To the Members,

The Directors have pleasure in presenting their 28^th Annual Report on the business and operations of the Company for the Financial Year ended March 31, 2018.

1. Financial summary and Performance of the Company Rs. Lakhs

2. Dividend & Transfer to Reserves

In view of the operating losses, no dividend is considered during the year under review and no amount is transferred to reserves.

3. Brief description of the Company's working during the year

The net sales during the year under review was Rs. 4479.71 lakhs as compared to Rs. 3489.81 lakhs during the previous year, a growth of 28.36%. The net loss before tax during the current year was Rs. 980.30 lakhs as against the loss of Rs.1091.70 lakhs during the previous year, a decrease in loss by 10.20%. The export supplies to US Market was higher during the year for the two products resulting in increase in the sales turnover. However, the Company has not yet achieved the break-even level of sales and still reporting a net loss of Rs. 989.54 lakhs. The Management expects to achieve the break-even sales during the current financial year.

Your Directors are pleased to inform that USFDA Regulatory authorities inspected the Manufacturing Plant during November 2017 and the Inspection was successful. The Company expects the approval of few more products in the near future and expect a reasonable increase in the sales and turnaround in the operations during the current year.

In order to cater to the export US Market on approval of more ANDA's, the Company proposes to set-up additional capacities for injectable and ophthalmic products during the current financial year at a cost of ^85 crores. The Management expects to fund this capital expenditure through borrowings temporarily.

4. Material changes and commitments affecting the financial position between the end of the financial year and date of report.

i. The Promoters of the Company have made a proposal to delist the equity shares of the Company from the Stock Exchange in compliance with SEBI (Delisting of Equity Shares) Regulations, 2009 and the Board of Directors of the Company at their meeting held on April 26, 2018 appointed Arihant Capital Markets Limited as Merchant bankers for conducting due diligence pursuant to Regulation 8(1A) of the SEBI Delisting Regulations. The proposal of delisting of equity shares of the company is subject to approval of shareholders.

ii. The Board of Directors have approved the proposal to effect slump sale of the pharmaceutical business undertaking of the Company to Par Formulations Pvt. Ltd., subject to all requisite approvals, specially shareholders' approval and also subject to the successful completion of the delisting of equity shares by the Promoters.

iii. The Board of Directors have also approved a proposal to increase the borrowing limits of the Company upto Rs.130 crores subject to the approval of the shareholders for meeting the Capital Expenditure and working capital requirements of the Company.

4. The Company during the year has not provided any loans, guarantees or investments in terms section 186 of the Companies Act 2013.

5. There are no material orders by any Regulators, or Courts or Tribunals during the year impacting the going concern status and company's operations in future.

6. The Company has no subsidiaries. The company has investments in an Associate Company (Medispec Pharmaceutics Pvt. Ltd.) whose net worth has completely eroded and the investment in the Associate Company and the amount due from it has been fully provided for in the Books of the Company. The associate company has ceased to carry on any business since last three years and is now defunct and therefore the Company is not expecting any economic benefits from it. As the Company has no other subsidiary or associates, the present standalone financial statement represent the consolidated financial statement required to be prepared as per Schedule III of the Companies Act, 2013.

7. Details in respect of adequacy of internal financial controls with reference to the Financial Statements.

The Company has adopted the policies and procedures for ensuring the orderly and efficient conduct of its business including adherence to the Company's policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records and the timely preparation of reliable financial disclosures.

8. Fixed Deposits

The details relating to deposits, covered under Chapter V of the Companies Act, 2013:

a. accepted during the year; : Nil

b. remained unpaid or unclaimed as at the end of the year; : N.A.

c. whether there has been any default in repayment of deposits : N.A.

or payment of interest thereon during the year and if so,

number of such cases and the total amount involved-

d. at the beginning of the year; : Nil

e. maximum during the year; : N.A.

f. at the end of the year; : Nil

The Company has not accepted or renewed any deposits during the year which are not in compliance with the requirements of Chapter V of the Act.

9. Share Capital

During the year the Company has not issued any (i) equity shares with differential rights,

(ii) Sweat Equity Shares (iii) Employee Stock Options and (iv) the company has not provided money for purchase of its own shares by employees or by trustees for the benefit of employees.

