Suven Life Sciences Ltd Directors Report.

To the Members of Suven Life Sciences Limited

Your Companys Board of Directors has pleasure in presenting this 29th Annual Report together with Ind AS compliant Audited Financial Statements of the Company for the financial year ended 31st March, 2018.

(Rs. in lakhs)

Particulars

Standalone

Consolidated

2017-18 2016-17 2017-18 2016-17
Revenue from operations 62,525.84 54,447.78 62,525.84 54,447.78
Operating expenditure 39,234.24 37,913.45 42,706.55 41,540.33
Depreciation and amortisation 2,130.99 2,141.31 2,130.99 2,141.31
Operating profit 21,160.61 14,393.02 17,688.30 10,766.14
Finance cost 461.11 566.58 462.78 568.34
Other income 2,327.07 2,109.25 2,327.07 2,109.25
Profit before Tax 23,026.57 15,935.69 19,552.59 12,307.05
Tax expenses 7,183.84 3,588.32 7,183.84 3,588.32
Profit for the year 15,842.73 12,347.37 12,368.75 8,718.73
Other Comprehensive Income
Items that will not be reclassified to profit or loss
(42.33) (14.90) (42.33) (14.90)
Income tax relating to items that will not be reclassified to
profit or loss 14.65 5.15 14.65 5.16
Total Other Comprehensive Income (27.68) (9.75) (27.68) (9.74)
Total Comprehensive Income 15,815.05 12,337.62 12,341.07 8,708.99
Retained earnings - opening balance 39,531.80 29,926.12 33,080.04 27,102.99
Add:
Profit for the year 15,815.05 12,337.62 12,341.07 8,708.99
Less:
Dividend including dividend tax (2,297.99) (1,531.94) (2,297.99) (1,531.94)
Transfer to General Reserve (1,500.00) (1,200.00) (1,500.00) (1,200.00)
Retained earnings - closing balance 51,548.85 39,531.80 41,623.12 33,080.04

REVIEW OF OPERATIONS

Your Company has performed well during the year under review and registered standalone revenue from operations of Rs 62,526 lakhs as against Rs 54,448 lakhs in the previous year. Profit after Tax (PAT) of the Company has gone up by 28% to Rs 15,815 lakhs from Rs 12,338 lakhs in the previous financial year. The Earnings per Share (EPS) of your Company has improved to Rs 12.43 in fiscal 2017-18 per share from the previous year EPS of Rs 9.69 in fiscal 2016-17 per share.

Your Companys consolidated revenue from operations for the year 2017-2018 remained the same as that of standalone revenue. The consolidated profit after tax decreased to Rs 12,341 lakhs mainly due to clinical development expenditure incurred by Suven Neurosciences, Inc., (formerly Suven Inc.,) on SUVN-502.

EXPORTS

The exports of the Company continue to be a major chunk of revenue accounting for a volume of Rs 57,651 lakhs, representing 92% of the total revenue of Rs. 62,526 lakhs during the year under review.

DIVIDEND

Your Board of Directors has declared an interim dividend of Rs. 1.50 per equity share during January, 2018. The total cash outflow on account of dividends including dividend tax paid is Rs. 2,298 lakhs. The Company has paid the interim dividend to the shareholders who are on the Register of Members of the Company as on the Record Date 07th February, 2018 and notified to the stock exchanges in terms of SEBI (LODR) Regulations, 2015. Keeping the funding requirements for meeting the expansion plans in view, the Board recommends that interim dividend already paid may please be treated as the final dividend for the year 2017-2018.

TRANSFER TO RESERVES

The Company transferred Rs. 1,500 lakhs to the general reserve during the current financial year.

RESEARCH AND DEVELOPMENT

During the year your company has spent Rs 6,390 lakhs on innovative R&D in CNS therapies accounting for 10% on sales. Suven is a biopharmaceutical company focused on discovering, developing and commercialising novel pharmaceutical products, which are first in class or best in class CNS therapies through the use of GPCR targets. Suven has 4 clinical stage compounds, a Phase 2 undergoing SUVN-502, Phase 2 ready SUVN-G3031, Phase 1 completed SUVN-D4010 and Phase 1 commenced SUVN-911.

In addition to these clinical compounds the Company has nine (9) internally-discovered therapeutic drug candidates currently in various stages of pre-clinical development targeting conditions such as ADHD, dementia, depression, Huntingtons disease, Parkinsons disease and pain.

