Equity Analysis

Your directors are pleased to present forty-eighth report and audited financial statements of the Company for the financial year ended on March 31,2024.

1. FINANCIAL HIGHLIGHTS

The following are the highlights of financial performance of the Company during the year under review.

2. DIvIDEND

Your directors recommend a final dividend of Rs. 6.75 (675%) per equity share of face value of Rs. 1, payment whereof will be subject to deduction of tax at source. During the year, Board of Directors declared interim dividend of Rs. 5.50 (550%) per equity share of face value Rs. 1 each, which was paid on February 28, 2024. The final dividend, if declared, together with interim dividend already paid would result in total outgo of Rs. 19,009.42 lakhs. The Board has not proposed any transfer out of profit for the financial year to reserves in relation to these dividend payments. The Company paid interim dividend of Rs. 8.50 (425%) and final dividend of Rs. 9.25 (462.50%) per equity share of face value of Rs. 2 in the previous year.

3. OPERATIONS/STATE OF AFFAIRS

The Company is pleased to report another year of robust performance driven by enhanced operational efficiencies. Despite a slow acute season in India and lower South Africa revenue on account of the strategic decisions we took, our top-line demonstrated impressive year-on-year growth of 11%, reaching Rs. 348,418 lakhs. Domestic business registered growth of 16% fuelled by improved traction in the established brands and a strong performance by the acquired portfolio while the international business registered growth of 5%.

Total standalone revenue during the year at Rs. 329,864 lakhs was 14% higher over the previous year.

Domestic formulations business recorded revenue of Rs. 189,791 lakhs as compared to Rs. 163,965 lakhs for the previous year. As per IQVIA MAT March'24 data, JB Pharma established itself as one of the fastest growing company amongst the Top 25 companies, growing better than the Indian Pharmaceuticals Market (IPM) and now ranks 22 in the IPM. The 5 big brands of the Company namely Cilacar, Rantac, Metrogyl, Cilacar-T and Nicardia now rank amongst the Top 150 brands in the Indian Pharmaceuticals Market. Chronic portfolio registered strong growth of 14% vs overall chronic segment which grew by 10% and we rank amongst the top 20 in the overall chronic segment in the industry. Razel franchise registered strong growth of 24% exceeding expectations.

Our field force productivity (excluding the ophthalmology portfolio) further improved to Rs. 7 lakhs per person per month from Rs. 6.20 lakhs in FY23. After including ophthalmology sales and its additional field force, the productivity of the field force was Rs. 6.80 lakhs per person per month.

Despite the strategic decision regarding the South Africa business exerting pressure on the overall international segment, the business grew 5% to Rs. 158,627 lakhs vs Rs. 150,963 lakhs in FY23. The CDMO business grew 6% to Rs. 43,185 lakhs despite a very high base and the order book remains healthy. International formulations business stood at Rs. 106,855 lakhs growing 6% over the previous year. The Company witnessed strong performance in all the geographies. API business recorded Rs. 8,588 lakhs of sales against Rs. 9,359 lakhs in FY23.

Although the cost environment was impacted by geopolitical issues, a favourable product mix and operational efficiencies led to an improved margin profile for the Company. Gross margins saw a noteworthy uplift from 62.9% to 66.1%, while operating EBITDA (after adjusting non-cash ESOPs costs) experienced a notable improvement of 270 basis points, reaching 27.0%. Freight costs elevated in the second half of the year and remained a challenge.

Profit before tax stood at Rs. 75,151 lakhs as against Rs. 55,523 lakhs in FY23 registering strong growth of 35%. Profit after tax was Rs. 55,263 lakhs vs Rs. 41,001 lakhs in FY23. PAT and PBT growth was impacted by higher depreciation and finance costs. However, finance costs softened by the end of the year on account of repayment of debt.

4. ACQUISITIONS

During the year, the Company entered into a TradeMark License Agreement with Novartis Innovative Therapies AG, Switzerland which is perpetual in nature, for a portfolio of 10 ophthalmology brands for the India market which will be effective from January 2027 for a consideration of USD 116 million payable on or before December 31,2026. The Company also entered into the promotion and distribution agreement with Novartis Healthcare Private Limited for the same portfolio for a period of three years starting December 2023 for a consideration of Rs. 12,500 lakhs for this exclusive promotion and distribution agreement.

