Unichem Laboratories Ltd Directors Report

Dear Members,

Your Directors have the pleasure of presenting the audited accounts of your Company for the financial year ended 31st March, 2024.

Standalone and Consolidated Financial Results

( in cr.)

	Standalone		Consolidated
Particulars	For the Year ended 31st March, 2024	For the Year ended 31st March, 2023	For the Year ended 31st March, 2024	For the Year ended 31st March, 2023
Revenue from operations	1,442.17	1,072.43	1,704.89	1,343.02
Other Income	30.39	41.85	31.60	38.52
Total Income	1,472.56	1,114.28	1,736.49	1,381.54
Profit/(loss) before tax after exceptional items	(92.18)	(279.09)	(61.67)	(176.36)
Current tax	-	-	7.94	11.06
Deferred tax	-	20.61	0.86	15.35
Short / (Excess) provision of tax for earlier years	-	-	-	(0.54)
Profit (Loss) for the year	(92.18)	(299.70)	(70.47)	(202.23)
Other Comprehensive Income	(0.53)	38.73	(5.47)	45.92
Total Comprehensive Income	(92.71)	(260.98)	(75.94)	(156.31)

The audited standalone and consolidated financial statements are prepared in accordance with the Indian Accounting Standards (Ind-AS) as prescribed under Section 133 of the Companies Act, 2013 (“Act”) read with Rule 3 of the Companies (Indian Accounting Standards) Rules, 2015 and Companies (Indian Accounting Standards) Amendment Rules, 2016.

In accordance with the provisions of Section 129(3) of the Act, the audited consolidated financial statements are also provided in the Annual Report.

The revenue from operation on a consolidation basis for the financial year under review was 1,704.89 cr. as against 1,343.02 cr. for the previous financial year, registering an increase of 26.9%. The profit before tax excluding exceptional items improved to (4.05) cr. for the financial year under review as against (137.80) cr. for the previous financial year. During the year, the Company on the basis of abundant precaution had made a full provision of 125.62 cr. towards EU Commission fine which is disclosed under exceptional items.

The Company continues to remain focussed on exports, the share of exports in the total revenue from operations is 94.8%.

Change in Control and Management

During the year, Ipca Laboratories Limited acquired 2,35,01,440 fully paid-up equity shares of 2/- each, constituting 33.38% of the fully diluted voting share capital of the Company from Dr. Prakash A. Mody, Promoter & Director.

On 21st September, 2023, Ipca Laboratories Limited further acquired an aggregate 1,35,79,571 equity shares at 440 per equity share pursuant to the open offer made by Ipca Laboratories Limited to the public shareholders of the Company in terms of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011.

Consequently, the aggregate holding of Ipca Laboratories Limited in the Company as on 31st March, 2024 stands at 3,70,81,011 equity shares of the Company representing 52.67% of the total paid-up equity share capital of the Company. Thus, Ipca Laboratories Limited acquired majority control over the Company and accordingly your Company is now a subsidiary of Ipca Laboratories Limited.

Review of Subsidiaries and Associates

Your Company has six subsidiaries and one associate company. As required, the financial data of the subsidiaries and associate company is furnished in the prescribed Form AOC-1 as an annexure to the consolidated financial statements.

Please refer to detailed note nos. 6.1, 38 & 42 of the standalone financials for impairment of investments in its associate company and Wholly Owned Subsidiaries.

Audited Financial Statements of subsidiaries are available on Companys website at www.unichemlabs.com and the same are also available for inspection at the Registered Office of the Company during business hours as stipulated under Section 136 of the Act. The same will be made available to interested members upon request.

Unichem Pharmaceuticals (USA) Inc., is a material subsidiary in accordance with the provisions of the SEBI (Listing Obligations And Disclosure Requirements) Regulations, 2015 (“Listing Regulations”) read with the Companys Policy on Material Subsidiaries which is available at https://www.unichemlabs.com/policy-on-material-subsidiaries.php.

