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,

2021.

Financial Highlights

The table below gives the financial highlights of the Company for the year ended 31st March, 2021 on a standalone and

consolidated basis as compared to the previous financial year.

(Rs in lakhs)
Particulars

Standalone (Audited) For the year ended

Consolidated (Audited) For the year ended

31st March, 2021 31st March, 2020 31st March, 2021 31st March, 2020
Revenue from operations 1,12,397.28 90,444.07 1,23, 513.53 1,10,371.28
Other Income 4,737.11 9,917.01 5,018.76 9,131.31
Total Income 1,17,134.39 100,361.08 1,28, 532.29 1,19,502.59
Profit/(Loss) before tax 6,564.55 (6,381.18) 5,147.94 (4,821.02)
Current tax - - 1,668.26 547.24
Deferred tax 1,094.30 (749.56) (14.82) 649.99
Short/(excess) provision for tax (earlier years) 62.02 - 62.02 -
Profit (Loss) for the year 5,408.23 (5,631.62) 3,432.48 (6,018.25)
Other comprehensive Income 2,130.49 299.50 1,639.47 305.64
Total Comprehensive Income 7,538.72 (5,332.12) 5,071.95 (5,712.61)

Management Discussion and Analysis

As required by Regulation 34(2) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (Listing Regulations), a Management Discussion and Analysis Report is part of this Report as Annexure A.

The state of the affairs of the business along with the financial

and operational developments has been given in this Report.

Appropriations

An amount of Rs 2,592 lakhs, after considering dividend paid during the year, is proposed to be carried forward in the Profit & Loss Account. Your Company does not propose to transfer any amount in the General Reserves of the Company.

Dividend

The Board has recommended a dividend of Rs 4/- (200%) per equity share of Rs 2/- each for the year ended 31st March,

2021. The dividend will be paid after approval of Members at the ensuing Annual General Meeting (AGM) of the Company which will result in a cash outflow of Rs 2,816.23 lakhs.

The Register of Members and Share Transfer Books shall remain closed from Monday, 26th July, 2021, to Saturday, 31st July, 2021 (both days inclusive) for AGM and, dividend, if approved by the Members.

Pursuant to Finance Act, 2020, dividend income will be taxable in the hands of Shareholders with effect from 1st April, 2020 and the Company shall deduct tax at source from dividends paid to the Shareholders at the prescribed rates. A detailed communication on this shall be separately sent to the Shareholders.

Dividend Distribution Policy

Pursuant to SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Company has formulated a Dividend Distribution Policy and is available on the Companys website https://www.unichemlabs.com/dividend-distribution-policy.php.

Employees Stock Options Schemes

During the year under review, no employee stock options were granted to the Senior Management under the Employees Stock Option Scheme 2018. In terms of the requirements specified under the SEBI (Share-Based Employee Benefits) Regulations, 2014, details of this scheme form part of the Directors Report and are available on the Companys website at https://www.unichemlabs.com/annual-report.php.

Research and Development (R&D)

Kindly refer to the write-up in the Section, Management

Discussion and Analysis Report.

Corporate Governance

As required under Regulation 34 of the Listing Regulations, a Report on Corporate Governance along with a Certificate of Compliance from the Auditors is given in Annexure B of this Report.

Corporate Social Responsibility (CSR)

The Board has constituted a Corporate Social Responsibility (CSR) Committee to monitor the implementation of CSR activities of your Company. The Annual Report on CSR activities as amended in terms of Section 135 of the Act and the Rules made thereunder, is annexed as Annexure C to this Report.

During the year under review, there was no mandatory

requirement to spend towards CSR. However, the Company

has voluntarily spent Rs 328.45 lakhs which includes an amount of Rs 5.00 lakhs which has remained unutilized with an

implementing agency as on 31st March, 2021 due to the Covid-19 pandemic. This is expected to be utilized in the subsequent financial year.

Consolidated Financial Statements

The annual audited consolidated financial statements together with the report of the Auditors thereon form part of this Annual Report.

Review of Subsidiaries and Associates

Your Company has 6(six) subsidiaries and 1(one) associate company. A statement containing salient features of the financial statements of the subsidiaries and associate company, pursuant to Section 129 of the Companies Act, 2013 (the Act), and the Rules made thereunder, is annexed to this Report as Annexure D in the prescribed Form AOC -1 and hence not repeated here for the sake of brevity.

Synchron Research Services Private Limited (Synchron) is an associate company in terms of Section 2(6) of the Act. Synchron is a contract research organization in India that offers competitive and high-quality clinical trial services to domestic and international pharmaceutical and bio-pharmaceutical companies.

