Directors Report of SMS Pharmaceuticals Ltd.

Mar 31, 2025

The Directors are pleased to present the 37^th Annual Report of SMS Pharmaceuticals Limited ("The Company”) along with the Audited
Financial Statements for the Financial Year ended 31^st March, 2025. The Consolidated performance of the Company has been referred
to wherever required.

FINANCIAL SUMMARY

The Audited Financial Statements of your Company as on 31^st March, 2025, are prepared in accordance with the relevant applicable Indian
Accounting Standards ("Ind AS”) and Regulation 33 of the Securities and Exchange Board of India (Listing Obligations and Disclosure
Requirements) Regulations, 2015 ("SEBI Listing Regulations”) and the provisions of the Companies Act, 2013 ("Act”).

The summarized financial highlight is depicted below:

Particulars	Standalone		Consolidated
	2024-25	2023-24	2024-25	2023-24
Gross Sales	82,392.24	73,406.91	82,392.24	73,406.91
Net Sales	77,191.14	69,232.52	77,191.14	69,232.52
Income from Services	736.26	1,413.13	736.26	1,413.13
Other Operating Income	347.41	280.69	347.41	280.69
Net Revenue from Operations	78,274.81	70,926.34	78,274.81	70,926.34
Other Income	622.44	445.97	622.44	445.97
EBIDTA	14619.87	12130.42	14,521.57	12,107.93
Finance Charges	1854.09	2345.68	1,854.09	2,345.68
Depreciation	3433.73	3151.57	3,433.73	3,151.57
Profit Before Tax	9332.05	6633.17	9233.75	6,610.68
Taxation	2493.93	1690.68	2,493.93	1,690.68
Profit After Tax	6838.12	4942.49	6913.50	4982.60
Earnings per share - Basic/Diluted(Rs)	8.07	5.84	8.16	5.89

STATEMENT OF AFFAIRS AND COMPANY''S
PERFORMANCE

Financial & Production Performance

During the FY 2024-25 the Company had achieved production of
3,097.24 M.T. of APIs and their Intermediates in comparison with
2,247.88 M.T. for the previous FY 2023-24.

During the FY 2024-25 the Company recorded the net sales of
H 77,191.14 Lakhs as against H 69,232.52 Lakhs for the previous
FY 2023-24. The Company has recorded EPS of H 8.07 in the
FY 2024-25 as against H 5.84 for the previous FY 2023-24.

Subsidiaries and Associates

Your Company is having an Associate Company i.e., "VKT Pharma
Private Limited”. Your Company holds 34.83% of equity shares
in the said Associate Company during the Financial Year ended
31^st March, 2025 and the share of profit for your Company for the
Financial Year 2024-25 was H 173.68 lakhs.

Your Company is having a subsidiary Company i.e., "SMS
Peptides Private Limited” incorporated on November 01, 2024.
Your Company holds 93.00% equity shares in the said subsidiary
Company during the Financial Year ended 31^st March, 2025 and
the share of Loss for your Company for the Financial Year 2024-25
was H 0.78 lakhs.

Your Company has incorporated a Joint Venture (JV) in Spain in
the year 2021 with nomenclature of "CHEMO SMS ENTERPRISES
SL'' in the capital ratio of 55:45 with a share of 45% contributed
by your Company.

There were no transactions during the reporting period, however,
all the JV product sales were routed directly from your Company
to the end customers during the reporting period as per JV
manufacturing arrangement.

The consolidated financial statements had been prepared as
per Accounting Standard (AS) 23 "Accounting for Investment in

Associates in Consolidated Financial Statements” specified under
Section 133 of Companies Act, 2013 for considering the financials
of Associate Company. The required form, as per the provisions of
the Sec. 129(3) read with Rule 5 of Companies (Accounts) Rules,
2014 i.e., Form AOC-1 forms part of the Report as Annexure 1.

CHANGE IN NATURE OF BUSINESS

As per the requirements of Rule 8 (5) (ii) of Companies (Accounts)
Rules, 2014, your Board of Directors specify that, there is no
significant change in the nature of business of the Company
during the financial year under review.

TRANSFER TO RESERVES

During the year, Your Company has transferred an amount of
H1000.00 Lakhs to General Reserve out of the amounts available
for appropriations.

DIVIDEND

Your Directors have pleasure in recommending the dividend of Re.

0.40 (i.e. 40%) per equity share of Re. 1/- face value, aggregating
to H3,54,60,812/- (Rupees Three Corers Fifty Four Lakhs Sixty
Thousand Eight Hundred and Twelve only) which shall be paid
within 30 days after the conclusion of the Annual General Meeting,
subject to the approval of the shareholders of the Company.
Payment of dividend to members will be subject to tax deduction
at source (TDS) as per statutory requirement.

Pursuant to Regulation 43A of the SEBI (Listing Obligations
and Disclosure Requirements) Regulations, 2015, the Board of
Directors of the Company have adopted a Dividend Distribution
Policy. The policy lays down a broad framework and factors which
the Board considers for deciding the distribution of dividend to
its shareholders. The said policy is available on the Company''s
website https://smspharma.com/wp-content/uploads/2022/08/
Dividend-Distribution-policy.pdf

DIRECTORS AND KEY MANAGERIAL PERSONNEL

During the year under review, the Company has key changes in its
Directors and Key Managerial Personnel.

(i) Appointment:

During FY 2024-25, pursuant to the recommendation
of the Nomination & Remuneration Committee and
approval of the Board:

a. Dr. Suresh Kumar Gangavarapu (DIN: 00183128) was
appointed as an Independent Director of the Company
for a term of Five consecutive years from 12^th August,
2024 to 11^th August, 2029.

b. Mrs. Shanti Sree Bolleni (DIN: 07092258) was appointed
as an Independent Director (Women Director) of the
Company for a term of Five consecutive years from 12^th
August, 2024 to 11^th August, 2029.

c. Mr. Trilok Potluri (DIN: 07634613) was appointed as
a Non-Executive Non Independent Director of the
Company w.e.f. 12^th August, 2024.

d. Dr. Sunkara Venkata Satya Shiva Prasad (DIN: 10404277)
was appointed as a Non-Executive Non Independent
Director of the Company w.e.f. 12^th August, 2024.

The aforementioned appointments were further approved by
the Shareholders at the Annual General Meeting held on 30^th
September, 2024.

(ii) Re-appointment:

On the recommendation of Nomination and Remuneration
Committee, the Board of Directors at their meeting held on
1^st July, 2025 has re-appointed Mr. Vamsi Krishna Potluri
(DIN: 06956498) as a Whole-Time Director designated
as Executive Director of the Company for a second term
of Three Years (3) with effect from 1^st July, 2025 to 30^th
June, 2028, subject to the approval of the members at
the ensuing AGM.

(iii) Term Completion/ Retirement:

a. Mr. Sarath Kumar Pakalapati (DIN: 01456746) has
retired as an Independent Director of the Company on
account of completion of his second and final term
w.e.f. close of business hours on 11^th August 2024.

b. Mrs. Neelaveni Thummala (DIN: 00065571), has retired
as an Independent Director of the Company on account
of completion of her second and final term w.e.f. close
of business hours on 11^th August 2024.

(iv) Retirement by rotation:

In accordance with the provisions of section 152(6) of the Act
and in terms of the Articles of Association of the Company,
Mr. Trilok Potluri (DIN: 07634613), Non-Executive Non
Independent Director, will retire by rotation at the ensuing
Annual General Meeting and being eligible, offers himself for
re-appointment. The Board recommends his re-appointment.

(v) Declaration of Independence:

The Company has received declarations of independence
from the Independent Directors as stipulated under
Section 149 (7) of the Companies Act, 2013, that each
Independent Director meets the criteria of Independence
laid down in the Section 149 (6) of the Companies Act,
2013 and Regulation 16(1)(b) of SEBI (Listing Obligations
and Disclosure Requirements), Regulations, 2015. All the
Independent Directors of the Company have enrolled in
the Independent Director databank maintained by Indian
Institute of Corporate Affairs (IICA) as per Companies
(Creation and Maintenance of databank of Independent
Directors) Rules, 2019.

MANAGEMENT DISCUSSION & ANALYSIS

Pursuant to Regulation 34 of the SEBI (Listing Obligations and
Disclosure Requirements) Regulations, 2015 (''Listing Regulations''),
the Management Discussion and Analysis is presented in a
separate section forming part of this Annual Report for the year
ended 31^st March, 2025, as required under the provisions of the
Listing Regulations.

SHARE CAPITAL
Equity Share Capital:

During the year under review, the authorized share capital remained
unchanged at H 12,00,00,000/- divided into 12,00,00,000 equity
shares of H 1/- each. However, the paid-up share capital changed
from H8,46,520,300 to H 8,86,52,030/- comprising 8,86,52,030
equity shares of H 1/- each, consequent to the conversion of
40,00,000 warrants into 40,00,000 equity shares on 27^th March,
2025. A report on the same i.e., ''Equity Buildup Report'' forms part
of this report as Annexure - 2.

Listing of shares: Equity shares of the Company are listed in
National Stock Exchange of India (NSE) and BSE Limited (BSE)
with effect from 28^th February, 2007. [Listing fees has been paid
for the year 2025-26 to both the Exchanges].

Conversion of Warrants into Equity Shares issued on a
private placement basis

Pursuant to the approval accorded by the members, at their Extra¬
Ordinary General Meeting held on 06^th March, 2023 the Securities
Allotment Committee of Board of Directors passed resolution
on 19^th March, 2024 for allotment of 90,00,000 (Ninety Lakh)
Convertible Warrants at an issue price of H127/- each Warrant
aggregating up to H114,30,00,000/- to promoters/promoters group
of the Company, upon receipt of upfront money of 25% of issue
price i.e., H31.75/- per warrant aggregating to H28,57,50,000/-.

During the financial year, the Company received the balance
75% of the issue price (i.e., H95.25 per warrant) aggregating to
H 38,10,00,000/- from two allottees holding 40,00,000 convertible
warrants. On 27 March 2025, the Securities Allotment Committee
converted these warrants into 40,00,000 equity shares of H1/-
each, in accordance with SEBI (ICDR) Regulations, 2018.

The Company duly submitted the required filings with the Ministry
of Corporate Affairs and submitted the documents for listing and
trading approvals with both the National Stock Exchange of India
Limited and BSE Limited.

On 17^th June, 2025, the Company received trading approvals from
the stock exchanges for the 40,00,000 equity shares.

As a result, 50,00,000 out of the original 90,00,000 convertible
warrants (issued on 19 March 2024) remain pending for conversion.

MATERIAL CHANGES AND COMMITMENTS,
AFFECTING THE FINANCIAL POSITION OF THE
COMPANY:

There are no material changes and commitments which affect the
financial position of the Company that have occurred between the
end of the financial year to which the financial statements relate
and the date of this report.

EVALUATION OF PERFORMANCE OF BOARD OF
DIRECTORS:

The Company believes in creating value for its stakeholders
through strong corporate governance practices. Pursuant to the
provisions of the Companies Act, 2013 and the SEBI (Listing
Obligations and Disclosure Requirements) Regulations, 2015,
the formal annual evaluation of the performance of the Board
as well as non-independent directors was undertaken by the
Nomination and Remuneration Committee. The performance of
Board Committees and of individual independent directors was
undertaken by the Board members.

The Board evaluation was conducted through a structured
questionnaire designed based on the criteria for evaluation laid
down by the Nomination and Remuneration Committee as per the
Guidance Note on Board Evaluation issued by the Securities and
Exchange Board of India.

Your Company had conducted two separate Meetings of
Independent Directors during the year on 05^th August, 2024 and
12^th February, 2025 in which they had evaluated the Performance of
Non Independent Directors and the Board as a whole, performance
of the Chairperson of the company, taking into account the views
of executive directors and non-executive directors. Further, at the
Board meeting held on 12^th February, 2025 the performance of the
Board, its committees, and individual directors was also discussed.
The evaluation had been made based on specified standards.

FAMILIARIZATION PROGRAMMES FOR INDEPENDENT
DIRECTORS:

Your Company has a strong induction process that enables
newly appointed Directors to familiarise them with the Company,
management, operations and pharmaceutical industry. All the
directors are made aware of their roles and duties at the time
of their appointment/re-appointment through a formal letter of
appointment which also stipulates other terms and conditions
of their appointment. The Directors are provided with all the
documents to enable them to have a better understanding
of the Company, its various operations, and the industry in
which it operates.

The Company has put in place a systematic familiarisation
program to deepen Directors understanding of the Company''s
business, governance framework, strategic priorities, and risk
landscape. Independent Directors, in particular, are introduced
to their roles, rights, and responsibilities, the business model,
operational context, and broader market environment. The
Company also offers access to relevant external programs and
workshops for further development.

The Board members are periodically updated in its meetings on
topics such as industry trends, corporate performance, operational
strategy, compliance frameworks, governance developments, and
emerging risks and opportunities. These sessions encourage
active discussion and gather Directors'' input on strategic
directions and business initiatives.

The details of these familiarization programs have been placed
on the Company''s website at https://smspharma.com/investor-
relations/download/

COMMITTEES OF THE BOARD:

The Board of Directors has the following Committees:

1. Audit Committee

2. Nomination and Remuneration Committee

3. Stakeholders'' Relationship Committee

4. Corporate Social Responsibility Committee

5. Risk Management Committee

6. Securities Allotment Committee

The details of all the above Committees (except for Risk
Management Committee) along with their composition, number of
meetings and attendance at the meetings are provided in detail in
the Corporate Governance Report annexed to this Board''s Report.

RISK MANAGEMENT POLICY:

The Risk Management Committee of the Company have the
following Directors:

Mr. Ramesh Babu Potluri - Chairman
Mr. Vamsi Krishna Potluri - Member
Mr. Shravan Kudaravalli - Member.

The Committee created a Risk Management Policy to handle
various risks faced during the company''s daily operations. This
policy details different types of risks and the measures the
Board should take to lessen them. The company has strong
internal controls and procedures to combat these risks. The
Audit Committee and the Board of Directors review these risk
management procedures every quarter when they examine the
company''s financial results.

Brief description of terms of reference of the Committee, inter alia,

includes the following:

• managing and monitoring the implementation of action
plans developed to address material business risks within
the Company and its business units, and regularly reviewing
the progress of action plans;

• setting up internal processes and systems to control the
implementation of action plans;

• regularly monitoring and evaluating the performance of
management in managing risk;

• providing management and employees with the necessary
tools and resources to identify and manage risks;

• regularly reviewing and updating the current list of material
business risks;

• regularly reporting to the Board on the status of material
business risks;

• review and monitor cyber security; and

• Ensuring compliance with regulatory requirements and best
practices with respect to risk management.

DIRECTORS'' RESPONSIBILITY STATEMENT

Pursuant to the provisions of Section 134(3)(c) of the Companies

Act, 2013 as amended, the Board of Directors confirm that:

1. in the preparation of the Financial Statements for the year
ended 31^st March, 2025 the applicable accounting standards
had been followed along with proper explanation relating to
material departures, if any.

2. they had selected such accounting policies as notified &
modified by ICAI 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 profit and
loss of the Company for that period;

3. they had taken proper and sufficient care for the maintenance
of adequate accounting records in accordance with the
provisions of the Companies Act, 2013, as amended from
time to time for safeguarding the assets of the Company and
for preventing and detecting fraud and other irregularities;

4. the Annual Accounts had been prepared on
going concern basis.

5. the Company has developed an effective mechanism for
internal financial controls to be followed by the Company
consistently and that such internal financial controls are
adequate and operating effectively;

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

THE CRITERIA FOR APPOINTMENT OF DIRECTORS,
KMP AND SENIOR MANAGEMENT

A person for appointment as Director, KMP or in senior
management should possess adequate qualifications, expertise
and experience for the position considered for appointment.
The Nomination and Remuneration Committee decides whether
qualification, expertise and experience possessed by a person are
sufficient for the concerned position. The Committee ascertains
the credentials and integrity of the person for appointment as
Director, KMP or senior management level and recommends to
the Board his/ her appointment.

The Committee, while identifying suitable persons for appointment
to the Board, will consider candidates on merit against objective
criteria and with due regard for the benefits of diversity on the Board.

The Nomination and Remuneration Committee shall assess
the independence of directors at the time of appointment, re¬
appointment and the Board shall assess the same annually. The
Board shall re-assess determination of independence when any
new interests or relationships are disclosed by a Director.

The criterion of independence is as prescribed in the Act and the
listing regulations and the Independent Directors shall abide by
the Code specified for them in Schedule IV of the Act.

The Nomination and Remuneration Committee has the criteria for
appointing any Key Managerial Personnel (KMP) and nominating
directors on the Board. The appointment of any KMP is made
by the Nomination and Remuneration Committee based on
the requirement of the position and experience and skill sets of
the candidate.

COMPOSITION & NUMBER OF MEETINGS OF THE
BOARD AND AUDIT COMMITTEE

During the year under review, four (4) Board Meetings and four (4)
Audit Committee Meetings were duly convened and held. Detailed
information regarding these meetings is provided in the Corporate
Governance Report, which forms an integral part of this Report.
The intervals between the meetings were in compliance with the
timelines prescribed under the Companies Act, 2013, and the
Listing Regulations.

ANNUAL RETURN

The Annual Return of the Company as on 31^st March, 2025, in
terms of the provisions of Section 92(3) and 134(3)(a) of the Act,
2013 is available on the Company''s website: https://smspharma.
com/annual-report/

CORPORATE GOVERNANCE

A separate section on Corporate Governance standards followed
by your Company, as stipulated under Schedule V of the SEBI
(LODR) Regulations, 2015, which is forming part of this report.
The requisite certificate from M/s. Suryanarayana & Suresh,
Chartered Accountants, confirming the compliance with the
conditions of Corporate Governance is annexed to the Report on
Corporate Governance.

BUSINESS RESPONSIBILITY AND SUSTAINABILITY
REPORT (BRSR)

The ''Business Responsibility and Sustainability Report'' (BRSR) of
your Company for the year ended 31^st March, 2025, forms part of
this Annual Report as required under Regulation 34 (2) (f) of the SEBI
(Listing Obligations and Disclosure Requirements) Regulations,
2015 is available as a separate section in this Annual Report.

VIGIL MECHANISM / WHISTLE BLOWER POLICY:

The Company has established a Vigil Mechanism and adopted
a Whistle Blower Policy to enable Directors and employees to
report concerns regarding unethical behavior, actual or suspected
fraud, or any violation of the Company''s Code of Conduct or
Ethics Policy. The Policy ensures that all reported matters are
investigated in a fair and unbiased manner, and appropriate
corrective actions are taken to uphold the highest standards of
ethical and professional conduct.

The mechanism also includes safeguards to protect
whistleblowers from any form of retaliation or victimization and
provides for direct access to the Chairman of the Audit Committee
in exceptional circumstances.

During the year under review, the Company did not receive any
complaints, disclosures, or concerns under the Vigil Mechanism.
The Whistle Blower Policy is available on the Company''s website at
https://smspharma.com/company-announcements/downloads/

DEPOSITS

The Company has not accepted any deposits from the public
within the purview of Chapter V of the Companies Act, 2013.
Hence, no amount on account of principal or interest on public
deposits was outstanding as on the date of the balance sheet.

LOANS, GUARANTEES AND INVESTMENTS

Particulars of Loans, guarantees and investments covered under
Section 186 of the Companies Act, 2013 form part of the Notes to
the Financial Statements provided in this Annual Report.

RELATED PARTY TRANSACTIONS

All related party transactions that were entered by the Company
during the financial year 2024-25 with related parties were in the

ordinary course of business and on an arm''s length basis and are
in compliance with the provisions of the Companies Act, 2013
and the SEBI (Listing Obligations & Disclosure Requirements)
Regulations, 2015. There are no materially significant related party
transactions made by the Company with Promoters, Directors and
Key Managerial Personnel, etc., which may have potential conflict
with the interest of the Company. All related party transactions
are presented to the Audit Committee on quarterly basis and were
also placed before the Board.

A statement of all Related Party Transactions is being presented
before the Audit Committee on Quarterly basis specifying the
nature, value and terms and conditions of the transactions. A
Policy on Related Party Transactions approved by the Board
is uploaded on the Company''s website at the web link https://
smspharma.com/wp-content/uploads/2024/11/updated-Policy-
on-Related-Party-Transactions-08.11.2024.pdf

The particulars of contracts or arrangements entered into by the
Company with related parties referred to in Section 188(1) are kept
by the Company in Statutory Form AOC-2. Further details required
to disclose as per Accounting Standard form part of the notes to
the financial statements provided in the annual report. The Form
AOC-2 is attached to the Report as Annexure - 3.

CORPORATE SOCIAL RESPONSIBILITY

Pursuant to the provisions of Section 135 of the Companies Act,

2013, read with the Companies (Corporate Social Responsibility
Policy) Rules, 2014, the Company has duly constituted a Corporate
Social Responsibility (CSR) Committee.

A brief overview of the Company''s CSR Policy, details of the
CSR Committee, and the initiatives undertaken by the Company
during the financial year are provided in Annexure-4 to this
Report, in the format prescribed under the Companies (Corporate
Social Responsibility Policy) Rules, 2014.The CSR Policy of the
Company is also available on the Company''s website at: https://
smspharma.com/wp-content/uploads/2025/02/Corporate-
Social-Responsibility-Policy.pdf

PARTICULARS OF EMPLOYEES

In accordance with the provisions 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, the requisite disclosures pertaining to remuneration and
other relevant details are provided in the ''Employees Remuneration
Report'', which forms an integral part of this Report and is annexed
herewith as Annexure - 5.

Further, the statement containing particulars of employees as
required under Section 197(12) of the Act, read with Rules 5(2)
and 5(3) of the said Rules, has not been included in this Report.
However, in terms of the provisions of Section 136 of the Act,
the said statement is available for inspection by members. Any
member desirous of obtaining a copy of the same may make a

written request by sending an email to the Company Secretary at
[e-mail]

PREVENTION OF INSIDER TRADING

To ensure compliance with the SEBI (Prohibition of Insider Trading)
Regulations, 2015, the Company has adopted a comprehensive
Insider Trading Policy aimed at regulating, monitoring, and
reporting trading activities by designated persons. This Policy
encompasses detailed procedures for the fair disclosure of
unpublished price-sensitive information, along with provisions
for initial and continual disclosures, in accordance with the
applicable regulatory framework. The Board periodically reviews
the Policy, as and when required. The Policy is available on the
Company''s website at: https://smspharma.com/company-
announcements/downloads/

The Company undertakes various initiatives to educate and
sensitize its employees regarding the provisions of the Insider
Trading Code. These include the periodic dissemination of
informative communications on the prevention of insider trading,
guidelines outlining Do''s and Don''ts, notifications regarding the
closure of trading windows, and timely clarifications provided to
designated persons. Such initiatives have significantly enhanced
awareness and understanding of insider trading compliance
among the designated individuals.

ENVIRONMENT, HEALTH AND SAFETY ENVIRONMENT

The Company continuously monitors its energy consumption,
regulates emissions, and manages waste generation to minimize
its environmental footprint. We are committed to adopting
responsible water usage practices and continuously seek
innovative ways to reduce resource consumption. Our dedication
to environmental protection and occupational health and safety
is firmly embedded in our corporate policies and guides all our
operational decisions.