Dividend

The Board of Directors has not recommended any dividend on the Equity Shares of the Company. Pursuant to the Listing Regulations, the Company has formulated a Dividend Distribution Policy and is available on the Companys website https://www.unichemlabs.com/dividend-distribution-policy.php

Share Capital

There was no change in authorised or paid-up share capital of the Company during the year under review.

Employees Stock Options Scheme 2018

Unichem Employee Stock Option Scheme 2018 (“Scheme”) is in place which is administered by the Nomination and Remuneration Committee (“NRC”). No alterations were made in the scheme during the year. During the year under review, 5,00,000 options were granted to an employee of a subsidiary company.

Disclosure of details of the Scheme as required under Regulation 14 of the SEBI (Share Based Employee Benefits and Sweat Equity)

Regulations, 2021 are posted on the Companys website at https://www.unichemlabs.com/annual-report.php.

M/s. Alwyn Jay & Co., Secretarial Auditors have issued a certificate confirming that the aforesaid Scheme has been implemented in accordance with the Regulations and the resolution passed by members at the general meeting. The certificate will be available for inspection by members at the ensuing Annual General Meeting (“AGM”).

Credit Rating

The Companys banking facilities are rated by ICRA. During the year, ICRA has upgraded the Companys long-term rating to A (pronounced ICRA ‘A) from A- (pronounced ICRA ‘A minus) which indicates a stable outlook.

Sale of strategic investments of the Company

During the year, Company sold its balance 0.02% equity shareholding held in Optimus Drugs Private Limited (”Optimus”) to Sekhmet Pharmaventures Private Limited (”Sekhmet”) for a consideration of 67.47 cr. as per the Share Purchase Agreement entered into between the Company, Optimus and Sekhmet after satisfaction of necessary conditions precedent. Please refer to the detailed notes no. 11 and 12 of the standalone and consolidated financial statements respectively, which are self-explanatory.

Management Discussion and Analysis

In accordance with Regulation 34(2) read alongside Part B of Schedule V of the Listing Regulations, a comprehensive assessment of the business operations, performance, significant events that transpired during the year and the overall state of the companys affairs is provided in the Management Discussion and Analysis, which is an integral part of this report as Annexure A.

Corporate Governance

The Board of Directors reiterate their ongoing dedication to upholding good Corporate Governance and ethical standards. The Company is steadfast in its commitment to maintaining the highest level of Corporate Governance, striving to align with the best global practices.

The Corporate Governance Report for the year is included as an integral part of this report as Annexure B, alongwith a certificate from M/s. N. A. Shah Associates LLP, Statutory Auditors affirming compliance with Corporate Governance norms prescribed under the Listing Regulations.

Directors and Key Managerial Personnel

The Board of the Company consists of esteemed professionals from various backgrounds, each contributing diversified competencies, domain knowledge and experience. The optimal blend of Executive and Independent Directors ensures a fine balance of business acumen and independent judgment in the Boards decision-making process.

Throughout the year under review, none of the Non-Executive Directors maintained any pecuniary relationships or engaged in transactions with the Company, apart from receiving sitting fees and reimbursement of expenses, if applicable.

a. Appointment of Managing Director (“MD”) At the meeting held on 9th August, 2023, the Board approved the appointment & remuneration of Mr. Pabitrakumar Bhattacharyya as MD of the Company for a period of three years. His appointment was approved at the AGM by Shareholders on 25th September, 2023.

b. Retirement by Rotation Mr. Pranay Godha retires by rotation at the ensuing AGM and being eligible, has offered himself for re-appointment. The Board recommends his re-appointment. A resolution seeking Shareholders approval for his re-appointment along with other required details forms part of the Notice.

c. Independent Directors (“IDs”) All IDs have affirmed their continued compliance with the independence criteria outlined in Section 149(6) of the Act and the Listing Regulations. They have enrolled their names in the IDs database and have successfully completed required proficiency tests. There has been no change in the circumstances affecting their status as IDs of the Company. Additionally, they have attested to their adherence to the Code of Conduct for IDs.