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.

Deposits

The Company has not accepted any deposits within the meaning of Section 73 of the Act read with the Companies (Acceptance of Deposits) Rules, 2014.

Risk Management

Your Company considers risk management as a key element of its business operations and has put in place effective systems to identify, monitor, and mitigate risks to ensure sustained operations. Your Company has constituted a Risk Management Committee, details of which are disclosed in the Corporate Governance Report. A section on Risk Management practices of the Company is included in the Management Discussion and Analysis Report.

Directors and Key Managerial Personnel

The Members of the Company on 27th May, 2021, approved the re-appointment of Mr. Dilip Kunkolienkar (DIN: 02666678) as the Whole-time Director of the Company, designated as Director Technical with effect from 1st April, 2021.

Mr. Kunkolienkar, Director Technical retires by rotation and

being eligible has offered himself for re-appointment.

All Independent Directors have declared that they meet the criteria of Independence as laid down under Section 149(6) of the Act and Regulation 16(b) of the Listing Regulations. All Independent Directors have given declarations stating compliance with the Code of Ethics and Business Conduct. There has been no change in the circumstances affecting their status as Independent Directors of the Company. In the opinion of the Board, the Independent Directors fulfill the conditions specified in these Regulations and are independent of the management.

During the year under review, the Non-Executive Independent Directors of the Company had no pecuniary relationship or transactions with the Company, other than sitting fees, and the dividend paid on the equity shares held by them.

In terms of Section 203 of the Act, Dr. Prakash A. Mody, Chairman & Managing Director, Mr. Dilip Kunkolienkar, Director Technical, Mr. Sandip Ghume, Deputy Chief Financial Officer, and Mr. Pradeep Bhandari, Head-Legal & Company Secretary are the Key Managerial Personnel of the Company.

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 Companies Act, 2013 (Act):

1. that in preparation of annual accounts for the year ended 31st March, 2021, the applicable accounting standards have been followed and no material departures, have been made from the same;

2. 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 and Profit /Loss for that year;

3. 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;

4. that the annual accounts have been prepared on a going concern basis;

5. that the internal financial controls were in place and that they were adequate and operating effectively; and

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

Board performance and evaluation

Pursuant to the provisions of the Act and the Listing Regulations, the Board has carried out an annual performance evaluation of the working of its performance, its Committees, and the Directors individually. The performance evaluation of Independent Directors was done by the entire Board of Directors and in the evaluation, the Directors who were subject to evaluation did not participate. A structured questionnaire was prepared after taking into consideration inputs received from the Directors covering various aspects of the functioning of the Board and its Committees.

The evaluation of the Directors was done on various parameters such as vision and strategy, Board participation, Board disclosures of interests, review of management policies, budget concerning the risk and return, and leadership skills. The Directors expressed their satisfaction with the evaluation process.

Salient features of the Nomination and Remuneration Policy

The Board, on the recommendation of the Nomination and Remuneration Committee, has adopted a policy for selection, appointment, and remuneration of Directors, Key Managerial Personnel, and Senior Management. The policy is available on the Companys website at https://www.unichemlabs.com/nomination-and-remunerationpolicy.php.

The Company considers human resources as its invaluable assets. The Nomination and Remuneration Policy aims to pay equitable remuneration to all Directors, Key Managerial Personnel (KMP), and employees of the Company and is linked to the overall individual performance. The Remuneration policy for all employees is designed to attract talented personnel and remunerate them fairly and responsibly, this being a continuous, ongoing exercise at each level in the organization.

Whole-time/Managing Director

The Company pays remuneration by way of salary, perquisites, and allowances (fixed component) and commission (variable components wherever applicable as per terms of appointment) to its Whole-time Directors. A proper balance between fixed and variable components is aimed at. Salary is paid based on the recommendation of the Nomination and Remuneration Committee and as approved by the Board of Directors, subject to the approval of the Shareholders within the limits stipulated by the Act and the Rules made thereunder. The remuneration paid to the Whole-time Directors is determined keeping in view the industry benchmark and the relative performance of the Company compared to the industry performance.

Non-Executive Directors

Non-Executive Directors receive sitting fees for attending Meetings of the Board and its Committees as per the provisions of the Act and the Rules made thereunder. Besides payment of sitting fees and dividends on equity shares, if any, held by the Directors, no other remuneration is paid to the Non-Executive Directors.