To ensure a safe and healthy workplace, the Company regularly
conducts comprehensive training programmes and mock drills
that enhance employee awareness, preparedness, and response
capabilities. We proactively identify high-risk areas and invest in
advanced technological solutions, such as automation and real¬
time monitoring systems, to mitigate potential hazards. Awareness
campaigns and safety workshops are conducted regularly to
foster a strong safety culture across all levels of the organization.

In addition, the Company has implemented ergonomic
assessments to optimize workplace design and reduce strain-
related injuries. To support employee well-being beyond the
workplace, free health check-up programmes are organized
periodically, alongside mental health awareness sessions
and wellness initiatives such as fitness challenges and stress
management workshops.

Our ongoing efforts to improve environmental sustainability and
employee safety are reinforced through continuous feedback

mechanisms and audits, ensuring that we adapt and enhance our
practices to meet evolving standards and best practices.

CONSERVATION OF ENERGY, TECHNOLOGY
ABSORPTION

The information required under Section 134(3)(m) of the
Companies Act, 2013 read with the applicable Rules forms part of
this report as Annexure-6.

FOREIGN EXCHANGE EARNINGS AND OUTGO

Particulars	2024-25	2023-24
Earnings
FOB Value of Exports	31,268.18	30,245.53
Outgo
Sales Commission	687.27	17.25
Travelling Expenses	-	-
CIF Value of Imports
Raw Materials	9342.98	10,553.87
Capital Goods	239.80	414.15

AUDITORS APPOINTMENT AND THEIR REPORTS
Statutory Auditors

The Company appointed M/s. Suranarayana & Suresh, Chartered
Accountants, (Firm Registration No. 006631S), Hyderabad as
Statutory Auditors of the Company at the Annual General Meeting
held on 30^th September, 2022 for a second term of five (5) years
i.e., from the conclusion 34^th AGM till the conclusion of 39^th Annual
General Meeting to be held in the year 2027.

Further, the report of the Statutory Auditors along with notes to
accounts forms part of the Annual Report. There has been no
other qualification, reservation, adverse remark or disclaimer
given by the Auditors in their Report.

Internal Auditor

The Board has appointed M/s. Adusumilli and Associates,
Chartered Accountants, as an Internal Auditors of the Company
for a period of one year from 01.04.2025 to 31.03.2026 under
Section 138 of the Companies Act, 2013, in accordance with the
scope as defined by the Audit Committee.

Secretarial Auditor

As per Section 204 of the Companies Act, 2013 and the Companies
(Appointment and Remuneration of Managerial Personnel)
Rules, 2014 the Company has appointed M/s. SVVS Associates
Company Secretaries LLP to undertake Secretarial Audit of the
Company for the Financial Year ended on 2024-2025. Secretarial
Audit Report in Form MR-3 for the financial year 2024-2025 forms
part of this report as Annexure - 7.

There has been no qualification, reservation, adverse remark
or disclaimer given by the Auditors in their Report. However,
an observation related that under Regulation 19(1 )(c) of SEBI
(LODR) Regulations, 2015 to Non-compliance pertaining to the
composition of Nomination and Remuneration Committee of the
Board for the period from 12^th August, 2024 to 07^th November,
2024. This was brought to the notice of the Board and the
management has clarified that the Company has complied with
the said provision w.e.f. 7^th November, 2024 and a fine of H 2,000/-
per day by each stock exchange from 12^th August 2024 to 7^th
November, 2024 was paid. However, during the said period the
company has not conducted any Nomination and Remuneration
Committee Meetings. It was an inadvertent and isolated
oversight and unintentional nature prompt corrective action was
taken immediately.

The Board on recommendations of the Audit Committee has
approved and recommended to the members the appointment of
M/s. SVVS Associates Company Secretaries LLP, as Secretarial
Auditor of the Company for a period of five consecutive years from
financial year 2025-26 to 2029-30.

Brief details as required under the Listing Regulations, are provided
in the Notice of 37^th AGM. The Directors recommend the same for
approval by the Members.

Annual Secretarial Compliance Report

As per Regulation 24A of the SEBI (Listing Obligations and
Disclosure Requirements) Regulations, 2015, the Company has
obtained the Annual Secretarial Compliance Report which forms
part of this Report as Annexure-B from Mr. C. Sudhir Babu,
Practicing Company Secretary (Proprietor, CSB Associates) and
submitted the same to the Stock Exchanges where the shares of
the Company are listed.

Cost Auditor

As per Section 148 of the Companies Act, 2013 read with
the Companies (Audit and Auditors) Rules, 2014, and the
Companies (Cost Records & Audit) Amendment Rules, 2014,
the Company maintains Cost Records. Your Board has, upon
the recommendations of the Audit Committee, appointed
M/s. Harshitha Annapragada & Co., Cost Accountants (Firm
Registration No. 006031 and Membership No. 39895) as Cost
Auditor of the Company for the financial year 2024-2025.

The Board of Directors on the recommendations of the Audit
Committee, appointed M/s. Harshitha Annapragada & Co., Cost
Accountants (Firm Registration No. 006031 and Membership No.
39895) as Cost Auditors of the Company for the financial year
2025-2026. As required under the Act and Rules made thereunder,
the remuneration payable to the Cost Auditors is required to be
placed before the Members at a general meeting for ratification.
Accordingly, a resolution seeking ratification of the remuneration
payable to M/s. Harshitha Annapragada & Co., Cost Accountants,
by the members is included in the Notice convening 37^th Annual
General Meeting.

FINANCIAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Company has implemented a comprehensive system of
internal financial controls tailored to its operational scale and
complexity, ensuring the integrity of financial reporting, protection
of assets, and compliance with applicable accounting standards,
regulations, and corporate policies. These have been designed
to provide reasonable assurance with regard to recording and
providing reliable financial and operational information, complying
with applicable accounting standards and relevant statutes,
safeguarding assets from unauthorised use, executing transactions
with proper authorisation and ensuring compliance of corporate
policies. The Company uses an established Tally to record day-to¬
day transactions for accounting and financial reporting.

Assurance on the effectiveness of internal financial controls is
obtained through management reviews, continuous monitoring by
functional owners as well as testing of the internal financial

control systems by the internal auditors during the course of
their audits. We believe that these systems provide reasonable
assurance that our internal financial controls are designed
effectively and are operating as intended.

The Company actively reinforces its control environment through
routine audits, updates, and enhancements, thereby ensuring that
its internal controls remain resilient, responsive, and aligned with
evolving risks and compliance obligations.

POLICIES Company has following policies in place pursuant to applicable provisions of the Act and SEBI Listing Regulations and the same are published on the official website of the Company (www.smspharma.com):
Code of Business Conduct & Ethics for Other Stake Holders	Code of Regulation & Prohibition of Insider Trading
Code of Conduct for Board of Directors & Senior Management	Remuneration Criteria for Non-Executive Directors policy
Corporate Social Responsibility Policy	Document preservation policy
Familiarization program of Independent Director	Policy for evaluation performance of the Board of Directors
Policy for related party transactions	Policy on prevention, prohibition and redressal of sexual harassment of women at workplace
Vigil Mechanism (Whistle blower policy )	Staff advances policy
Dividend Distribution Policy	Risk Management Policy
Code of Practices and procedures for Fair Disclosure	Policy for Determination of Materiality for Disclosure
Policy on Determining material subsidiary

HUMAN RESOURCES / INDUSTRIAL RELATIONS

Your Company believes that employees are its most valuable
assets, and it is the responsibility of the Company to provide support
and care to all its employees. It strives to create an environment
conducive to employees'' development. Through ongoing learning,
development initiatives, and collaborative experiences, we foster
a culture of continuous improvement, teamwork, and shared
success that drives both individual potential and the sustained
performance of our organization.

SHARE TRANSFER SYSTEM

Pursuant to Regulation 40(1) of SEBI (LODR) Regulations,
2015, as amended from time to time, transfer, transmission
and transposition of securities shall be effected only in
dematerialised form.

SEBI vide its circular no. SEBI/HO/MIRSD/MIRSD_RTAMB/P/
CIR/2022/8 dated 25^th January, 2022, has made it mandatory
for listed companies to issue shares only in demat form while
processing investor service requests viz., issue of duplicate
securities certificate, claim from Unclaimed Suspense Account,
renewal / exchange of securities certificate, endorsement, sub-

division / splitting of securities certificate, consolidation of
securities certificates / folios, transmission and transposition.
Listed entities/ RTAs are now required to issue a ''Letter of
Confirmation'' in lieu of the share certificate while processing any
of the aforesaid investor service requests.

In cases where the securities holder / claimant fails to submit
the demat request to the depository participant within a period of
120 days from the date of issuance of the Letter of Confirmation
from RTA / listed companies, the said securities are credited to
''Suspense Escrow Demat Account''. Securities which are moved to
''Suspense Escrow Demat Account'' may be claimed by the security
holder / claimant by submitting a duly executed Form ISR- 4 and
self-attested KYC documents.

In view of the above and to eliminate risk associated with
physical shares and to avail various benefits of dematerialisation,
shareholders are advised to dematerialize their shares held
in physical form.

The Stakeholders Relationship Committee meets as often as
required to approve share transfers and to attend to any grievances
or complaints received from the members.

GENERAL DISCLOSURE

Your Directors state that no disclosure or reporting is required in
respect of the following items as there were no transactions on
these items during the year under review:

a) No material changes and commitments affecting the
financial position of the Company between the financial year
ended 31^st March, 2025 and the date of this report.

b) No fraud has been reported by the Auditors to the Audit
Committee or to the Board.

c) No material and significant orders passed by the regulators
or courts or tribunals impacting the going concern status
and the Company''s operations in future

d) Company has complied with the requirements of the
Secretarial Standards issued by Institute of Company
Secretaries of India.

e) There are no instances where the Board has not accepted
the recommendation of Audit Committee.

f) Cost records are maintained as per the requirements of
Section 148 of the Act.

g) The extract of Annual Return is disclosed on the
Company''s website.

DISCLOSURE UNDER THE SEXUAL HARASSMENT OF
WOMEN AT WORKPLACE (PREVENTION, PROHIBITION
AND REDRESSAL) ACT, 2013:

Your Company is dedicated to maintaining a workplace free from
sexual harassment and has implemented a comprehensive policy
aimed at preventing, prohibiting, and addressing any incidents of
sexual harassment in accordance with the Sexual Harassment of
Women at Workplace (Prevention, Prohibition and Redressal) Act,
2013, along with its applicable rules. The Company upholds a strict
zero-tolerance stance towards any form of sexual harassment
within the work environment.

In compliance with Sexual Harassment of Women at
Workplace (Prevention, Prohibition and Redressal) Act, 2013,
statement of complaints for the financial year ended March 31,
2025, is as follows:

Particulars	Number
Number of complaints pending as on beginning of the financial year	Nil
Number of complaints filed during the financial year	Nil
Number of complaints disposed of during the financial year	Nil
Number of complaints pending as on end of financial year	Nil

COMPLIANCE WITH SECRETARIAL STANDARDS

During the year under review, the Company has complied with
the Secretarial Standards issued by the Institute of Company
Secretaries of India.

MATERNITY BENEFIT ACT, 1961

The Company affirms that it has duly complied with all provisions
of the Maternity Benefit Act, 1961, and has extended all statutory
benefits to eligible women employees during the year.

INSURANCE:

The Company''s plant, properties, equipment and stocks are
adequately insured against all major risks. The Parent Company
has taken Directors'' and Officers'' Liability Policy to provide
coverage against the liabilities arising on them, which includes the
Directors of the Company also.

RATING

CARE Rating Limited has assigned its rating of ''CARE A''; ''Stable''
(Single A; Outlook Stable) on the Long Term Bank Facilities
of the Company and ''CARE A2 '' on the Short Term Bank
Facilities of the Company

DETAILS OF SIGNIFICANT AND MATERIAL ORDERS
PASSED BY THE REGULATORS OR COURTS OR
TRIBUNALS IMPACTING THE GOING CONCERN
STATUS AND COMPANY''S OPERATIONS IN FUTURE

During the year under review, there were no significant material
orders passed by the Regulators / Courts which would impact the
going concern status of the Company and its future operations.

DISCLOSURE OF CERTAIN TYPES OF AGREEMENTS
BINDING ON THE COMPANY:

During the period under the review the Company does not enter
into any agreement(s) which were falling under clause 5A of
para A of part A of schedule III of SEBI (Listing Obligations and
Disclosure Requirements) Regulations, 2015.

APPLICATION MADE OR ANY PROCEEDING PENDING
UNDER THE INSOLVENCY AND BANKRUPTCY CODE:

During the year M/s. Sai Sreyas Pharmaceutical Pvt Ltd
(Petitioner), an Operational Creditor has filed a petition under
Section 9 of the Insolvency and Bankruptcy Code, 2016, before
the National Company Law Tribunal (NCLT), Hyderabad Bench
seeking initiation of Corporate Insolvency Resolution Process
against the Company alleges default in the payment of unpaid
operational debt amounting to ?3.02 Crores. The Company has
previously raised concerns regarding the quality of materials
supplied by the aforementioned Operational Creditor and had
requested them to take back the disputed material. In spite
of this, the petitioner filed an application under IBC and the

Company has received a communication from the Hon''ble NCLT, Hyderabad in relation to the above registration of the said
petition. The Company is taking necessary legal steps against the Operational Creditor.

ACKNOWLEDGEMENTS:

Your Directors wish to place on record their sincere appreciation for the continued cooperation and support extended to the Company
by the Banks & Financial Institutions. The Board also takes this opportunity to thank all Shareholders, Analysts, Business Partners,
Government and Regulatory Authorities, Distributors, Suppliers, Business Associates, Medical professionals, and Customers for their
invaluable guidance, encouragement, and unwavering support.

The Board of Directors further expresses its deep sense of gratitude for the dedicated and committed services rendered by the Company''s
executives, staff, and workers.

The Directors also wish to convey their heartfelt thanks to the investors for the confidence and trust they have continued to repose
in the Company.

By the order of the Board
Ramesh Babu Potluri

Place: Hyderabad Chairman and Managing Director

Date: 09.08.2025 (DIN:00166381)

---

Mar 31, 2024

Your Directors take pleasure in presenting the 36^th Annual Report of SMS Pharmaceuticals Limited ("The Company”) along with the Audited Financial Statements for the Financial Year ended 31^st March, 2024. The Consolidated performance of the Company has been referred to wherever required.

FINANCIAL SUMMARY

The Audited Financial Statements of your Company as on 31^st March, 2024, are prepared in accordance with the relevant applicable Indian Accounting Standards ("Ind AS”) and Regulation 33 of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 ("SEBI Listing Regulations”) and the provisions of the Companies Act, 2013 ("Act”).

The summarized financial highlight is depicted below: (INR in Lakhs)
Particulars	Standalone		Consolidated
	2023-24	2022-23	2023-24	2022-23
Gross Sales	73,406.91	53,139.29	73406.91	53,139.29
Net Sales	69,232.52	50,075.85	69,232.52	50,075.85
Income from Services	1,413.13	1,898.83	1,413.13	1,898.83
Other Operating Income	280.69	230.46	280.69	230.46
Net Revenue from Operations	70,926.34	52,205.14	70926.34	52,205.14
Other Income	445.97	491.38	445.97	491.38
EBIDTA	12130.42	5958.83	12107.93	5938.78
Finance Charges	2345.68	2191.33	2345.68	2191.33
Depreciation	3151.57	3212.54	3151.57	3212.54
Profit Before Tax	6633.17	554.96	6610.68	534.91
Taxation	1690.68	146.50	1690.68	146.50
Profit After Tax	4942.49	408.46	4982.60	(705.93)
Earnings per share - Basic/Diluted(Rs)	5.84	0.48	5.89	(0.83)

STATEMENT OF AFFAIRS AND COMPANY''S PERFORMANCE

Financial & Production performance

During the year Company had achieved production of 2247.88 M.T. of APIs and their Intermediates in comparison with 1,147.53 M.T for the previous FY 2022-23.

During the FY 2023-24 the Company has recorded the net sales of H 69,232.52 Lakhs as against H 50,075.85 Lakhs for the previous FY 2022-23. The Company has recorded EPS of H 5.84 in the FY 2023-24 as against H 0.48 for the previous FY 2022-23.

Subsidiaries and Associates

Your Company is having one Associate Company i.e., "VKT Pharma Private Limited”. Your Company is holding 36.55% equity shares in the said Associate Company during the Financial Year ended and the share of profit for your Company for the Financial Year 2023-24 was H 62.60 lakhs.

Your Company has incorporated a Joint Venture (JV) in Spain in the year 2021 with nomenclature of "CHEMO SMS ENTERPRISES SL'' in the capital ratio of 55:45 with a share of 45% contributed by your Company.

There were no transactions during the reporting period, however, all the JV product sales were routed directly from your Company to the end customers during the reporting period as per JV manufacturing arrangement.

The consolidated financial statements had been prepared as per Indian Accounting Standard (Ind As) 28 investments in Associates & Joint Ventures specified under Section 133 of Companies Act, 2013 for considering the financials of Associate Company. The required form, as per the provisions of the Sec. 129(3) read with Rule 5 of Companies (Accounts) Rules, 2014 i.e., Form AOC-1 forms part of the Report as Annexure-1.

CHANGE IN NATURE OF BUSINESS

As per the requirements of Rule 8 (5) (ii) of Companies (Accounts) Rules, 2014, your Board of Directors specify that, there is no significant change in the nature of business of the Company during the financial year under review.

TRANSFER TO RESERVES

During the year, Your Company has transferred an amount of H1000.00 lakhs to General Reserve out of the amounts available for appropriations.

DIVIDEND

Your Directors have pleasure in recommending the dividend of Re.

0.40 (i.e. 40%) per equity share of Re. 1/- face value, aggregating to H3,38,60,812/- (Rupees Three Crores Thirty-eight Lakhs Sixty Thousand Eight Hundred and Twelve only) which shall be paid within 30 days after the conclusion of the Annual General Meeting, subject to the approval of the shareholders of the Company. Payment of dividend to members will be subject to tax deduction at source (TDS) as per statutory requirement.

Pursuant to Regulation 43A of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Board of Directors of the Company have adopted a Dividend Distribution Policy. The policy lays down a broad framework and factors which the Board considers for deciding the distribution of dividend to its shareholders. The said policy is available on the Company''s website https://smspharma.com/wp-content/uploads/7077/08/ Dividend-Distribution-policy.pdf

DIRECTORS AND KEY MANAGERIAL PERSONNEL

During the year under review, there is no change in the Directors and Key Managerial Personnel of the Company. However, after the year under review the following changes have occurred which are mentioned as under:

(i) Appointment:

a. On the recommendation of Nomination and

Remuneration Committee, the Board of Directors at their meeting held on 05^th August, 2024 had appointed Dr. Suresh Kumar Gangavarapu (DIN: 00183128) as an Independent Director of the Company for a term of Five consecutive years from 12^th August, 2024 to 11^th August, 2029, subject to the approval of the members at the ensuing AGM.

b. On the recommendation of Nomination and

Remuneration Committee, the Board of Directors at their meeting held on 05^th August, 2024 had appointed Mrs. Shanti Sree Bolleni (DIN: 07092258) as an Independent Director (Women) of the Company for a term of Five consecutive years from 12^th August, 2024

to 11^th August, 2029, subject to the approval of the members at the ensuing AGM.

c. On the recommendation of Nomination and

Remuneration Committee, the Board of Directors at their meeting held on 05^th August, 2024 had appointed Mr. Trilok Potluri (DIN: 07634613) as a Non-Executive

Non Independent Director of the Company w.e.f. 12^th August, 2024, subject to the approval of the members at the ensuing AGM.

d. On the recommendation of Nomination and

Remuneration Committee, the Board of Directors at their meeting held on 05^th August, 2024 had appointed Dr. Sunkara Venkata Satya Shiva Prasad (DIN: 10404277) as a Non-Executive Non Independent Director of the Company w.e.f. 12^th August, 2024, subject to the approval of the members at the ensuing AGM.

(ii) Re-appointment:

On the recommendation of Nomination and Remuneration Committee, the Board of Directors at their meeting held on 05^th August, 2024 has re-appointed Mr. Sarvepalli Srinivas (DIN: 02292051) as an Independent Director of the Company for a second term of Five Years (5) with effect from 12^th August, 2024 to 11^th August, 2029, subject to the approval of the members at the ensuing AGM.

(iii) Term Completion/ Retirement:

a. Mr. Sarath Kumar Pakalapati (DIN: 01456746) has retired as an Independent Director of the Company with effect from the close of business hours on 11^th August, 2024 after completion of his second term of directorship which was from 12^th August, 2019 to 11^th August, 2024.

b. Mrs. Neelaveni Thummala (DIN: 00065571), has retired as an Independent Director of the Company with effect from the close of business hours on 11^th August, 2024 after completion of her second term of directorship which was from 12^th August, 2019 to 11^th August, 2024.

The Board placed on record its sense of deep appreciation for the services rendered by the above Independent Directors to the Company.

(iv) Retirement by rotation:

In accordance with the provisions of section 152(6) of the Act and in terms of the Articles of Association of the Company, Mr. Vamsi Krishna Potluri (DIN: 06956498), Whole Time Director, will retire by rotation at the ensuing Annual General Meeting and being eligible, offers himself for re-appointment. The Board recommends his re-appointment.

(v) Declaration of Independence:

The Company has received declarations of independence from the Independent Directors as stipulated under section 149 (7) of the Companies Act, 2013, that each Independent Director meets the criteria of Independence laid down in the Section 149 (6) of the Companies Act, 2013 and Regulation 16(1 )(b) of SEBI (Listing Obligations and Disclosure Requirements), Regulations, 2015. All the Independent Directors of the Company have enrolled in the Independent Director databank maintained by Indian Institute of Corporate Affairs (IICA) as per Companies (Creation and Maintenance of databank of Independent Directors) Rules, 2019.

MANAGEMENT DISCUSSION & ANALYSIS

Pursuant to Regulation 34 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (''Listing Regulations''), the Management Discussion and Analysis is presented in a separate section forming part of this Annual Report for the year ended 31^st March, 2024, as required under the provisions of the Listing Regulations.

SHARE CAPITAL Equity Share Capital:

During the year under review there were no changes in authorized and paid-up share capital of the Company. The authorised share capital of the Company is H 12,00,00,000 /- divided into

12.00. 00.000 Equity Shares of H1/- each and Paid-up share capital of the Company is H8,46,52,030/- divided into 8,46,52,030 Equity Shares of H1/- each. A report on the same i.e., ''Equity Buildup Report'' forms part of this report as Annexure-2.

Listing of shares: Equity shares of the Company are listed in National Stock Exchange of India (NSE) and BSE Limited (BSE) with effect from 28^th February, 2007. [Listing fees has been paid for the year 2024-25 to both the Exchanges].

Issue of Warrants convertible into Equity Shares on a private placement basis

During the year under review, pursuant to the approval accorded by the members, at their Extra-Ordinary General Meeting held on 06^th March,2023 and in Principle approval received from both Stock Exchanges i.e. BSE Limited and National Stock Exchange of India Limited, the Company has issued the following securities on preferential basis:

90.00. 000 (Ninety Lakh) Convertible Warrants at an issue price of H127/- (Rupees One Hundred and Twenty-Seven only) each Warrant aggregating up to H114,30,00,000/- (One Hundred Fourteen Crores and Thirty Lakhs only) to promoters/promoters group of the Company.

