TO THE MEMBERS
Your Directors have pleasure in presenting the 39th Annual Report and Financial Statements for the year ended 31st March, 2024.
STANDALONE AND CONSOLIDATED FINANCIAL RESULTS
STANDALONE
CONSOLIDATED
TRANSFER TO RESERVES
The Company does not propose to transfer any amount to the general reserve.
FINANCIAL STATEMENTS
The financial statements are prepared in accordance with the Indian Accounting Standards (Ind-AS) as prescribed under Section 133 of the Companies Act, 2013 read with Rule 3 of the Companies (Indian Accounting Standards) Rules, 2015 and Companies (Indian Accounting Standards) Amendment Rules, 2016.
In accordance with Indian Accounting Standard (Ind AS-110), the audited consolidated financial statements are also provided in the Annual Report.
CREDIT RATING
CARE Ratings has assigned the following ratings to the Company's long term bank facilities of '8.40 crores (Reduced from '12.00 crores) : CARE BBB+; Stable (Re-affirmed).
MANAGEMENT DISCUSSION AND ANALYSIS
(a) Financial Performance and Operations Review
On a standalone basis, the sales and other income for the financial year under report amounted to '5024.04 lacs as compared with '4368.40 lacs for the previous year, growth of 15%.
On a standalone basis, the operations have resulted in a cash loss of '260.93 lacs before interest, depreciation and taxation as compared to a cash loss of '299.64 lacs in the previous year. After providing for depreciation, finance cost and provision for taxation, the standalone operations of the Company have resulted in a net loss of '695.19 lacs as compared to a net loss of '636.09 lacs in the previous financial year.
On a consolidated basis, sales and other income for the financial year under report amounted to '10591.73 lacs as compared to '10355.38 lacs in the previous year. The consolidated operations have resulted in a net loss (after share of non-controlling interest) of '626.41 lacs as compared to a net loss (after share of non-controlling interest) of '475.08 lacs in the previous financial year.
Your Company markets generic formulations only in Indian market, which is highly competitive. The generic formulations are mainly used by the dispensing doctors, nursing homes and hospitals. Due to lower prevalence of acute diseases in the country during the financial year under report, for which diseases most of the generic formulations are used, there was lower growth in the Company's generic business. The demand for the liquid injectables manufactured by your Company was also lower in the financial year under report due to above reason.
The depreciation charges, finance cost and other overheads relating to new ophthalmic eye drops manufacturing facility of your Company situated at GIDC, Naroda, Ahmedabad, Gujarat, which was commercialised in the later part of the financial year 2020-21, impacted the profitability of the Company in the financial year under report. This manufacturing unit, apart from presently manufacturing few products commercially for Indian market, is also currently engaged in the developing of ophthalmic eye drops for rest of the world (ROW) markets. Product development, dossier registration, plant inspection and approval by regulatory authorities is a lengthy and time consuming procedure.
As the commercial production from this manufacturing unit gradually increases, post commercialisation of Company's products for the ROW markets, the same shall result in improved financials of this manufacturing unit. Your Board is happy to inform you that the Ministry of Industry and Trade of the Russian Federation inspected this manufacturing facility in the month of May, 2023 and this manufacturing facility has now received the Eurasian Economic Union (EAEU) RU GMP Certificate. Once the product dossier(s) filed from this manufacturing facility in Eurasian market gets approval, your Company can start manufacturing of Ophthalmic Eye Drops from this facility for Eurasian market.
Your Company in the last financial year also completed the upgradation/ modernization/capacity enhancement project of its old liquid injectable manufacturing facility situated at Plot No. 29/3, Phase III, GIDC Industrial Estate, Naroda, Ahmedabad - 382330, Gujarat, with a capital outlay of '11.22 crores, so as to enable this manufacturing facility to be offered for WHO-GMP certification. This certification shall enable your Company to offer injectables manufactured at this manufacturing facility for marketing in various ROW countries, thus providing scope for exports. This facility upgradation/modernisation/ capacity enhancement project was completed by July, 2022. This manufacturing unit is in the process of obtaining registrations for its product dossiers from ROW countries to enable it to manufacture the products to ROW markets.
