bank facilities of the Company.

MANAGEMENT DISCUSSION AND ANALYSIS

The Management Discussion and Analysis on the operations of the Company, as prescribed under Schedule V read with Regulation 34(3) of the Listing Regulations, is provided in a separate section and forms part of this Report.

CORPORATE GOVERNANCE REPORT

Report on the Corporate Governance along with the certificate from the Auditors of your Company confirming compliance of the conditions of Corporate Governance as stipulated in Schedule V read with Regulation 34(3), of the Listing Regulations, are provided in a separate section and forms part of this Report.

BUSINESS RESPONSIBILITY AND SUSTAINABILITY REPORT

The Business Responsibility and Sustainability Report of the Company for the year ended March 31, 2023, in the prescribed format as required under Regulation 34(2)(f) of the Listing Regulations, forms part of this Report and is also available on the website of the Company and may be accessed through the web link https://www.sparc.life/announcements-disclosures.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO

The information on conservation of energy, technology absorption and foreign exchange earnings and outgo as stipulated under Section 134(3)(m) of the Act read with Rule 8 of the Companies (Accounts) Rules, 2014, is annexed as Annexure 5.

SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS OR TRIBUNALS

No significant or material orders were passed by the Regulators or Courts or Tribunals during the year which may impact the going concern status of the Companys future operations.

WHISTLE BLOWER POLICY/ VIGIL MECHANISM

The Company believes in ensuring the highest level of honesty, integrity and ethical behavior across all its operations. Accordingly, the Company has devised a Whistle Blower Policy and has established the necessary vigil mechanism for its Directors and employees in accordance with Section 177(9) of the Act and Regulation 22 of the Listing Regulations, to enable them to report suspected or actual occurrence of illegal, unethical or inappropriate events. The Policy is available on the website of the Company and may be accessed through the web link https:// www.sparc.life/policies-and-codes

DIRECTORS RESPONSIBILITY STATEMENT

Pursuant to the requirements under section 134(3)(c) read with section 134(5) of the Act, with respect to Directors Responsibility Statement, it is hereby confirmed that:

a) in the preparation of the annual accounts for the financial year ended March 31, 2023, the applicable accounting standards have been followed along with proper explanation relating to material departures;

b) the Directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent, so as to give a true and fair view of the state of affairs of the Company as at March 31, 2023 and of the loss of the Company for the year ended on that date; c) the Directors have taken proper and su_icient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

d) the Directors have prepared the annual accounts on a going concern basis; and

e) the Directors have laid down internal financial controls to be followed by the Company and such internal financial controls are adequate and operating effectively.

f) the Directors have devised proper systems to ensure compliance with the provisions of all applicable laws and such systems are adequate and operating effectively.

ACKNOWLEDGEMENTS

Your Directors wish to thank all stakeholders, business partners, Companys bankers, medical professionals and business associates for their continued support and valuable co-operation. The Directors also express their gratitude to investors for the faith that they continue to repose in the Company.

For and on behalf of the Board of Directors
Dilip S. Shanghvi
Place: Mumbai Chairman
Date: May 22, 2023 (DIN: 00005588)