The upfront money of 25% of issue price i.e., H31.75/- per warrant aggregating to H28,57,50,000/- (Rupees Twenty-Eight Crore Fifty-Seven Lakhs Fifty Thousand only) was received by the Company

on allotment of warrants. The balance money of 75% of the issue price i.e., H95.25/- per warrant will be paid by the warrant holders on conversion of the warrants.

Further, the Securities Allotment Committee of Board of Directors passed resolution on 19^th March, 2024 for allotment of 90,00,000 Convertible warrants to the Promoters/Promoters Group of the Company on Preferential basis.

MATERIAL CHANGES AND COMMITMENTS, AFFECTING THE FINANCIAL POSITION OF THE COMPANY:

There are no material changes and commitments which affect the financial position of the Company that have occurred between the end of the financial year to which the financial statements relate and the date of this report.

EVALUATION OF PERFORMANCE OF BOARD OF DIRECTORS:

Pursuant to the provisions of the Companies Act, 2013 and the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the formal annual evaluation of the performance of the Board as well as non-independent directors was undertaken by the Nomination and Remuneration Committee. The performance of Board Committees and of individual independent directors was undertaken by the Board members.

The manner of the evaluation of the Board and other Committees has been determined by the Nomination and Remuneration Committee as per the Guidance Note on Board Evaluation issued by the Securities and Exchange Board of India.

Your Company had conducted a separate Meeting of Independent Directors during the year on 08^th August, 2023 in which they had evaluated the performance of Executive directors and NonExecutive directors. Further, at the Board meeting that followed the meeting of Nomination and Remuneration Committee in its meeting held on 08^th February, 2024 the performance of the Board, its committees, and individual directors was also discussed. The evaluation had been made based on specified standards.

FAMILIARIZATION PROGRAMMES FOR INDEPENDENT DIRECTORS:

The Members of the Board of the Company have been provided opportunities to familiarize themselves with the Company, its Management, and its operations. The Directors are provided with all the documents to enable them to have a better understanding of the Company, its various operations, and the industry in which it operates.

The Company has put in place a system to familiarize its Independent Directors with the Company, their roles, rights & responsibilities in the Company, nature of the industry in which the Company operates, business model of the Company, etc. further

the Company has provided an opportunity to Directors to attend the programs conducted by various organizations

The Board members are periodically updated in its meetings about the industry overview, business operations, Company''s performance, compliance procedures and practices in place, various statutory amendments, the operations of the Company, its plans, strategy, risks involved, new initiatives etc., and seek their views and suggestions on the same.

The details of these familiarization programs have been placed on the Company''s website at https://smspharma.com/investor-relations/download/

COMMITTEES OF THE BOARD:

The Board of Directors has the following Committees:

1. Audit Committee

2. Nomination and Remuneration Committee

3. Stakeholders'' Relationship Committee

4. Corporate Social Responsibility Committee

5. Risk Management Committee

6. Securities Allotment Committee

The details of all the above Committees along with their composition, number of meetings and attendance at the meetings are provided in detail in the Corporate Governance Report annexed to this Board''s Report.

RISK MANAGEMENT POLICY:

The Risk Management Committee of the Company have the following Directors:

Mr. Ramesh Babu Potluri - Chairman Mr. Vamsi Krishna Potluri - Member Mr. Shravan Kudaravalli - Member.

The Committee had formulated a Risk Management Policy for dealing with different kinds of risks which it faces in day-to- day operations of the Company. Risk Management Policy of the Company outlines different kinds of risks and risk mitigating measures to be adopted by the Board. The Company has adequate internal control systems and procedures to combat risks. The Risk management procedures are reviewed by the Audit Committee and the Board of Directors on a quarterly basis at the time of review of the Quarterly Financial Results of the Company.

Brief description of terms of reference of the Committee, inter alia, includes the following:

• managing and monitoring the implementation of action plans developed to address material business risks within

the Company and its business units, and regularly reviewing the progress of action plans;

• setting up internal processes and systems to control the implementation of action plans;

• regularly monitoring and evaluating the performance of management in managing risk;

• providing management and employees with the necessary tools and resources to identify and manage risks;

• regularly reviewing and updating the current list of material business risks;

• regularly reporting to the Board on the status of material business risks;

• review and monitor cyber security; and

• Ensuring compliance with regulatory requirements and best practices with respect to risk management.

DIRECTORS'' RESPONSIBILITY STATEMENT

Pursuant to the provisions of Section 134(3)(c) of the Companies

Act, 2013 as amended, the Board of Directors confirm that:

1. In the preparation of the Financial Statements for the year ended 31^st March, 2024 the applicable accounting standards had been followed along with proper explanation relating to material departures, if any.

2. They had selected such accounting policies as notified & modified by ICAI 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 profit and loss of the Company for that period;

3. They had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013, as amended from time to time for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

4. The Annual Accounts had been prepared on going concern basis.

5. The Company has developed an effective mechanism for internal financial controls to be followed by the Company consistently and such internal financial controls are adequate and operating effectively;

6. They had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems are adequate and operating effectively.

THE CRITERIA FOR APPOINTMENT OF DIRECTORS, KMP AND SENIOR MANAGEMENT

A person for appointment as Director, KMP or in senior management should possess adequate qualifications, expertise and experience for the position considered for appointment. The Nomination and Remuneration Committee decides whether qualification, expertise and experience possessed by a person are sufficient for the concerned position. The Committee ascertains the credentials and integrity of the person for appointment as Director, KMP or senior management level and recommends to the Board his/ her appointment.

The Committee, while identifying suitable persons for appointment to the Board, will consider candidates on merit against objective criteria and with due regard for the benefits of diversity on the Board.

The Nomination and Remuneration Committee shall assess the independence of directors at the time of appointment, reappointment and the Board shall assess the same annually. The Board shall re-assess determination of independence when any new interests or relationships are disclosed by a Director.

The criteria of independence are as prescribed in the Act and the listing regulations and the Independent Directors shall abide by the Code specified for them in Schedule IV of the Act.

The Nomination and Remuneration Committee has the criteria for appointing any Key Managerial Personnel (KMP) and nominating directors on the Board. The appointment of any KMP is made by the Nomination and Remuneration Committee based on the requirement of the position and experience and skill sets of the candidate.

COMPOSITION & NUMBER OF MEETINGS OF THE BOARD AND AUDIT COMMITTEE

During the year under review, four (4) Board Meetings and five (5) Audit Committee Meetings were convened and held, the details of which are given in the Corporate Governance Report, which forms part of this report. The intervening gap between the Meetings was within the period prescribed under the Companies Act, 2013 and Listing Regulations.

ANNUAL RETURN

The Annual Return of the Company as on 31^st March, 2024, in terms of the provisions of Section 92(3) and 134(3)(a) of the Act, 2013 is available on the Company''s website: https://smspharma. com/annual-report/

CORPORATE GOVERNANCE

A separate section on Corporate Governance standards followed by your Company, as stipulated under Schedule V of the SEBI (LODR) Regulations, 2015, which is forming part of this report. The requisite certificate from M/s. Suryanarayana & Suresh, Chartered Accountants, confirming the compliance with the

conditions of Corporate Governance is annexed to the Report on Corporate Governance.

BUSINESS RESPONSIBILITY AND SUSTAINABILITY REPORT (BRSR)

The ''Business Responsibility and Sustainability Report'' (BRSR) of your Company for the year ended 31^st March, 2024, forms part of this Annual Report as required under Regulation 34 (2) (f) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 is available as a separate section in this Annual Report.

VIGIL MECHANISM / WHISTLE BLOWER POLICY:

The Board of Directors of the Company had adopted a vigil mechanism and formulated a Whistle Blower Policy to provide mechanism for directors and employees of the Company to report their concerns about any unethical behavior, actual or suspected fraud or violation of the Company''s code of conduct or ethics policy. The Policy provides that the Company investigates such incidents, when reported, in an impartial manner and takes appropriate action to ensure that requisite standards of professional and ethical conduct are always upheld. This mechanism also provides for adequate safeguards against victimization of director(s)/ employee(s) who avail the mechanism and also provide for direct access to the Chairman of the Audit Committee in exceptional cases. There were no allegations / disclosures / concerns received during the year under review in terms of the vigil mechanism established by the Company. A copy of the Whistle Blower Policy is hosted on the Company''s website at https://smspharma.com/ company-announcements/downloads/

DEPOSITS

The Company has not accepted any deposits from the public within the purview of Chapter V of the Companies Act, 2013. Hence, no amount on account of principal or interest on public deposits was outstanding as on the date of the balance sheet.

LOANS, GUARANTEES AND INVESTMENTS

Particulars of Loans, guarantees and investments covered under Section 186 of the Companies Act, 2013 form part of the Notes to the Financial Statements provided in this Annual Report.

RELATED PARTY TRANSACTIONS

All related party transactions that were entered by the Company during the financial year 2023-24 with related parties were in the ordinary course of business and on an arm''s length basis and are in compliance with the provisions of the Companies Act, 2013 and the SEBI (Listing Obligation & Disclosure Requirement) Regulation, 2015. There are no materially significant related party transactions made by the Company with Promoters, Directors and Key Managerial Personnel, etc., which may have potential conflict with the interest of the Company. All related party transactions

are presented to the Audit Committee on quarterly basis and were also placed before the Board.

A statement of all Related Party Transactions is being presented before the Audit Committee on Quarterly basis specifying the nature, value and terms and conditions of the transactions. A Policy on Related Party Transactions approved by the Board is uploaded on the Company''s website at the web link https:// smspharma.com/wp-content/uploads/2022/08/Policy-on-Related-Party-Transactions.pdf

The particulars of contracts or arrangements entered into by the Company with related parties referred to in Section 188(1) are kept by the Company in Statutory Form AOC-2. Further details required to disclose as per Accounting Standard form part of the notes to the financial statements provided in the annual report. The Form AOC-2 is attached to the Report as Annexure-3.

CORPORATE SOCIAL RESPONSIBILITY

Pursuant to Section 135 of the Companies Act, 2013 read with the Companies (Corporate Social Responsibility Policy) Rules, 2014, your Company has constituted the Corporate Social Responsibility (CSR) Committee.

The brief outline of the CSR policy of the Company, details regarding CSR Committee and the initiatives undertaken by the Company on CSR activities during the year are set out in Annexure-4, of this report in the format prescribed in the Companies (Corporate Social Responsibility Policy) Rules, 2014. CSR Policy is available on the Company''s website on https://smspharma.com/wp-content/ uploads/?0??/08/corporate-social-responsibility-policy.pdf

PARTICULARS OF EMPLOYEES

The information relating to remuneration and other details as required, pursuant to Section 197 (12) of the Companies Act, 2013 read with Rule 5 (1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is mentioned under ''Employees Remuneration Report'' which forms part of this report as Annexure-5

The statement containing particulars of employees as required under Section 197(12) of the Act read with Rule 5(2) and 5(3) of the Rules does not form part of this Report however the same shall be kept open for inspection in terms of Section 136 of the Act and any member can obtain a copy of the said statement by writing an email to the Company Secretary at [e-mail]

PREVENTION OF INSIDER TRADING

The Company has adopted an Insider trading Policy to regulate, monitor and report trading by insiders under the SEBI (Prohibition of Insider Trading) Regulations, 2015. This policy includes practices and procedures for fair disclosure of unpublished price-sensitive information, initial and continual disclosure. The Board reviews the policy on a need basis. The policy is available on our website: https://smspharma.com/company-announcements/downloads/

The Company takes several measures to familiarise and sensitize its employees with the provisions and various aspects of the Insider Trading Code, including periodic circulation of informative emails on Prevention of Insider Trading, Do''s and Don''ts, Trading Window closure notifications, and providing clarifications to the designated persons as and when required. These activities have created awareness amongst the Designated Persons.

ENVIRONMENT, HEALTH AND SAFETY ENVIRONMENT

The Company continuously monitors its energy usage, regulates the emissions released and waste generated, and makes sure it follows responsible water consumption practices. Our focus on environmental protection and occupational health and safety is enshrined in our policies.

The Company conducts training programmes mock drills for and safety of the employees. To help protect our employees from injuries, identifies high risk areas and invest in technological solutions and awareness-raising initiatives. The Company conducts free health checkup programmes.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION

The information required under Section 134(3)(m) of the Companies Act, 2013 read with the applicable Rules forms part of this report as Annexure-6.

FOREIGN EXCHANGE EARNINGS AND OUTGO

(H in Lakhs)
Particulars	2023-24	2022-2023
Earnings
FOB Value of Exports	30,245.53	31,650.27
Outgo
Sales Commission	17.25	43.92
Travelling Expenses	-	-
CIF Value of Imports
Raw Materials	10,553.87	12,608.57
Capital Goods	414.15	51.59

AUDITORS APPOINTMENT AND THEIR REPORTS Statutory Auditors

M/s. Suranarayana & Suresh, Chartered Accountants, (Firm Registration No. 006631S), Hyderabad were appointed as Statutory Auditors of the Company at the Annual General Meeting held on 30^th September, 2022 for a second term of five (5) years i.e., from the conclusion 34^th AGM till the conclusion of 39^th Annual General Meeting to be held in the year 2027.

Further, the report of the Statutory Auditors along with notes to accounts forms part of the Annual Report. There has been no other qualification, reservation, adverse remark or disclaimer given by the Auditors in their Report.

Internal Auditor

The Board has appointed M/s. Adusumilli and Associates, Chartered Accountants, as an Internal Auditors of the Company for a period of two years from 01.04.2022 to 31.03.2024 under Section 138 of the Companies Act, 2013, in accordance with the scope as defined by the Audit Committee.

Secretarial Auditor

As per Section 204 of the Companies Act, 2013 and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 the Company has appointed M/s. SVVS & Associates Company Secretaries LLP to undertake Secretarial Audit of the Company for the Financial Year ended on 2023-2024. Secretarial Audit Report in Form MR-3 for the financial year 2023-2024 forms part of this report as Annexure - 7.

There has been no qualification, reservation, adverse remark or disclaimer given by the Auditors in their Report.

Annual Secretarial Compliance Report

As per Regulation 24A of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Company has obtained the Annual Secretarial Compliance Report which forms part of this Report as Annexure - B from Mr. C. Sudhir Babu, Practicing Company Secretary (Proprietor, CSB Associates) and submitted the same to the Stock Exchanges where the shares of the Company are listed.

Cost Auditor

As per Section 148 of the Companies Act, 2013 read with the Companies (Audit and Auditors) Rules, 2014, and the Companies (Cost Records & Audit) Amendment Rules, 2014, the Company maintains Cost Records. Your Board has, upon the recommendations of the Audit Committee, appointed Mr. K.S.N. Sarma (Registration No.102145 and Membership No.6875) as Cost Auditor of the Company for the financial year 2023-2024.

The Board of Directors on the recommendations of the Audit Committee, appointed M/s. Harshitha Annapragada & Co., Cost

Accountants (Firm Registration No. 006031 and Membership No. 39895) as Cost Auditors of the Company for the financial year 2024-2025.As required under the Act and Rules made thereunder, the remuneration payable to the Cost Auditors is required to be placed before the Members at a general meeting for ratification. Accordingly, a resolution seeking ratification of the remuneration payable to M/s.Harshitha Annapragada & Co., Cost Accountants, by the members is included in the Notice convening 36^th Annual General Meeting.

FINANCIAL CONTROL SYSTEMS AND THEIR ADEQUACY

Internal Financial Controls are an integral part of the risk management process, addressing financial and financial reporting risks. Internal financial control systems of the Company are in commensurate with its size and the nature of its operations. These have been designed to provide reasonable assurance with regard to recording and providing reliable financial and operational information, complying with applicable accounting standards and relevant statutes, safeguarding assets from unauthorised use, executing transactions with proper authorisation and ensuring compliance of corporate policies. The Company uses an established Tally to record day-to-day transactions for accounting and financial reporting.

Assurance on the effectiveness of internal financial controls is obtained through management reviews, continuous monitoring by functional owners as well as testing of the internal financial control systems by the internal auditors during the course of their audits. We believe that these systems provide reasonable assurance that our internal financial controls are designed effectively and are operating as intended.

The Company has in place adequate internal financial controls with reference to financial statements. However, the Company recognizes that no matter how the internal control framework is, it has inherent limitations and accordingly, periodic audits and reviews ensure that such systems are updated on regular intervals.

POLICIES Company has following policies in place pursuant to applicable provisions of the Act and SEBI Listing Regulations and the same are published on the official website of the Company (www.smspharma.com):
Code of Business Conduct & Ethics for Other Stake Holders	Code of Regulation & Prohibition of Insider Trading
Code of Conduct for Board of Directors & Senior Management	Remuneration Criteria for Non-Executive Directors policy
Corporate Social Responsibility Policy	Document preservation policy
Familiarization program of Independent Director	Policy for evaluation performance of the Board of Directors
Policy for related party transactions	Policy on prevention, prohibition and redressal of sexual harassment of women at workplace
Vigil Mechanism (Whistle blower policy )	Staff advances policy
Dividend Distribution Policy	Risk Management Policy
Code of Practices and procedures for Fair Disclosure	Policy for Determination of Materiality for Disclosure

HUMAN RESOURCES / INDUSTRIAL RELATIONS

The Company believes that competent and committed human resources are vitally important to attain success in the organization. In line with this philosophy, utmost care is being exercised to attract quality resources and suitable training is imparted on various skill-sets and behavior. Employee knowledge enrichment is a core value of the organisation, and focus has been placed on training and development of the Company''s human capital and also various initiatives were undertaken to enhance the competitive spirit and encourage bonding teamwork among the employees and could achieve the targeted growth in the performance of the Company.

SHARE TRANSFER SYSTEM

Pursuant to Regulation 40(1) of SEBI (LODR) Regulations, 2015, as amended from time to time, transfer, transmission and transposition of securities shall be effected only in dematerialised form.

Pursuant to SEBI Circular dated January 25, 2022, the listed companies shall issue the securities in dematerialised form only, for processing any service requests from shareholders vis., issue of duplicate share certificates, endorsement, transmission, transposition, etc. After processing the service request, a letter of confirmation will be issued to the shareholders and shall be valid for a period of 120 days, within which the shareholder shall make a request to the Depository Participant for dematerialising those shares. If the shareholders fail to submit the dematerialisation request within 120 days, then the Company shall credit those shares in the Suspense Escrow Demat account held by the Company. Shareholders can claim these shares transferred to Suspense Escrow Demat account on submission of necessary documentation.

The Stakeholders Relationship Committee meets as often as required to approve share transfers and to attend to any grievances or complaints received from the members.

GENERAL DISCLOSURE

Your Directors state that no disclosure or reporting is required in respect of the following items as there were no transactions on these items during the year under review:

a) No material changes and commitments affecting the financial position of the Company between the financial year ended 31^st March, 2024 and the date of this report.

b) No fraud has been reported by the Auditors to the Audit Committee or to the Board.

c) No material and significant orders passed by the regulators or courts or tribunals impacting the going concern status and the Company''s operations in future

d) Company has complied with the requirements of the Secretarial Standards issued by Institute of Company Secretaries of India.

e) There are no instances where the Board has not accepted the recommendation of Audit Committee.

f) Cost records are maintained as per the requirements of Section 148 of the Act.

g) The extract of Annual Return is disclosed on the Company''s website.

DISCLOSURE UNDER THE SEXUAL HARASSEMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION AND REDRESSAL) ACT, 2013:

The Company is committed to ensure that there is no scope for sexual harassment at workplace and has adopted a policy on prevention, prohibition and redressal of sexual harassment at workplace in line with the provisions of Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 and the rules framed thereunder. Your Company has zero tolerance towards sexual harassment at the workplace.

During the Financial Year ended on March 31,2024, the Company has not received any complaint of sexual harassment.

COMPLIANCE WITH SECRETARIAL STANDARDS

During the year under review, the Company has complied with the Secretarial Standards issued by the Institute of Company Secretaries of India.

INSURANCE:

The Company''s plant, properties, equipment and stocks are adequately insured against all major risks. The Parent Company has taken Directors'' and Officers'' Liability Policy to provide coverage against the liabilities arising on them, which includes the Directors of the Company also.

RATING

CARE Rating Limited has assigned its rating of ''CARE A''; ''Negative'' (Single A; Outlook Negative) on the Long Term Bank Facilities of the Company and ''CARE A2 '' on the Short Term Bank Facilities of the Company

DETAILS OF SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS OR TRIBUNALS IMPACTING THE GOING CONCERN STATUS AND COMPANY''S OPERATIONS IN FUTURE

During the year under review, there were no significant material orders passed by the Regulators / Courts which would impact the going concern status of the Company and its future operations.

DISCLOSURE OF CERTAIN TYPES OF AGREEMENTS BINDING ON THE COMPANY:

During the period under the review the Company does not enter into any agreement(s) which were falling under clause 5A of para A of part A of schedule III of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

APPLICATION MADE OR ANY PROCEEDING PENDING UNDER THE INSOLVENCY AND BANKRUPTCY CODE:

As on the date of the Report no application is pending against the Company under the Insolvency and Bankruptcy Code, 2016 and the Company did not file any application under (IBC) during the Financial Year 2023-24.

ACKNOWLEDGEMENTS:

Your Directors place on record their sincere appreciation for the continued co-operation and support extended to the Company by

the Banks. Board takes this opportunity to thank all shareholders, analysts, business partners, government and regulatory authorities, distributors, suppliers, business associates, medical professionals and customers for their continued guidance, encouragement and splendid support.

The Board of Directors also wish to place on record its deep sense of appreciation for the dedicated and committed services by the Company''s executives, staff and workers.

The Directors also wish to express their gratitude to the Investors for the confidence and faith that they continued to repose in the Company.

---

Mar 31, 2023

Your Directors are pleased to present the 35^th Annual Report of SMS Pharmaceuticals Limited (“The Company”) along with the Audited Financial Statements for the Financial Year ended 31^st March, 2023. The Consolidated performance of the Company has been referred to wherever required.

FINANCIAL SUMMARY

(INR in Lakhs)
Particulars	Standalone		Consolidated
	2022-23	2021-22	2022-23	2021-22
Gross Sales	53,139.29	54,124.25	53,139.29	54,124.25
Net Sales	50,075.85	50,718.67	50,075.85	50,718.67
Income from Services	1,898.83	782.91	1,898.83	782.91
Other Operating Income	230.46	485.85	230.46	485.85
Net Revenue from Operations	52,205.14	51,987.43	52,205.14	51,987.43
Other Income	488.56	519.77	488.56	519.77
EBIDTA	5959.00	11,968.26	5938.95	11,952.70
Finance Charges	2191.50	1,887.54	2191.50	18,87.54
Depreciation	3212.54	3,215.25	3212.54	3,215.25
Profit Before Tax	554.96	6,865.47	534.91	6,849.91
Taxation	146.50	61.82	146.50	61.82
Profit After Tax	408.46	6,803.65	(705.93)	6,221.99
Earnings per share - Basic/Diluted(Rs)	0.48	8.04	(0.83)	7.35

STATE OF COMPANY AFFAIRS In Financial & Production terms

FY 2022-23 is another challenging year due to market conditions post Covid-19. During these difficult times, your Company had achieved production of 1147.53 M.T. of APIs and their Intermediates in comparison with 1141.09 M.T. for the FY 2021-22.

During the FY 2022-23, the Company has recorded the net sales of Rs. 50,075.84 Lakhs as against Rs. 50,718.67 Lakhs for the previous FY 2021-22. The Company has recorded EPS of Rs. 0.48 in the FY 2022-23 as against Rs. 8.04 for the previous FY 2021-22.