Based on the disclosures provided by the IDs, none of them are disqualified or debarred from serving as Directors under Section 164 of the Act, SEBI order or any other relevant authority. The Board affirms that the IDs maintain independence from the management.

The Board acknowledges that the IDs possess the requisite qualifications, experience and expertise across various domains including manufacturing, operations, finance, foreign exchange, human resources, strategy, sales & marketing, auditing, banking and risk management. Furthermore, they uphold high standards of integrity.

A comprehensive overview of the skill set, expertise and competencies matrix of all Directors, including IDs, is available in the Corporate Governance Report, which is an integral part of this Annual Report. i. Completion of tenure The consecutive second term of five years as ID of Mr. Prafull Anubhai, Mr. Prafull Sheth and Mr. Anand Mahajan was completed on 31st March, 2024. As per Listing Regulations no IDs shall hold office for more than two consecutive terms. The Board of Directors of the Company places on record their utmost appreciation and gratitude for the meaningful contribution made by Mr. Prafull Anubhai, Mr. Prafull Sheth and Mr. Anand Mahajan during their tenure with the Company. ii. Appointment of new IDs

Based on the recommendations of NRC, Board had approved the appointment of Mr. Anand Kusre (DIN 00818477) and Mr. Arun Todarwal (DIN 00020916) as IDs of the Company for a term of five consecutive years with effect from 5th February, 2024. The members of the Company, by way of a special resolution passed through Postal Ballot, approved their appointment on 22nd March, 2024. d. Key Managerial Personnel (“KMP”) Mr. Pabitrakumar Bhattacharyya, Managing Director; Mr. Sandip Ghume, Deputy Chief Financial Officer and Mr. Pradeep Bhandari, Head Legal & Company Secretary are the KMP of the Company as on the date of this report.

Consequent to the change in the Board of Directors, the Board committees were also reconstituted, the details of which are aptly covered in the Corporate Governance Report.

Board Performance and Evaluation

In accordance with the provisions of the Act and the Listing Regulations, the Board has conducted an annual performance evaluation of its own performance, its Committees and the individual Directors.

The manner of evaluation of Board of Directors performance and matters incidental thereto, are detailed in the Corporate Governance Report.

Salient features of the Nomination and Remuneration Policy

The Board, upon the recommendation of the NRC, has implemented a policy for the selection, appointment and remuneration of Directors, KMP and Senior Management. This policy is accessible on the Companys website at the following link: https://www.unichemlabs.com/nomination-and-remunerationpolicy.php.

The Company regards its human resources as invaluable assets. Employee compensation, including salary, benefits, perquisites and allowances is provided with annual increments tied to individual performance evaluations. The Remuneration policy is crafted to attract, retain and incentivize talented personnel.

i. Whole-time/ Managing Director

The Company provides remuneration to its Whole-time Directors in the form of salary, perquisites and allowances (fixed component), as well as commission (variable component, where applicable as per terms of appointment). Salaries are disbursed based on the recommendation of the NRC and subsequent approval by the Board of Directors. Furthermore, such remuneration is subject to the endorsement of the Shareholders, within the limits prescribed by the Act and its accompanying Rules.

The remuneration accorded to Whole-time Directors is determined with consideration to industry benchmarks and the Companys relative performance in comparison to industry standards.

ii. Non-Executive Directors

Non-Executive Directors receive sitting fees for their attendance at Board and Committee Meetings, in accordance with the provisions of the Act and the Rules. Apart from the payment of sitting fees, no additional remuneration is provided to Non-Executive Directors.

iii. KMP, Senior Management and other Employees

The remuneration of KMP, Senior Management and other employees primarily comprises of basic salary, perquisites, allowances and performance incentives including ESOPs wherever applicable. Perquisites and retirement benefits are disbursed in accordance with the Companys established policy.

In determining the remuneration package, the Company considers the prevailing employment landscape, as well as remuneration packages offered by industry peers.

