Zenotech Laboratories Ltd Directors Report.

Your Directors take pleasure in presenting the 32nd Annual Report and audited accounts of the Company for the financial year ended March 31, 2021:

Financial Results

Rs. in Lakhs
Particulars 2020-21 2019-20
(i) Revenue from operations 1,937.33 2,593.83
(ii) Other Operating Income 301.54 8.23
(iii) Other income 46.49 117.02
(iv) Total Revenue (i+ii+iii) 2,285.36 2,719.08
(v) Depreciation 645.60 484.96
(vi) Finance cost 154.75 89.25
(vii) Other expenses 1,606.52 1,704.09
(viii) Total Expenses (v+vi+vii) 2,406.87 2,278.29
(ix) Profit/(Loss) before exceptional items and tax (iv-viii) (121.51) 440.79
(x) Exceptional items - 636.96
(xi) Profit/(Loss) after tax (121.51) 1,077.75
(xii) Other Comprehensive Income (0.57) (4.68)
(xiii) Total Comprehensive Income for the period (xi+xii) (122.08) 1,073.07
(xiv) Loss brought forward from previous year (22,094.47) (23,167.54)
(xv) Profit/(Loss) carried forward to Balance Sheet (xiii+xiv) (22,216.55) (22,094.47)

Performance review and the state of Companys affairs

During the year under review, the Company recorded revenue of Rs.1,937.33 Lakhs (previous year Rs.2,593.83 Lakhs) from its operations over the corresponding previous year. The Company reported a loss of Rs.121.51 Lakhs as against the previous year reported profit of Rs.1,077.75 Lakhs, (includes exceptional items of Rs.636.96 Lakhs. The Earnings per Share (EPS) of your Company has come down to Rs.(0.20) per share in fiscal 2020-21 from the previous year EPS of Rs.1.77 per share in fiscal 2019-20. The operational performance of the Companys Oral Solid Dosage (OSD) facility and its newly commissioned Depot formulations facility were in growing trend during the year. However, the sluggish market demand to Cyto & General Injectables and ophthalmic formulations, hindered to attain optimum utilization of operational capacities. Based on the projected business plans for the current and forthcoming years, the Company believes that it can maintain its positive performance by utilizing its existing resources to its maximum. Your Company is constantly striving to optimize its operational capacities, control costs to remain competitive which would help to improve the operational efficiency.

The Company renovated its Biotech API manufacturing facility and the same has been leased to Sun Pharmaceutical Industries Limited, for their R&D activities. Companys other operating income is generated from leasing of its idle facility and equipments effective from July, 2021.

Impact of COVID-19 pandemic

The Company is fully operational during the year under review despite manpower crunch amid lockdown and social distancing measures. However, the production timelines have changed drastically due to non-availability or disrupted supply of raw materials and packing materials during COVID-19. The Company is moving forward very confidently by amending concerned SOPs to meet COVID-19 impact & challenges.

The COVID-19 pandemic has continued affecting the global economy from almost more than a year and second wave of the COVID-19 continued the restrictions and disruption in the routine. We remain committed to the health and safety of our employees and their families, as well as, business continuity to safeguard the interests of our partners, customers and other stakeholders.

Dividends

In view of loss incurred, your Directors do not recommend any dividend for the year under review.

Reserves

In view of loss incurred during the year under review, your Directors do not propose any amount to carry to any reserves.

Subsidiaries, Joint Ventures or Associates

The Company does not have any joint venture or associate company. All three overseas subsidiaries are reported defunct and no information with regard to their operations is available with the Company. During the year 2019-20, pursuant to the approval of members of Zenotech Laboratories Nigeria Limited, Nigeria (Zenotech Nigeria) the Corporate Affairs Commission, Nigeria (CAC) has approved the members voluntary winding up of the entity, a subsidiary of the Company. Due to COVID-19 pandemic, the winding up process of Zenotech Farmaceutica Do Brasil Ltda, Brazil during the financial year 2020-21, came to standstill. The Company has evaluated and concluded that it is not controlling Zenotech Inc., a US subsidiary. For more information on subsidiaries, please refer to section "Consolidated financial statements" in this Report.