Subsidiaries and Associates

Your Company is having one Associate Company i.e., “VKT Pharma Private Limited”. Your Company is holding 36.55% equity shares in the said Associate Company during the

Financial Year ended and the share of loss for your Company for the Financial Year 2022-23 was Rs. 1094.34 lakhs.

Your Company has incorporated a Joint Venture (JV) in Spain in the year 2021 with nomenclature of “CHEMO SMS ENTERPRISES SL” in the capital ratio of 55:45 with a share of 45% contributed by your Company.

There were no transactions during the reporting period, however, all the JV product sales were routed directly from your Company to the end customers during the reporting period as per JV manufacturing arrangement.

The consolidated financial statements had been prepared as per Accounting Standard (AS) 23 “Accounting for Investment in Associates in Consolidated Financial Statements” specified under Section 133 of Companies Act, 2013 for considering the financials of Associate Company. The required form, as per the provisions of the Sec. 129(3) read with Rule 5 of Companies (Accounts) Rules, 2014 i.e., Form AOC-1 forms part of the Report as Annexure 1.

CHANGE IN NATURE OF BUSINESS

As per the requirements of Rule 8 (5) (ii) of Companies (Accounts) Rules, 2014, your Board of Directors specify that, there is no significant change in the nature of business of the Company during the financial year under review.

TRANSFER TO RESERVES

During the year your Company did not transfer any portion of profits to Reserves.

DIVIDEND

Your Directors have pleasure in recommending the dividend of Re. 0.30 (i.e. 30%) per equity share of Re. 1/- face value, aggregating to Rs.2,53,95,609/- (Rs. Two Crore Fifty Three Lakhs Ninety Five Thousand Six Hundred And Nine only) which shall be paid within 30 days after the conclusion of the Annual General Meeting, subject to the approval of the shareholders of the Company. Payment of dividend to members will be subject to tax deduction at source (TDS) as per statutory requirement.

Pursuant to Regulation 43A of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Board of Directors of the Company have adopted a Dividend Distribution Policy. The policy lays down a broad framework and factors which the Board considers for deciding the distribution of dividend to its shareholders. The said policy is available on the company’s website https://smspharma.com/wp-content/ uploads/2022/08/Dividend-Distribution-policy.pdf

DIRECTORS AND KEY MANAGERIAL PERSONNEL(i) Appointment of Directors & Key Managerial Personnel:

The Board of Directors of the Company in its meeting held on 24^th May, 2023 has re-appointed Mr. Shravan Kudaravalli (DIN: 06905851) as an Independent Director of the Company, for a further period of 5 (Five) consecutive years, with effect from 26^th May, 2023 till 25^th May, 2028 (both days inclusive), whose term was expired on 25^th May, 2023. Pursuant Regulation 17(C) of SEBI (LODR)Regulations, the approval of the shareholders is being obtained via postal ballot. There is no change in Key Managerial Persons.

(ii) Withdrawal of Nominee Director:

During the year under the review, Exim Bank has withdrawn the nomination of Mrs. Shilpa R Waghmare (DIN: 07009966), as their Nominee on the Board of Directors of the Company w.e.f. 08^th August, 2022.

(iii) Retirement by rotation:

In accordance with the provisions of section 152(6) of the Act and in terms of the Articles of Association of the Company, Mr. Ramesh Babu Potluri (DIN: 00166381), Chairman and Managing Director, will retire by rotation at the ensuing Annual General Meeting and being eligible, offers himself for re-appointment. The Board recommends his re-appointment.

(iv) Declaration of Independence:

The Company has received declarations of independence from the Independent Directors as stipulated under section 149 (7) of the Companies Act, 2013, that each Independent Director meets the criteria of Independence laid down in the Section 149 (6) of the Companies Act, 2013 and Regulation 16(1)(b) of SEBI (Listing Obligations and Disclosure Requirements), Regulations, 2015. All the Independent Directors of the Company have enrolled in the Independent Director databank maintained by Indian Institute of Corporate Affairs (IICA) as per Companies (Creation and Maintenance of databank of Independent Directors) Rules, 2019.

MANAGEMENT DISCUSSION & ANALYSIS

Pursuant to Regulation 34 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (‘Listing Regulations’), the Management Discussion and Analysis is presented in a separate section forming part of this Annual Report for the year ended 31^st March, 2023, as required under the provisions of the Listing Regulations.

SHARE CAPITAL

During the year under review there were no changes in authorized and paid-up share capital of the Company. The authorised share capital of the Company is Rs.8,46,52,030/-divided into 8,46,52,030 Equity Shares of Rs.1/- each. A report on the same i.e., ‘Equity Buildup Report’ forms part of this report as Annexure - 2.

Listing of shares: Equity shares of the Company are listed in National Stock Exchange of India (NSE) and BSE Limited (BSE) with effect from 28^th February, 2007. [Listing fees has been paid for the year 2023-24 to both the Exchanges].

MATERIAL CHANGES AND COMMITMENTS, AFFECTING THE FINANCIAL POSITION OF THE COMPANY:

There are no material changes and commitments which affect the financial position of the Company that have occurred between the end of the financial year to which the financial statements relate and the date of this report.

EVALUATION OF PERFORMANCE OF BOARD OF DIRECTORS:

The formal annual evaluation of the performance of the Board as well as non-independent directors was undertaken by the Nomination and Remuneration Committee. The performance of Board Committees and of individual independent directors was undertaken by the Board members.

The manner of the evaluation of the Board and other Committees has been determined by the Nomination and Remuneration Committee as per SEBI circular dated January 05, 2017.

Your Company had conducted a separate Meeting of Independent Directors during the year on 12^th August, 2022 in which they had evaluated the performance of Executive directors and NonExecutive directors. Further, in the Board Meeting held on 09^th February, 2023 the Board had evaluated the performance of Independent Directors and their contribution in the Board. The evaluation had been made based on specified standards.

FAMILIARIZATION PROGRAMMES FOR INDEPENDENT DIRECTORS:

The Company has put in place a system to familiarize its Independent Directors with the Company, their roles, rights & responsibilities in the Company, nature of the industry in which the Company operates, business model of the Company, etc.

The senior management personnel of the Company regularly make presentations to the Board members on the operations of the Company, its plans, strategy, risks involved, new initiatives etc., and seek their views and suggestions on the same.

The details of these familiarization programs have been placed on the Company’s website at https://smspharma.com/ investor-relations/download/

COMMITTEES OF THE BOARD:

The Board of Directors has the following Committees:

1. Audit Committee

2. Nomination and Remuneration Committee

3. Stakeholders’ Relationship Committee

4. Corporate Social Responsibility Committee

5. Risk Management Committee

The details of all the above Committees along with their composition, number of meetings and attendance at the meetings are provided in detail in the Corporate Governance Report annexed to this Board’s Report.

RISK MANAGEMENT POLICY:

The Company in its Board Meeting held on 28^th May, 2021 has Constituted Risk Management Committee, with the following Directors:

Mr. Ramesh Babu Potluri - Chairman Mr. Vamsi Krishna Potluri - Member Mr. Shravan Kudaravalli - Member.

The Committee had formulated a Risk Management Policy for dealing with different kinds of risks which it faces in day-today operations of the Company. Risk Management Policy of the Company outlines different kinds of risks and risk mitigating measures to be adopted by the Board. The Company has adequate internal control systems and procedures to combat risks. The Risk management procedures are reviewed by the Audit Committee and the Board of Directors on a quarterly basis at the time of review of the Quarterly Financial Results of the Company.

Brief description of terms of reference of the Committee, inter alia, includes the following:

• managing and monitoring the implementation of action plans developed to address material business risks within the Company and its business units, and regularly reviewing the progress of action plans;

• setting up internal processes and systems to control the implementation of action plans;

• regularly monitoring and evaluating the performance of management in managing risk;

• providing management and employees with the necessary tools and resources to identify and manage risks;

• regularly reviewing and updating the current list of material business risks;

• regularly reporting to the Board on the status of material business risks;

• review and monitor cyber security; and

• Ensuring compliance with regulatory requirements and best practices with respect to risk management.

DIRECTORS’ RESPONSIBILITY STATEMENT

Pursuant to the provisions of Section 134(3)(c) of the Companies Act, 2013 as amended, the Board of Directors confirm that:

1. In the preparation of the Financial Statements for the year ended 31^st March, 2023 the applicable accounting standards had been followed along with proper explanation relating to material departures, if any.

2. They had selected such accounting policies as notified & modified by ICAI 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 profit and loss of the Company for that period;

3. They had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 as amended from time to time for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

4. The Annual Accounts had been prepared on going concern basis.

5. The Company has developed an effective mechanism for internal financial controls to be followed by the Company consistently and such internal financial controls are adequate and operating effectively;

6. They had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems are adequate and operating effectively.

THE CRITERIA FOR APPOINTMENT OF DIRECTORS, KMP AND SENIOR MANAGEMENT

A person for appointment as Director, KMP or in senior management should possess adequate qualifications, expertise and experience for the position considered for appointment. The Nomination and Remuneration Committee decides whether qualification, expertise and experience possessed by a person are sufficient for the concerned position. The Committee ascertains the credentials and integrity of the person for

appointment as Director, KMP or senior management level and recommends to the Board his/ her appointment.

The Committee, while identifying suitable persons for appointment to the Board, will consider candidates on merit against objective criteria and with due regard for the benefits of diversity on the Board.

The Nomination and Remuneration Committee shall assess the independence of directors at the time of appointment; reappointment and the Board shall assess the same annually. The Board shall re-assess determination of independence when any new interests or relationships are disclosed by a Director.

The criteria of independence are as prescribed in the Act and the listing regulations and the Independent Directors shall abide by the Code specified for them in Schedule IV of the Act.

The Nomination and Remuneration Committee has the criteria for appointing any Key Managerial Personnel (KMP) and nominating directors on the Board. The appointment of any KMP is made by the Nomination and Remuneration Committee based on the requirement of the position and experience and skill sets of the candidate.

COMPOSITION & NUMBER OF MEETINGS OF THE BOARD AND AUDIT COMMITTEE

During the year under review, four (4) Board Meetings and four (4) Audit Committee Meetings were convened and held, the details of which are given in the Corporate Governance Report, which forms part of this report. The intervening gap between the Meetings was within the period prescribed under the Companies Act, 2013 and Listing Regulations.

EXTRACT OF ANNUAL RETURN

Pursuant to Section 92(3) and Section 134(3)(2) of the Companies Act, 2013, the Company has placed a copy of the Annual Return as at 31^st March, 2023, on its website at https:// smspharma.com/annual-report/

CORPORATE GOVERNANCE

A separate section on Corporate Governance standards followed by your Company, as stipulated under Schedule V of the SEBI (LODR) Regulations, 2015 which is forming part of this report. The requisite certificate from M/s. Suryanarayana & Suresh, Chartered Accountants, confirming the compliance with the conditions of Corporate Governance is annexed to the Report on Corporate Governance.

BUSINESS RESPONSIBILITY AND SUSTAINABILITY REPORT (BRSR)

The ‘Business Responsibility and Sustainability Report’ (BRSR) of your Company for the year ended 31^st March, 2023 forms part of this Annual Report as required under Regulation 34 (2) (f) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 is available as a separate section in this Annual Report.

VIGIL MECHANISM / WHISTLE BLOWER POLICY:

The Company has established a vigil mechanism and formulated a Whistle Blower Policy to provide mechanism for directors and employees of the Company to report their concerns about any unethical behavior, actual or suspected fraud or violation of the Company’s code of conduct or ethics policy. The Policy provides that the Company investigates such incidents, when reported, in an impartial manner and takes appropriate action to ensure that requisite standards of professional and ethical conduct are always upheld. This mechanism also provides for adequate safeguards against victimization of director(s)/ employee(s) who avail the mechanism and also provide for direct access to the Chairman of the Audit Committee in exceptional cases. There were no allegations / disclosures / concerns received during the year under review in terms of the vigil mechanism established by the Company. The details of the vigil mechanism are displayed on the website of the Company https:// smspharma.com/company-announcements/downloads/

DEPOSITS

Your Company has not accepted any deposits from the public within the purview of Chapter V of the Companies Act, 2013. As such no amount of principal or interest was outstanding as on the date of the Balance Sheet.

LOANS, GUARANTEES AND INVESTMENTS

Particulars of Loans, guarantees and investments covered under Section 186 of the Companies Act, 2013 form part of the Notes to the financial statements provided in this Annual Report.

RELATED PARTY TRANSACTIONS

All related party transactions that were entered by the Company during the financial year 2022-23 with related parties were in the ordinary course of business and on an arm’s length basis and are in compliance with the provisions of the Companies Act,

2013 and the SEBI (Listing Obligation & Disclosure Requirement) Regulation, 2015. There are no materially significant related party transactions made by the Company with Promoters, Directors and Key Managerial Personnel, etc., which may have potential conflict with the interest of the Company. All related party transactions are presented to the Audit Committee on quarterly basis and were also placed before the Board.

A statement of all Related Party Transactions is being presented before the Audit Committee on Quarterly basis specifying the nature, value and terms and conditions of the transactions. A Policy on Related Party Transactions approved by the Board is uploaded on the Company’s website at the web link https:// smspharma.com/wp-content/uploads/2022/08/Policv-on-Related-Partv-Transactions.pdf

The particulars of contracts or arrangements entered into by the Company with related parties referred to in Section 188(1) are kept by the Company in Statutory Form AOC-2. Further details required to disclose as per Accounting Standard form part of the notes to the financial statements provided in the annual report. The Form AOC-2 is attached to the Report as Annexure - 3.

CORPORATE SOCIAL RESPONSIBILITY

Pursuant to Section 135 of the Companies Act, 2013 read with the Companies (Corporate Social Responsibility Policy) Rules, 2014, your Company has constituted the Corporate Social Responsibility (CSR) Committee.

The brief outline of the CSR policy of the Company, details regarding CSR Committee and the initiatives undertaken by the Company on CSR activities during the year are set out in Annexure-4, of this report in the format prescribed in the Companies (Corporate Social Responsibility Policy) Rules, 2014. CSR Policy is available on the Company’s website on https:// smspharma.com/wp-content/uploads/2022/08/corporate-social-responsibility-policy.pdf

PARTICULARS OF EMPLOYEES

The information relating to remuneration and other details as required, pursuant to Section 197 (12) of the Companies Act, 2013 read with Rule 5 (1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is mentioned under ‘Employees Remuneration Report’ which forms part of this report as Annexure -5

The statement containing particulars of employees as required under Section 197(12) of the Act read with Rule 5(2) and 5(3) of the Rules does not form part of this Report however the same shall be kept open for inspection in terms of Section 136 of the Act and any

member can obtain a copy of the said statement by writing an email to the Company Secretary at [e-mail]

PREVENTION OF INSIDER TRADING

The Company has adopted an Insider trading Policy to regulate, monitor and report trading by insiders under the SEBI (Prohibition of Insider Trading) Regulations, 2015. This policy includes practices and procedures for fair disclosure of unpublished price-sensitive information, initial and continual disclosure. The Board reviews the policy on a need basis. The policy is available on our website: https://smspharma.com/ companv-announcements/downloads/

ENVIRONMENT, HEALTH AND SAFETY ENVIRONMENT

The Company continuously monitors its energy usage, regulates the emissions released and waste generated, and makes sure it follows responsible water consumption practices. Our focus on environmental protection and occupational health and safety is enshrined in our policies.

The Company conducts training programmes mock drills for and safety of the employees. To help protect our employees from injuries, identifies high risk areas and invest in technological solutions and awareness-raising initiatives. The Company conducts free health checkup programmes.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION

The information required under Section 134(3)(m) of the Companies Act, 2013 read with the applicable Rules forms part of this report as Annexure-6.

FOREIGN EXCHANGE EARNINGS AND OUTGO

(H in Lakhs)
Particulars	2022-23	2021-22
Earnings
FOB Value of Exports	31,650.27	12,666.96
Outgo
Sales Commission	43.92	55.13
Travelling Expenses	-	-
CIF Value of Imports
Raw Materials	12,608.57	10,347.52
Capital Goods	51.59	17.97

AUDITORS APPOINTMENT AND THEIR REPORTSStatutory Auditors

M/s. Suranarayana & Suresh, Chartered Accountants, (Firm Registration No. 006631S), Hyderabad were appointed as Statutory Auditors of the Company in the previous Annual General Meeting held on 30^th September, 2022 for a second term of five (5) years i.e., from the conclusion 34^th AGM till the conclusion of 39^th Annual General Meeting to be held in the year 2027.

Further, the report of the Statutory Auditors along with notes to accounts is a part of the Annual Report. There has been no other qualification, reservation, adverse remark or disclaimer given by the Auditors in their Report.

Internal Auditor

The Board has appointed M/s. Adusumilli and Associates, Chartered Accountants, as an Internal Auditors of the Company for a period of two years from 01.04.2022 to 31.03.2024 under Section 138 of the Companies Act, 2013, in accordance with the scope as defined by the Audit Committee.

Secretarial Auditor

Pursuant to the provisions of Section 204 of the Companies Act, 2013, and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, M/s. SVVS & Associates Company Secretaries LLP were appointed to undertake Secretarial Audit of the Company for the Financial Year ended on 2022-2023. Secretarial Audit Report in Form MR-3 for the financial year 20222023 forms part of this report as Annexure - 7.

There has been no qualification, reservation, adverse remark or disclaimer given by the Auditors in their Report.

Annual Secretarial Compliance Report

Pursuant to Regulation 24A of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Company has obtained the Annual Secretarial Compliance Report which forms part of this Report as Annexure - B from Mr. C. Sudhir Babu, Practicing Company Secretary (Proprietor, CSB Associates) and submitted the same to the Stock Exchanges where the shares of the Company are listed.

Cost Auditor

As per Section 148 of the Companies Act, 2013 read with the Companies (Audit and Auditors) Rules, 2014, and the Companies (Cost Records & Audit) Amendment Rules, 2014, the Company maintains Cost Records. Your Board has, upon the

recommendations of the Audit Committee, appointed Mr. K.S.N. Sarma (Registration No.102145 and Membership No.6875) as Cost Auditor of the Company for the financial year 2023-2024.

As required under the Act and Rules made thereunder, the remuneration payable to the Cost Auditors is required to be placed before the Members at a general meeting for ratification. Accordingly, a resolution seeking ratification of the remuneration payable to Mr. K.S.N. Sarma, Cost Account, by the members is included in the Notice convening 35^th Annual General Meeting.

FINANCIAL CONTROL SYSTEMS AND THEIR ADEQUACY

Internal Financial Controls are an integral part of the risk management process, addressing financial and financial reporting risks. Internal financial control systems of the Company are in commensurate with its size and the nature of its operations. These have been designed to provide reasonable assurance with regard to recording and providing reliable

financial and operational information, complying with applicable accounting standards and relevant statutes, safeguarding assets from unauthorised use, executing transactions with proper authorisation and ensuring compliance of corporate policies. The Company uses an established Tally to record day-to-day transactions for accounting and financial reporting.

Assurance on the effectiveness of internal financial controls is obtained through management reviews, continuous monitoring by functional owners as well as testing of the internal financial

control systems by the internal auditors during the course of their audits. We believe that these systems provide reasonable assurance that our internal financial controls are designed effectively and are operating as intended.

The Company has in place adequate internal financial controls with reference to financial statements. However, the Company recognises that no matter how the internal control framework is, it has inherent limitations and accordingly, periodic audits and reviews ensure that such systems are updated on regular intervals.

POLICIES Company has following policies in place pursuant to applicable provisions of the Act and SEBI Listing Regulations and the same are
published on the official website of the Company (www.smspharma	com):
Code of Business Conduct & Ethics for Other Stake Holders	Code of Regulation & Prohibition of Insider Trading
Code of Conduct for Board & Senior Management	Remuneration Criteria for Non-Executive Directors policy
Corporate Social Responsibility Policy	Document preservation policy
Familiarization program of Independent Director	Policy for evaluation performance of the Board
Policy for related party transactions	Policy for sexual harassment
Vigil Mechanism (Whistle blower policy)	Staff advances policy
Dividend Distribution Policy	Risk Management Policy
Code of Practices and procedures for Fair Disclosure	Policy for Determination of Materiality for Disclosure

HUMAN RESOURCES / INDUSTRIAL RELATIONS

The Company believes that competent and committed human resources are vitally important to attain success in the organization. In line with this philosophy, utmost care is being exercised to attract quality resources and suitable training is imparted on various skill-sets and behavior. Employee knowledge enrichment is a core value of the organisation, and focus has been placed on training and development of the Company''s human capital and also various initiatives were undertaken to enhance the competitive spirit and encourage

bonding teamwork among the employees and could achieve the targeted growth in the performance of the Company.

SHARE TRANSFER SYSTEM

Pursuant to Regulation 40(1) of SEBI (LODR) Regulations, 2015, as amended from time to time, transfer, transmission and transposition of securities shall be effected only in dematerialised form.

Pursuant to SEBI Circular dated January 25, 2022, the listed companies shall issue the securities in dematerialised form only,

for processing any service requests from shareholders vis., issue of duplicate share certificates, endorsement, transmission, transposition, etc. After processing the service request, a letter of confirmation will be issued to the shareholders and shall be valid for a period of 120 days, within which the shareholder shall make a request to the Depository Participant for dematerialising those shares. If the shareholders fail to submit the dematerialisation request within 120 days, then the Company shall credit those shares in the Suspense Escrow Demat account held by the Company. Shareholders can claim these shares transferred to Suspense Escrow Demat account on submission of necessary documentation.

The Stakeholders Relationship Committee meets as often as required to approve share transfers and to attend to any grievances or complaints received from the members.

GENERAL DISCLOSURE

Your Directors state that no disclosure or reporting is required in respect of the following items as there were no transactions on these items during the year under review:

a) No material changes and commitments affecting the financial position of the Company between the financial year ended 31^st March, 2023 and the date of this report.

b) No fraud has been reported by the Auditors to the Audit Committee or to the Board.

c) No material and significant orders passed by the regulators or courts or tribunals impacting the going concern status and the Company’s operations in future

d) Company has complied with the requirements of the Secretarial Standards issued by Institute of Company Secretaries of India.

e) There are no instances where the Board has not accepted the recommendation of Audit Committee.

f) Cost records are maintained as per the requirements of Section 148 of the Act.

g) The extract of Annual Return is disclosed on the Company’s website.

DISCLOSURE UNDER THE SEXUAL HARASSEMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION AND REDRESSAL) ACT, 2013:

In order to comply with the provisions of the Sexual Harassment of Women at Work Place (Prevention, Prohibition and Redressal)

Act, 2013 and Rules framed thereunder, the Company has formulated and implemented a policy on prevention, prohibition and redressal of complaints related to sexual harassment of women at the work place. All women employees permanent, temporary or contractual are covered under the above policy. Your Company has zero tolerance towards sexual harassment at the workplace and the details of sexual harassment complaints as per the provisions of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 and the Rules framed thereunder.

During the Financial Year ended on March 31, 2023, the Company has not received any complaint of sexual harassment.

COMPLIANCE WITH SECRETARIAL STANDARDS

During the year under review, the Company has complied with the Secretarial Standards issued by the Institute of Company Secretaries of India.

INSURANCE:

The Company’s plant, properties, equipment and stocks are adequately insured against all major risks. The Parent Company has taken Directors’ and Officers’ Liability Policy to provide coverage against the liabilities arising on them, which includes the Directors of the Company also.