Significant and Material Orders passed by the Regulators/Courts/Tribunals

During the year under review, no significant or material orders were passed by the regulators or courts or tribunals, which may impact on the Companys going concern status and its operations in the future.

Corporate Social Responsibility (“CSR”)

The Corporate Governance Report provides the terms of reference and constitution of the CSR Committee. Additionally, your Company has developed a CSR Policy, accessible on the Companys website at https://www.unichemlabs.com/corporate-social-responsibility.php. Moreover, in compliance with the Companies (Corporate Social Responsibility Policy) Rules, 2014, as amended, the Annual Report on CSR activities is annexed as Annexure C, forming an integral part of this Report.

Statutory Auditors

N. A. Shah Associates LLP, Chartered Accountants, (Firm Registration No. 116560W/W100149) (“M/s. N.A. Shah”) are the Statutory Auditors of the Company.

At the 59th AGM held on 9th August, 2022, Members re-appointed M/s. N. A. Shah for a further period of five years, i.e. from the conclusion of the 59th AGM till the conclusion of the 64th AGM of the Company to be held in the year 2027.

The Notes on the Financial Statements referred to in the Auditors Report are self-explanatory and do not call for any comments.

The Auditors Report does not contain any qualification or reservation, adverse remark or disclaimer. M/s. N.A. Shah have confirmed that they are not disqualified from continuing as Statutory Auditors of the Company. The said auditors have confirmed that their firm has been subjected to the peer-review process of the Institute of Chartered Accountants of India (“ICAI”) and they hold a valid certificate issued by the Peer Review Board of the ICAI.

During the year under review, the Auditors have not reported any matter under Section 143(12) of the Act and therefore no details are disclosed under Section 134(3)(ca) of the Act.

Cost Auditors

The Company adheres to the provisions of Section 148(1) of the Act by maintaining cost accounts and records, which are subject to audit by Cost Auditors. In line with Section 148(6) of the Act read with Rule 6(6) of the Companies (Cost Records and Audit) Rules, 2014, the cost audit report for the year ending 31st March, 2024, in Form No. CRA-4 (in XBRL mode), will be duly submitted to the Ministry of Corporate Affairs within the stipulated timeframe.

Upon the recommendation of the Audit Committee, the Board has appointed M/s. Kishore Bhatia & Associates, Practicing Cost Accountants, to conduct the audit of the Companys cost records for the financial year 2024-25. They have affirmed that their appointment aligns with the applicable provisions of the Act and the rules established thereunder. Furthermore, they have confirmed their eligibility to serve as the Cost Auditors of the Company for the year ending 31st March, 2025.

In compliance with the provisions outlined in Section 148 of the Act, along with the Companies (Audit and Auditors) Rules, 2014, the remuneration proposed to be paid to the Cost Auditor for the financial year 2024-25 necessitates ratification by the members. Consequently, the Board of Directors advocates for its endorsement by the members during the upcoming AGM. This proposal is included as part of the notice for the AGM.

Secretarial Audit

In accordance with Section 204 of the Act, the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, and Regulation 24A of the Listing Regulations, the Board has engaged M/s. Alwyn Jay & Co., Practicing Company Secretaries, to conduct the Secretarial Audit of the Company for the financial year ending 31st March, 2024.

The Secretarial Audit Report is annexed to this report as Annexure D. It is noteworthy that the report does not contain any qualifications, reservations or adverse remarks. The content of the report is self-explanatory and does not necessitate any additional comments.

M/s. Alwyn Jay & Co., Practicing Company Secretaries, have also issued a Secretarial Compliance Report for the financial year ending 31st March, 2024. This report confirms that the Company has maintained proper records as mandated under various Rules and Regulations applicable to it. Furthermore, it affirms that no actions have been taken against the Company, its material subsidiaries or its promoters/directors by SEBI/Stock Exchanges. The Company disseminates this report on the websites of BSE and NSE within the specified timeframe.