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 Annual Return as at March 31, 2021 in Form MGT-7, can be accessed at Companys website http://www.zenotechlab.com/annual-report.

Internal Control Systems

Your Company has in place adequate systems of internal control commensurate with its size and the nature of its operations. They have been designed to provide reasonable assurance with regard to recording and providing reliable financial and operational information, complying with applicable statutes, safeguarding assets from unauthorized use or losses, executing transactions with proper authorization and ensuring compliance of internal policies. The internal control system is supplemented by extensive internal audits, conducted by independent firm of chartered accountants.

Human Resources & Industrial Relations

The Company believes that Human Resource is its most valuable resource which has to be nurtured well and equipped to meet the challenges in the Industry the Company operates. The staff is highly motivated with good work culture, training, remuneration packages and the values. The total number of people employed in the Company as on March 31, 2021 is 217. Your Directors would like to record their appreciation of the efficient and loyal service rendered by the employees.

Remuneration Policy

In terms of the provisions of Section 178(3) of the Act and Regulation 19 read with Schedule II Part D of Listing Regulations, the Nomination and Remuneration Committee is responsible for formulating the criteria for determining qualifications, positive attributes and independence of a Director.

The Nomination and Remuneration Committee is also responsible for recommending to the Board a policy relating to the remuneration of the Directors, Key Managerial Personnel and Senior Management.

The purpose of the Remuneration Policy is to establish and govern the procedure applicable:

a) To evaluate the performance of the members of the Board.

b) To ensure remuneration payable to Directors, KMP & other senior Management, strike appropriate balance and commensurate, among others, with the functioning of the Company and its long term objectives.

c) To retain, motivate and promote talent within the Company and to ensure long term sustainability of the managerial persons and create competitive advantage.

The Remuneration policy is available on the website of the Company http://zenotechlab.com/wp- content/uploads/2015/07/Remuneration-Policy.pdf.

Particulars of Employees

Disclosure pertaining to remuneration and other details as required under Section 197(12) of the Companies Act, 2013 read with Rules 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, is annexed herewith as Annexure 1 to this Report.

Further, the information pertaining to Rule 5(2) and 5(3) of the aforesaid Rules, a statement showing the names and other particulars of the top ten employees in terms of remuneration drawn is available for inspection at the Registered Office of the Company and pursuant to the proviso to Section 136(1) of the Companies Act, 2013, the report and the accounts are being sent to the members of the Company excluding this information. Any shareholder interested in obtaining such information may write to the Company Secretary at the Registered Office address of the Company. During the year under review, none of the employees was in receipt of remuneration in excess of the limits as stipulated in the Rule 5(2) of the aforesaid Rules.

Evaluation of performance of the Board, its Committees and individual directors

Pursuant to the provisions of the Companies Act, 2013 and the Corporate Governance requirements as prescribed under Regulation 17(10), 25(4) and other applicable provisions of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Board has carried out an annual evaluation of the Boards performance, its Committees and individual Directors.

Board performance evaluation, evaluation of Committees and individual Directors is carried out through a questionnaire encompassing upon various areas that provide an insight and feedback into the functioning of the Board, its Committees, individual Directors and areas of development.

The following are some of the broad issues that are considered in performance evaluation:

Criteria for evaluation of Board and its Committees:

- Setting up of performance objectives and performance against them

- Boards contribution to the growth of the Company

- Whether composition of the board and its committees is appropriate with the right mix of knowledge and skills sufficient to maximize performance in the light of future strategy

- Boards ability to respond to crisis

- Boards communication with the management team

- Flow of quality information to the Board

- Whether Board procedures are conducive to effective performance and flexible enough to deal with all eventualities Criteria for evaluation of Independent Directors:

- Quality and value of their contributions at Board meetings

- Contribution to development of strategy and risk management policy

- Exhibits understanding of policies of the Company

- Level of attendance and participation in the Board and Committee Meetings Criteria for evaluation of Non-Independent Directors:

