Board of Directors' Report of Nectar Life sciences Limited

Dear members,

The Directors have pleasure in presenting the 23^rd Annual Report together with the audited accounts of Nectar Life sciences Limited (‘NLL' or ‘Neclife' or ‘Nectar' or ‘the Company') for the financial year ended March 31, 2018.

Financial results

(Rs. in millions)

Company’s performance

The company's revenue during FY18 stood at Rs. 2092 Crores against Rs. 1744 Crores in previous year recording a strong growth of 20%. Finance cost decreased by 2% in this financial year to Rs. 115 Crores. Input cost has gone up significantly on the account of huge increase in the raw material costs which resulted into decrease in operational profit of the company for this financial year. The Profit After Tax has decreased by 6% as compared to last year due to high input costs and price erosion in the domestic market.

The financial results of the company for the quarter ended on June 30, 2017 are available on the website of the company (URL: www.neclife.com).

Indian Accounting Standards (IndAS) and Secretarial Standards

The company has adopted Indian Accounting Standards (Ind AS) prescribed under section 133 of the Companies Act, 2013, read with the relevant rules issued there under and accordingly, standalone and consolidated audited financial statements have been prepared in accordance with the recognition and measurement principles laid down in Ind AS 34 “Interim Financial Reporting” and the other accounting principles generally accepted in India.

The Company is in Compliance of Secretarial Standards as issued by Institute of Company Secretaries of India.

Management Discussion and Analysis Report

The details of the Company's various operations and state of affairs and nature of business are discussed under Management Discussion and Analysis Report. The Management Discussion and Analysis of financial condition and result of operations of the Company for the year under review as required under Securities & Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (“LODR Regulations”), is given as Annexure 1 and forms and part of this report.

Corporate Governance

The Company aimed to conduct its affairs in an ethical manner. A separate Report on Corporate Governance is given as Annexure 2 and forms and part of this report. A certificate from the Company’s Auditors regarding the Compliance of Conditions of Corporate Governance as stipulated under LODR Regulations is given in Annexure 3.

Share capital

The paid up equity share capital as on March 31, 2018 was Rs. 224.26 Millions. There was no public issue, rights issue, bonus issue or preferential issue, etc. during the year. The Company has not issued shares with differential voting rights, sweat equity shares, nor has it granted any stock options.

Global Depository Receipts (GDRs)

The Company has issued and allotted 46,000,000 equity shares of Rs. 1/- each underlying 46,000,000 Global Depository Receipts (GDRs). The GDRs are listed on:

Luxembourg Stock Exchange/ LuxSE Societe de la Bourse de Luxembourg S.A.

B.P 165, L-2011 Luxembourg Siege social, 11, av de la Porte-Neuve,

Telephone: (352) 47 79 36 - 1, Fax: (352) 47 32 98

Subsidiary companies

The company has a wholly owned subsidiaries namely Nectar Life sciences UK Limited, incorporated in United Kingdom and Nectar Life sciences US, LLC in United States. There are negligible investments in Nectar Life sciences UK Limited and no business activity has been carried out in it in financial year 2017-18 and till date in financial year 2018-19. Therefore, nothing is to report on the performance and financial position of Nectar Life sciences UK Limited.

However, the Nectar Life sciences US, LLC commenced the business operations of trading of pharmaceutical products. The company's gained the profit of US$ 10387.20 during the year under review as compared to profit of US$ 16077.72 during last year.

Pursuant to the provisions of Section 129(3) of the Companies Act, 2013 (hereinafter referred as ‘Act'), a statement containing salient features of financial statements of subsidiaries, associates and joint venture companies in Form AOC-1 is attached to the Financial Statements. The separate financial statements in respect of each of the subsidiary companies shall be kept open for inspection at the Registered Office of the Company during working hours for a period of 21 days before the date of the Annual General Meeting (AGM). Your Company will also make available these documents upon request by any Member of the Company interested in obtaining the same. The separate audited financial statements in respect of each of the subsidiary companies are also available on the website of your Company at www.neclife.com.

None of the subsidiaries is material as per Policy for determining Material Subsidiaries of the Company and LODR Regulations.

Consolidated financial Statements

As required under Section 129 of the Act and LODR Regulations, a consolidated financial statements for the year ended on March 31, 2018 of the Company are attached.