SHARE CAPITAL

The paid up Equity Share Capital as on March 31, 2018 was Rs.1272.82 lakhs. During the year under review, the Company has not issued any shares with differential voting rights nor granted stock options or sweat equity shares.

EXTRACT OF ANNUAL RETURN

Pursuant to sub-section 3(a) of Section 134 and sub-section (3) of Section 92 of the Companies Act 2013, read with Rule 12 of the Companies (Management and Administration) Rules, 2014 the extracts of the Annual Return as at March 31, 2018 forms part of this report as "Annexure – A".

NUMBER OF MEETINGS OF THE BOARD AND AUDIT COMMITTEE

During the year under review four Board Meetings were convened and held and four Audit Committee Meetings were convened and held. The details of Board meetings and Audit Committee meetings are presented in the Corporate Governance report, which forms a part of this Annual Report.

The Audit Committee composed of all independent directors. Shri D. G. Prasad is the Chairman of the Audit Committee and Dr. M. R. Naidu and Shri M. Gopalakrishna are members of the Audit Committee. The time gap between the said meetings was within the period prescribed under the provisions of the Companies Act, 2013 and the SEBI guidelines thereof.

DIRECTORS RESPONSIBILITY STATEMENT

Your Directors state that: i) The applicable accounting standards have been followed in the preparation of the Annual Accounts. ii) Such Accounting policies have been selected and applied consistently and judgments and estimates made when required 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 of the Company for that period. iii) Proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities. iv) The Directors have prepared the Annual Accounts on a going concern basis. v) Proper internal financial controls were in place to be followed by the Company and that the financial controls were adequate and were operating effectively. vi) Proper systems devised to ensure compliance with the provisions of all applicable laws and that such systems are adequate and operating effectively.

REMUNERATION POLICY

The Board has, on the recommendation of the Nomination

& Remuneration Committee framed a policy for selection and appointment of Directors, Senior Management and their remuneration. The Remuneration Policy is stated in the Corporate Governance Report.

DIVIDEND POLICY

The Board has adopted a suitable Policy for Dividend Distribution as per the requirements of SEBI Guidelines. The policy is stated in the Annual Report and has been uploaded on the Companys website and can be accessed at http://www.suven.com/pdf/ Policy-for-Dividend-Distribution.pdf

PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS

The Company has invested a sum of Rs 10,223 lakhs in Suven Neurosciences, Inc., (formerly Suven Inc.,) a wholly owned subsidiary as at 31st March, 2018 for its business purpose. Apart from the investment, the Company did not give any Loans, or provided Guarantees or any security during the year under the provisions of Section 186 of the Companies Act, 2013.

SUBSIDIARY

The Company has one international wholly owned subsidiary company by name Suven Neurosciences, Inc., (formerly Suven Inc.,) in USA. The consolidated financial statements of the Company prepared in accordance with Indian Accounting Standards as specified in the Companies (Indian Accounting Standards) Rules, 2015, form part of the annual report.

Pursuant to the provisions of Section 129(3) of the Companies Act, 2013, a statement containing salient features of financial statements of subsidiary in Form AOC-1 forms part of Boards Report as "Annexure B". The separate audited financial statements in respect of the subsidiary company shall be kept open for inspection at the Registered Office of the Company during working hours for a period of 21 days before the date of the Annual General Meeting. Your Company will also make available these documents upon request by any Member of the Company interested in obtaining the same. The separate audited financial statements in respect of the subsidiary company is also available on the website of your Company at http://www.suven.com/ annual-reports.html

RELATED PARTY TRANSACTIONS

The Particulars of contracts or arrangements with related parties referred to in sub-section (1) of section 188 in the prescribed Form AOC-2 pursuant to clause (h) of sub-section (3) of section 134 of the Act and Rule 8(2) of the Companies (Accounts) Rules, 2014, forms part of this report as "Annexure – C".

The Board has approved a policy for related party transactions which has been uploaded on the Companys website.

MATERIAL CHANGES AND COMMITMENT AFFECTING FINANCIAL POSITION OF THE COMPANY

There are no material changes and commitments, affecting the financial position of the Company which has occurred between the end of the financial year of the Company i.e. March 31, 2018 and the date of the Directors report i.e. 15th May, 2018.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORP3 TION, FOREIGN EXCHANGE EARNINGS AND OUTGO

The information on conservation of energy, technology absorption, foreign exchange earnings and outgo stipulated under Section 134(3)(m) of the Companies Act, 2013 read with Rule, 8 of the Companies (Accounts) Rules, 2014, forms part of this report as "Annexure – D".