- Demonstrates knowledge of the sector in which the company operates

- Knowledge of industry issues and exhibition of diligence in leading the organization

- Level of attendance at the Board and Committee meetings

- Effectiveness in working with the Board of directors to achieve the desired results

- Providing direction and support to the Board regarding its fiduciary obligations and governance role

- Provides well-balanced information and clear recommendations to the Board as it establishes new policies

The Chairperson of the Company interacted with each Director individually, for evaluation of performance of the individual Directors. The evaluation for the performance of the Board as a whole and of the Committees was conducted by way of questionnaires.

In a separate meeting of Independent Directors, performance of Non Independent Directors and performance of the Board as a whole was evaluated.

The Board of Directors were satisfied with the overall performance of the Directors individually and that the Directors generally met their expectations of performance.

Familiarization programme for Independent Directors

In compliance with the requirements of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Company has put in place a Familiarisation Programme for the independent Directors to familiarize them with the Company, their roles, rights, responsibilities in the Company, nature of the industry in which the Company operates, business model etc. The policy is available on the website of the Company http://zenotechlab.com/wp-content/uploads/2021/08/ Familiarization-Programme.pdf.

Share Capital

During the financial year under review, there was no change in the Share Capital of the Company. The Share Capital of the Company stood at Rs.61,03,05,680/- (6,10,30,568 Equity Shares of Rs.10/- each).

Auditors and their Reports Statutory Auditors

M/s. PKF Sridhar & Santhanam LLP (Firm registration number- 003990S/S 200018) Chartered Accountants, Hyderabad were re-appointed as the Statutory Auditors of the Company in the 31st Annual General Meeting of the Company held on September 26, 2020 for a further period of five years i.e. till the conclusion of the 36th Annual General Meeting to be held in the year 2025.

The Notes on the financial statements referred to in the Auditors Report are self-explanatory and do not call for any further comments. The Auditors Report is unmodified i.e. it does not contain any qualification, reservation or adverse remark or disclaimer.

Secretarial Audit

Pursuant to the provisions of Section 204 of the Companies Act, 2013 and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Board of Directors of the Company had appointed Mr. Mahadev Tirunagari, Company Secretary in Practice, Hyderabad, to undertake the Secretarial Audit of the Company for the financial year 202021. The Secretarial Audit Report for the financial year ended March 31,2021, is appended herewith as Annexure 2 to this Report. The Secretarial Audit Report does not contain any qualifications, reservation or adverse remark.

Cost Audit

The Company is not required to maintain cost records as specified by the Central Government under section 148 (1) of the Act and accordingly the Cost Audit is not applicable.

Secretarial Standards

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

Reporting of Frauds by Auditors

During the year under review, the Statutory Auditors and Secretarial Auditor have not reported any instances of frauds committed in the Company by its Officers or Employees to the Audit Committee under section 143(12) of the Companies Act, 2013, details of which needs to be mentioned in this Report.

Consolidated financial statements

Books of accounts and other related records/documents of the overseas subsidiaries of the Company were missing and due to non-availability of those records/information, the Company is unable to prepare consolidated accounts and attach the required statements and particulars in terms of the applicable provisions of the Companies Act, 2013 and the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. The facts of the case had already been reported in earlier years.

Overseas subsidiaries were apparently created; investments and loans were made during the period from 2006-07 to 2010-11 under the erstwhile management headed by Late Dr. Jayaram Chigurupati. Therefore, it was the responsibility of that management to handover those details to the Company during the transition. However, no details on those subsidiaries were made available to your Company. Despite several attempts by the Company to recover them, details concerning those subsidiaries including the documents and certificates related to the foreign exchange transactions which included loans and investments made to those foreign subsidiaries, could not be obtained.