Upon the recommendation of the Audit Committee, the Board of Directors has re-appointed M/s. Alwyn Jay & Co., Practicing Company Secretaries, to conduct the secretarial audit for the financial year 2024-25. They have provided their consent and confirmed their eligibility for the said re-appointment.

During the reviewed period, the Statutory, Internal, Secretarial and Cost Auditors have not reported any instances of fraud perpetrated against the Company by its officers or employees to the Audit Committee. Hence, there are no details pertaining to such incidents to be included in the Directors report.

Compliance with Secretarial Standards

During the financial year 2023-24, the Company has complied with all the applicable Secretarial Standards issued by the Institute of Company Secretaries of India as amended.

Meetings of Board

During the year, seven Board Meetings were held, the details of which are given in the Corporate Governance Report.

Committees of the Board

The Board has constituted five committees, viz., Audit Committee, NRC, CSR Committee, Stakeholders Relationship Committee and Risk Management Committee. The Board has endorsed all recommendations put forth by these committees, with comprehensive information regarding the committees composition, reconstitution following changes in the Board of Directors, meeting schedules and other pertinent details outlined in the Corporate Governance Report.

Related Party Transactions (“RPTs”)

During the year under review, the Company has obtained prior approval from both the Audit Committee and/or Board of Directors for RPTs whenever necessary. The details of such transactions undertaken during a particular quarter are placed at the meeting of the Audit Committee held in the succeeding quarter. These transactions conducted with related parties were on an arms length basis and wherever not in the ordinary course of business, approval of the Board is obtained. Notably, the Company did not engage in any RPTs (with the exception of transactions involving the Companys Wholly Owned Subsidiaries) that could be deemed material as per the Companys Policy on materiality of RPTs or necessitating reporting in Form AOC-2 as per Section 134(3)(h) read with Section 188 of the Act and Rule 8(2) of the Companies (Accounts) Rules, 2014 or could have a potential conflict with the interests of the Company at large.

Members had approved following material related party transactions to be entered into for financial year 2024-25: a. Unichem Laboratories Limited with Ipca Laboratories Limited; b. Ipca Laboratories Limited with Unichem Pharmaceuticals USA Inc., wholly owned subsidiary of Unichem Laboratories Limited; and c. Unichem Laboratories Limited with Unichem Pharmaceuticals USA Inc.

The Board approved policy on RPTs is accessible on the Companys website via the weblink: https://www.unichemlabs.com/related-party-transactions-policy.php.

Apart from the shares held in the Company, remuneration and sitting fees, there is no pecuniary transaction with any Director/KMP, which had potential conflict of interest with the Company.

Internal control system and Risk Management

Internal control system and Risk Management have been dealt with in Management Discussion & Analysis, which forms integral part of this report.

Whistle Blower Policy

The Company upholds a zero-tolerance policy towards any form of unethical conduct or behavior for maintaining an unwavering commitment to integrity in its business operations. To uphold these standards, the Company has implemented a Whistle Blower Policy/Vigil Mechanism, allowing stakeholders, directors and employees to report genuine concerns regarding unethical behavior, fraud or violations of the Companys Code of Business Conduct and Ethics.

This mechanism ensures adequate safeguards against victimization of individuals who utilizes it. It is affirmed that no individual has been denied access to the Audit Committee. During the year under review, there was one complaint received and the same was resolved. The policy is readily accessible on the Companys intranet and website, with the designated email address for reporting genuine concerns being whistleblower@unichemlabs.com.

Energy Conservation, Technology Absorption and Foreign Exchange Earnings and Outgo

The details required under Section 134(3)(m) of the Act and related rules are outlined in Annexure E of this Report.

Particulars of Employees

Details regarding remuneration and other necessary information, as mandated by Section 197(12) of the Act and Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, as amended, are provided in Annexure F of this Report.