RISK MANAGEMENT POLICY

The Board formulated a suitable risk policy to take care of unique business models of your Company: Contract Technical Services (CTS) and CRAMS. Suven is an IP creating and protecting company, strictly adheres to and harmonise with the global patent regime. To ensure the security and confidentiality of client data access to client data, is restricted to the senior most team leader working on the respective project and observes strict standards of confidentiality by entering into an internal CDA. We believe that strict compliances to the non-disclosure requirements insulate our company against risks relating to IPR infringement claims of our clients. In addition to these practices, your company regularly conducts safety and preventive audits in all plants and ensures that necessary safeguards are in place to protect the work force and assets against all perils with appropriate insurance policies.

CORPORATE SOCIAL RESPONSIBILITY

In compliance with Section 135 of the Companies Act, 2013 read with the Companies (Corporate Social Responsibility Policy) Rules 2014, the Company has established Corporate Social Responsibility (CSR) Committee composed of Shri M. Gopalakrishna as Chairperson, Shri D. G. Prasad, Prof. Seyed E. Hasnain, Shri Venkateswarlu Jasti and Smt. Sudharani Jasti as members. The committee is responsible for formulating and monitoring the CSR policy of the Company. Annual Report on CSR Activities forms part of this Report as "Annexure – E".

PERFORMANCE EVALUATION OF THE BOARD

Pursuant to the provisions of the Companies Act, 2013 and as per the SEBI (LODR) Regulations, 2015, the Board has carried out an annual performance evaluation of its own performance, the directors individually as well as the evaluation of the working of its Committees. The manner in which the evaluation has been carried out has been explained in the Corporate Governance Report.

APPOINTMENTS/ RESIGNATIONS OF DIRECTORS OR KEY MANAGERIAL PERSONNEL

The Company did not appoint any directors or Key Managerial Personnel during the year under review. All Independent Directors have given declarations confirming that they meet the criteria of independence as laid down under Section 149(6) of the Companies Act, 2013 and SEBI (LODR) Regulations, 2015. None of the Directors or Key Managerial Personnel has resigned during the year under review.

CHANGES IN DIRECTORS

Dr. K.V. Raghavan, Independent Director, passed away on 12th October, 2017. Your Directors deeply mourn the sudden demise of Dr. Raghavan and place on record their appreciation for the valuable contribution made by Dr. Raghavan during his tenure as Director on the Board of your Company.

DIRECTORS RETIRING BY ROTATION

In accordance with the provisions of the Companies Act, 2013, Shri Venkateswarlu Jasti, Chairman & CEO retires by rotation at the ensuing Annual General Meeting and being eligible, offers himself for re-appointment.

The brief profile(s) of the director(s) seeking appointment/ re-appointment at the ensuing Annual General Meeting are presented in the Annual Report.

PUBLIC DEPOSITS

The Company has not accepted any public deposits and as such, no amount on account of principal or interest on public deposits was outstanding as on the date of the balance sheet.

INTERNAL FINANCIAL CONTROL SYSTEMS AND THEIR ADEQUACY

Your Company has laid down set of standards which enables to implement internal financial control across the organisation and ensure that the same are adequate and operating effectively (1) to provide reasonable assurances that: transactions are executed in conformity with generally accepted accounting principles/ standards or any other criteria applicable to such statements, (2) to maintain accountability for assets; access to assets is permitted only in accordance with managements general or specific authorisation and the maintenance of records that are in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the company; and (3) Provide reasonable assurance regarding prevention or timely detection of unauthorised acquisition, use or disposition of the assets that could have a material effect on the financial statements.

VIGIL MECHANISM

The Company has put in place Whistle Blower Policy a vigil mechanism to deal with instance of fraud and mismanagement, if any. The details of the Whistle Blower Policy is explained in the Corporate Governance Report and also posted on the website of the Company

PARTICULARS OF EMPLOYEES AND REMUNERATION

The information required under Section 197(12) of the Act read with Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, forms part of this report as "Annexure – F".

INVESTOR SERVICE

Your Companys share registry operations (physical as well as electronic form of holdings) will continue with Karvy Computershare Private Limited, Registrars and Transfer Agents. They can be contacted at Karvy Selenium, Tower B, Plot 31-32, Gachibowli, Financial District, Nanakramguda, Hyderabad - 500 032, Phone No. 040-6716 1565 Fax No. 040 -2300 1153 for any query relating to Shares.