Dividend

Your Directors are pleased to recommend a Final Dividend @ 5% i.e. Re. 0.05/- per equity shares of face value of Re. 1/- each aggregating to Rs. 11,213,048.50 for the year ended 31st March, 2018. The final dividend, subject to the approval by the shareholders in the forthcoming Annual General Meeting and if declared, will be paid on or after October 3, 2017, to those members whose names appears in the register of members as on date of book closure. The register of members and the share transfer books of the Company will remain closed from September 22, 2018 to September 28, 2018 (Both days inclusive) for Annual General Meeting and payment of dividend, if declared, on equity shares.

Your Directors are not proposing to carry any amount to any reserve. Directors and Key Managerial Persons

Mr. Sanjiv Goyal (DIN - 00002841), Director will retire by rotation in the forthcoming Annual General Meeting and being eligible, offer himself for reappointment. The Board recommends his reappointment as a Director.

Dr. Dinesh Dua has been re-appointed as Whole time Director designated as Chief Executive Officer & Director by the Board of Directors in their meeting held on August 07, 2018 w.e.f. October 14, 2018 for a period of One year. The Board recommends his reappointment as a Whole time Director.

Pursuant to the provisions of Regulation 17A of LODR Regulations, approval of the members by way of a special resolution is required, effective from April 01, 2019, for appointment of a person who has attained the age of 75, as Non-Executive Director and to continue the existing tenure of a Non- Executive Director of a Company. Dr. (Maj. Gen.) Shamsher Singh Chauhan, VSM, Non-Executive Independent Director, has already attained the age of 75 years. Considering the amendment made to the LODR Regulations, the Board at its meeting held on August 07, 2018, on basis recommendation of the Nomination and Remuneration Committee, proposed seeking consent of the members by way of special resolution for continuation of office of directorship of Dr. (Maj. Gen.) Shamsher Singh Chauhan, VSM, in the Non-Executive Independent category, for the remaining period of current tenure of appointment. The Board recommends the special resolution for continuing him as a Director.

Mr. Vijay J. Shah (DIN - 00747226), an Independent Director of the Company, due to certain eventualities, had not attended all the meetings of the Board of Directors of the Company held during the period of twelve months from June 27, 2017 to June 27, 2018. Accordingly, in view of the provisions of Section 167(1)(b) of the Companies Act, 2013, his office of Director in the Company had become vacant on June 27, 2018 i.e. he was ceased to be director on that date. As per SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 (LODR Regulations), the ceased independent director has to be replaced by a new independent director by listed entity at the earliest but not later than the immediate next meeting of the board of directors or three months from the date of such vacancy, whichever is later.

Based on recommendation of Nomination and Remuneration Committee, the Board of Directors on August 07, 2018, appointed Mr. Vijay J. Shah as an Additional Director in the capacity of Independent Director and he vacates his office at the ensuing Annual General Meeting. The Nomination and Remuneration Committee also proposed to re-appoint him as regular independent director for a second term. The Board recommends the appointment of Mr. Vijay J. Shah as regular independent director for a period up to August 07, 2023 for a second term.

As on the date of this report, the company has right proportionate of Independent Directors viz a viz Non-Independent Directors as per applicable provisions of Section 149 of the Act, and LODR Regulations.

The Company has received declarations from all the Independent Directors of the Company confirming that they meet with the criteria of independence as prescribed both under sub-section (6) of Section 149 of the Act, and under LODR Regulations.

Mr. Sunder Lal ceases to be the Company Secretary of Nectar Life sciences Limited upon his superannuation and relieved with effect from June 26, 2017. Further, Mr. Suk winder Singh has been appointed as Company Secretary and Compliance Officer of the company from July 1, 2017 and has been elevated to some other department and ipso facto ceased to be a Company Secretary and Compliance Officer of the company w.e.f. November 08, 2017. Thereafter, in Board Meeting held on November 11, 2017, Ms. Ankita Jain has been appointed as Company Secretary and Compliance Officer of the company with effect from that date.

Pursuant to the provisions of Section 203 of the Act, the key managerial personnel of the Company as on March 31, 2018 are as under:

Mr. Sanjiv Goyal, Chairman & Managing Director

Mr. Dinesh Dua, Whole time Director designated as Chief Executive Officer & Director

Mr. Harparkash Singh Gill, Whole time Director designated as President (Operations) & Director

Mr. Sandeep Goel, Chief Financial Officer

Ms. Ankita Jain, Company Secretary

Number of meetings of the board

Six meetings of the board were held during the year. The details of Directors and meeting held during the financial year 2017-2018 are provided in Corporate Governance Report which forms and part of this report.