Key Managerial Personnel (KMP) and Senior Management

The remuneration of KMP other than the Executive Directors and other Senior Managerial Employees largely consists of basic salary, perquisites, allowances and performance incentives (wherever paid). Perquisites and retirement benefits are paid according to the Companys policy. The components of the total remuneration vary for different grades and are governed by the industry pattern, qualification and experience, merits, and performance of each employee. The Company while deciding the remuneration package takes into consideration the current employment scenario and remuneration package prevalent in the industry and peer group companies.

Board Meetings

During the year, 4 (four) Board Meetings were held, the details

of which are given in the Corporate Governance Report.

Audit Committee

The Company has an Audit Committee pursuant to the requirements of the Act read with the Rules framed thereunder and Listing Regulations. The details relating to the same are given in the report on Corporate Governance forming part of this Report. During the financial year 2020-2021, the recommendations of the Audit Committee were duly accepted by the Board.

Whistle Blower Policy

The Company has in place a Whistle Blower/Vigil Mechanism through which its Stakeholders, Directors, and Employees can report genuine concerns about unethical behaviour and actual or suspected fraud or violation of the Companys Code of Business Conduct and Ethics. The said policy provides for adequate safeguards against victimization and direct access to the Audit Committee. The e-mail id for reporting genuine concerns is whistleblower@unichemlabs.com. During the year, 1 (one) complaint was received and the same has been resolved in terms of the policy.

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

No significant or material orders were passed by the regulators or courts or, tribunals which impact the Companys going concern status and its operations in the future.

However on 9th July, 2014, the European Commission (“EU”) decided to impose an unjustified fine of Euro 13.96 million, jointly and severally on the Company and its subsidiary Niche Generics Limited (“Niche”) contending that they had acted in breach of EU competition law as Niche Generics Limited had, in early 2005 (when the Company was only a part-owner and financial investor in Niche) had agreed to settle a financially crippling patent litigation with Laboratories Servier. The Company vehemently denies any wrongdoing on the part of either itself or Niche. Both the Company and Niche had submitted appeals in September 2014 to the General Court of the EU seeking appropriate relief in the matter. The General Court of the EU has rejected the appeals vide Order dated 12th

December, 2018 and confirmed the fine of Euro 13.96 million. The Company and its subsidiary based on legal advice and merits have filed appeals against the decision of the General Court before the Court of Justice of the EU, and the outcome of the appeals is awaited. Considering the above in view of the management, no provision for the aforesaid fine is considered necessary. Based on the above a fine imposed by the EU of Euro 13.96 million (equivalent to Rs 12,044.69 lakhs) is disclosed under contingent liability.

Material changes and commitment, if any, affecting the financial position of the Company from the end of the financial year till the date of this Report

There have been no material changes and 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.

Related Party Transactions

During the year under review, approval of the Audit Committee and Board of Directors was sought for Related Party Transactions wherever required.

The Audit Committee has given prior approval for all Related Party Transactions wherever applicable. The policy on Related Party Transactions as approved by the Board is uploaded on the Companys website and the weblink is https://www.unichemlabs.com/related-party-transactions-policy.php. The particulars of contracts or arrangements with Related Parties referred to in Section 188(1) of the Act are provided, in the prescribed Form AOC-2 annexed as Annexure E to this Report.

Except to the extent of the shares held in the Company and the remuneration drawn from the Company, none of the Directors and Key Managerial Personnel have any pecuniary relationships or transactions vis-a-vis the Company.

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

The Company has in place a policy on Prevention, Prohibition and Redressal of Sexual Harassment at the Workplace in line with the requirements of The Sexual Harassment of Women at the Workplace (Prevention, Prohibition and Redressal) Act, 2013. An Internal Complaints Committee (ICC) has been set up to redress complaints received regarding sexual harassment. The policy has set guidelines on the redressal and inquiry process that is to be followed by complainants and the ICC, whilst dealing with issues related to sexual harassment at the workplace. All women employees (permanent, temporary, contractual, and trainees) are covered under this policy. The policy also provides for the requisite checks, balances, and safeguards to ensure that no employee is victimized or harassed for reporting and bringing up such incidents in the interest of the Company. The ICC did not receive any complaints during the year under review.

Auditors

Pursuant to provisions of Section 139 of the Act read with the Companies (Audit and Auditors) Rules, 2014, N.A. Shah Associates LLP (Firm Registration No. 116560W/W100149), Chartered Accountants, were appointed as Statutory Auditors of the Company, to hold office from the conclusion of 54th AGM until the conclusion of 59th AGM, subject to ratification by Members at every subsequent AGM.

The provisions of Section 139 of the Act were amended and notified with effect from 7th May, 2018. In terms of the said amendment, the appointment of the Auditors is no longer required to be ratified by the Members at every subsequent AGM. Given this, no Resolution is proposed for ratification of the appointment of the Auditors at the ensuing AGM.