Ophthalmology is one of the fastest growing therapies in the Indian Pharmaceuticals Market and registered a 3 year CAGR of 15% as per IQVIA MAT October 2023 data and these Ophthalmology brands secure a strong position in the market. Of the total brands, 5 are ranked #1 in their respective molecule market space while another 4 rank amongst the top 5 within their covered market. This acquisition has solidified JB Pharma's leadership status in the swiftly expanding ophthalmology segment, perfectly aligning with our overarching strategy of operating within leading brand categories.

5. SUB-DIVISION OF EQUITY SHARES OF THE COMPANY

On May 24, 2023, the Board of Directors of the Company, considered and approved the proposal for sub-division of 1 (One) equity share of the Company having face value of Rs. 2/- each into 2 (Two) equity shares of the Company having face value of Rs. 1/- each and consequential amendments in the Capital Clause of the Memorandum of Association of the Company. The said proposal was approved by the Shareholders of the Company at the Annual General Meeting held on August 24, 2023. The Record Date for the sub-division was fixed as September 18, 2023 and consequently, the face value of the equity share of the Company was subdivided to Rs. 1/- each from Rs. 2/- each.

The Directors confirm:

(i) that in the preparation of the annual accounts for the year under review, the applicable accounting standards have been followed;

(ii) that they have selected appropriate accounting policies and applied them 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 at the end of financial year 2023-24 and of profit of the Company for that year;

(iii) that they have taken proper and sufficient care 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) that they have prepared the annual accounts for the year ended on March 31, 2024 on a going concern basis;

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

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

7. SUBSIDIARIES

The highlights of performance of the subsidiary companies in Rupee terms for the year 2023-24 is presented in Schedule-A. After inter-company adjustments, subsidiary companies contributed Rs. 18,554 lakhs to consolidated revenue and Rs. 1,318 lakhs to consolidated profit before tax of the Company.

Revenues for Biotech Laboratories (Pty.) Ltd., South Africa, for the financial year 2023-24 were Rand 540.21 million, which represents degrowth of 16.59% over the previous year, while its operating profit and profit after tax at Rand 37.83 million and Rand 31.61 million were 20.42% and 14.87% lower over the previous year respectively. Sales of LLC Unique Pharmaceutical Laboratories, Russia, for the financial year 2023-24, at Rouble 865.93 million were 9.01% higher over the previous year, while it recorded net profit of Rouble 42.79 million against loss of Rouble 2.58 million in the previous year. Unique Pharmaceutical Laboratories FZE, Dubai is presently not engaged in any business activity and incurred loss of AED 1.63 million due to operating and other expenses. On April 2, 2024, JBCPL Philippines Inc., a wholly-owned step-down subsidiary in Philippines was incorporated by the Company's wholly-owned subsidiary, viz. Unique Pharmaceutical Laboratories, FZE, Dubai.

8. CORPORATE GOVERNANCE AND COMPLIANCES

A certificate from practising company secretary on compliance with conditions of corporate governance is annexed to this Board's report. Management Discussion and Analysis Report, Compliance report on Corporate Governance, Business Responsibility and Sustainability Report and Dividend Distribution Policy form part of this annual report.

9. PUBLIC DEPOSITS

The Company has not accepted any deposit covered under Chapter V of the Companies Act, 2013 during the year. All the public deposits accepted prior to the commencement of the said Act have been repaid in 2014-15.

10. DIRECTORS AND KEY MANAGERIAL PERSONNEL

Mr. Ranjit Shahani, Chairman and Non-Executive Independent Director of the Company passed away on March 9, 2024. Mr. Shahani was an inspiring leader and a great visionary. Your directors acknowledge his valuable contribution towards growth of the Company. Your directors would like to place on record its gratitude for his support and guidance over the years.

Mr. Akshay Tanna was appointed as an additional director in the category of non- executive, nonindependent director on November 7, 2023. The members of the Company approved appointment of Mr. Akshay Tanna as a director liable to retire by rotation as set out in the postal ballot notice dated March 6, 2024, which concluded on April 7, 2024.

The members of the Company at the annual general meeting held on August 24, 2023 re-appointed Mr. Gaurav Trehan as director liable to retire by rotation.

In accordance with provisions of the Companies Act, 2013, Mr. Prashant Kumar would retire by rotation at the ensuing Annual General Meeting. Being eligible, he has offered himself for re-appointment.