Apart from this, during beginning of the financial year under report, there was also substantial increase in the prices of several key active pharmaceutical ingredients used in the manufacturing of Company's major selling generic formulations. Due to the price control regime, the increased raw material cost could not be passed on by the Company to its customers for several of its formulations. This coupled with inflationary trend in the economy resulting in increased operating cost also contributed in the reduction of margins in several products as well as lower overall business and profitability during the financial year under report. However, from the second half of the financial year under report, the raw material prices have started moderating.
During the year, the Company added few generic formulations in the market place as well as increased its geographical coverage in the country through appointment of new distributors.
Key Financial Ratios
Due to lower generics business volume, idle capacity of eye drops manufacturing facility as well as lower demand for liquid injectbales due to lower prevalence of acute diseases in the country, for which diseases the generic formulations are commonly used, the topline of the Company got impacted which resulted in business loss and negative key financial ratios including profitability ratios in the financial year under report.
(b) Opportunities, Threats, Risk and Concerns
The Indian generic formulations market is currently in the growth phase. It is expected that use of generic formulations will gradually increase in India. However, cut throat competition, quality issues of generics manufactured in the country and non existence of organised generic formulations distribution and retailing system are the few causes of concern that is hampering the growth of generic formulations market in the country.
During the year under report, there was no change in the nature of Company's business.
(c) Internal Control Systems
The Company has an adequate internal control system including suitable monitoring procedures commensurate with its size and the nature of the business. The internal control systems provide for all documented policies, guidelines, authorisation and approval procedures. The statutory auditors while conducting the statutory audit, review and evaluate the internal controls and their observations are discussed with the Audit Committee of the Board.
(d) Human Resources
Your Company continued to have cordial and harmonious relations with its employees at all levels.
Your Company has adopted quality culture across the organisation in all line and staff functions at all the locations. The quality culture has helped your Company in achieving productivity improvement, cost reduction and waste elimination through employee involvement at all levels.
Your Company had 121 permanent employees as at 31st March, 2024.
(e) Cautionary Statement
Certain statements in the Management Discussion and Analysis may be forward looking within the meaning of applicable securities laws and regulations and actual results may differ materially from those expressed or implied. Factors that would make differences to Company's operations include competition, price realisation, changes in government policies and regulations, tax regimes and economic development within India.
MATERIAL CHANGES AND COMMITMENTS AFTER THE END OF THE FINANCIAL YEAR
No material changes or commitments affecting the financial position of the Company have occurred between the end of the financial year to which financial statements in this report relate and the date of this report.
SHARE CAPITAL
The paid-up equity share capital of the Company as at 31st March, 2024 is '590.04 lacs. The Company currently has no outstanding shares issued with differential rights, sweat equity or ESOS.
SUBSIDIARY, JOINT VENTURE AND ASSOCIATE COMPANIES
Your Company has defacto control over the affairs of M/s. Resonance Specialties Ltd., a listed entity with 45.48% shareholding in the said company. Therefore, the Company treats Resonance Specialties Ltd. as its subsidiary.
RESEARCH & DEVELOPMENT
During the year under report, the Company has spent an amount of '7.28 lacs as R&D expenditure (0.14% of the turnover) as against '9.16 lacs spent in the previous financial year (0.21% of the turnover).
DIVIDEND
In view of the losses incurred, the Board of Directors do not recommend any dividend for the financial year under report.
INVESTORS EDUCATION AND PROTECTION FUND (IEPF)
The Company has transferred to the Investors Education and Protection Fund (IEPF) all the unpaid dividend amount required to be so transferred on or before the due date for such transfer. The Company has also transferred to IEPF, such of the Company's equity shares in respect of which the dividend declared has not been paid or claimed for seven consecutive years.
The details of the unpaid / unclaimed dividend for the last seven financial years are available on the website of the Company (www.makerslabs.com).
The Company has appointed the Company Secretary as its nodal officer under the provisions of IEPF. DIRECTORS
Mr. Saahil Parikh retires as a director by rotation at the ensuing Annual General Meeting and, being eligible, offers himself for re-appointment.
The shareholders have approved the appointment of Ms. Dipti Shah as Independent director for a second term of five years w.e.f 29th January, 2023 and Mr. R. K. P Verma as Independent Director of the Company for a second term of five years w.e.f 13th February, 2024 and Mr. Vishal Jain as Independent Director of the Company for a period of 5 years with effect from 4th November, 2020. Terms and conditions of their appointment as Independent Directors have been disclosed on the website of the Company www.makerslabs.com.