RATING

CARE Rating Limited has assigned its rating of ‘CARE A-‘ on the Long Term Bank Facilities of the Company and ‘CARE A2 ’ on the Short Term Bank Facilities of the Company

DETAILS OF SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS OR TRIBUNALS IMPACTING THE GOING CONCERN STATUS AND COMPANY''S OPERATIONS IN FUTURE

During the year under review, there were no significant material orders passed by the Regulators / Courts which would impact the going concern status of the Company and its future operations.

DISCLOSURE OF CERTAIN TYPES OF AGREEMENTS BINDING ON THE COMPANY:

During the period under the review the Company does not entered any agreement(s) which were falling under clause 5A

of para A of part A of schedule III of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

APPLICATION MADE OR ANY PROCEEDING PENDING UNDER THE INSOLVENCY AND BANKRUPTCY CODE

As on the date of the Report no application is pending against the Company under the Insolvency and Bankruptcy Code, 2016 and the Company did not file any application under (IBC) during the Financial Year 2022-23.

ACKNOWLEDGEMENTS:

Your Directors place on record their sincere appreciation for the continued co-operation and support extended to the Company by the Banks. Board takes this opportunity to thank

all shareholders, analysts, business partners, government and regulatory authorities, distributors, suppliers, business associates, medical professionals and customers for their continued guidance, encouragement and splendid support.

The Board of Directors also wish to place on record its deep sense of appreciation for the dedicated and committed services by the Company’s executives, staff and workers.

The Directors also wish to express their gratitude to the Investors for the confidence and faith that they continued to repose in the Company.

By the order of the Board

Ramesh Babu Potluri

Place: Hyderabad Chairman and Managing Director

Date: 08.08.2023 (DIN:00166381)

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Mar 31, 2018

BOARD''S REPORT

Dear Shareholders,

Your Directors have pleasure in presenting before you the 30th Annual Report of the Company together with Audited Statement of Accounts for the year ended 31st March, 2018.

FINANCIAL SUMMERY	(INR in Lakh)
Particulars	Standalone
	2017-18	2016-17
Gross Sales	43,659.61	41,455.68
Net Sales	40,080.29	39,830.15
Other Operating Income	216.06	3,952.80
Net Revenue from Operations	46,486.33	43,782.95
Other Income	238.79	142.71
EBIDTA	9572.76	7,612.12
Finance Charges	1547.95	1,538.66
Depreciation	1989.98	1,917.72
Profit Before Tax	6034.82	4,155.73
Taxation	1989.39	603.31
Profit After Tax	4045.43	3,552.42
Appropriations:
Proposed Dividend	211.63	169.30
Dividend Tax	43.50	34.47
General Reserve	1,000.00	1,000.00
Earnings per share -Basic/Diluted	4.78	4.21

STATE OF COMPANY AFFAIR''S

In Financial & Production terms

During the year 2017-18 the Company had achieved production of 550.71 M.T. of APIs and their Intermediates in comparison with 594 M.T for the FY 2016-17. The net sales of the Company for the FY 2017-18 have reached 40,080.29 lakhs as against 39,830.15 lakhs for the FY 2016-17. EPS has reached to Rs. 4.78 in the FY 2017-18 as against Rs. 4.21 in the FY 2016-17.

Subsidiaries and Associates:

Your company is having one associate company i.e., "VKT Pharma Private Limited" and is under the same management. Your Company is holding 42.62% equity

shares in the said associate company and the share of loss for your company for the financial year 2017-18 was Rs. 870.46. Same specified in the previous annual report also.

The consolidated financial statements had been prepared as per Accounting Standard (AS) 23 "Accounting for Investment in Associates in Consolidated Financial Statements" specified under Section 133 of Companies Act, 2013 for considering the financials of Associate Company. The required form, as per the provisions of the Sec. 129(3) read with rule 5 of Companies (Accounts) Rules, 2014. i.e., AOC-I forms part of the Report as Annexure - I.

Change in Nature of Business

There is no change in Nature of Business. A detailed report on the same viz. ''Management Analysis and Discussion Report'' is form part of this report as Annexure -2

Share Capital

During the year under review the company had neither issued fresh equity/sweat equity shares nor any debentures, Employees Stock Option Scheme or any share based employee benefits. A report on the same viz. ''Equity Buildup Report'' forms part of this report as Annexure -3

TRANSFER TO RESERVES:

Your Company has transferred an amount Rs. 1,000.00 Lakhs (previous year Rs. 1,000.00 Lakhs) to General Reserve out of the amount available for appropriations.

DIVIDEND:

Your Directors have pleasure in recommending the dividend of Re. 0.25/ (i.e. 25%) per equity share of Re. 1/- face value, aggregating to Rs. 2,11,63,007.5/-which shall be paid within 30 days after the conclusion of the Annual General meeting, subject to the approval of the shareholders of the Company.

DIRECTORS'' RESPONSIBILITY STATEMENT:

Pursuant to the provisions of Section 134(3)(c) of the Companies Act, 2013 as amended, the Board of Directors confirm that:

I. In preparation of the Financial Statements for the year ended 31st March, 2018 the applicable accounting standards had been followed along

with proper explanation relating to material departures, if any.

2. They had selected such accounting policies as notified & modified by ICAI 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 profit and loss of the company for that period;

3. They had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 as amended form time to time for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities;

4. The Annual Accounts had been prepared on going concern basis.

5. The company has developed an effective mechanism for internal financial controls, it has been followed by the Company consistently; such internal financial controls are adequate and operating effectively.

6. They had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

LOANS, GUARANTEES AND INVESTMENTS:

Your Company had made investment in its associate company viz. M/s. VKT Pharma Private Limited for its business purpose. During the year under review, your Company had acquired 7,84,100 equity shares of face value of Rs. 10/- each in the said associate at an average price of Rs.200.81

The Particulars of loans/advances given are provided in the Standalone Financial Statements.

The company is maintaining the details of investments made during the year in Statutory Form MBP - 2. The details of loans / advances given and investments made during the financial year ended on 31st March, 2018. Annexure-4

RELATED PARTY TRANSACTIONS:

All contracts/arrangements/transactions entered by the Company during the financial year 2017-18 with related parties were in the ordinary course of business and on an arm''s length basis and are in compliance with the provisions of the Companies Act and the SEBI (Listing Obligation & Disclosure Requirement) Regulation, 2015. There are no materially significant related party transactions made by the company with Promoters, Directors and Key Managerial Personnel etc. which may have potential conflict with the interest of the Company. All related party transactions are presented to the Audit Committee on quarterly basis and also placed before the aboard.

A statement of all Related Party Transactions is being presented before the Audit Committee on Quarterly basis specifying the nature, value and terms and conditions of the transactions. A Policy on Related Party Transactions approved by the Board on 14th May, 2016 is uploaded on the Company''s website at the web link http://www.smspharma.com/investors/ download s/policy-on-related-party-transactions.pdf.

The particulars of contracts or arrangements entered into by the Company with related parties referred to in Section 188(1) are kept by the Company in Statutory Form AOC-2. Further details required to disclose as per Accounting Standard-18 (as issued & modified by ICAI) form part of the notes to the financial statements provided in the annual report. The Form AOC-2 is attached to the report as Annexure-5

STATE OF BOARD AFFAIRS

Board of Directors and Key Managerial Personnel:

Your company is maintaining an optimum combination of Independent and Executive directors in the Board, who have vast experience in Pharma and other relevant fields.

The Board had appointed Mr.Lakashmi Narayana Tammineedi as Chief Financial Officer (CFO) with effect from 13th September, 2017.

The Board had appointed Mr. VS.Venkatish in place of Mr. Thirumalesh Tumma on 08th February, 2018 and designated him as Company Secretary and Compliance Officer of the Company pursuant to provisions of Section 203 of the Companies Act, 2013 and SEBI (LODR) Regulations, 2015. Mr. Thirumalesh Tumma resigned as Company Secretary and Compliance Officer w.e.f 30th December, 2017.

Mr.Lakshmi Narayana T CFO has been appointed as a compliance officer of the Company from 31st December, 2017 to 7th February, 2018.

Mr. Lakshmi Narayana T CFO was appointed as a compliance officer of the Company from 31st December, 2017 to 7th February, 2018.

As per the Articles of Association of the Company all the Executive Directors are compulsorily liable to retire by rotation. Accordingly Mr. TWS Murthy is liable to retire by rotation at the ensuing Annual General Meeting scheduled on 20th September, 2018 and being eligible, seeks reappointment. A brief profile of directors and managers seeking re-appointment are given along with the AGM Notice for the reference of the shareholders.

Independent Directors:

In accordance with the provisions of the Section 149 (7) of the Companies Act, 2013, each independent director had confirmed to the Company that he/ she meets the criteria of Independence laid down in the Section 149 (6) of the Companies Act, 2013 and Regulation 25(1) of SEBI (Listing Obligations and Disclosure Requirements), Regulations, 2015.

All the independent Directors of the Company have given declarations under sub-section (6) of Section 149 of the Act, and the same had been considered and taken on record by the Board.

Annual Evaluation:

Your company had conducted a separate Meeting of Independent Directors on 11Ith August, 2017 in which they had evaluated the performance of Executive directors and Non- Executive/Nominee Director''s. Further, in the Board Meeting held on 13th September, 2017 the Board had evaluated the performance of Independent Directors and their contribution in the Board. The evaluation had been made on specified standards.

Risk Management Policy

In accordance with the provisions of the Regulation 21 of SEBI (Listing Obligations and Disclosure Requirements), Regulations, 2015 your Company is not required to form the separate Risk Management Committee and accordingly Risk Management Policy is also not applicable to the Company.

The Company has adequate internal control systems and procedures to mitigate the financial risk (if any), arise in near future. The Risk Management procedure will be reviewed by the Audit Committee and the Board of Directors on a Quarterly basis.

KMP Appointment & Remuneration Policy

The Company had a ''Nomination and Remuneration Committee Charter'' the Nomination and Remuneration Committee abide by the said Charter for appointing any Key Managerial Persons (KMP). During the year under review, the Committee had recommended for appointment of Chief Financial Officer and Company Secretary. Appointment of any KMP is made by the Nomination and Remuneration Committee in commensuration of the requirement of the position and experience of the candidate.

Composition & Number of Meetings of the Board and Audit Committee:

During the year under review the Board of Directors met six times. The dates on which the Board Meetings were held on 30th May 2017, 11Ith August 2017, 13th September, 2017, 27th September, 2017, 13th December, 2017, and on 8th February 2018. The Audit Committee members met 4 times. The dates on which the Audit Committee meetings were held on 27th May, 2017, 12th September, 2017, 13th December, 2017 and 8th February, 2018. A detailed report on the above mentioned along with reporting required under Sec. 177(8) and 177(10) of the Companies Act, 2013 and composition of various committees formed part of the report viz. ''Corporate Governance Report'' forms part of this report as Annexure - 6.

Extract of Annual Return:

In accordance with the provisions of the Companies Act, 2013 and Rule 12 of Companies (Management and Administration) Rules, 2014 the extract of Annual Return is prepared in prescribed form i.e.. ''Form MGT-9''.

DEPOSITS

Your Company had not accepted/invited any deposits from the public during the year under review. As such no amount of principal or interest was outstanding on the date of the Balance Sheet.

CORPORATE SOCIAL RESPONSIBILITY

As per the provisions of Section 135 and Schedule-VII of the Companies Act, 2013, and Companies (Corporate Social Responsibility Policy) Rules, 2014 your company had formulated a Corporate Social Responsibility Policy (CSR Policy). The said policy contains the scope of CSR Expenditure and provides guidance for way forward for expending the same. The composition of CSR committee and other details mentioned under ''Corporate Governance Report'' is form part of this report as Annexure - 6.

As per the provisions of the Section 135 of the Act, the average net profits of the company during the preceding three years stands as Rs. 5512.79 lakhs hence the company is required to spend a sum of Rs. 110.26 lakhs towards CSR Expenditure in FY 2017-18. The details of it are mentioned under ''CSR Expenditure'' in statutory format is which forms part of this report as Annexure - 8.

PARTICULARS OF EMPLOYEES:

Disclosures pertaining to remuneration and other details as required under Section 197 (12) of the Companies Act, 2013 read with Rule 5 (I) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is mentioned under ''Employees Remuneration Report'' is form part of this report as Annexure - 9.

None of the employees is receiving salary of more than Rs. 8.5 lakhs Lakh per month.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION:

The information required under Section 134(3)(m) of the Companies Act, 2013 read with the applicable Rules is form part of this report as Annexure - 10

FOREIGN EXCHANGE EARNINGS AND OUTGO

		[Rs. in Lakhs)
Particulars	2017-18	2016-17
Earnings
FOB Values Exports	6445.05	5014.38
Out go
Sales Commission	54.40	42.61
Travelling Expenses	3.54	1.91
CIF Value of Imports
Raw Materials	350.97	880.99
Capital Goods	248.22	128.99

AUDITORS:

Statutory Auditors

At the Annual General Meeting held on 27th September, 2017, M/s. Suryanarayana & Suresh Chatered Accountants, (Firm Reg No. 006631S) were appointed Statutory Auditors of the Company to hold office for five consecutive years from the conclusion of the 29th Annual General Meeting of the Company till the conclusion of 34th Annual General Meeting of the Company to be held in the year 2022. Accordingly, M/s Suryanarayan & Suresh to be continued as Statuatory Auditors of the Company till the conclusion of 34th Annual General Meeting of the Company.

Secretarial Auditor

Pursuant to Section 204 of the Companies Act, 2013, and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, M/s. SWS & Associates Company Secretaries LLP were appointed to conduct Secretarial Audit of the Company for the Financial Year ended on 31st March, 2018. Secretarial Audit Report for the financial year 2017-18 is form part of this report as Annexure -II.

Cost Auditor

Pursuant to Section 148 of the Companies Act, 2013 read with the Companies (Audit and Auditors) Rules, 2014, and the Companies (Cost Records & Audit) Amendment Rules, 2014, the Company maintains Cost Records Your Board has on the recommendations of the Audit Committee, appointed Sri K.S.N. Sarma having Registration No.-102145 and Membership No.-6875 as Cost Auditor of the Company for the financial year 2018-19. The provisions also require the remuneration of the Cost Auditor to be approved by the shareholders, as mentioned under AGM Notice under item no. 6. As a matter of record, the Cost Audit Report for the year 2016-17 was filed with the Central Government within the prescribed time limit and for the year 2017-18 will be filed within the stipulated time.

INTERNAL FINANCIAL CONTROL SYSTEMS AND THEIR ADEQUACY:

Your Company has laid down the set of standards which enables to implement internal financial control

across the organization and ensure that the same are adequate and operating effectively (I) to provide reasonable assurance that: transactions are executed in conformity with generally accepted accounting principles/standards or any other criteria applicable to such statements, (2) to maintain accountability for assets; access to assets is permitted only in accordance with management''s general or specific authorization and the maintenance of the records that in reasonable detail, accurate and fairly reflect the transactions and dispositions of the assets of the company, (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the assets that could have a material effect on the Financial Statements.

WHISTEL BLOWER POLICY/VIGIL MECHANISM

The Company has established a mechanism trough which all the stakeholders can report the suspected frauds and genuine grievances to the appropriate authority. The whistle Blower Policy which has been approved by the Board of Directors of the Company has been uploaded on the Company''s website of the company (http://www.smspharma.com/investors/ downloads/whistle-blower-protection-policy.pdf). During the year under review the Company has not received any complaint(s) under this policy.

BOARD''S RESPONSE ON AUDITORS QUALIFICATION, RESERVATION OR ADVERSE REMARK OR DISCLAIMER MADE:

There are no qualifications, reservations or adverse remarks made by the Statuatory Auditors and Cost Auditor in their Report.

REPORTING ON SEXUAL HARRASEMENT:

The Company has zero tolerance for sexual harassment at workplace and has adopted a "Policy on Prevention, Prohibition and Redressal of Sexual Harassment of Women at Workplace" in line with the provisions of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 and the Rules thereunder for prevention and redressal of complaints of sexual harassment at workplace.

The Company is committed to providing equal opportunities without regard to their race, caste, sex, religion, colour, nationality, disability, etc. All women associates (permanent, temporary, contractual and trainees) as well as any women visiting the Company''s office premises or women service providers are covered under this policy. All employees are treated with dignity with a view to maintain a work environment free of sexual harassment whether physical, verbal or psychological.

During the year under review, the Company has not received any complaints on Sexual Harrasements.

DETAILS OF SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS OR TRIBUNALS IMPACTING THE GOING CONCERN STATUS AND COMPANY''S OPERATIONS IN FUTURE:

No significant and material orders passed by the regulators or courts or tribunals impacting the going concern status and Company''s operations in future except the NCLT order dated 15th May, 2017 approving the scheme of arrangement resulting in demerger of semi-regulated units of the Company. Further, No material Changes and commitments which affecting the financial position of the Company.

Acknowledgements:

Your Directors place on record sincere appreciation for the significant contribution made by the employees through their dedication, hard work and commitments. Your Directors gratefully acknowledge and appreciate the support extended by the Banks, Financial Institutions, various government authorities, customers and also shareholders of the Company, for their continued support and confidence reposed in the Company.

	By the order of the Board
	Ramesh Babu Potluri Chairman and Managing Director
	(DIN:00166381)
Place: Hyderabad
Date: 26-05-2018

Annexure-l

FORM NO.AOC-I Part "A": Associates and Joint Ventures

Statement pursuant to Section 129 (3) of the Companies Act, 2013 related to Associate Companies and Joint Ventures

SI. No.	Name of associates/Joint Ventures	VKT Pharma Private Limited
1	Latest audited Balance Sheet Date	31.03.2018
2	Shares of Associate/Joint Ventures held by the company on the year end
	No.	38,50,165 Equity Shares of Rs. 10/- each.
	Amount of Investment in Associates/Joint Venture	Rs.4,449.87 Lakhs
	Extend of Holding%	42.62
3	Description of how there is significant influence	Based on the percentage of holding over these investees.
4	The associate is consolidated	Financial Statement Consolidated for FY20I7-18
5	Net worth attributable to shareholding as per latest audited Balance Sheet	Rs. 3920.38 Lakhs
6	Profit/Loss for the year i. Considered in Consolidation ii. Not Considered in Consolidation	Rs. (2048.39) Lakhs

	By the order of the Board
	Ramesh Babu Potluri
Place: Hyderabad	Chairman and Managing Director
Date: 26-05-2018	(DIN:00166381)

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Mar 31, 2016

Dear Shareholders,

The Directors have pleasure in presenting before you the 28th Annual Report of the Company together with Audited Statement of Accounts for the year ended 31st March, 2016.

A. FINANCIAL SUMMERY: (INR In lakh)

Standalone

Particulars

2015-16 2014-15 (INR in Lakhs) (INR in Lakhs)

Gross Sales 58,246.88 55,764.66

Net Sales 55,607.10 53,604.12

Other Operating Income 4,712.23 4,324.46

Net Revenue from 60,3|9.33 57,928.58

Operations

Other Income 360.80 1,632.00

EBIDTA 9,280.35 10,258.05

Finance Charges 1,709.81 1,793.09

Depreciation 1,943.30 1,716.61

Profit Before Tax 5,627.24 6,748.35

Taxation 1,463.32 3,223.89

Profit After Tax 4,163.92 3,524.46

Balance brought forward 8,369.01 6,073,30 from previous year

Less : Adjustment of - 24.98 depreciation reserve as per Schedule II of Companies Act, 201 3

Balance available for 12,532.93 9,572.78

Appropriations.

Appropriations:

Proposed Dividend 169.30 169.30

Dividend Tax 34.47 34.47

General Reserve 1,000.00 1,000.00

Profit carried to Balance

Sheet

Earnings per share 4.92 4.16

- Basic/Diluted

B. STATE OF Company AFFAIR''S

B.I) In Financial & Production terms

During the year 2015-16 the Company had achieved production of 2,375 M.T of APIs and their Intermediates in comparison with 2,026 M.T of FY 2014-15 and registered a growth of 17.22% The net sales of the Company has reached to Rs, 55,607.10 lakhs as against Rs,53,604.12 lakhs registering a growth of 3.74% and the net revenue from operations have increased by 4.12%. With this EPS has increased to Rs, 4.92 as against Rs, 4.16 during the year 2014-15. The management believes that the profitability margins from the operations are sustainable and it will continue to strengthen its leadership position.

B.2) Awards and Approval

Your Company had won first "India Pharma Award, 2015" in the following two categories:

1. INDIA PHARMA BULK DRUG Company OF THE YEAR AWARD.

2. INDIA PHARMA BULK DRUG EXPORT Company OF THE YEAR AWARD.

During the year under review, the facility located at kandivalasa has completed USFDA Inspection and there were no observations in this regard. Apart from this our facility at bachupally, also had the USFDA approval.

B.3) Subsidiaries and Associates:

Your Company is having one associate Company. The said associate Company viz. "VKT Pharma Private Limited" is under the same management. Your Company is holding 34.33% equity shares in the said associate Company and the share of loss for your Company for financial year 2015-16 was Rs, 74,71,033/-. SMS Life sciences India Limited has become the wholly owned subsidiary of your Company during the Financial Year 2016-17.

The consolidated financial statements had been prepared as per Accounting Standard (AS) 23 - "Accounting for Investment in Associates in Consolidated Financial Statements" specified under Section 133 of Companies Act, 201 3 for considering the financials of Associate Company. The required form, as per the provisions of the Sec. 129(3) read with rule 5 of Companies (Accounts) Rules, 2014 viz. AOC-1'' is form part of this report as Annexure -'' I''

B.4) Change in Nature of Business

There is no change in Nature of Business. A detailed report on the same viz. ''Management Analysis and Discussion Report'' is form part of this report as Annexure - ''2''

B.5) Share Capital

During the year under review the Company had neither issued fresh equity/sweat equity shares nor any debentures, Employees Stock Option Scheme or any share based employee benefits. The Company had sub divided the face value of share of Rs, 10/- each into face value of Rs, I/- of each with record date of 18th December, 2015. A report on the same viz. ''Equity Buildup Report'' is form part of this report as Annexure - ''3''

C. TRANSFER TO RESERVES:

Your Company has transferred an amount Rs, 1,000 Lakhs (previous year Rs, 1000 Lakhs) to General Reserve out of the amount available for appropriations.

D. DIVIDEND:

Your Directors have pleasure in recommending the dividend of Rs, 0.20/- (i.e. 20%) per equity share of Rs, I/-face value, aggregating toRs, 1,69,30,406/-which shall be paid within 30 days after the conclusion of the Annual General meeting, subject to the approval of the shareholders of the Company. The total cash outflow on account of dividend including dividend distribution tax is Rs, 203.77 lakhs.

E. PROPOSAL FOR DE-MERGER OF SEMI REGULATED UNITS:

The Board has approved the "Draft Scheme of Arrangement for Demerger of Semi Regulated Units (Unit - I, IV & V) along with other Assets to transfer the same to SMS Life sciences India Limited (Resulting Company), with an object to reduce the impact of Semi Regulated Units on Regulated Units, achieving operational efficiencies, site synergies and streamlining its current structure. The Draft Scheme of Arrangement is subject to the Approvals of Stock Exchanges, Securities Board of India Limited, Reserve

Bank of India and other regulatory authorities and also Hon''ble High Court of Judicature at Hyderabad for the State of Telangana and Andhra Pradesh.