Directors’ responsibility statement

The Directors confirm that:

- in the preparation of the annual accounts, the applicable accounting standards have been followed and that no material departures have been made from the same;

- they 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 and of the profits of the Company for that period;

- 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;

- they have prepared the annual accounts on a going concern basis;

- they have laid down internal financial controls for the Company and such internal financial controls are adequate and operating effectively; and

- they have devised proper systems to ensure compliance with the provisions of all applicable laws and such systems are adequate and operating effectively.

Board evaluation

Pursuant to the provisions of the Act, and the corporate governance requirements as prescribed by LODR Regulations, the performance of the Board and committees was evaluated by the Board after seeking inputs from all the directors/ committee members on the basis of the criteria such as the Board/ committee composition and structure, effectiveness of board processes, information and functioning, etc.

The Board and the Nomination and Remuneration Committee (“NRC”) reviewed the performance of the individual directors on the basis of the criteria such as the contribution of the individual director to the Board and committee meetings like preparedness on the issues to be discussed, meaningful and constructive contribution and inputs in meetings, etc. In addition, the Chairman was also evaluated on the key aspects of his role.

In a separate meeting of independent Directors, performance of no independent directors, performance of the board as a whole and performance of the Chairman was evaluated. The same was discussed in the board meeting that followed the meeting of the independent Directors, at which the performance of the Board, its committees and individual directors was also discussed.

Policy on directors’ appointment and remuneration and other details

The Company's policy on directors' appointment and remuneration and other matters namely Nomination Remuneration and Evaluation Policy as provided in Section 178(3) of the Act has been uploaded on the website of the company at http://www.neclife.com/public/ uploads/1533716025839470625.pdf.

Committees of the Board

The Company constituted the Committees as per the provisions of Sections 177 and 178 of the Act and LODR Regulations. The composition, powers and duties of the Committees, during financial year 2016-17, are detailed out in the Corporate Governance Report. The Board of Directors accepted all recommendations of the Audit Committee.

Internal financial control systems and their adequacy

The company has adequate financial controls. The details in respect of internal financial control and their adequacy are included in the Management Discussion & Analysis, which forms part of this report.

Auditors and Auditors’ Report

M/s Ashwani K. Gupta & Associates, Chartered Accountants (ICAI Registration No. 003803N) were appointed as Statutory Auditors of your Company at the Annual General Meeting held on September 28, 2017 for a term of five consecutive years. In accordance with the Companies Amendment Act, 2017, enforced on 7th May, 2018 by the Ministry of Corporate Affairs, the appointment of Statutory Auditors is not required to be ratified at every Annual General Meeting.

The Report given by the Auditors on the financial statements of the Company is part of the Annual Report. There has been no qualification, reservation, adverse remark or disclaimer given by the Auditors in their Report.

Secretarial Auditor and Secretarial Audit Report

During the year, Secretarial Audit was carried out by Mr. Prince Chadha of P. Chadha & Associates., Practicing Company Secretary, the Secretarial Auditor of the company for the Financial Year 201718. There were no qualifications, reservation or adverse remarks given by Secretarial Auditors of the Company. The Secretarial Audit Report is appended as an Annexure 4 to this report.

However, there is a note on late submission of audited financial results for the year ended on March 31, 2018 by the Secretarial Auditor, which is self-explanatory. The company had submitted the audited financial results for the year ended on March 31, 2017 on June 27, 2017 which was 28 days after the prescribed period that was expired on May 30, 2017. National Stock Exchange of India Limited (NSE) and BSE Limited (BSE) had imposed fine on the company for late submission of said financial results. The company had deposited the fine along with service tax, wherever applicable, which was acknowledged by NSE and BSE. Since, the company has regularized the lapse by paying the fine; no more comments from Directors are required. The company has complied all other provisions of LODR Regulations.

Cost Records and Audit

The Company is required to maintain of cost records as specified by the Central Government under sub-section (1) of section 148 of the Companies Act, 2013 and accordingly such accounts and records are made and maintained.

The company has appointed Dr. Vimal Kumar (Membership No. 9982) prop. of M/s V. Kumar and Associates, SCO, 124-125, Sector 34A, Chandigarh, Cost and Works Accountants as the Cost Auditors of the Company for the financial year 2017-18.

The Cost Audit Reports for the financial year 2016-17 have been filed on October 7, 2017 being within 56 days of date of report i.e. August 12, 2017 with late filing fee. However, the last date of cost audit report was extended to December 31, 2017 by Ministry of Corporate Affairs vide circular dated December 04, 2017.