The statement showing particulars of employees pursuant to Section 197 of the Act read with Rule 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, is not being sent to the Members along with this Annual Report in accordance with the provision of Section 136 of the Act. Any Member interested in obtaining a copy of this information may request it by writing to the Company Secretary stating their Folio No./DPID & Client ID at shares@unichemlabs.com.

Business Responsibility and Sustainability Report (“BRSR”)

The Company is committed to ensuring that its actions have a positive impact on the economic, societal and environmental fronts. BRSR for the financial year 2023-24 in accordance with Regulation 34(2)(f) of the Listing Regulations, forming part of this report is annexed as Annexure G and forms an integral part of this Annual Report.

Disclosure under the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013

The Company is dedicated to fostering a safe, supportive and healthy working environment where employees can work without fear of prejudice or gender bias. The management continuously strives to cultivate an environment that is free from discrimination and sexual harassment.

The Company has established a policy on Prevention of Sexual Harassment at the Workplace, aligning with the requirement of The Sexual Harassment of Women at the Workplace (Prevention, Prohibition and Redressal) Act, 2013. An Internal Complaints Committee (“ICC”) has been constituted to address complaints pertaining to sexual harassment. The policy provides guidelines for the redressal, inquiry process to be followed by complainants and the ICC while addressing incidents of sexual harassment in the workplace. All women employees, including permanent, temporary, contractual and trainees, are covered under this policy. Additionally, the policy includes measures to ensure that no employee faces victimization or harassment for reporting such incidents in the Companys interest. During the year under review, no complaint of sexual harassment has been received.

Annual Return

In accordance with the provisions of Section 92(3) and Section 134 of the Act read with Rule 12 of the Companies (Management and Administration) Rules, 2014 of the Act, Annual Return of the Company is hosted on the website of the Company at https://www.unichemlabs.com/annual-report.php.

Particulars of Loans, Guarantees and Investments

Details of Loans, Guarantees and Investments covered under the provisions of Section 186 of the Act are given in the notes to the financial statements.

Other disclosures

No disclosure or reporting is necessary regarding the following items, as there were no transactions of this nature during the year under review:

Details relating to deposits covered under Chapter V of the Act;

Transfer of any amount to reserves;

Material changes and commitments affecting the financial position of the Company between the end of the financial year and the date of this report.

Human Resource, health and safety

The Company is committed towards providing an enabling environment that recognizes and values the contributions of its employees while offering them opportunities for growth and development.

The Company is deeply committed to safeguarding human health, safety and the environment, upholding the highest standards of health and safety across all its plants and facilities. This dedication serves as the cornerstone of our Environmental, Health and Safety (EHS) management systems and governance.

Directors Responsibility Statement

To the best of their knowledge and belief and according to the information and explanations obtained by them, your Directors make the following statements in terms of Section 134(3)(c) of the Act: a. that in preparation of annual accounts for the year ended 31st March, 2024, the applicable accounting standards have been followed and no material departures, have been made from the same; b. that such accounting policies have been selected and applied consistently and made judgements 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 the end of the financial year ending 31st March, 2024 and Profit /Loss for that year; c. that proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; d. that the annual accounts have been prepared on a going concern basis; e. that the internal financial controls were in place and that they were adequate and operating effectively; and f. that systems to ensure compliance with the provisions of all applicable laws were devised and such systems were adequate and operating effectively.

Acknowledgement

The Board gratefully acknowledges the invaluable support and wise counsel provided to the Company by its customers, bankers, government agencies, suppliers, shareholders and other esteemed associates who serve as its business partners. Your directors express sincere gratitude for the invaluable contributions made by employees during the year under review. The consistent growth of the Company has been made possible by their hard work, solidarity, cooperation and unwavering perseverance and commitment. The Board further expresses its gratitude for the trust bestowed upon the Company by the medical fraternity and patients alike. With deep appreciation, we anticipate continued support in our mission to advance health through the delivery of quality products.

For and on behalf of the Board of Directors,

	Dr. Prakash A. Mody
Mumbai	Chairman
22nd May, 2024	(DIN: 00001285)