The shareholders have also approved the appointment of Mr. Prashant Godha as Non-Executive, Non-Independent Director of the Company liable to retire by rotation with effect from 4th November, 2020.
Mr. Saahil Parikh, Whole-time Director was re-appointed as the Whole-time Director of the Company for a further period of 3 years w.e.f. 11th August, 2023 at the meeting of the Board of Directors of the Company held on 22nd May, 2023 which re-appointment was approved by the shareholders at the 38th Annual General Meeting of the Company held on 14th August, 2023.
At the meeting of the Board of Directors of the Company held on 23rd May, 2024, Mr. Nilesh Jain was re-appointed as the Whole-time Director of the Company for a further period of 3 years with effect from 13th February, 2025. This re-appointment is subject to the approval of the shareholders at the ensuing Annual General Meeting.
Mr. R.K.P. Verma, Ms. Dipti Shah and Mr. Vishal Jain who are independent directors have submitted declaration that each of them meets the criteria of independence as provided in Section 149(6) of the Companies Act, 2013 and SEBI (LODR) Regulations and there has been no change in the circumstances which may affect their status as independent directors during the year.
None of the directors of the Company are debarred from holding the office of Director by virtue of any SEBI order or order by any other competent authority.
In the opinion of the Board, the independent directors possess appropriate balance of skills, experience and knowledge, as required.
A brief note on Directors retiring by rotation and eligible for re-appointment is furnished in the Report on Corporate Governance, annexed herewith.
KEY MANAGERIAL PERSONNEL (KMP)
During the financial year under report, the following persons were the Key Managerial Personnel:
Ms. Surbhi Sharma resigned as the Company Secretary during the financial year under report. In her place, the Company has now appointed Mr. Piyush Ajmera as the Company Secretary and Compliance Officer w.e.f 23rd May, 2024.
POLICY ON DIRECTORS' APPOINTMENT, REMUNERATION AND OTHER DETAILS
The Nomination and Remuneration Committee has laid down the criteria for Directors' appointment and remuneration including criteria for determining qualifications, positive attributes and independence of a Director. The following attributes/criteria for selection have been laid by the Board on the recommendation of the Committee:
• the candidate should posses the positive attributes such as leadership, entrepreneurship, industrialist, business advisor or such other attributes which in the opinion of the Committee the candidate possess and are in the interest of the Company;
• the candidate should be free from any disqualifications as provided under Sections 164 and 167 of the Companies Act, 2013;
• the candidate should meet the conditions of being independent as stipulated under the Companies Act, 2013 and SEBI (LODR) Regulations, 2015 in case of appointment as an independent director; and
• the candidate should posses appropriate educational qualification, skills, experience and knowledge in one or more fields of finance, law, management, sales, marketing, administration, research, corporate governance, technical operations, infrastructure, medical, social service, professional teaching or such other areas or disciplines which are relevant for the Company's business.
BOARD EVALUATION
The Nomination and Remuneration Committee lays down the criteria for performance evaluation of independent directors, Board of Directors and Committees of the Board. The criteria for performance evaluation is based on the various parameters like attendance and participation at meetings of the Board and Committees thereof, contribution to strategic decision making, review of risk assessment and risk mitigation, review of financial statements, business performance and contribution to the enhancement of brand image of the Company.
The Board has carried out evaluation of its own performance as well as that of the Committees of the Board and all the Directors.
PROFICIENCY OF DIRECTORS
All the Independent Directors of the Company have registered their names in the database maintained by the Indian Institute of Corporate Affairs, Manesar. Those Independent Directors who are not otherwise exempted have appeared and passed the common proficiency test conducted by the said institute within the prescribed time.