The Cost Auditor shall forward the Cost Audit Report for the financial year 2017-18 by September 30, 2018. The report will be filed with Ministry of Corporate Affairs within 30 days of date of Cost Audit Report.

Risk management

The development and implementation of risk management policy has been covered in the management discussion and analysis, which forms part of this report.

Though not mandatory, the Company has constituted a Risk Management Committee with Mr. Dinesh Dua as the Chairman and Mr. Harparkash Singh as a member to, inter-alia:

- to formulate and recommend to the Board, a Risk Management Policy which shall indicate the activities such as identification of risks and mitigation strategy thereof;

- to recommend the Board about risk assessment and minimization procedures ; and

- monitoring and reviewing of the risk management plan to the Board.

The audit committee has additional oversight in the area of financial risks and controls. Major risks identified by the businesses and functions are systematically addressed through mitigating actions on a continuing basis.

Particulars of loans, guarantees and investments

The company has not given any loan or provide guarantee as per Section 186 of the Act, however, the amount receivable from subsidiaries and the investments under section 186 of the Act are given in the Financial Statements forming part of the Annual Report.

Transactions with related parties

Information on transactions with related parties pursuant to Section 134(3)(h) of the Act read with rule 8(2) of the Companies (Accounts) Rules, 2014 are given in Annexure 5 in Form AOC-2 and the same forms part of this report.

Corporate social responsibility

The brief outline of the Corporate Social Responsibility (CSR) Policy of the Company and the initiatives undertaken by the Company on CSR activities during the year are set out in Annexure 6 of this report in the format prescribed in the Companies (Corporate Social Responsibility Policy) Rules, 2014. The policy is available on the website of the Company.

Extract of annual return

As provided under Section 92(3) of the Act, the extract of annual return is given in Annexure 7 in the prescribed Form MGT-9, which forms part of this report. The extract of annual return in MGT-9 and annual return in MGT-7 are also available on the website of the company at http://www.neclife.com/public/uploads/1533896433653228884.pdf and http://www.neclife.com/public/ uploads/15341562752035896430.pdf, respectively.

Employees

The information required under Section 197 of the Act read with rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is attached as Annexure 8. In terms of first proviso to Section 136 of the Act, the Report and Accounts are being sent to the Members and others entitled thereto, excluding the information on employees' particulars as required pursuant to provisions of Rule 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014. The said information is available for inspection by the Members at the Registered Office of the Company during business hours on working days of the Company up to the date of the ensuing AGM. If any Member is interested in obtaining a copy thereof, such Member may write to the Company Secretary in this regard.

Fixed deposits

During the year under Report, your Company did not accept any deposits from the public in terms the provisions of Companies Act, 2013.

Disclosure requirements

- As per LODR Regulations, corporate governance report with auditors' certificate thereon and management discussion and analysis are attached, which form part of this report.

- Details of the familiarization programme of the independent directors are available on the website of the Company (URL: www.neclife.com).

- Policy for determining material subsidiaries of the Company is available on the website of the Company (URL: www.neclife.com).

- Policy on dealing with related party transactions is available on the website of the Company (URL: www.neclife.com).

- The Whistle Blower Policy to provide Vigil Mechanism for employees including directors of the Company (URL: www.neclife.com).

Committee and Policy against Sexual Harassment at Workplace

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

The company has made the Anti-Sexual Harassment Policy under above referred Act for all individuals working for Nectar at all levels and grades, including senior executives, officers, employees (whether permanent, fixed-term or temporary), consultants, contractors, trainees, staff, casual workers, interns. As per policy any aggrieved woman employee who feels and is being sexually harassed directly or indirectly may make a complaint of the alleged incident to any member of the Committee constituted for this purpose.

No complaint of sexual harassment has been received from any women employee during the financial year ended on March 31, 2018.

Energy, technology and foreign exchange

The particulars relating to conservation of energy, technology absorption, foreign exchange earnings and outgo, as required to be disclosed under the Act, are provided in Annexure 9 to this Report.

Acknowledgement

Your Directors would like to express their sincere and grateful appreciation for the assistance and cooperation received from bankers and government authorities and also thank the shareholders for the confidence reposed by them in the Company and looks forward to their valuable support in the future plans of the Company.

Your Directors also thank its agents, the medical professionals and its customers for their continued patronage to the Company's products.

For and on behalf of the Board of Directors of

Nectar Lifesciences Limited

Dated : 07-08-2018 (Sanjiv Goyal)

Place : Chandigarh Chairman and Managing Director