Hikal Ltd

To,

The Members,

The Directors are pleased to present the 36th Annual Report with the Audited Standalone and Consolidated Financial Statements for the financial year ended 31 March 2024.

1. Financial Results

2. COMPANY PERFORMANCE

The Company achieved revenue of A 17,870 million in 2023-24, against A 20,284 million in the previous year, recording a decline of 12%. The sales of the pharmaceutical business recorded a decline of 1% to A 11,002 million, while the sales of the Crop Protection saw a decline of 25% to A 6,844 million. Primarily due to Significant channel inventory coupled with over-capacity has resulted in reduced sales.

The EBIDTA margins improved by 214 bps on the back of stable raw materials prices, improved product mix and ongoing business excellence initiatives & stood at around 15%, increased from A2,625 million in the previous year to A2,694 million in 2023-24. Absolute EBITDA increased by A 69 million. The Profit before Tax (PBT) reduced by 9% from A1,054 million in the previous year to A 954 million in 2023-24. Profit After Tax (PAT) witnessed a decline of 11% from A784 million in the previous year to A 695 million in 2023-24 due to increase in interest cost and depreciation as new assets were capatilized. The Earning per Share (EPS) decreased from A 6.36 in the previous year to A 5.64 in 2023-24.

The Company is incurring substantial capital expenditure for growth in both businesses & to create capacities for new products as well as existing products.

The Company has prudently been funding the growth Capex with a mix between internal accruals and long-term loans. In doing so, the Company ensures that it maintains a healthy liquidity position and that its financial gearing and debt service coverage are at comfortable levels.

The Current Ratio of the Company is at 1.28 for 2023-24, as against 1.42 in the previous year. The net Debt to Equity Ratio slightly increased from 0.61 in the previous year to 0.67 in 2023-24, while the Debt Service Coverage Ratio (DSCR) declined from 1.77 in the previous year to 1.52 in 2023-24.

3. EXPORTS

Exports for the year 2023-24 were A 11,082 million (63% of total sales) as compared to A13,684 million (68% of total sales) in the previous year. The decrease in exports were due to over capacity and high channel inventory at an industry level.

4. MANAGEMENT DISCUSSION AND ANALYSIS

The Management Discussion and Analysis on the Company's operations is provided in a separate section and forms part of this Annual Report.

5. BUSINESS RESPONSIBILITY AND SUSTAINABILITY REPORT

The Company's Business Responsibility and Sustainability Report, in terms of Regulation 34 of SEBI (Listing Obligations & Disclosure Requirements) Regulations, 2015, (Listing Regulations), is provided in a separate section and forms part of this Annual Report.

6. DIVIDEND & RESERVES

The Company had in the financial year 20232024 declared and paid in the month of March 2024 an interim dividend of 30% i.e. 60 paise per share of face value of 2/- each. Further, the Board has recommended a final dividend of 30% i.e. A 0.60 per share of Rs. 2/- each. The payment of final dividend is subject to the approval of shareholders at the ensuing Annual General Meeting of the Company. If the final dividend is approved by the shareholders, the total dividend for the Financial Year 2023-24 shall aggregate to 60% i.e. A 1.20/- per share of face value of A 2/- each.

As per the Income Tax Act, 1961, dividends paid or distributed by the Company shall be taxable in the hands of the shareholders. The Company shall, accordingly, make the payment of the final dividend after deduction of tax at source.

During the year under review, the Company has not transferred any amount to any of the reserves maintained by the Company.

The Dividend Distribution policy of the Company which provides the Company's philosophy on Dividend is available on the website of the Company at https://www.hikal.com/uploads/ documents/HIKAL-DividendDistributionPolicy. pdf

7. SHARE CAPITAL

There has been no change in the Company's paid-up share capital during the current financial year. The paid-up equity share capital as on 31 March, 2024, stood at A 246.60 million. During the financial year, the Company did not issue shares with differential voting rights nor granted any stock options or sweat equity. As on 31 March, 2024, none of the Company's Directors held any instruments convertible into equity shares of the Company.

8. ANNUAL RETURN

The Annual Return of the Company, as required under Section 92 of the Companies Act, 2013 (the Act), read with the Rules framed thereunder, in the prescribed Form MGT-7, is available on the website of the Company at www.hikal.com/ documents/agm.

9. SUBSIDIARIES

The Company has two subsidiaries viz. Acoris Research Limited and Hikal LLC, USA. A statement containing the salient features of the Financial Statements of subsidiaries in the prescribed Form AOC-1, is attached as "Annexure A" to this Report. The Company will provide the Financial Statements of the subsidiaries and the related information to any member of the Company who may be interested in obtaining the same. The financial statements of the subsidiaries will also be available for inspection in electronic mode. Members who wish to inspect the same are requested to write to the Company by sending an email to secretarial_agm@hikal.com. The Consolidated Financial Statements of the Company, forming part of this Annual Report, include the Financial Statements of subsidiaries. The Financial Statements of subsidiaries are also hosted on the website of the Company at www. hikal.com/documents/annual-reports.