10. Directors:

A. Changes in Directors and Key Managerial Personnel

Sri.S.Jayaprakash Mady, Managing Director resigned as the Managing Director of the Company and was relieved as the Managing Director on 29.05.2017. However Mr.S.Jayaprakash Mady continues to be a non-executive Director on the Board.

Sri.S.T.R.Mady, Chairman and Director retires by rotation and being eligible offers himself for re-appointment.

Mr.R.A.Thirumoorti and Mrs.Kavitha Krishnamoorthy, Independent Directors on the Board resigned on 11.08.2017.

Dr.K.Paranhothy and Ms.K.M.Ganga were appointed as Additional Directors (Independent) on the Board on 27.07.2017.

B. Declaration by Independent Director (s):

The Company has received necessary declaration from each independent director under Section 149 (7) of the Companies Act, 2013 that he/she meets the criteria of independence laid down in Section 149(6) of the Companies Act 2013.

C. Policy on Directors' appointment and remuneration:

The Company's policy is to have an appropriate mix of executive and independent Directors to maintain the independence of the Board, and separate its functions of governance and management. As on March 31, 2018, the Board consists of 5 Members and all are nonexecutive Directors and three are independent directors.

D. Formal Annual Evaluation

The Board evaluates the effectiveness of its functioning and that of the Committees and of individual Directors by seeking their inputs on various aspects of Board proceedings. This would cover the active participation of Directors at the Board and Committee meetings, monitoring of corporate governance practices and participation in the long-term strategic planning of the Company.

The Chairman of the board interacted with all the Independent Directors to obtain Directors' inputs on effectiveness of Board/Committee processes and the Board considered and discussed the inputs received from the Directors. Further Independent Directors at their meeting, reviewed the performance of Board, Chairman and NonExecutive Directors.

11. The Board met six times during the financial year, the details of which are provided in the Corporate Governance Report that forms part of this Annual Report. The intervening gap between any two meetings was within the period prescribed by the Companies Act 2013.

12. Audit Committee - The Board has constituted an Audit Committee as required under Section 177 of the Companies Act 2013 and under the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015. The composition of the Audit Committee is as under:

Mr.Arun Eashwar - Chairman (Independent and non-executive Director)

Dr.K.Paranjothy - Member (Independent and non-executive Director)

Ms.K.M.Ganga - Member (Independent and non-executive Director)

Mr.S.T.R.Mady - Member (Non-executive Chairman)

The Company has established a vigil mechanism (Whistle Blower policy & Vigil Mechanism) for Directors and employees to report concerns of unethical behaviour, actual or suspected, fraud or violation of the Company's code of conduct. The Whistle Blower Policy & Vigil Mechanism is disclosed on the Company's website.

13. Nomination and Remuneration Committee and Stakeholders Relationship Committee

The Board has constituted a Nomination and Remuneration Committee. This Committee consists of four non-executive Directors and three of them are Independent Directors. The Chairman of the Committee is an Independent Director. The role of the Committee is to identify persons who are qualified to become Directors, recommend to the Board their appointment. The Committee also recommends to the Board a policy relating to the remuneration for the Directors and Key Managerial personnel. As part of the policy Company strives to ensure that

(i) the level and composition of remuneration is reasonable and sufficient to attract, retain and motivate senior management personnel required to run the operations successfully and (ii) remuneration is commensurate with the performance and efficiency and meets performance benchmarks. The Committee has been now entrusted with the responsibility of administering the ESOP Scheme which was approved by the shareholders and for which in-principle approval of the Stock Exchange has been received. However, the Committee has not allotted any ESOPs to the employees during the year 2017-18.

The Stakeholders Relationship Committee constituted by the Board reviews and ensures redressal of investor grievances. The Committee consists of four non-executive directors and the Chairman of the Committee is an Independent Director.

14. During the year the Company has not given any loans (other than loans to employees as per the policy of the Company), Guarantee, Security, Investments under section 186 of the Companies Act 2013.

15. Managerial Remuneration:

A. Details of the ratio of the remuneration of each director to the median employee's remuneration and other details as required pursuant to Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014.

i. Ratio of the remuneration of Manager to the median remuneration of employees of the Company for the financial year - 01: 0.045

ii. Percentage of increase in the remuneration of:

a. Manager/C.O.O -23%

b. Company Secretary - 10 %

c. Chief Financial Officer - 15 %

d. Median Employee -17%

e. No. of employees on the rolls - 334

f. Average increase made in salaries of employees other than KMP - 16%

The remuneration is as per the remuneration policy of the Company.