The Company has evaluated and concluded that it is not controlling the US subsidiary. Further the Board had initiated the winding up process for the defunct subsidiary in Brazil, however due to COVID-19 pandemic, the process came to standstill. Accordingly, the Company is of the view that it does not have subsidiaries within the definition of IndAS 110 and hence, it is not required to prepare and present Consolidated Financial Statements.

The Company had filed a complaint before the Honble Economic Offences Court, Nampally, Hyderabad, under the provisions of Section 630 of erstwhile Companies Act, 1956 against the former Managing Director, Late Dr. Jayaram Chigurupati, who was in complete control over the Company affairs during the period of these events. However, due to demise of Dr. Jayaram Chigurupati on January 31, 2019 the case before Economic Offence Court was abated.

Directors Responsibility Statement

Pursuant to Section 134 (5) of the Companies Act, 2013, directors of your Company hereby state and confirm that:

(a) in the preparation of the annual accounts, the applicable accounting standards had been followed along with proper explanation relating to material departures;

(b) they had 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 at the end of the financial year ended March 31, 2021 and of the loss of the Company for that period;

(c) they had taken proper and sufficient 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) they had prepared the annual accounts on a going concern basis; and

(e) they had laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively;

(f) they had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

Report on Corporate Governance & Management Discussion and Analysis

Pursuant to SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, a separate section titled Report on Corporate Governance and Management Discussion and Analysis forms part of this Annual Report.

The compliance certificate of Mr. Mahadev Tirunagari, Company Secretary in Practice, Hyderabad confirming compliance with the conditions of Corporate Governance as stipulated in Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 is appended as Annexure to the Report of Corporate Governance.

Public Deposits

The Company has not accepted any deposit from the public during the year under review, under the provisions of the Companies Act, 2013 and the rules framed thereunder.

Directors & Key Managerial Personnel

Pursuant to Section 152 of the Companies Act, 2013, Dr. Azadar Husain Khan (DIN: 01219312), Director, is liable to retire by rotation at the ensuing 32nd Annual General Meeting and being eligible, has offered himself for re-appointment. The Board recommends his appointment.

During the year under review, Mr. Rajendra Singh Parihar, on attaining the age of superannuation, has ceased to be Chief Executive Officer of the Company on the closing hours of August 14, 2020. The Board, on the recommendation of the Nomination and Remuneration Committee, appointed Mr. Devendra Chandrakant Shenvi Kenkre as Chief Executive Officer of the Company w.e.f January 23, 2021.

Pursuant to Section 2(51) and Section 203 of the Companies Act, 2013 read with the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, Mr. Devendra Chandrakant Shenvi Kenkre, Chief Executive Officer, Mr. Poly K.V., Chief Financial Officer and Mr. Abdul Gafoor Mohammad, Company Secretary & Compliance Officer continued as the Key Managerial Personnel of the Company.

Further, the Independent Directors of the Company are exempted from the requirement to undertake online proficiency self-assessment test conducted by the Indian Institute of Corporate Affairs in terms of Section 150 of the Act read with Rule 6 of the Companies (Appointment and Qualification of Directors) Rules, 2014.

Declaration by Independent Directors

The Company has received declarations from all the independent directors of the Company under Section 149(7) of the Act, that they meet the criteria of independence as prescribed under the applicable provisions of Section 149 of the Act and Regulation 25 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

Number of Meetings of the Board

The Board of Directors of the Company met 5 (five) times during the financial year ended March 31,2021. The details are given in Corporate Governance report that forms part of this Report. The intervening gaps between the meetings were within the period prescribed under the Companies Act, 2013, SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 and also revised Secretarial Standard-1 (SS-1) on Meetings of the Board of Directors.

Audit Committee

The details pertaining to composition and other particulars of Audit Committee are included in the Corporate Governance Report which forms a part of this Report.

Particulars of Loans, Guarantees or Investments

During the year under review, your company has not granted any loans or made any investments or provided any guarantees or securities to the parties covered under Section 185 and 186 of the Companies Act, 2013.