E DIRECTORS'' RESPONSIBILITY STATEMENT:

Pursuant to the provisions of Section I 34(3)(c) of the Companies Act, 2013 as amended, the Board of Directors confirm that:

1. In preparation of the Financial Statements for the year ended 31st March, 2016 the applicable accounting standards had been followed along with proper explanation relating to material departures, if any.

2. They had selected such accounting policies as notified & modified by ICAI 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 profit and loss of the Company for that period;

3. They had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 as amended form time to time for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

4. The Annual Accounts had been prepared on going concern basis.

5. The Company has developed an effective mechanism for internal financial controls, it has been followed by the Company consistently; such internal financial controls are adequate and operating effectively.

6. They had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

G. LOANS, GUARANTEES AND INVESTMENTS:

Your Company had made investment in its associate Company viz. M/s. VKT Pharma Private Limited for its business purpose. During the year under review,

your Company had acquired 5,1 1,400 equity shares of face value of Rs, 10/- each in the said associate at an average price of Rs, 157.21. Further, your Company had also made an investment in 1000 equity shares of Sireen Drugs Private Limited of Rs, 10/- each.

The Particulars of loans/advances given are provided in the Standalone Financial Statements. Please refer (Note no. 16.1) of the Standalone Financial Statements.

The Company is maintaining the details of investments made during the year in Statutory Form MBP - 2. The details of loans / advances given and investments made during the financial year ended on 31st March, 2016 are furnished as Annexure -''4''.

H. RELATED PARTY TRANSACTIONS

All contracts/arrangements/transactions entered by the Company during the financial year 2015-16 with related parties were in the ordinary course of business and at an arm''s length basis and are in compliance with the provisions of the Companies Act and the SEBI (Listing Obligation & Disclosure Requirement) Regulation, 2015. There are no materially significant related party transactions made by the Company with Promoters, Directors and Key Managerial Personnel etc. which may have potential conflict with the interest of the Company. All related party transactions are presented to the Audit Committee and to the Board on quarterly basis.

A statement of all Related Party Transactions is being presented before the Audit Committee on Quarterly basis specifying the nature, value and terms and conditions of the transactions. A Policy on Related Party Transactions approved by the Board on 14th May, 2016 is uploaded on the Company''s website at the web link http://www.smspharma.com/investors/ down loads/policy-on-related-party-transactions. pdf. The particulars of contracts or arrangements entered into by the Company with related parties referred to in Section 188(1) are kept by the Company in Statutory Form AOC-2. Further details required to disclose as per Accounting Standard-18 (as issued & modified by ICAI) form part of the notes to the financial statements provided in the annual report. The required form viz. AOC-2'' is form part of this report as Annexure -''5''

I. STATE OF BOARD AFFAIRS

1.1) Board of Directors and Key Managerial Personnel:

Your Company is maintaining an optimum combination of Independent and Executive directors in the Board, who have vast experience in pharma and other relevant fields. During the year under review following changes occurred in the position of Independent directors:

a) Sri A. R Rao resigned from the Board on 9th October, 2015.

b) The Board had appointed Sri Potluri Venkata Subba Rao (PS. Rao) as an additional Independent Director on Board w.e.f. 7th November, 2015.

c) Sri K.S. Rao having a long association with the Company had demised on 29th November, 2015 due to illness.

Further, in accordance with the provisions of Section I52(6)(a) of the Companies Act, 2013 and revised Articles of Association as approved by the shareholders at their meeting held on 29th September, 2015. All the Executive Directors are compulsorily liable to retire by rotation. Accordingly Sri Ramesh Babu Potluri and Sri TWSN Murthy, whole time directors, are liable to retire by rotation at the forthcoming/ensuing Annual General Meeting scheduled on 30th September, 2016 and being eligible, seeks reappointment. A brief profile of directors and managers seeking re-appointment are given along with the AGM Notice for the reference of the shareholders.

The board had been appointed Sri Saurav Roy in place of Sri R Prabhakar Rao on 4th August, 2015 and designated him as Company Secretary of the Company pursuant to provisions of Section 203 of the Companies Act, 2013. Sri R Prabhakar Rao resigned from the Company w.e.f. 31st July, 2015. Further the Board has affirmed the Compliance of the Code of Conduct as applicable on the Directors & Senior Management Personnel.

1.2) Independent Directors:

In accordance with the provisions of the Section 149 (7) of the Companies Act, 201 3, each independent director had confirmed to the Company that he/ she meets the criteria of Independence laid down in the Section 149 (6) of the Companies Act, 201 3 and Regulation 25(1) of SEBI (Listing Obligations and Disclosure Requirements), Regulations, 2015.

All the independent Directors of the Company have given declarations under sub-section (6) of Section 149 of the Act, and the same had been considered and taken on record by the Board.

1.3) Annual Evaluation:

Your Company had conducted a separate Meeting of Independent Directors on 9th February, 2015 in which they had evaluated the performance of Executive directors and Non- Executive/Nominee Director''s. Further, in the Board Meeting held on 14th May, 2016 the Board had evaluated the performance of Independent Directors and their contribution in the Board. The evaluation had been made on specified standards.

1.4) Risk Management Policy

In accordance with the provisions of the Regulation 21 of SEBI (Listing Obligations and Disclosure Requirements), Regulations, 2015 your Company is not required to form the separate Risk Management Committee and accordingly Risk Management Policy is also not applicable to the Company.

The Company has adequate internal control systems and procedures to mitigate the financial risk (if any), arise in near future. The Risk Management procedure will be reviewed by the Audit Committee and the Board of Directors on a Quarterly basis.

1.5) KMP Appointment and Remuneration Policy

During the year under review your Company had adopted a ''Nomination and Remuneration Committee Charter'' in its Board meeting held on 5th December, 2015. The Nomination and Remuneration Committee abide by the said Charter for appointing any Key Managerial Persons (KMP). During the year under review, the Committee had recommended for appointment of Company Secretary and one Independent Director. The appointment made by the Company for the position of Independent Director in compliance with the relevant provisions of Companies Act, 2013, its allied rules and other applicable norms of the SEBI.

Appointment of any KMP is made by the Nomination and Remuneration Committee in com menstruation of the requirement of the position and experience of the candidate. The Committee has not formulated any formal policy for appointment of KMP it is more as and when basis.

1.6) Composition and Number of Meetings of the Board and Audit Committee:

During the year under review the Board of directors met seven times. The dates on which the Board Meetings were held on 30th May 2015, 8th August 2015, 9th October 2015, 7th November 2015, 5th December 2015, Nth February 2016, 30th March

2016. A detailed report on the above mentioned along with reporting required under Sec. 177(8) and 177(10) of the Companies Act, 2013 and composition of various committees formed part of the report viz. ''Corporate Governance Report'' is form part of this report as Annexure - ''6 ''

1.7) Extract of Annual Return:

In accordance with the provisions of the Companies Act, 201 3 and Rule 12 of Companies (Management and Administration) Rules, 2014 the extract of Annual Return is prepared in prescribed form i.e. ''Form MGT-9''. The said form part of this report as Annexure -''7''

j. DEPOSITS

Your Company had not accepted/invited any deposits from the public during the year under review. As such no amount of principal or interest was outstanding on the date of the Balance Sheet.

K. CORPORATE SOCIAL RESPONSIBILITY

As per the provisions of Section 135 and Schedule- VII of the Companies Act, 2013, and Companies (Corporate Social Responsibility Policy) Rules, 2014 your Company had formulated a Corporate Social Responsibility Policy (CSR Policy). The said policy contains the scope of CSR Expenditure and provides guidance for way forward for expending the same. The composition of CSR committee and other details mentioned under ''Corporate Governance Report'' is form part of this report as Annexure - ''6''

As per the provisions of the Section I 35 of the Act, the average net profits of the Company during the preceding three years stands as Rs, 923.75 lakhs hence the Company is required to spend a sum of Rs, 18.47 lakhs towards CSR Expenditure in FY 2015-16. The details of it are mentioned under ''CSR Expenditure'' in statutory format is form part of this report as Annexure-''8''.

L. PARTICULARS OF EMPLOYEES:

Disclosures pertaining to remuneration and other details as required under Section 197 (12) of the Companies Act, 2013 read with Rule 5 (I) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is mentioned under ''Employees Remuneration Report'' is form part of this report as Annexure - ''9''. None of the employees is receiving salary of more than Rs, 5 Lakh per month.

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

The information required under Section 134(3)(m) of the Companies Act, 201 3 read with the applicable Rules is form part of this report as Annexure- '' 10''.

N. AUDITORS:

N. I) Statutory Auditors

The shareholders at their 27th Annual General Meeting (AGM) held on 29-09-2015, approved the reappointment of M/s. Rambabu& Co., Chartered Accountants (ICAI Firm Registration No. 002976S), as Statutory Auditors of the Company, to hold the office till the conclusion of the 28th Annual General Meeting. M/s. Rambabu & Co., Chartered Accountants, are eligible for reappointment and have confirmed their eligibility under Section 141 of the Companies Act, 2013, read with Rule 4 of the Companies (Audit and Auditors) Rules, 2014. They have consented to the said appointment. They have further confirmed that they are not disqualified to be appointed as statutory auditor.

The Audit Committee of the Board of Directors recommended the appointment of M/s. Rambabu & Co., Chartered Accountants, as Statutory Auditors of the Company from the conclusion of 28th Annual General Meeting till the conclusion of the 29th Annual General Meeting.

N.2) Secretarial Auditor

Pursuant to Section 204 of the Companies Act, 2013, and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, M/s. SWS & Associates Company Secretaries LLP were appointed to conduct Secretarial Audit of the Company for the Financial Year ended on 31st March, 2016. Secretarial Audit Report for the financial year 2015-16 is form part of this report as Annexure-'' I I''

N.3) Cost Auditor

Pursuant to Section 148 of the Companies Act, 2013 read with the Companies (Audit and Auditors) Rules, 2014, and the Companies (Cost Records & Audit) Amendment Rules, 2014, the Company maintains Cost Records Your Board has on the recommendations of the Audit Committee, appointed Sri K.S.N. Sarma having Registration No.- 102145 and Membership No.-6875 as Cost Auditor of the Company for the financial year 2016-1 7. The provisions also require the remuneration of the Cost Auditor to be approved by the shareholders, as mentioned under AGM Notice under item no. 12. As a matter of record, the Cost Audit Report for the year 2014-15 was filed with the Central Government within the prescribed time limit and for the year 2015-16 will be filed within the stipulated time.

O. INTERNAL FINANCIAL CONTROL SYSTEMS AND THEIR ADEQUACY:

Your Company has laid down set of standards which enables to implement internal financial control across the organization and ensure that the same are adequate and operating effectively (I) To provide reasonable assurance that: transactions are executed in conformity with generally accepted accounting principles/standards or any other criteria applicable to such statements, (2) to maintain accountability for assets; access to assets is permitted only in accordance with management''s general or specific authorization and the maintenance of the records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company, (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the assets that could have a material effect on the Financial Statements.

P. WHISTEL BLOWER POLICY/VIGIL MECHANISM

The Company has established a mechanism trough which all the stakeholders can report the suspected frauds and genuine grievances to the appropriate authority. The whistle Blower Policy which has been approved by the Board of Directors of the Company has been uploaded on the Company''s website of the Company (http://www.smspharma.com/investors/ downloads/whist le-blower-protection-policy.pdf). During the year under review the Company has not received any complaint(s) under this policy.

Q. BOARD''S RESPONSE ON AUDITORS QUALIFICATION, RESERVATION OR

ADVERSE REMARK OR DISCLAIMER MADE:

There are no qualifications, reservations or adverse remarks made by the Statutory Auditor, Secretarial Auditor and Cost Auditor in their report.

R. REPORTING ON SEXUAL HARRASEMENT:

The Company has zero tolerance for sexual harassment at workplace and has adopted a "Policy on Prevention, Prohibition and Redressal of Sexual Harassment of Women at Workplace" in line with the provisions of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 and the Rules there under for prevention and redressal of complaints of sexual harassment at workplace.

The Company is committed to providing equal opportunities without regard to their race, caste, sex, religion, colour, nationality, disability, etc. All women associates (permanent, temporary, contractual and trainees) as well as any women visiting the Company''s office premises or women service providers are covered under this policy. All employees are treated with dignity with a view to maintain a work environment free of sexual harassment whether physical, verbal or psychological.

During the year under review, the Company has not received any complaints on sexual harassments. No workshops were carried out against sexual harassment, but awareness programms were carried out at each manufacturing unit and corporate office for women employees'' regarding this policy and the said policy is also displayed on the website of the Company.

S. DETAILS OF SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS OR TRIBUNALS IMPACTING THE GOING CONCERN STATUS AND Company''s OPERATIONS IN FUTURE:

No significant and material orders passed by the regulators or courts or tribunals impacting the going concern status and Company''s operations in future. Further, No material Changes and commitments which affecting the financial position of the Company.

Acknowledgements:

Your Directors place on record their sincere appreciation for the significant contribution made by the employees through their dedication, hard work and commitments. Your Directors gratefully acknowledge and appreciate the support extended by the Banks, Financial Institutions, various government authorities, customers and also shareholders of the Company, for their continued support and confidence reposed in the Company.

By the order of the Board

Ramesh Babu Potluri

Chairman and Managing Director

(DIN:00I6638I)

Place: Hyderabad

Date: 10-08-2016

---

Mar 31, 2015

Dear Shareholders,

The Directors have pleasure in presenting before you the 27th Annual Report of the Company together with Audited Statement of Accounts for the year ended 31st March, 2015.

Financial Results

(Amount : Rs. In Lakhs)

Particulars 2014-15 2013-14

Gross Sales 55,764.66 50,098.33

Net Sales 53,604.12 48,197.76

Other Operating 4,324.46 3,606.04 Income

Net Revenue from 57,928.58 51,803.80 Operations

Other Income 1,632.00 152.41

EBIDTA 10,258.05 5,869.15

Finance Charges 1,793.09 1,381.88

Depreciation 1,716.61 1,285.46

Profit Before Tax 6,748.35 3,201.81

Taxation 3,223.89 1,163.36

Profit After Tax 3,524.46 2,038.45

B/f from previous year 6,073.30 4,651.87

Less: Adj. of dep. reserve as per Sch. II of 24.98 - Companies Act, 2013

Balance available for 9,572.78 6,690.32 Appropriations.

Appropriations:

Transfer to Capital - 155.00 Redemption Reserve

Proposed Dividend 169.30 169.30

Dividend Tax 34.47 28.77

Dividend of previous year - (36.06) including Tax

General Reserve 1,000.00 300.00

Profit carried to 8,369.01 6,073.31 Balance Sheet

Earnings per share

- Basic/Diluted 41.63 23.06

Review of Operations

During the period under review the company has posted very good results. During the year 2014-15 the Company has achieved production of 2,026 M.T. of APIs and their Intermediates as against 1,791 M.T. during the corresponding year and registered a growth of 13%. The net sales of the company has reached to Rs. 53,604 Lakhs as against Rs. 48,198 Lakhs during the previous year registering growth of 11%. The EBITDA stood at Rs. 10,258 Lakhs for the year 2014-15 compared to Rs. 5,869 Lakhs for the year 2013-14, registering a growth of 75%. The profit after Tax for FY 2014-15 stood at Rs. 3,524 Lakhs, compared to Rs. 2,038 Lakhs for FY 2013-14, registering a growth of 73% With this EPS has increased to Rs. 41.63 as against Rs. 23.06 during the year 2013-14.

The Company has improved its economy of scale by increasing utilization of production facility at Kandivalasa and Bachupally units. The management believes that the profitability margins from the operations are sustainable and it will continue to strengthen its leadership position through dedicated research and introduction of new products. During the year the company has re-enforced its fundamental strength of FDA compliant facilities by successfully completing the US FDA audits at Kandivalasa and Bachupally facilities. Apart from the above, we are having PMDA (Japan) approval on accreditation basis for all the four facilities. KFDA (Korea) approval was obtained for Bachupally and Kandivalasa facilities. TGA (Australia) and EUGMP (E.U.) approval was obtained for Bachupally facility. COFEPRIS (Mexico) approval was obtained for Kazipally facility. During the year the company has filed 9 Drug Master Files and total DMFs filed up to 31.03.2015 are 24. The management believes that the profitability margins from the operations are sustainable and it will continue to strengthen its leadership position through dedicated research and introduction of new products. The company will continue to strengthen its model and build systems that are sustainable as it continues to scale-up.

Transfer to Reserves:

Your Company has transferred an amount Rs. 1,000 Lakhs (previous year Rs. 300 Lakhs) to General Reserve out of the amount available for appropriations.

Dividend:

Your Directors are pleased to recommend the dividend of Rs. 2-00 per equity share of Rs. 10/- each (Previous year Rs. 2/- per Equity Share).

Subsidiaries, Associates and Joint Ventures:

During the year the Company acquired 12,25,900 equity shares of Rs. 10/- each in M/s. VKT Pharma Private Limited. With this the said company has become an associate company. The project of the said associate company is in final stage and at the verge of completion and operations are yet to be commenced. The Company has not having any subsidiaries. Hence, as per the Notification GSR 723 (E) dated 14th October, 2014 issued by the Ministry of Corporate Affairs, the company need not give consolidated accounts for the year 2014-15. The required form, as per the provisions of Companies (Accounts) Rules, 2014 viz. AOC-1 is attached as Annexure –'A' to the Board report.

Loans, Guarantees and Investments:

During the year under review your Company had made investment in an associate company for its business purposes. The Company has not given any loans or extended any guaranty to other Company's, firms or other parties covered in the register maintained under section 189 of the companies Act, 2013.

In compliance with the provisions of section 186 of the Companies Act, 2013 read with Companies (Meetings of Board and its Powers) Rules, 2014, the details of investments made during the year are given in Annexure-'B'.

Board of Directors and Key Managerial Personnel:

As per the provisions of Section149 and 152 of the Companies Act, 2013, the shareholders at their 26th Annual General Meeting held on 30th September, 2014, had approved the appointment of all the existing independent directors of the Company for tenure of up to five consecutive years. None of the independent directors are liable to retire by rotation.

In accordance with the provisions of the Section 149 (7) of the Companies Act, 2013, each independent director had confirmed to the Company that he/ she meets the criteria of Independence laid down in the Section 149 (6) of the Companies Act, 2013 and Clause 49 of the Listing Agreement.

Further in accordance with the provisions of Section 152 of the Companies Act, 2013, the shareholders also approved the terms of appointment of Sri Ramesh Babu Potluri and Sri T V V S N Murthy, whole time directors, making them liable to retire by rotation. Accordingly Sri Ramesh Babu Potluri, Managing Director, retires by rotation at the forthcoming Annual General Meeting scheduled on 29th September, 2015 and being eligible, seeks reappointment.

All the independent Directors of the Company have given declarations under sub-section (6) of Section 149 of the Act, and the same have been considered and taken on record by the Board.

Sri N. Rajendra Prasad has been designated as Chief Financial Officer and Sri P. Prabhakar Rao, has been designated as Company Secretary of the Company pursuant to provisions of Section 203 of the Companies Act, 2013.

Mechanism for Evaluation of Board:

As per provisions of the Companies Act, 2013 and Clause 49 of the Listing Agreement, the evaluation of the performance of the Board and the members of the Board was under taken. The contribution and impact of the individual directors and the Board as a whole were reviewed through a peer evaluation on the following parameters:

A) Criteria for evaluation of Board of Directors as a whole.

i. The frequency of meetings;

ii. The length of meetings;

iii. The administration of meeting.

iv. The number of committees and their roles.

v. The flow of information to board members and between board members;

vi. The quality and quantity of information; and

vii. The Disclosure of Information to the stakeholders.

B) Criteria for evaluation of the Individual Directors.

i. Ability to contribute and monitor corporate governance practices;

ii. Ability to contribute by introducing best practices to address top management issues.

iii. Participation in long term strategic planning.

iv. Commitment to the fulfillment of director obligations and fiduciary responsibilities;

v. Guiding strategy;

vi. Monitoring management performance and development;

vii. Statutory compliance & Corporate Governance;

viii. Attendance and contribution at Board/ Committee Meetings;

ix. Independence of judgment, conflict resolution and contribution in the enhancement of the Board's overall effectiveness.

x. Time spent by each of the member; and

xi. Core competencies. A 360 degree feedback-cum-assessment of individual directors, the Board as a whole and its committees was conducted.

Number of Meetings of the Board of Directors:

The Board of directors met five times during the year. The dates on which the Board Meetings were held are 30th May, 2014, 12th August, 2014, 26th August, 2014, 11th November, 2014 and 6th February, 2015.

Nomination and Remuneration Committee:

The terms of reference for the committee includes:-

1. Identifying persons who are qualified to become Directors, Key Managerial Persons and who may be appointed in Senior Management in accordance with the criteria laid down and recommend to the Board for their appointment and removal;

2. Carry on the evaluation of every director's performance;

3. Formulation of the criteria for determining qualifications, positive attributes and independence of a director;

4. Recommend to the Board a policy relating to the remuneration of the directors, key managerial personnel and other employees;

5. Formulation of criteria for evaluation of independent directors and the Board;

6. Devising a policy on Board diversity; and

7. Any other matter as the Board may decide from time to time.

Nomination and Remuneration policy:

In accordance to Section 178 (3) of the Companies Act, 2013, Clause 49 (IV) (B) of the Listing Agreement and on the recommendations of Nomination and Remuneration Committee, the Board adopted the remuneration policy for the Directors, Key Managerial Personnel (KMPs) and Senior Management. The Objectives of the Policy are as under:

1. To lay down criteria and terms and conditions with regard to identifying persons who are qualified to become Directors (Executive and Non-Executive) and persons who may be appointed in Senior Management and Key Managerial positions and to determine their remuneration.

2. To determine remuneration based on the Company's size and financial position and trends and practices on remuneration prevailing in peer companies.

3. To carry out evaluation of the performance of Directors.

4. To provide them reward linked directly to their effort, performance, dedication and achievement relating to the Company's operations.

5. To retain, motivate and promote talent and to ensure long term sustainability of talented managerial persons and create competitive advantage.

Audit Committee:

The Audit Committee of the Board of Directors consists entirely of Independent Directors. Presently the Committee comprises of Sri K.S. Rao, (Chairman), Sri A.P. Rao and Sri P. Sarath Kumar.

The Board has accepted all the recommendations made by the Audit Committee during the year.

Risk Management Policy:

The Audit Committee had formulated a Risk Management Policy for dealing with different kinds of risks which it faces in day to day operations of the Company. Risk Management Policy of the Company outlines different kinds of risk and risk mitigating measures to be adopted by the Board. The Company has adequate internal control systems and procedures to combat the risk. The Risk Management procedure will be reviewed by the Audit Committee and the Board of Directors on a Quarterly basis at the time of review of Quarterly Financial Results of the Company.

Internal Financial Control Systems and Their Adequacy:

Your company has laid down set of statements which enables to implement internal financial control across the organization and ensure that the same are adequate and operating effectively

1. To prove reasonable assurances that transactions are executed in conformity with generally accepted accounting principles, standards or any other criteria applicable to such statements,

2. To maintain accountability for assets, access to assets is permitted only in accordance with management's general or specific authorization and the maintenance of records accurately with required details and fairly reflect the transactions and dispositions of the assets of the company; and

3. Provide reasonable assurance regarding prevention or timely detection of frauds and errors and unauthorized acquisition, use or disposition of the assets that could have a material effect on the financial statements.