B. There was no employee employed during the year or part of the year drawing remuneration in excess of the limits specified under Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014.

C. Corporate Governance - Pursuant to Clause 49 of the Listing Agreement with the Stock Exchange, a Management Discussion and Analysis statement, Corporate Governance Report and Auditors' Certificate on the compliance of conditions of Corporate Governance forms part of the Annual Report.

16. Particulars of contracts or arrangements with related parties:

The particulars of contract or arrangements entered into by the Company with related parties referred to in sub-section (1) of section 188 of the Companies Act, 2013 including certain arm's length transactions under third proviso thereto in the prescribed form AOC-2 is appended to the Board's report.

17. Statutory Auditors - M/s.Ramadhyani & Co LLP, Chartered Accountants (Firm Registration No.002878S/S200021) were appointed as the Statutory Auditors of the Company for a term of 5 years from the conclusion of 27^th Annual General Meeting by the shareholders of the Company during the previous AGM held on 10.08.2017.

18. Secretarial Auditor- Parameshwar G Hegde, Practicing Company Secretary has been appointed to conduct the secretarial audit of the Company for the financial year 2017-18 as required under Section 204 of the Companies Act, 2013. The Secretarial Audit Report for FY 2017-18 is annexed to the Board's Report and forms part of the Annual Report.

19. Extract of the annual return - In accordance with the provisions of Section 134(3) (a) of the Companies Act, 2013, extract of the annual return in the prescribed format is enclosed to the Board's Report.

20. Conservation of energy, technology absorption and foreign exchange earnings and outgo.

The details of conservation of energy, technology absorption, foreign exchange earnings and outgo are as follows:

(A) Conservation of energy:

(i) The steps taken and its impact on conservation of energy;

- Installation of Automatic power factor correction panel.

- Steam condensate recovery with insulated pipelines.

- Rain water harvesting.

- Recycling of purified water from process machineries as infeed water to boiler.

(ii) The steps taken by the company for utilising alternate sources of energy;

- Installation of Bricket fired Boilers which is environmental friendly and uses brickets (agricultural by-product) as fuel instead of Diesel or Furnace Oil.

- Energy efficient motors for Air Handling Units.

(iii) The capital investment on energy conservation equipment: Nil

(B)Technology absorption:

(i) the efforts made towards technology absorption;

- Formulation development activities for Export market i.e., USA is carried out. ANDA for 9 products developed in house were filed for USA market during last year by our customer.

- ANDA for 4 products developed in house will be filed shortly for USA market.

- 4 products developed in house are ready for execution of exhibit batches for USA market.

- 7 products got USFDA approval and commercialised.

(ii) the benefits derived like product improvement, cost reduction, product development or import substitution;

- More Foreign Exchange revenue since the products are developed for export market.

- After approval of dossiers from respective Regulatory Agencies, regular commercial supplies is expected and ensure good growth in export business.

- Technical capability of the personnel strengthened to handle additional products.

(iii) in case of imported technology (imported during the last three years reckoned from the beginning of the financial year)-

- the details of technology imported : Nil

- the year of import : N.A.

- whether the technology been fully absorbed : N.A.

- if not fully absorbed, areas where absorption has not : N.A.

taken place, and the reasons thereof; and

(iv) the expenditure incurred on R & D Rs. 886.91 lakhs

(C) Foreign exchange earnings and Outgo:

Foreign Exchange Earnings : Rs. 3889.56 Lakhs

Foreign Exchange Outflows : Rs. 240.93 Lakhs

21. Directors' Responsibility Statement

The Directors' Responsibility Statement referred to in clause (c) of sub-section (3) of Section 134 of the Companies Act, 2013, state that—

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

b. the 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, of the profit and loss and cash-flow of the company for that period;

c. the directors 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;

d. the directors have prepared the annual accounts on a going concern basis;

e. the directors have laid down internal financial controls to be followed by the company and that such internal financial controls are adequate and are operating effectively and

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

22. Acknowledgements

The Board places on record its appreciation of the continued cooperation and support received from the various government authorities, shareholders, business associates, medical profession, employees and bankers.

For and on behalf of the Board of Directors

Date : 23^rd May, 2018 (S.T.R.MADY)

Place : Bengaluru. Chairman