In the opinion of the Board of Directors, Mr. Sumit Bose and Ms. Padmini Khare Kaicker, independent directors, are persons of integrity and possess relevant expertise and experience necessary for effective functioning of the Company. The Company has received declarations from the Independent Directors stating that they meet the criteria of independence pursuant to Section 149(6) of the Companies Act, 2013 as well as Regulation 16 of Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015. They have also confirmed that they have registered with the Indian Institute of Corporate Affairs to include their names in the databank of independent directors. However, in terms of the Companies (Appointment and Qualification of Directors) Rules, 2014, as amended, these independent directors are not required to pass an online proficiency self-assessment test conducted by the said Institute notified under subsection (1) of Section 150 of the Companies Act, 2013.

Six meetings of the Board of Directors were held during the financial year ended on March 31, 2024. These meetings were held on May 24, 2023, August 9, 2023, November 7, 2023, December 19, 2023, February 6, 2024 and March 14, 2024.

Mr. Lakshay Kataria ceased to be the Chief Financial Officer with effect from November 30, 2023 and Mr. Narayan Saraf was appointed as Chief Financial Officer of the Company effective February 23, 2024.

11. POLICY ON DIRECTORS' APPOINTMENT AND REMUNERATION

The Company's policy on directors' appointment is set out in Schedule-B. The salient features of the Company's policy on remuneration to the directors, key managerial personnel and other employees is set out in Schedule-C. The said Policy including criteria for determining qualifications, positive attributes and independence of a director has been posted on the Company's website www.jbpharma.com.

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

The particulars as required under Section 134(3)(m) of the Companies Act, 2013 read with Rule 8(3) of the Companies (Accounts) Rules, 2014 are given in Schedule-D.

13. CORPORATE SOCIAL RESPONSIBILITY

The Company spent Rs. 953.13 lakhs on CSR activities (Rs. 913.13 lakhs on CSR activities and Rs. 40.00 lakhs on administrative overheads for general management and administration of CSR function) during the financial year 2023-24 as against obligation of Rs. 949.03 lakhs being 2% of the average net profits of the Company made during three immediately preceding financial years.

During the year under review, Corporate Social Responsibility (CSR) Committee of the Board comprised of Mr. Ranjit Shahani (upto 9/3/2024), Mr. Sumit Bose, Mr. Prashant Kumar and Mr. Nikhil Chopra. The salient features of the CSR Policy of the Company and the annual report on CSR in the prescribed form are set out in Schedule-E. The CSR Policy and annual report on CSR are posted on the Company's website www.jbpharma.com.

14. AUDIT cOMMITTEE AND viGILANcE MEcHANISM

The Board has constituted Audit Committee that consists of Ms. Padmini Khare Kaicker as Chairperson, Mr. Ranjit Shahani (upto 9/3/2024), Mr. Sumit Bose and Mr. Prashant Kumar. There has been no instance of nonacceptance of recommendation of Audit Committee by the Board.

The Board of Directors has adopted revised vigil mechanism in the form of Whistle-Blower Policy to enable directors, employees and other stakeholders to make Protected Disclosures (as defined in the Policy) in relation to alleged Wrongful Conduct (as defined in the Policy) to the Redressal Committee for evaluation and investigation in consultation with the Audit Committee. The Company has posted the Whistle-Blower Policy and the associated Complaint Response Plan Policy on its website www.jbpharma.com.

15. ANNUAL PERFORMAcE EvALUATION

The Board of Directors carried out formal annual evaluation of performance of the Board, its Committees and individual directors during 2023-24 in accordance with the manner specified by the Nomination and Remuneration Committee (NRC) and using evaluation criteria recommended by the NRC and approved by the Board. The performance evaluation was carried out in the following manner, being manner recommended by the NRC.

Evaluation of performance of the Board: Members of the Board evaluated the Board on the given criteria on scale of 1 to 4 (4 being highest). The aggregate of simple average of rating assigned by each Board member was further averaged to ascertain Board's performance.

Evaluation of performance of the Board Committees: Members of the concerned committee evaluated performance of the committee on the given criteria on scale of 1 to 4. Aggregate of simple average of rating assigned by members was further averaged to ascertain performance of the concerned committee.

Evaluation of performance of Individual Director: Board members (excluding director being evaluated) evaluated performance of all other Board members on the given criteria on scale of 1 to 4. Aggregate of simple average of rating assigned to each Board member was further averaged to ascertain performance of such director.

16. CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES

Form AOC-2 prescribed under Section 134(3)(h) read with Rule 8(2) of the Companies (Accounts) Rules, 2014 provides for disclosure of (a) details of contracts or arrangements or transactions not at arm's length basis, and (b) details of material contracts or arrangement or transactions at arm's length basis.

All the transactions entered into by the Company with the related parties during the year were pursuant to the contracts or arrangement approved by the Audit Committee and the Board of Directors. The transactions so entered into were in the ordinary course of business of the Company and on arm's length basis. The contracts or arrangements or transactions were neither material in terms of the Policy on materiality of related party transactions adopted by the Company nor it exceeded the threshold limit prescribed pursuant to first proviso to Section 188(1) of the Companies Act, 2013. Accordingly, the disclosure of related party transactions in Form AOC-2 is not applicable. However, disclosure on related party transactions as per Ind AS-24 has been provided under Note No. 45 of the standalone financial statements and Note No. 42 of the consolidated financial statements.

17. PARTICULARS OF EMPLOYEES AND OTHER REMUNERATION Related DIScLOSURES

Disclosure related to the remuneration as required in terms of Section 197(12) of the Companies Act, 2013 read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, as amended, are given in Schedule-F.

A statement showing name and other particulars of the employees in terms of Section 197(12) of the Companies Act, 2013 read with Rule 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, as amended, is given in Schedule-G.

18. employee stock option scheme

"JBCPL Employee Stock Option Scheme 2021" ("Scheme") was approved by the shareholders on July 31, 2021. The Compensation Committee of the Board administers the Scheme and granted time based options and performance based options to eligible employees and director(s) of the Company and its subsidiary companies with a view to achieve overall growth objective. On December 20, 2023, the shareholders of the Company approved amendment to the scheme. Earlier, for a period of five years from Grant Date, option grantee was not entitled to transfer more than 40% of the cumulatively vested options. On December 20, 2023, this condition was modified. The Scheme now provides that 60% of the cumulatively vested options shall remain locked for transfer for a period up to two years from the Grant Date, while this percentage progressively reduces each year (from 40% to 10%) after two years and up to five years from the Grant Date.

The Scheme is in compliance with the Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, 2014 and under the Securities and Exchange Board of India (Share Based Employee Benefits and Sweat Equity) Regulations, 2021.

Disclosure of details of the Scheme as required under (a) Regulation 14 of the Securities and Exchange Board of India (Share Based Employee Benefits and Sweat Equity) Regulations, 2021 are posted on the Company's website www.jbpharma.com and web link thereto is https://jbpharma.com/download/esop-disclosure-for- the-year-ended-31-03-2024/ and (b) the Companies (Share Capital and Debentures) Rules, 2014, is set out in Schedule-H to this report.

19. RISK MANAGEMENT

The Board of Directors has developed and implemented risk management policy for the Company. Pursuant to the Listing Regulations, the Board has constituted Risk Management Committee and delegated monitoring and review of the risk management plan to the Committee. The Committee periodically reviews the status of mitigation measures taken in respect of risk management plan and reports the progress thereof and new risks identified to the Board and Audit Committee. The Board at present does not perceive any element of risk, which may threaten existence of the Company.

20. INTERNAL FINANciAL cONTROLS

The Board has adopted internal financial controls encompassing policies and procedures for ensuring orderly and efficient conduct of business, including

adherence to the Company's policies, safeguarding the Company's assets, prevention and detection of fraud and errors, accuracy and completeness of the accounting records and timely preparation of reliable financial information. The specific internal financial controls with reference to financial statements include internal audit of important activities and processes relating to preparation of financial statements, adoption of well-defined standard operating procedure for business transactions and compliance relating thereto, use of ERP for accuracy and control, review of periodically prepared financial statements with an objective to ensure that financial statements present true and fair view and are sufficient/credible and in compliance with legal and regulatory requirements. The Board has appointed Ernst & Young LLP as internal auditor to periodically audit systems and controls in all key areas of operations to ascertain effective functioning of internal controls including internal financial controls. In the opinion of the Board, the Company has adequate internal controls with reference to the financial statements.

Neither the management of the Company has come across any instance of fraud during the year 2023-24 nor the auditors of the Company have reported any such instance to the Audit Committee.