4. The company ensures the accuracy and completeness of the accounting records, and the timely preparation of reliable financial information.

5. The company has a comprehensive budget control system to monitor revenue and expenditure against approved budget on an ongoing basis.

Directors' Responsibility Statement:

Pursuant to the provisions of Section 134 (3) (c) of the Companies Act, 2013 as amended, the Board of Directors confirm that in the preparation of the Financial Statements for the year ended 31st March, 2015:

1. The applicable accounting standards have been followed in the preparation of the Annual Accounts.

2. Such Accounting policies as notified by ICAI have been selected and applied consistently and judgments and estimates made when required 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 profit of the company for that period.

3. Proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safe guarding the assets of the Company and for preventing and detecting fraud and other irregularities.

4. The Annual Accounts have been prepared on going concern basis.

5. Proper internal financial controls were in place and were following by the Company and that the financial controls were adequate and operating effectively.

6. Proper systems have been devised to ensure compliance with the provisions of all the applicable laws and these systems are adequate and operating effectively.

The Board, further confirm that, during the year under review, there were no cases filed pursuant to the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013.

Related Party Transactions:

All contracts/arrangements/transactions entered by the Company during the financial year 2014-15 with related parties were in the ordinary course of business and on an arm's length basis and are in compliance with the provisions of the Companies Act and the Listing Agreement. There are no materially significant related party transactions made by the company with Promoters, Directors are Key Managerial Personnel etc. which may have potential conflict with the interest of the Company. However, to have more transparency in related parties' transactions the Board is seeking shareholders' approval for the said transactions.

All related party transactions are presented to the Audit Committee and the Board. Omnibus approval is obtained for the transactions which are foreseeable and repetitive in nature. A statement of all related party transactions is presented before the Audit Committee on quarterly basis pacifying the nature, value and terms and conditions of the transactions The Related Party Transactions Policy as approved by the Board is uploaded on the Company's website at the web link http://www. smspharma.com. In accordance with Section 134 (3) (h) of the Companies Act, 2013, and Rule 8 (2) of the Companies (Accounts ) Rules, 2014, the particulars of contracts or arrangements entered into by the Company with related parties referred to in Section 188 (1) in Form AOC-2 is attached as Annexure-'C'

The details of related party disclosures form part of the notes to the financial statements provided in the annual report.

With regard to the observation made by the Secretarial Auditor for the appointment of Sri P. Vamshi Krishna and Sri T. V. Praveen, the related parties for place of profit at a monthly remuneration in aggregate exceeding two and half Lakhs Rupees.

Your Directors wish to place on record that Sri T. V. Praveen and Sri P. Vamsi Krishna were appointed has officer holding a place under the erstwhile Section 314(1B) of the Companies Act, 1956 at a monthly remuneration of Rs. 3.00 lakh and Rs. 1.50 lakh per month respectively and a resolution to this effect was passed by the shareholders in the 25th Annual General Meeting held on 30th September, 2013, subject to the approval Central Government. The approval of the Central Government was obtained vide approval letter No. SRNB86666047/3/2013-CL-VII dated 24th January, 2014 for the payment of monthly remuneration of two and half Lakhs Rupees to Sri T. V. Praveen.

Section 188 of the Companies Act, 2013 has come into force with effect from 01-04-2014 and accordingly, Rule 15 (3) (ii) (b) of Companies (Meetings of Board and its Powers) Rules, 2014 prescribes the prior approval of the Company by an Ordinary Resolution for the appointment of a related parties to any office or place of profit in the Company at a monthly remuneration exceeding two and half Lakhs Rupees. Since the said appointments were approved by the shareholders on 30th September, 2013 and no fresh appointments were made under the Section 188 of the Companies Act, 2013 after its implementation. The total remuneration paid to the related parties was put for ratification of the Members once again at the ensuing Annual General Meeting.

Vigil Mechanism:

The Board of Directors has adopted Whistle Blower Policy. The Whistle Blower Policy aims for conducting the affairs in a fair and transparent manner by adopting highest standards of professionalism, honesty, integrity and ethical behavior. All permanent employees of the Company are covered under the Whistle Blower Policy.

A mechanism has been established for employees to report concerns about unethical behavior, actual or suspected fraud or violation of Code of Conduct and Ethics. It also provides for adequate safeguards against the victimization of employees who avail of the mechanism and allows direct access to the Chairman of the Audit Committee in exceptional cases.

Auditors:

Statutory Auditors

The shareholders at their 26th Annual General Meeting (AGM) held on 30-09-2014, approved the reappointment of M/s. Rambabu & Co., Chartered Accountants, as Statutory Auditors of the Company, to hold the office till the conclusion of the 27th Annual General Meeting. M/s. Rambabu & Co., Chartered Accountants, are eligible for reappointment and have confirmed their eligibility under Section 141 of the Companies Act, 2013, read with Rule 4 of the Companies (Audit & Auditors) Rules, 2014 and Clause 41(1) (h) of the Listing Agreement.

The Audit Committee of the Board of Directors recommended the appointment of M/s. Rambabu & Co., Chartered Accountants, as Statutory Auditors of the Company from the conclusion of 27th Annual General Meeting till the conclusion of the 28th Annual General Meeting.

Secretarial Auditor

Pursuant to Section 204 of the Companies Act, 2013, and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, Sri C Sudhir Babu, Practicing Company Secretary (C.P. No.7666) was appointed to conduct Secretarial Audit of the Company for the Financial Year ended on 31st March, 2015. Secretarial Audit Report for the financial year 2014-15 is attached as Annexure-'D' to this Report.

Cost Auditor

Pursuant to Section 148 of the Companies Act, 2013 read with the Companies (Audit and Auditors) Rules, 2014, and the Companies (Cost Records & Audit) Amendment Rules, 2014, the Company maintains Cost Records. Your Board has on the recommendations of the Audit Committee, appointed Sri K.S.N. Sarma as Cost Auditor of the Company for the financial year 2015-16. The provisions also require the remuneration of the Cost Auditor to be approved by the shareholders.

The Cost Audit Report for the year 2013-14 was filed with the Central Government within the prescribed time limit and for the year 2014-15 will be filed within the stipulated time.

Board's Response on Auditors qualification, reservation or adverse remark or disclaimer made:

There are no qualifications, reservations or adverse remarks made by the Statutory Auditor and Cost Auditor in their report. Reply on one qualification made by secretarial auditor already form part of this report under head "Related Party Transactions".

Details of significant and material orders passed by the regulators or courts or tribunals impacting the going concern status and company's operations in future:

NO SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS OR TRIBUNALS IMPACTING THE GOING CONCERN STATUS AND COMPANY'S OPERATIONS IN FUTURE.

Corporate Social Responsibility:

The company recognizes that business enterprises are economic organs of society and part of society and draw on social resources for their growth. The company has duty towards society and the communities and neighborhoods in whose vicinity the company operates.

The Company has constituted Corporate Social Responsibility Committee consisting of the Board of Directors Sri Ramesh Babu Potluri (Chairman & Managing Director), Sri K.S. Rao, an Independent Director and Sri P. Sarath Kumar an Independent Director as Chairman and as members of the committee respectively. The Board approved the CSR Policy as recommended by the CSR Committee with various CSR initiatives falling within the purview of Schedule VII of the Act.

The company would undertake CSR initiatives in compliance with schedule VII of the Companies Act, 2013 The CSR Policy may be accessed on the company's website: www.smspharma.com

As per the provisions of the Section 135 of the Act, the average net profit of the company during the preceding three years was negative. In computing the Net Profits in accordance with Sec. 198 of the Companies Act, 2013 for the purpose of CSR as specified under section 135; your company had earned a profit of Rs. 41.75 Lakhs in the financial year 2011-12 and Rs. 3,250.82 lakhs in the financial year 2013-14 and incurred a loss of Rs. 7,230.04 Lakhs in the financial year 2012-13 after adjusting the capital gains from sale of an unit. Hence, the average net profit of the company for preceding three financial years stands negative i.e. Rs. (1,279.16). spending provisions of CSR are not applicable for the year under review. However an amount of Rs. 1,80,000/- was spent during the year 2014-15 for providing purified drinking water in a village in whose vicinity the company operates.

Transfer of unpaid and unclaimed amounts to IEPF:

Pursuant to the provisions of Section 125 of the Companies Act, 2013, the declared dividends, which remained unpaid or unclaimed for a period of 7 years, have been transferred by the company to the Investor Education and Protection Fund (IEPF) established by the Central Government pursuant to the Section 125 of the said Act.

Employees Stock Option Schemes:

The Company has not implemented any Stock Option Schemes to the Employees.

Particulars of Employees:

Disclosures pertaining to remuneration and other details as required under Section 197 (12) of the Companies Act, 2013 read with Rule 5 (1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are attached as Annexure-'E'

Conservation of Energy, Research and Development, Technology Absorption, Foreign Exchange Earnings and Outgo:

The information required under Section 134 (3) (m) of the Companies Act, 2013 read with the Rule 2 of the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 is enclosed as Annexure- 'F' to this Report.

Research and Development (R & D):

The company is committed to building a sound base for sustained growth in API and key starting Materials business through the development of new products, innovative technology, process improvement, cost optimization and strengthening the compliance standards leveraging our collective R&D experience resulting enhancement in value of all stakeholders.

The company's R&D delivers on both fronts of profitability and growth giving us a head start in the competitive industry, developing cost effective process for new genetic APIs, meticulously documenting and testing new and improved processes to manufacture quality drug substances and drug intermediates.

The company continues to make fairly significant investments for generic-related pharmaceutical research and technology. This research supports generic business across all the markets and ensures to have a healthy pipeline for future growth. Strong new product capability is key part of strategy of the R&D.

The Department of Scientific and Industrial Research, Ministry of Science and Technology of Government of India has granted approval to the in house research and development facility of Company under the provisions of the Income Tax Act, 1961.

Fixed Deposits:

Your Company has not accepted/ invited any deposits from the public during the year under review. As such no amount of principal or interest was outstanding on the date of the Balance Sheet.

Contribution to the ex-chequer:

Your Company has contributed Rs. 4,077.25 Lakhs to the ex-chequer (Previous year Rs. 2,306.28 Lakhs) by way of taxes.

Extract of Annual Return:

The Extract of Annual Return is prepared in Form MGT-9 as per the provisions of the Companies Act, 2013 and Rule 12 of Companies (Management and Administration) Rules, 2014 and the same is enclosed as Annexure-'G' to this Report.

Management's Discussion and Analysis:

Management Discussion and Analysis Report for the year under review, as stipulated under Clause 49 of the listing agreement is presented in a separate section forming part of the Annual Report.

Corporate Governance:

A detailed Report on Corporate Governance practices followed by your company, in terms of clause 49 of the Listing Agreement with Stock Exchanges, is provided separately in this Annual Report.

Listing of Equity Shares:

The Company's Equity Shares are listed at the following Stock Exchanges:

(i) BSE Limited, Phiroze Jeejeebhoy Towers, Dalal Street, Mumbai-400 001 and

(ii) National Stock Exchange of India Limited, Exchange Plaza, Floor 5, Plot No. C/1, G Block Bandra-Kurla Complex, Bandra (East), Mumbai-400 051.

The Company has paid the Annual Listing Fees to the said Stock Exchanges for the financial year 2014-15.

Material changes and commitments:

There are no Material changes and commitments in the business operations of the Company from the financial year ended 31st March, 2015 to the date of signing of the Directors' Report.

Environment:

The Company has taken initiatives to reduce the pollution. Anti-pollution measures taken by the Company will help to minimize the impact of industrial process on the environment and local are nearby.

Acknowledgements:

Your Directors place on record sincere appreciation for the significant contribution made by the employees through their dedication, hard work and commitments. Your Directors gratefully acknowledge and appreciate the support extended by the Banks, Financial Institutions, various government authorities and also customers, for their continued support and confidence reposed in the Company.

for and on behalf of the Board

Ramesh Babu Potluri

Chairman and Managing Director

DIN:00166381

Place : Hyderabad

Date : 08.08.2015

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Mar 31, 2014

Dear Shareholders,

The Directors have pleasure in presenting the 26th Annual Report and Audited Accounts of your company for the year ended 3lst March, 20l4.

Financial Results:

(Amount : Rs. In Lakhs)

Particulars 2013-14 20l2-l3

Gross Sales 50,098.33 25,402.97

Net Sales 48,197.76 23,993.38

Other Operating 3,606.04 526.0l Income

Other Income 152.41 l6l.90

Total Net Income 51,956.21 24,68l.29

PBIDT 5,869.15 (3,446.46)

Finance Charges 1,381.88 2,426.34

Depreciation 1,285.46 l,372.l6

Profit before Extra- 3,201.81 (7,244.96) Ordinary Items

Extra-Ordinary Items - l0,2ll.36

Profit before Tax 3,201.81 2,966.40

Taxation 1,163.36 433.9l

Profit After Tax 2,038.45 2,532.49

Profit brought forward 4,651.87 2,653.72

Total available for 6,690.32 5,l86.2l Appropriations.

Appropriations:

Transfer to Capital 155.00 - Redemption Reserve

Proposed Dividend 169.30 200.30

Dividend Tax 28.77 34.04

General Reserve 300.00 300.00

Profit carried to 6,073.31 4,65l.87 Balance Sheet Earning per share Basic/Diluted

Before Extra- 23.06 (76.67) Ordinary items

After Extra- 23.06 25.29 Ordinary items

Operational performance:

During the year 2013-14 your company has produced l,79l M.T of APIs and their intermediates as against l ,439 M.T during the corresponding year. The net sales of the company has reached to Rs. 48,197.76 Lakhs as against Rs. 23,993.38 Lakhs during the previous year. Apart from this, Other Operating Income has reached to Rs. 3,606.04 Lakhs as against Rs. 526.0l Lakhs during the previous year. With this, your company has earned net profit of Rs. 2,038.45 Lakhs as against Rs. 2,532.49 Lakhs during the previous year. The main reason for increase in tax expenditure is increase in difered tax liability.

Dividend:

Your Directors are pleased to recommend the dividend of 20% i.e. Rs. 2-00 per equity share of Rs. 10/- each for the year ended 31 -03-2014. The Dividend, if approved by the shareholders at the AGM, will be paid to the equity shareholders whose names appear in the Register of Members as on 30-09-20l4. Expenditure on the proposed dividend will be Rs. l98.07 lakhs, inclusive of taxes.

Share Capital:

The Authorised Share Capital of the Company is Rs. 12,00,00,000 (Rupees Twelve Crores only) divided into l,20,00,000 (One Crore Twenty Lakhs only) equity shares of Rs. l0/- each. The paid up share capital of the Company has decreased to Rs. 8,46,52,030 (Rupees Eight Crore Forty Six Lakhs Fifty Two Thousand and Thirty only) divided into 84,65,203 (Eighty Four Lakhs Sixty Five Thousand Two Hundred and Three only) equity shares of Rs. l0/- each from Rs. l0,0l,52,030 Lakhs (Rupees Ten Crore One Lakh Fifty Two Thousand and Thirty only) divided into l,00,l5,203 (One Crore Fifteen Thousand Two Hundred and Three only) equity shares of Rs. l0/- each. During the financial year under review the company has bought back of l5,50,000 (Fifteen Lakhs Fifty Thousand only) equity shares of Rs. l0/- each.

Transfer to Reserves:

Your Company has transferred an amount of Rs. 155.00 Lakhs (Previous year Nil) to Capital Redemption Reserve and Rs. 300.00 lakhs (previous year Rs. 300.00 lakhs) to General Reserve out of the amount available for appropriations.

Auditors:

(a) Statutory Auditors

The Statutory Auditors of the Company M/s. Rambabu & Co., Chartered Accountants and M/s. P Murali & Co., Chartered Accountants as Joint Auditors of the Company, retired at the ensuing Annual General Meeting. The Audit Committee and the Board of Directors recommend the appointment of M/s. Rambabu & Co., Chartered Accountants as Statutory Auditors of the Company from the conclusion of the forthcoming Annual General Meeting of the Company till the conclusion of the 27th Annual General Meeting to be held in the year 2015.

(b) Cost Auditors:

Sri K.S.N. Sarma, Cost Accountant has been reappointed as Cost Auditor of the Company with the consent of the Central Government of India to conduct Cost Audit of the Company for the year 2013-14. The due date for filing of the cost audit report of the company in XBRL format for the year 2012-13 was 30th September, 2013 and the same was filed with the Ministry of Corporate Affairs.

Based on the recommendations of the Audit Committee the Board of Directors appointed Sri K.S.N. Sarma as Cost Auditor of the Company for the year 2014-15. As per the provisions of the Companies Act, 2013 the remuneration of the Cost Auditor as approved by the Board is to be ratified by the Members.

Fixed Deposits:

Your Company has not accepted/invited any deposits from the public during the year under review. As such no amount of principal or interest was outstanding on the date of the Balance Sheet.

Contribution to the ex-chequer:

Your Company has contributed Rs. 2,306.28 lakhs to the ex-chequer (Previous year Rs. 2,748.18 lakhs) by way of taxes.

Directors:

During the year 2013-14, Dr. B.M. Choudary has resigned as Director from the Board of your Company due to his pre-occupied business activities. The Board places on record its deep appreciation to Dr. B.M. Choudary for the excellent contributions made by him as Director.

Dr. (Mrs.) Thummala Neelaveni and Sri P Sharath Kumar have joined on the Board as Additional Directors with effect from 12th August, 2014.

Dr. Ayman Sahli and Sri T.V.V.S.N. Murthy retire by rotation at the ensuing Annual General Meeting and being eligible, offers themselves for re-appointment.

As per Section 149 (4) of the Companies Act, 2013, Sri A. P Rao, Dr. Mihir K. Choudhari, Sri K. S. Rao, Sri P Sharath Kumar and Dr. (Mrs.) Thummala Neelaveni are being appointed as independent directors to hold office for a period of five years with effect from 30th September. 2014. Brief particulars and expertise of these directors and their other directorships and committee memberships have been given in the annexure to the Notice of the Annual General Meeting in accordance with the requirements of listing agreement with Stock Exchanges.

Directors'' Responsibility Statement:

Pursuant to the provisions of Section 134 (3) (c) of the Companies Act, 2013, with reference to Directors'' Responsibility Statement, it is hereby confirmed:

1. That the applicable accounting standards have been followed in the preparation of the Annual Accounts.

2. That the selected accounting policies were applied consistently and judgments and estimates made are reasonable and prudent were made 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 profit of the Company for that year.

3. That the Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, l956 for safe guarding the assets of the Company and for preventing and detecting fraud and other irregularities.

4. That the Annual Accounts have been prepared on going concern basis.

Research and Development (R&D):

Your Company is committed to building a sound base for sustained growth in API and Key starting materials business through the development of new products, innovative technology, process improvement, cost optimization and strengthening the compliance standards leveraging our collective R&D expertise resulting in value of all stakeholders.

SMS Pharma''s R&D delivers on both fronts of profitability and growth giving us a head start in the competitive industry. Scientists at your research laboratories are hard at work developing cost effective process for new generic APIs, meticulously documenting and testing new and improved processes to manufacture quality drug substances and drug intermediates.

Management''s Discussion and Analysis:

Management Discussion and Analysis Report for the year under review, as stipulated under Clause 49 of the listing agreement is presented in a separate section forming part of the Annual Report.

As required by the Listing Agreement, a Certificate on Corporate Governance by a Practicing Company Secretary and a declaration by the Chairman & Managing Director with regard to Code of Conduct are attached to the report on Corporate Governance.

Corporate Governance:

A detailed Report on Corporate Governance practices followed by your company, in terms of clause 49 of the Listing Agreement with Stock Exchanges, is provided separately in this Annual Report.

Human Resources:

During the year, Industrial relations continued to be cordial throughout the year. Your Company firmly believes that a dedicated workforce constitute the primary source of sustainable competitive advantage. Accordingly, human resource development continues to receive focused attention. Your Directors wish to place on record their appreciation of the dedicated and commendable services rendered by the staff and workforce of the company, without whose efforts, such an impressive performance may not have been possible.

Particulars of Employees:

Statement of particulars of employees pursuant to the provisions of Section 2l7 (2A) of the Companies Act, l956 read with the Companies (Particulars of employees) Rules, l975 as amended.

Notes:

i) Remuneration includes salary, allowances, company contribution to provident fund and commission on profits.

ii) The above appointments are contractual.

iii) None of the above employees are relatives to any director of the Company.

Corporate Social Responsibility:

In terms of Section l35 of the Companies Act, 20l3, the company is required to constitute Corporate Social Responsibility Committee to monitor the CSR activities. The Company has formed CSR Committee out of its Board of Directors to recommend (a) the policy on Corporate Social Responsibility (CSR) and

(b) implementation of the CSR Projects or Programs

to be undertaken by the Company as per CSR Policy for consideration and approval by the Board of Directors.

Conservation of Energy, Technology Absorption and Foregin Exchange Earnings/outgo:

The information required under Section 2l7(l)(e) of the Companies Act, l956 read with the Rule 2 of the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, l988 is enclosed herewith and forms part of this report.

Dematerialization:

Your Company''s shares are under compulsory Dematerialization mode and all the physical shareholders are hereby recommended to opt for this facility for prompt services.

Vigil Mechanism:

In pursuant to the provisions of section l 77 (9) & (10) of the Companies Act, 2013, a vigil mechanism for directors and employees to report genuine concerns has been established. A dedicated Email ID: [e-mail] was established for this purpose and Phone number 040-66288888 Extn: 902 was alloted for this purpose.

Environment:

The Company has taken initiatives to reduce the pollution, Anti-pollution measures taken by the Company help to minimize the impact of industrial process on the environment.

Related party transactions:

As a matter of policy, your company carried out transactions with related parties on an arms-length basis. Statement of these transactions is given in Notes on Accounts in compliance with accounting standards issued by ICAI.

CEO/CFO Certification:

As required by the Clause 49 of the Listing Agreement, a certificate on the financial statements and cash flow statement of the Company for the year ended 31st March, 2014 duly signed by the Chairman and Managing Director and Chief Financial Officer was submitted to the Board of Directors.

Acknowledgements:

Your Directors gratefully acknowledge and appreciate the support extended by the Banks, Financial Institutions, various government authorities and also customers, dealers and trade, employees and workers for their continued support and confidence reposed in the company.

for and on behalf of the Board Ramesh Babu Potluri

Chairman and Managing Director

Place : Hyderabad Date : 26.08.2014

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Mar 31, 2013

Dear Shareholders,

The Directors have pleasure in presenting the 25th Annual Report and Audited Accounts of your company for the year ended 31st March, 2013.

Financial Results

(Rs. In Lakhs)

Particulars 2012-13 2011-12

Gross Sales 25,402.97 22,630.57

Net Sales 23,993.38 20,692.30

Other Operating Income 239.28 717.44

Other Income 161.89 56.41

Total Net Income 24,394.55 21,466.15

PBIDT (3,446.48) 3,818.05

Finance Charges 2,426.34 2,412.34

Depreciation 1,372.15 1,263.97

Profit before

Extraordinary Items (7,244.97) 141.75

Extraordinary Items 10,211.37 -

Profit Before Tax 2,966.40 141.75

Taxation 433.91 28.00

Profit After Tax 2,532.49 113.75

Profit brought forward 2,653.72 2,539.98

Total available for Appropriations 5,186.21 2,653.73

Appropriations:

Proposed Dividend 200.30 -

Dividend Tax 34.04 -

General Reserve 300.00 -

Profit carried to Balance Sheet 4,651.87 2,653.73

Earning per share

Basic/Diluted

Before Extraordinary Items (72.34) 1.14

After Extraordinary Items 25.29 1.14



Transfer of Undertaking

During the year under review the company has transferred one of its manufacturing facilities situated in Jawaharlal Nehru Pharma City Parawada as a going concern under slump sale basis for a total consideration of Rs. 17,300.00 lakhs and earned profit of Rs. 10,351.37 lakhs. The said profit was reflected in Extrordinary items in Statement of Profit & loss.