REMUNERATION POLICY
The objective and broad framework of the Company's Remuneration Policy is to consider and determine the remuneration, based on the fundamental principles of payment for performance, potential and growth. The Remuneration Policy reflects on certain guiding principles of the Company such as aligning remuneration with the longer term interests of the Company and its shareholders, promoting a culture of meritocracy and creating a linkage to corporate and individual performance and emphasising on line expertise and market competitiveness so as to attract the talent. The Nomination and Remuneration Committee recommends the remuneration of Directors and Key Managerial Personnel, which is approved by the Board of Directors, subject to the approval of shareholders, where necessary. The level and composition of remuneration shall be reasonable and sufficient to attract, retain and motivate the directors, key managerial personnel and other employees of the quality required to run the Company successfully. The relationship of remuneration to performance should be clear and meet appropriate performance benchmarks. The remuneration to directors, key managerial personnel and senior management personnel should also involve a balance between fixed and incentive pay reflecting short and long term performance objectives appropriate to the working of the Company and its goals. The Remuneration Policy is placed on the Company's website www.makerslabs.com.
Information about elements of remuneration package of individual directors is provided in the Annual Return as provided under Section 92(3) of the Companies Act, 2013 which is placed on the website of the Company.
FAMILIARISATION PROGRAM FOR INDEPENDENT DIRECTORS
Details of the familiarisation program of independent directors are disclosed on the website of the Company www.makerslabs.com.
MEETINGS OF THE BOARD AND COMMITTEES THEREOF
This information has been furnished under Report on Corporate Governance, which is annexed.
DIRECTORS' RESPONSIBILITY STATEMENT
Your Directors confirm:
i) that in the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures;
ii) that your Directors have 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 March 31,2024 and of the loss of the Company for the financial year;
iii) that your Directors have taken proper and sufficient care 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;
iv) that your Directors have prepared the annual accounts on a going concern basis;
v) that your Directors 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 your Directors have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.
CORPORATE GOVERNANCE
As per the requirements of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Company has complied with the requirements of Corporate Governance in all material aspects.
A report on Corporate Governance (Annexure 1) together with a certificate of its compliance from the Practising Company Secretary, forms part of this report.
FIXED DEPOSITS
Your Company has not accepted any deposits from the public during the year under review and as such no amount of principal or interest on deposits from public was outstanding as on the date of the balance sheet.
AUDIT COMMITTEE
Details of the Audit Committee along with its constitution and other details are provided in the Report on Corporate Governance.
AUDITORS, AUDIT REPORT AND AUDITED ACCOUNTS
M/s. Natvarlal Vepari & Co., Chartered Accountants (Firm Registration No. 106971W) were re-appointed as the Statutory Auditors to carry out statutory audit activities of the Company for a further period of 5 (five) years from the conclusion of the 37th AGM of the Company and till completion of 42nd Annual General Meeting of the Company and this appointment was approved by the shareholders of the Company at the 37th Annual General Meeting of the Company held on 12th August, 2022.
The Auditors' Report read with the notes to the accounts referred to therein are self-explanatory and therefore, do not call for any further comments. There are no qualifications, reservations or adverse remarks made by the Auditors.
COST AUDIT
Pursuant to the provisions of Section 148 of the Companies Act, 2013, M/s. Kale & Associates, Cost Accountants (Firm Registration. No. 001819) were appointed as the Cost Auditors to conduct audit of cost records of the Company for the financial year 2023-24.
The Cost Audit Report for the financial year 2022-23, which was due to be filed with the Ministry of Corporate Affairs by 25th October, 2023 was filed on the 20th October, 2023.
The Company has maintained the cost accounts and cost records as specified by the Central Government under sub-section (1) of Section 148 of the Companies Act, 2013.
SECRETARIAL AUDIT
Pursuant to the provisions of Section 204 and other applicable provisions, if any, of the Companies Act, 2013, M/s. Parikh & Associates, Practising Company Secretaries were appointed as the Secretarial Auditors for auditing the secretarial records of the Company for the financial year 2023-24.
The Secretarial Auditors' Report is annexed hereto. There are no qualifications, reservations or adverse remarks made by the Secretarial Auditors.
CORPORATE SOCIAL RESPONSIBILITY (CSR)
The provisions of Section 135 of the Companies Act, 2013 pertaining to Corporate Social Responsibility (CSR) is not applicable to the Company.
SAFETY, ENVIRONMENT AND HEALTH
The Company considers safety, environment and health as the management responsibility. Regular employee training programmes are carried out in the manufacturing facility on safety and environment.
PARTICULARS OF LOANS, GUARANTEES AND INVESTMENTS
The Company has not given any loans or guarantees or made investments in contravention of the provisions of the Section 186 of the Companies Act, 2013. The details of the loans and guarantees given and investments made by the Company are provided in the notes to the financial statements.