N.A. Shah Associates LLP, (Firm Registration No. 116560W/W100149), Chartered Accountants, have confirmed that they are not disqualified from continuing as Statutory Auditors of the Company.

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.

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.

Cost Auditors

The Company is required to maintain cost records as specified by the Central Government under sub-section (1) of Section 148 of the Act accordingly such accounts and records are made and maintained by the Company.

The Board of Directors at its Meeting held on 29th May, 2021, based on the recommendation of the Audit Committee, appointed Kishore Bhatia & Associates, Cost Accountants, (Firm Registration No. 00294); as Cost Auditors for undertaking Cost Audit of the Cost Accounting Records maintained by the Company for the financial year 2020-2021 at a remuneration not exceeding Rs 8.25 lakhs (Rupees Eight Lakhs Twenty -Five Thousand Only) plus applicable taxes and out-of-pocket expenses at actuals. The said Auditors have confirmed their eligibility for appointment as Cost Auditors. The remuneration payable to the said Cost Auditors is required to be placed before the Members at the ensuing AGM for ratification and a suitable Resolution has been set out in the Notice of this AGM. The Cost Audit Report for the year ended 31st March, 2020 was filed with the Ministry of Corporate Affairs on 24th August, 2020.

Secretarial Audit

Pursuant to the provisions of Section 204 of the Act and the Rules made thereunder, the Company has appointed Alwyn Jay & Co., Company Secretaries in practice to undertake the Secretarial

Audit of the Company. The Secretarial Audit Report is annexed as Annexure F to this Report. There is no qualification, reservation, adverse remark, or disclaimer in the said Report.

During the year under review, the Secretarial 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.

Compliance with Secretarial Standards

The Company has complied with the Secretarial Standards issued by The Institute of Company Secretaries of India about Board Meetings (SS-1) and General Meetings (SS-2).

Internal control systems and their adequacy

The Company has in place adequate internal financial controls concerning its financial statements. These controls ensure the accuracy and completeness of the accounting records and the preparation of reliable financial statements. The details of the same are included in the Management Discussion and Analysis Report.

Energy Conservation, Technology Absorption, and

Foreign Exchange Earnings and Outgo

The particulars as prescribed under Section 134(3)(m) of the Act and Rules made thereunder are set out in Annexure G to this Report.

Particulars of Employees and related disclosures

Disclosures pertaining to remuneration and other details as required under Section 197(12) of the Act and Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 as amended, are annexed as Annexure H to this Report.

In terms of the provisions of Section 197(12) of the Act and Rules 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 as amended, details of employees remuneration, form part of this Report. However, as per the provisions of Sections, 134 and 136 of the Act, the Report and financial statements are being sent to the Members and others entitled thereto, excluding the information on employees particulars. Any Member interested in obtaining a copy of the same may write to the Company Secretary at shares@unichemlabs.com.

Extract of 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, Annual Return of the Company is hosted on the website of the Company at https://www.unichemlabs.com/annual-report.php.

Business Responsibility Report

In compliance with Regulation 34(2) of the Listing Regulations, the Business Responsibility Report for the financial year 2020-2021 is set out in Annexure I of this Annual Report.

Human Resources and Employee Relations

The Board of Directors commends the continued dedication of all its employees. Details of Human Resources and Employee Relations and matters incidental thereto are provided in the Management Discussion and Analysis Report.

Acknowledgement

Your Directors place on record its deep appreciation to employees at all levels for their dedication, commitment, and extended splendid support during this period of uncertainty created by the Covid-19 pandemic.

Your Directors acknowledge the support and wise counsel extended to the Company by investors analysts, bankers, government agencies, shareholders, suppliers, and others associated with the Company as its business partners. Your Directors also acknowledge the trust reposed in the Company by the medical fraternity and patients. We look forward to having the same support in our mission to enhance health through quality products.

Cautionary Statement

Statements in this Directors Report and Management Discussion and Analysis Report describing the Companys objectives, projections, estimates, expectations, or predictions may be “forward-looking statements” within the meaning of applicable securities laws and regulations. Actual results could differ materially from those expressed or implied. Important factors that could make a difference to the Companys operations include raw material availability and prices, cyclical demand, pricing and changes in government regulations, tax regimes, economic developments among the countries in which the Company conducts business, and other ancillary factors.

For and on behalf of the Board of Directors,
Dr. Prakash A. Mody
Mumbai Chairman & Managing Director
29th May, 2021 (DIN: 00001285)