The shares of the Company are listed on National Stock Exchange of India Limited (NSE) and BSE Limited (BSE)

CORPORATE GOVERNANCE

A detailed Report on Corporate Governance prepared in substantial compliance with the provisions of SEBI (LODR) Regulations, 2015 with the Stock Exchanges together with the Auditors Certificate regarding the compliance of conditions of corporate governance, is presented in a separate section forming part of the Annual Report.

MANAGEMENTS DISCUSSION AND ANALYSIS

Managements Discussion and Analysis Report for the year under review, as stipulated under Regulation 34 of the SEBI (LODR) Regulations, 2015, is presented in a separate section forming part of the Annual Report.

AUDITORS

STATUTORY AUDITORS

Pursuant to the provisions of section 139 of the Companies Act, 2013 and the Rules framed thereunder the Company in its Annual General Meeting (AGM) held on 14th August 2017 has appointed M/s. TUKARAM & Co., Chartered Accountants (Firm Registration No. 004436S), as statutory auditors of the Company, from the conclusion of the 28th Annual General Meeting till the conclusion of the 33rd Annual General Meeting to be held in the year 2022. The Companies (Amendment) Act, 2017 dispensed the ratification of auditors appointment at every Annual General Meeting. Accordingly the Ordinary Business Agenda Item relating to ratification of statutory auditors appointment is not placed in the AGM. The Auditors Report does not contain any qualifications.

SECRETARIAL AUDITORS

Pursuant to the provisions of Section 204 of the Companies Act, 2013 and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Company has appointed M/s. dvmgopal & associates, a Company Secretary in Practice to undertake the Secretarial Audit of the Company. The Report of the Secretarial Audit Report forms part of this report as "Annexure – G". The Secretarial Audit Report does not contain any qualifications.

COST AUDIT

In terms of Cost (Records and Audit) Amendment Rules, 2014 dated 31st December 2014 issued by the Central Government, the requirement for Cost Audit is not applicable to the Company based on the export turnover criteria prescribed under Cost Audit Rules.

BUSINESS RESPONSIBILITY REPORT

A detailed Business Responsibility Report (BRR) is prepared. As a green initiative the BRR is placed on website of your company and can be accessed at web link at http://www.suven.com/annual-reports.html

EMPLOYEES STOCK OPTION SCHEMES

During the year, there has been no material change in the ‘Suven Employees Stock Option Scheme, 2004 (referred as ‘the scheme). The scheme is in compliance with the SEBI (Share Based Employee Benefits) Regulations, 2014. The details are available on the companys web link at: http://suven.com/pdf/ESOP-Annexure_ tofithe_Boards_Report.pdf

TRANSFER OF UNPAID AND UNCLAIMED AMOUNTS TO INVESTOR EDUCATION AND PROTECTION FUND 3IEPF3

Pursuant to the provisions of the Companies Act, 2013, read with IEPF Authority (Accounting, Audit, Transfer and Refund) Rules, 2016, as amended, declared dividends which remained unpaid or unclaimed for a period of seven years have been transferred by the company to the IEPF, which has been established by the central government.

The above referred rules now mandate transfer of dividends lying unpaid and unclaimed for a period of seven years as well as the underlying equity shares to IEPF. The company shall accordingly follow the prescribed procedures in this regard.

GENERAL

During the FY2018, there is no change in the nature of business of the company or of its wholly owned subsidiary (WoS) Suven Neurosciences, Inc., (formerly Suven Inc.,) in USA. There are no companies which have become or ceased to be its subsidiaries, joint ventures or associate companies during the year.

The Company has complied with the provisions of all applicable Secretarial Standards issued by the Institute of Company Secretaries of India during the year under review.

There are no significant material orders passed by the Regulators/ Courts which would impact the going concern status of the Company and its future operations.

Your Directors further state that during the year under review, there were no cases filed pursuant to the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013.

ACKNOWLEDGEMENTS

Your Directors wish to place on record their gratitude to Shareholders for the confidence reposed by them and thank all the shareholders, customers, dealers, suppliers and other business associates for their contribution to your Companys growth. The Directors also wish to place on record their appreciation of the valuable services rendered by the executives, staff and workers of the Company.

Your Directors also thank the Central Government and State Government, the Financial Institutions and Banks for their support during the year and we look forward to its continuance.

For and on behalf of the Board of Directors
Venkateswarlu Jasti
Place: Hyderabad, Chairman & CEO
Date: 15 May, 2018 DIN: 00278028