Operational performance

During the year 2012-13 your company has produced 9,72,158 M.T. of APIs as against 9,16,922 M T. during the corresponding year. The net sales of the company has reached to Rs. 23,993.38 lakhs as against Rs. 20,692.30 lakhs during the previous year. Your company has earned net profit of Rs. 2,532.49 lakhs as against Rs. 113.75 lakhs during the year 2011-12.

Buy back of Shares of the Company.

Your company has bought back 15,50,000 Equity shares of Rs. 10/- each with an average price of Rs. 261.80 per share with a total outlay of Rs. 4,650.00 lakhs apart from brokerage and other expenses and the same was reflected in reduction of share capital and Securities Premium account.

The present paid up capital of the Company has declined to Rs. 8,46,52,030/- from Rs. 10,01,52,030/-. The buyback is undertaken mainly to enhance the shareholders'' value and confidence.

Dividend

Your Directors are pleased to recommend the dividend of Rs. 2.00 per equity share of Rs. 10/- each (Previous year Nil).

Transfer to General Reserve:

Your Company has transferred an amount of Rs. 300.00 lakhs (previous year Nil) to General Reserve out of the amount available for appropriations.

Auditors

The Statutory Auditors of the Company, M/s. Rambabu & Co., Chartered Accountants and M/s. P. Murali & Co., Chartered Accountants, retire at the ensuing Annual General Meeting and being eligible for re-appointment have confirmed their eligibility and willingness to accept office for the financial year ended 31st March, 2014.

The Company has received confirmation from both the firms that their appointment will be within the limits prescribed under Section 224 (1) of the Companies Act, 1956. The Audit Committee of the board has recommended the re-appointment of joint auditors.

Cost Auditors

Sri K. S. N Sarma, Cost Accountant, Hyderabad has been reappointed as Cost Auditor of the Company to conduct cost audit of the Company for the year 2013-14. The due date for filing of Cost Audit Report of the Company in XBRL format for the year 2011-12 was 28th February, 2013 and the same was filed with the Ministry of Corporate affairs on 16th January, 2013.

Fixed Deposits

Your Company has not accepted/ invited any deposits from the public during the year under review. As such no amount of principal or interest was outstanding on the date of the Balance Sheet.

Directors

In accordance with the provisions of the Companies Act, 1956 read with the Articles of Association of the Company, Dr. Mihir K. Chaudhuri and Sri K.S. Rao, will retire by rotation at the ensuing Annual General Meeting and being eligible offers themselves for re-appointment as Directors. Your Board of Directors recommends their re- appointment.

The brief profile of the respective Directors are provided in the Report on Corporate Governance forming part of the Annual report.

Contribution to the ex-chequer.

Your Company has contributed Rs. 2,754.61 lakhs to the ex-chequer (Previous year Rs. 2,215.10) by way of taxes.

Directors'' Responsibility Statement

Pursuant to the provisions of Section 217 (2AA) of the Companies Act, 1956 as amended, the Board of Directors confirm that in the preparation of the Statement of Profit and Loss for the year ended 31st March, 2013 and the Balance Sheet an on that date:

i. The applicable accounting standards have been followed in the preparation of the Annual Accounts.

ii. The accounting policies as mentioned in the schedule 29 of the notes to the financial statement have been selected and applied consistently and judgments and estimates made are reasonable and prudent so as to give a true and fair view of the state of affairs of the company as at 31st March, 2013 and its profit for the year ended on that date.

iii. Proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities.

iv. The Annual Accounts have been prepared on a going concern basis.

Research and Development (R & D).

Research and Development is the backbone of a Company in Pharma Industry. The R & D activity of your company focusing mainly on development of new chemical entities apart from cost cutting of the existing products and also for development of cost effective non-infringing routes for the products whose patents are due for expiry in the coming years. The major therapeutic focus of the R & D is Retro Viral and anti-Hypertensive.

Management''s Discussion and Analysis

Manage''s Discussion and Analysis Report for the year under review, as stipulated under clause 49 of the Listing Agreement is presented in a separate section forming part of the Annual Report.

Corporate Governance

A detailed Report on Corporate Governance practices followed by your Company, in terms of clause 49 of the listing agreement with Stock Exchanges, is provided separately in this Annual Report.

Particulars of Employees

During the year under review, there was no employee drawing salary in excess of the prescribed limit and whose particulars are required to be given under Section 217 (2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees) Amendment Rules, 1975 as amended.

Conservation of Energy, Technology Absorption

The information required under Section 217 (1) (e) of the Companies Act, 1956 read with the Rule 2 of the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 is enclosed herewith and forms part of this report.

Corporate Social Responsibility

Corporate Social Responsibility is commitment of the Company to improve the quality of life of the

workforce and their families and also the community and society at large. The Company believes in undertaking business in such a way that it leads to overall development of all stake holders and society.

Environment

The Company has taken initiatives to reduce the pollution. Anti-pollution measures taken by the Company are helpfull to minimize the impact of industrial process on the environment.

Dematerialization

Your Company''s shares are under compulsory DEMAT mode and all the physical shareholders are hereby recommended to opt for this facility for prompt services.

Related party transactions.

As a matter of policy, your company carried out transactions with related parties on an arms-length basis. Statement of these transactions is given in Notes on Accounts in compliance with accounting standards issued by ICAI.

Acknowledgements

Your Directors gratefully acknowledge and appreciate the support extended by the Banks, Financial Institutions, various government authorities and also customers, dealers and trade, employees and workers for their continued support and confidence reposed in the company.

for and on behalf of the Board

P. Ramesh Babu

Chairman & Managing Director

Place : Hyderabad

Date : 13.08.2013

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Mar 31, 2012

The Directors have pleasure in presenting the 24th Annual Report and Audited Accounts of your company for the year ended 31 st March, 2012.

Financial Results (Rs. In Lakhs)

Particulars 2011-12 2010-11

Gross Sales 22,630.57 24,911.60

Net Sales 20,692.30 22,427.43

Other Operating Income 717.44 166.69

Other Income 42.95 219.08

Total Net Income 21,452.69 22,813.20

PBIDT 3,818.06 4,099.83

Finance Charges 2,412.34 1,787.17

Depreciation 1,263.97 1,264.29

Profit before Tax 141.75 1,048.37

Taxation 28.00 209.10

Profit After Tax 113.75 839.27

Profit brought forward 2,539.98 1,975.31

Total available for Appropriations. 2,653.73 2,814.58

Appropriations:

Proposed Dividend - 150.23

Dividend Tax - 24.37

General Reserve - 100.00

Profit carried to Balance Sheet 2,653.73 2,539.98

Earning per share

- Basic/Diluted 1.14 8.38

Operational performance

During the year 201 1-12 your company has produced 1945 M.T. of APIs and their intermediates as against 2948 MT. during the corresponding year. The net sales of the company has reached to Rs.206.92 crores as against Rs.224.27 crores during the previous year. Your company has earned net profit of Rs.1.14 crores as against Rs.8.39 crores during the year 2010-1 1.

Dividend

Your Directors have not recommended the dividend for the year 2011-12 to the Shareholders keeping in view of the conservation of resources (Previous year Rs. 1.50 per equity share of Rs. 10/-).

Auditors

The Statutory Auditors of the Company, M/s. Rambabu & Co., Chartered Accountants and M/s. P. Murali & Co., Chartered Accountants, retire at the ensuing Annual General Meeting and being eligible for re-appointment have confirmed their eligibility and willingness to accept office for the financial year ended 31st March, 2013.

The Company has received confirmation from both the firms that their appointment will be within the limits prescribed under Section 224(1) of the Companies Act, 1956. The Audit Committee of the board has recommended the re-appointment of joint auditors.

Cost Auditors

Pursuant to Section 233B of the Companies Act, 1956, the Central Government has prescribed Cost Audit for the Company. Based on recommendations of the Audit Committee and with the approval of the Central Government, Sri K. S. N Sarma, Cost Accountant, Hyderabad was appointed as Cost Auditor of the Company for the year 2012-13.

The relevant cost audit report for the financial year 2010-1 1 was already filed. The cost audit report for the financial year 2011-12 shall be submitted to the Central Government within the stipulated period.

Fixed Deposits

The company has not accepted / invited any deposits from the public in terms of Section 58A and 58AA of the Companies Act, 1956.

Directors

Pursuant to Article 110 of the Articles of Association of the Company Dr. B.M. Choudary and Mr. A.P Rao, will retire by rotation at the ensuing Annual General Meeting and being eligible offers themselves for re- appointment as Directors. Your Board of Directors recommends their re-appointment.

The profiles of the respective Directors are included in the Report on Corporate Governance annexure.

Contribution to the ex-chequer.

Your Company has contributed Rs 2,215.10 lakhs to the ex-chequer (Previous year Rs.3,040.68 lakhs) by way of taxes.

Directors' Responsibility Statement

As required under Section 217(2AA) of the Companies Act, 1956, Directors of your company hereby state and confirm that:

1. The applicable accounting standards have been followed in the preparation of the Annual Accounts.

2. The accounting policies as mentioned in the schedule 27 of the notes to the financial statement have been selected and applied consistently and judgments and estimates made are reasonable and prudent so as to give a true and fair view of the state of affairs of the company as at 31 st March, 2012 and its profit for the year ended on that date.

3. Proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safe guarding the assets of the Company and for preventing and detecting fraud and other irregularities.

4. The Annual Accounts have been prepared on going concern basis.

Research and Development (R & D)

Research and Development is the backbone of a Company in Pharma Industry. The R & D activity of your company focusing mainly on development of new chemical entities apart from cost cutting of the existing products and also for development of cost effective non-infringing routes for the products whose patents are due for expiry in the coming years. The major therapeutic focus of the R & D is Oncolgoy, Retro Viral and anti-Hypertensive.

Management's Discussion and Analysis

A detailed Management Discussion and Analysis is provided in the Annual Report.

Corporate Governance

A detailed Report on Corporate Governance as required under the Listing Agreement forms part of this Annual Report.

Rarticulars of Employees

During the year under review, there was no employee drawing salary in excess of the prescribed limit and whose particulars are required to be given under Section 217 (2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees) Amendment Rules, 1975 as amended.

Conservation of Energy, Technology Absorption

The information required under Section 217 (1) (e) of the Companies Act, 1956 read with the Rule 2 of the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 is enclosed herewith and forms part of this report.

Corporate Social Responsibility

Corporate Social Responsibility is commitment of the Company to improve the quality of life of the workforce and their families and also the community and society at large. The Company believes in undertaking business in such a way that it leads to overall development of all stake holders and society.

Environment

The Company has taken initiatives to reduce the pollution, Anti-pollution measures taken by the Company help minimize the impact of industrial process on the environment.

Dematerialization

Your Company's shares are under compulsory DEMAT mode and all the physical shareholders are hereby recommended to opt for this facility for prompt services.

Related party transactions.

As a matter of policy, your company carried out transactions with related parties on an arms-length basis. Statement of these transactions is given in Notes on Accounts in compliance with accounting standards issued by ICAI.

Acknowledgements

Your Directors gratefully acknowledge and appreciate the support extended by the Banks, Financial Institutions, various government authorities and also customers, dealers and trade, employees and workers for their continued support and confidence reposed in the company.

for and on behalf of the Board

P. Ramesh Babu

Chairman & Managing Director

Place : Hyderabad

Date : 10.08.2012

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Mar 31, 2011

Dear Shareholders,

The Directors have pleasure in presenting the 23rd Annual Report and Audited Accounts of your company for the year ended 31st March, 2011.

Financial Results

(Rs. In Lakhs)

Particulars 2010-11 2009-10

Gross Sales 24,911.60 23,876.77

Net Sales 22,427.43 21,975.51

Other Income 360.10 243.61

Total Net Income 22,787.53 22,219.12

PBIDT 4,074.16 2,480.42

Financial Charges 1,761.50 1,355.85

Depreciation 1,264.29 836.48

Profit before Tax 1,048.37 288.09

Taxation 209.10 48.55

Profit After Tax 839.27 239.54

Profit brought forward 1,975.31 1,952.55

Available for

Appropriations. 2,814.58 2,192.09

Appropriations:

Transfer to General Reserve 100.00 100.00

Proposed Dividend 150.23 100.15

Dividend Tax 24.37 16.63

Profit carried to

Balance Sheet 2,539.98 1,975.31

Earning per share

- Basic/Diluted 8.38 2.39

Operational performance

During the year 2010-11 your company has produced 2948 M T. of APIs and their intermediates as against 2442 M T. during the corresponding year. The net sales of the company has reached to Rs.224.27 crores as against Rs.219.76 crores during the previous year. You company has earned net profit of Rs.8.39 crores as against Rs.2.4 crores during the year 2009-10.

Dividend

Your Board of Directors have recommended the dividend of Rs.1.50 per equity share on par value of Rs.10/- each (Previous year Rs.1/- per equity share) absorbing an amount of Rs.174.60 lakhs.

Transfer to Reserves:

An amount of Rs.1,00,00,000/- (previous year Rs.1,00,000/-) was transferred to the General Reserve out of the amount available for appropriations.

Auditors

The Statutory Auditors of the Company, M/s. Rambabu & Co., Chartered Accountants and M/s. P. Murali & Co., Chartered Accountants, retire at the ensuing Annual General Meeting and being eligible for re-appointment have confirmed their eligibility and willingness to accept office for the financial year ended 31st March, 2012.

The Company has received confirmation from both the firms that their appointment will be within the limits prescribed under Section 224 (1) of the Companies Act, 1956. The Audit Committee of the board has recommended the re-appointment of joint auditors.

Cost Auditors

Sri KSN Sarma, Cost Accountant was appointed as Cost Auditor of the Company subject to the consent of the Government of India to conduct cost audit of the Company for the year 2010-11.

Fixed Deposits

The company has not accepted/invited any public deposits from the public in terms of Section 58 A and 58 AA of the Companies Act, 1956.

Directors

Pursuant to Article 110 of the Articles of Association of the Company Dr. Mihir K. Chaudhuri and Dr. Ayman Sahli, will retire by rotation at the ensuing Annual General Meeting and being eligible offer themselves for re-appointment as Directors. Your Board of Directors recommend their re-appointment.

The profiles of the respective Directors are included in the Report on Corporate Governance annexure.

Contribution to the ex-chequer

Your Company has contributed Rs.2,790.25 lakhs to the ex-chequer (Previous year Rs.2,165.05 lakhs) by way of taxes.

Directors' Responsibility Statement

As required under Section 217 (2AA) of the Companies Act, 1956, Directors of your company hereby state and confirm that:

1. The applicable accounting standards have been followed in the preparation of the Annual accounts.

2. The accounting policies as mentioned in the schedule 22 of the notes to the financial statement have been selected and applied consistently and judgments and estimates made are reasonable and prudent so as to give a true and fair view of the state of affairs of the company as at 31st March, 20011 and its profit for the year ended on that date.

3. Proper and sufficient care has been taken for the maintaince of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safe guarding the assets of the Company and for preventing and detecting fraud and other irregularities.

4. The Annual Accounts have been prepared on going concern basis.

Research and Development (R & D)

Your Company has given utmost importance for Research and Development. The R & D centers of the company having 10 labs including dedicated oncology laboratory. This center was equipped with dedicated analytical development block in 22,000 Sft area, kilo lab and cGMP Pilot Plant.

The R & D activity of your company mainly focusing relentlessly on development of new chemical entities apart from cost cutting of the existing products and also for development of cost effective non-infringing routes for the products whose patents are due for expiry in the forthcoming years. The major therapeutic focus of the R&D is Oncology, Retro Viral, and anti Hypertensive.

Management's Discussion and Analysis

A report on Management Discussion and Analysis is provided as part of this Annual Report.

Corporate Governance

A detailed Report on Corporate Governance as required under the Listing Agreement forms part of this Annual Report.

Particulars of Employees

During the year under review, there was no employee drawing salary in excess of the prescribed limit and whose particulars are required to be given under Section 217 (2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees) Amendment Rules, 1975 as amended.

Conservation of Energy, Technology Absorption

The information required under Section 217 (1) ( e) of the Companies Act, 1956 read with the Rule 2 of the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 is enclosed herewith and forms part of this report.

Dematerialization

Your Company's shares are under compulsory DEMAT mode and all the physical shareholders are hereby recommended to opt for this facility for prompt services.

Related party transactions

As a matter of policy, your company carried out transactions with related parties on an arms-length basis. Statement of these transactions is given in Notes on Accounts in compliance with accounting standards issued by ICAI.

Acknowledgements

Your Directors gratefully acknowledge and appreciate the support extended by the Banks, Financial Institutions, various government authorities and also customers, dealers and employees for their continued support and confidence reposed in the company.

for and on behalf of the Board

P. Ramesh Babu

Chairman & Managing Director

Place: Hyderabad

Date : 05.08.2011

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Mar 31, 2010

The Directors have pleasure in presenting the 22nd Annual Report and Audited Accounts of your company for the year ended 31st March, 2010.

Financial Results

(Rs. In Lakhs)

Particulars 2009-10 2008-09

Gross Sales 23,876.77 27,406.95

Net Sales 21,975.51 24,478.67

Other Income 243.61 40.52

Total Net Income 22,219.12 24,519.19

PBIDT 2,480.42 2,381.52

Finance Charges 1,355.85 959.04

Depreciation 836.48 627.91

Profit before Tax 288.09 794.57

Taxation 48.55 164.72

Profit After Tax 239.54 629.85

Profit brought forward 1,952.55 1,657.05

Available for

Appropriations 2,192.09 2,286.90

Appropriations:

Proposed Dividend 100.15 200.31

Dividend Tax 16.63 34.04

Transfer to General Reserve 100.00 100.00

Profit carried to

Balance Sheet 1,975.31 1,952.55

Earning per share 2.39 6.29

Managements Discussion and Analysis

A detailed Management Discussion and Analysis is provided in the Annual Report.

Dividend

Your Board of Directors have recommended the dividend of Re.1.00 per Equity Share of Rs. 10/-

each (previous year Rs. 2/- per Equity Share) considering the financial commitments of the Company.

Transfer to General Reserve:

The Company proposes to transfer Rs.1,00,00,000/- to the General Reserve out of the amount available for appropriations.

Auditors

The Statutory Auditors of the Company, M/s. Rambabu & Co., Chartered Accountants and M/s. P. Murali & Co., Chartered Accountants, retire at the ensuing Annual General Meeting and are eligible for re-appointment have confirmed their eligibility and willingness to accept office for the financial year ended 31st March, 2011.

The Company has received confirmation from both the firms that their appointment will be within the limits prescribed under Section 224 (1B) of the Companies Act, 1956. The Audit Committee of the board has recommended the re-appointment of joint auditors.

Cost Auditor

Sri KSN Sarma, Cost Accountant was appointed as Cost Auditor of the Company subject to the consent of the Government of India to conduct cost audit of the Company for the year 2009-10.

Fixed Deposits

The company has not accepted/ invited any deposits from the public in terms of Section 58 A and 58 AA of the Companies Act, 1956.

Directors

Pursuant to Article 110 of the Articles of Association of the Company Sri K.S. Rao and Sri A.P. Rao, will retire by rotation at the ensuing Annual General Meeting and are being eligible offers themselves for re-appointment as Directors. Your Board of Directors recommends their re-appointment.

The profiles of the respective Directors are included in the Report on Corporate Governance annexed.

Corporate Governance

A detailed Report on Corporate Governance along- with the Certificate issued by M/s CSB Associates, Company Secretaries confirming compliance of conditions of Corporate Governance as stipulated under Clause 49 of the Listing Agreement, forms part of this Annual Report.

The Ministry of Corporate Affairs, Government of India has issued a set of voluntary guidelines on Corporate Governance in December, 2009. These guidelines provide for good governance practices which may be adopted by the corporate voluntarily. The Board of Directors would examine and comply the guidelines with the extent possible.

Contribution to the ex-chequer.

Your Company has contributed Rs.2,165.05.lakhs to the ex-chequer (Previous year Rs.3,152.02 lakhs) by way of taxes.

Directors Responsibility Statement

Pursuant to the requirement under Section 217 (2AA) of the Companies Act, 1956 on the Directors Responsibility Statement, it is hereby confirmed:

1. That in the preparation of the Annual Accounts for the year ended 31st March, 2010, applicable, accounting standards were followed along with proper explanations relating to material departures.

2. That your Directors selected such accounting policies and applied them consistently and made judgments and estimates were 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 31st March, 2010 and of the profit of the company for that period.

3. That your Directors took proper and sufficient care to maintain adequate accounting records in accordance with the provisions of this act to safe guard the assets of the Company and to prevent and detect fraud and other irregularities.

4. That your Directors prepared the Annual Accounts for the year ended 31st March, 2010 on a going concern basis.

Research and Development (R & D).

Your company places significant emphasis on research and development with a dual focus on non infringing and cost effective processes. The company has two R & D Centers with the first one working on new products and process development, custom synthesis and contract research for customers. This center has 10 labs including a dedicated oncology lab in 40,000 Sft area. It has infrastructure right from product conception to DMF filing. The center is capable of developing 20 products per annum. The center is also equipped with dedicated analytical development block in 22,000 sft area, kilo lab, and cGMP pilot plant.

The company has developed non infringing process in anti cancer, anti migraine and other highly potential therapeutic categories which will enable us to have early entry opportunities in different markets

The second R & D center in 3750 sft area is dedicated for continuous process improvement of existing products which enables us to maintain our leadership position in cost competitive generic industry. Both R & D Centers are recognized by the Department of Scientific and Industrial Research.

Due to ongoing cost reduction efforts from this R&D center, the company has been able to maintain leadership in extremely competitive API like Ranitidine, Sildenafil, Sumatriptan, Pantoprazole etc

Particulars of Employees

The particulars of employees required under the provisions of Section 217 (2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees) Rules, 1975 as amended to date were not applicable to your Company as none of the employees were in receipt of remuneration which in aggregate is Rs.24,00,000/- or more per year or Rs.2,00,000/- or more per month..

Disclosure of Particulars

As required by the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988, the relevant information and data is attached as an Annexure to this report.

Dematerialization

Your Companys shares are under compulsory DEMAT mode and all the physical shareholders are hereby recommended to opt for this facility for prompt services.

Related party transactions.

As a matter of policy, your company carried out transactions with related parties on an arms-length basis. Statement of these transactions is given in Notes on Accounts in compliance with accounting standards issued by ICAI.

Transfer of unpaid/unclaimed dividend to Investor Education and Protection Fund (IEPF)

The dividend declared for the year 2002-03 has been fully claimed and paid by the Company.

Acknowledgements

Your Directors gratefully acknowledge and appreciate the support extended by the Banks, Financial Institutions, various government authorities and also customers, dealers and trade, employees and workers for their continued support and confidence reposed in the company.

for and on behalf of the Board

P. Ramesh Babu

Chairman & Managing Director

Place: Hyderabad

Date : 27.08.2010