21. LOANS, GUARANTEES AND INVESTMENTS

During the year, the Company has not given any loan or provided a guarantee attracting the provisions of Section 186 of the Companies Act, 2013. The particulars of investment made pursuant to Section 134(3)(g) of the Companies Act, 2013 during the year and outstanding as at the year-end are given in Annexure-I.

22. AUDITORS

The members at annual general meeting held on September 9, 2021 has appointed Deloitte Haskins & Sells LLP, (having firm registration no. 117366W/W- 100018) as statutory auditors of the Company until conclusion of the 49^th Annual General Meeting of the Company at such remuneration as may be agreed by the Board of Directors with the auditors.

23. COST RECORDS

The Company is required to maintain cost records as specified by the Central Government under subsection (1) of Section 148 of the Companies Act, 2013, and such accounts and records are duly made and maintained by the Company. The Company is further required to get such cost records audited by a

cost auditor in accordance with the Companies (Cost Records and Audit) Rules, 2014 and furnish cost audit report received from the cost auditor to the Central Government within the prescribed time. The Company is in compliance with these provisions.

24. SECRETARIAL AUDIT REPORT

Ashish Bhatt & Associates, Practising Company Secretaries, Secretarial Auditor of the Company, carried out secretarial audit for the financial year 2023-24 as provided under Section 204 of the Companies Act, 2013 and rules made thereunder. The secretarial audit report given by the said auditor is annexed to this report as Schedule-J.

25. ESG (ENvIRONMENTAL, SOcIAL AND GOvERNANCE)

At JB Pharma, we are guided by the idea of "Good people for good health", a mantra that encapsulates our unwavering commitment to addressing socioeconomic and environmental challenges. Our sustainable business strategy is deeply rooted in principles of quality, customer centricity, integrity, passion, and a people-first approach. Our commitment to sustainability extends beyond our operational excellence to encompass environmental stewardship, social impact, and governance. All eight of our manufacturing facilities adhere to current Good Manufacturing Practice (GMP) standards and hold various international certifications, ensuring the quality and safety of our products.

During the year, we published our second sustainability report which showcases the Company's efforts towards propelling sustainable development while continuing business responsibly. Through this report, we communicated our vision for a purpose-driven, future- ready and patient-centric approach as we champion the cause of spreading good health. The report was developed with reference to GRI 2021 Standards United Nations Sustainable Development Goals (UN SDGs).

This year, we revisited our material topics with an impact-focused lens in line with the guidance provided by the GRI 2021 standards. Our stakeholder- inclusiveness materiality assessment formed the foundation of this Sustainability Report as we highlight our performance across the myriad of ESG tenets. Additionally, this year we commenced our journey of Scope 3 emissions accounting with the aim of understanding and implementing systematic changes for lowering our emissions.

The Company implemented cleaner and greener initiatives, including the expansion of our renewable energy portfolio and robust water and waste management practices. Our efforts in environmental sustainability are complemented by initiatives to promote diversity, equity, and inclusion within our workforce. We are proud to report a 14% increase in women representation and the employment of 12 individuals with disabilities.

Additionally, our CSR interventions focus on community development, education, healthcare accessibility, and poverty alleviation. We are committed to serving communities and making a positive impact on society.

Looking ahead, we remain dedicated to embedding ESG principles into our operations and fostering a sustainable future for generations to come. Our focus on efficiency, efficacy, and ethical practices reflects our commitment to creating shared value for all stakeholders while advancing the health and well-being of people and the planet.

26. OTHER DiSCLOSURES AND CONFiRMATiONS

The Board has to make further disclosures and provide confirmations, as under:

• The Company has placed annual return referred to in sub-section (3) of section 92 on its website www.jbpharma.com.

• No regulator or court or tribunal has passed, during the year, any significant or material order affecting the going concern status and the Company's operations in future.

• The Company has complied with applicable Secretarial Standards specified by the Institute of Company Secretaries of India and approved by the Central Government under Section 118(10) of the Companies Act, 2013.

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

27. HEALTH AND SAFETY

The Company continues to accord high priority to health and safety of employees and workmen at all manufacturing locations. Annual medical check-up of all employees at all sites was carried out. The Company also conducted safety training programmes and mock- drills for increasing disaster preparedness and creating awareness among all employees at the plants. There was no casualty at any site during the year.