Related Party Transactions:

Related party transactions entered during the financial year ended March 31, 2021 are disclosed in Notes No. 27 of the Financial Statements of the Company. These transactions were entered in the ordinary course of business and at arms length. Form AOC-2, containing the note on the aforesaid related party transactions is appended as Annexure 3 to this Report.

The Policy on materiality of related party transactions and dealing with related party transactions as approved by the Board may be accessed on the web link at http://zenotechlab.com/wp-content/uploads/2015/07/Policy_on_Related_ Party_Transactions_Annex_1.pdf.

Risk Management Policy

The Companys policy for Risk Management is to apply best practice in identifying, evaluating and cost-effectively controlling risks to ensure that any residual risks are at an acceptable level. Whilst it is not possible to eliminate the risk absolutely, effort is underway to actively promote and apply best practices at all levels and to all its activities, including its dealing with external partners.

Corporate Social Responsibility

The Company has attracted criteria for Corporate Social Responsibility (CSR) by crossing net profit beyond Rs. 5 crores (in the last financial year ended on March 31, 2020) pursuant to the provisions of Section 135 of the Companies Act, 2013 including Rules framed there under.

The Company has constituted the Corporate Social Responsibility Committee and it comprises of Dr. Azadar Husain Khan as Chairperson of the Committee, Mr. Jignesh Anantray Goradia and Smt. Jagruti Prashant Sheth as Members. The Company is in the process of formulating CSR policy, in consultation with CSR Committee, in terms of Section 135 and other applicable provisions, if any, of the Companies Act, 2013 and read with Companies (Corporate Social Responsibility Policy) Rules, 2014. The CSR spend is not applicable to the Company for the financial year 2020-21, since the average net profits for the preceding three financial years is resulting in the loss.

Prevention of Sexual Harassment Policy

The Company has in place a Prevention of Sexual Harassment policy in line with the requirements of the Sexual Harassment of Women at the Workplace (Prevention, Prohibition and Redressal) Act, 2013. An Internal Complaints Committee has been set up to redress complaints received regarding sexual harassment. All employees (permanent, contractual, temporary, trainees and visitors) are covered under this policy. During the year 2020-21 no complaints were received by the Company related to sexual harassment.

Environment, Health & Safety

The Companys Environment, Health & Safety (EHS) imperatives are part of its broader sustainability journey. These initiatives focus on reducing the environment footprint, help enhance well-being of employees and set high safety standards for employees, contractors and visitors.

The Company continued to ensure that environmental norms were abided by its Formulation units. The operating formulation units have conformed to the regulations for disposal of waste water to Common Effluent Treatment Plants (CETPs). The Companys EHS policy provides framework for compliance with applicable laws and regulations and commitment to the continuous improvement of Environment, personnel skills and conservation of natural resources.

Conservation of Energy, Technology Absorption, Foreign Exchange Earnings and Outgo

Information required under section 134(3)(m) of the Companies Act, 2013 read with Rule 8 of the Companies (Accounts) Rules, 2014, is appended herewith as Annexure 4 to this Report.

Vigil Mechanism/Whistle Blower Policy

Pursuant to the provisions of section 177(9) & (10) of the Companies Act, 2013, a Vigil Mechanism or Whistle Blower Policy for directors and employees to report genuine concerns has been established.

A copy of the Policy is available on the website of the Company www.zenotechlab.com and may be accessed through the web link http://zenotechlab.com/wp-content/uploads/2015/07/Vigil-Mechanism.pdf.

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 under review, which may impact the Going Concern status of the Companys operations in the future.

Material Changes

No material changes and commitments occurred after the close of the financial year till the date of this Report, which affect the financial position of the Company.

Further, it is hereby confirmed that there has been no change in the nature of business of the Company.

Acknowledgement

Your Directors would like to express their sincere appreciation for the assistance and co-operation received from the banks, Government authorities, customers, vendors and members during the year under review. Your Directors also wish to place on record their deep sense of appreciation for the committed services by the Companys executives, staff and workers.

For and on behalf of the Board of Directors
Place: Delhi
Date: May 01, 2021 Chairperson