RELATED PARTY TRANSACTIONS
All related party transactions that were entered into during the financial year were on arm's length basis and were in the ordinary course of Company's business.
The Board has approved a policy for related party transactions which has been uploaded on the website of the Company https://www.makerslabs.com/pdf/Corporate Policv/Related Party Transactions.pdf.
All the related party transactions are placed before the Audit Committee as well as the Board for approval on a quarterly basis. Omnibus approval was also obtained from the Audit Committee on an annual basis for repetitive transactions. Approval of the shareholders is also obtained, wherever necessary, in this regard.
Related party transactions are disclosed in the notes to the financial statements. Prescribed Form No. AOC-2 pursuant to clause (h) of sub-section (3) of Section 134 of the Act and Rule 8(2) of the Companies (Accounts) Rules, 2014 is furnished as Annexure 2 to this report.
PARTICULARS OF EMPLOYEES
The information required pursuant to Section 197 read with Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, a statement showing the names and other particulars of the employees drawing remuneration and other details as set out in the said rules are provided as an Annexure 3 in this annual report. The Company had no employee drawing remuneration in excess of the amount as mentioned under Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014. The necessary information in respect of top 10 employees of the Company in terms of remuneration drawn is furnished in Annexure.
However, having regard to the provisions of the first proviso to Section 136(1) of the Act and as advised, the Annual Report excluding the aforesaid information under Explanation (2) to the above Rule is being sent to the members of the Company. The said information is available for inspection at the registered office of the Company during working hours excluding Saturdays and any member interested in obtaining such information may write to the Company Secretary and the same will be furnished on request.
CODE OF CONDUCT
The Board has laid down a code of conduct for Board members and senior management personnel of the Company. The code also incorporates the duties of independent directors as laid down in the Companies Act, 2013. The said code of conduct is posted on Company's website www.makerslabs.com. The Board members and senior management personnel have affirmed compliance with the said code of conduct. A declaration signed by the Wholetime Director / CEO is given at the end of this Report.
WHISTLE BLOWER POLICY / VIGIL MECHANISM
There is a Whistle Blower Policy in the Company and no personnel has been denied access to the Chairman of the Audit Committee. The policy provides for adequate safeguards against victimization of persons who use vigil mechanism. The Whistle Blowing Policy is posted on the website of the Company www.makerslabs.com.
PREVENTION OF INSIDER TRADING
The Board has adopted a Code of Prevention of Insider Trading based on the SEBI (Prohibition of Insider Trading) Regulations, 2015. The same has been placed on the website of the Company www.makerslabs.com.
All the Directors, senior management employees and other employees who have access to the unpublished price sensitive information of the Company are governed by this code. During the year under Report, there has been due compliance with the said code of conduct for prevention of insider trading.
CONSTITUTION OF COMMITTEE UNDER SEXUAL HARRASSMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION AND REDRESSAL) ACT, 2013
The Company has adopted a policy in line with the requirements of Prevention of Sexual Harassment of Women at the Workplace and a Committee has been set-up to redress sexual harassment complaints received, if any.
BUSINESS RISK MANAGEMENT
Pursuant to the provisions of Section 134 of the Companies Act, 2013, the Company has constituted a Risk Management Committee. The details of the Committee and its terms of reference are provided in the Report on Corporate Governance, which is annexed.
SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS
There are no significant or material orders passed by any regulator, tribunal or court that would impact the going concern status of the Company and its future operations.
CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO
In accordance with the requirements of Section 134 of the Companies Act, 2013, statement showing particulars with respect to conservation of energy, technology absorption and foreign exchange earnings and outgo is furnished as Annexure 4 to this report.
ANNUAL RETURN
In accordance with the requirements of Section 92 (3) of the Companies Act, 2013 and Rule 12 (1) of the Companies (Management and Administration) Rules, 2014, a copy of Annual Return in Form MGT-7 is placed on the website of the Company as part of Company's Annual Report 2023-24.
SECRETARIAL STANDARDS
The Company has complied with all the applicable Secretarial Standards.
ACKNOWLEDGEMENT
Your Directors place on record their appreciation for the co-operation and support extended to the Company by its bankers. Your Directors also place on record their appreciation of the continued hard work put in by employees at all levels.