10. DIRECTORS

In accordance with the provisions of Section 152 of the Companies Act, 2013, and the Company's Articles of Association, Mrs. Sugandha Hiremath (DIN - 00062031), Director, retires by rotation at the forthcoming Annual General Meeting (AGM), and being eligible, offers herself for reappointment.

Based on the recommendation of the Nomination and Remuneration Committee, the Board of Directors has re-appointed, in its meeting held on 1 August 2024, Mr. Shrikrishna K. Adivarekar (DIN: 06928271) as an Independent Director for the second consecutive term of 5 years with effect from 22 December 2024, subject to the approval of the shareholders by way of a Special Resolution.

The members of the Company at their 35th Annual General Meeting held on September 26, 2023 approved the appointment of Mr. Berjis Minoo Desai (DIN: 00153675) and Mr. Ramachandra Kaundinya Vinnakota (DIN: 00043067) as Independent Directors for a term of 5 (Five) years with effect from 1 October 2023. Based on the recommendation of the Nomination and Remuneration Committee, the Board of Directors approved the appointment of Mr. Ravi B. Kapoor (DIN: 01761752), Mrs. Ranjana S Salgaocar (DIN: 00120120) as Independent Directors of the Company, for a term of 5 (Five) years each with effect from 11 January 2024 and 23 March 2024 respectively. The appointments of Mr. Ravi B Kapoor (DIN: 01761752) and Mrs. Ranjana S Salgaocar (DIN: 00120120) as Independent Directors of the Company have also been approved by Members of the Company vide their special resolution passed through Postal Ballot on 20 March 2024 and 24 May 2024 respectively. Further based on the recommendation of the

Nomination and Remuneration Committee, the Board of Directors approved the appointment of Mr. Sarangan Suresh (DIN: 10562713) with effect from 1 April 2024 as Whole Time Director of the Company for a term of 5 (Five) years, which has been approved by the Members through Postal Ballot on 24 May 2024.

Pursuant to the provisions of Regulation 17 (1A) of the SEBI Listing Regulations, no listed entity shall continue the directorship of any person as a nonexecutive director who has attained the age of 75 years unless a special resolution was passed to that effect. The Company had therefore approached the shareholders for their approval, by way of special resolution to be passed by Postal Ballot, for the continuation of directorship of Mr. Babasaheb Neelkanth Kalyani (DIN: 00089380), after attaining the age of 75 years on 7 January 2024. As per the votes cast by the shareholders and the report of the scrutinizer dated 25 December 2023, the resolution did not receive the requisite majority from the shareholders and was therefore considered ‘not passed.' Mr. Babasaheb Neelkanth Kalyani resigned from the Directorship of the Company on and with effect from 29 December 2023. The Board places on record its gratitude and appreciation for the guidance received from Mr. Kalyani, during his tenure on the Board of the Company.

Mr. Ranjit Gobindram Shahani (DIN: 00103845) Non-Executive, Independent Director of the Company, passed away on 9 March 2024, the Board expresses its sincere condolences to the Shahani family. The Board also places on record its gratitude and appreciation for the guidance received from Late Mr. Shahani, during his tenure on the Board of the Company.

Further, Mr. Prakash V Mehta (DIN: 00001366) and Dr. Kannan K. Unni (DIN: 00227858) completed their respective second tenures as Independent Directors of the Company on 31 March 2024 and retired from the Board accordingly. The Board places on the record its appreciation for the wisdom and guidance imparted by its veteran Directors, during their long stint with the Company.

All Independent Directors have given declarations that they meet the criteria of independence as laid down under Section 149(6) of the Companies Act, 2013, and Securities and Exchange Board of India (Listing Obligations & Disclosure Requirements) Regulations, 2015, as amended. In the opinion of the Board, the Independent Directors appointed during the year possess the integrity, expertise and experience (including proficiency) required to contribute to the quality and better governance of the Board processes.

Details of the number of Board meetings, held during the financial year 2023-24, are mentioned in the Corporate Governance Report, which forms an integral part of this Annual Report.

11. BOARD EVALUATION

Pursuant to the provisions of the Companies Act, 2013, and Securities and Exchange Board of India (Listing Obligations & Disclosure Requirements) Regulations, 2015, as amended, a structured questionnaire was prepared after taking into consideration the various aspects of the Board's functioning, like composition of the Board and its Committees, culture, execution and performance of specific duties, obligations and governance.

The performance evaluation of the Independent Directors was carried out in accordance with the applicable provisions of Companies Act, 2013 and SEBI Listing Regulations. In a separate meeting of Independent Directors, performance of NonIndependent Directors, the Board as a whole and the Chairman of the Company was evaluated, taking into account the views of Executive Directors and Non-Executive Directors. The Board of Directors expressed their satisfaction with the evaluation process.

12. WHISTLE-BLOWER POLICY

The Company has a Whistle Blower policy to report genuine concerns or grievances. The Whistle Blower Policy is posted on the Company's website www.hikal.com/uploads/documents/ whistle-blower-policy.pdf.

13. REMUNERATION POLICY

The Company has a policy which lays down a framework in relation to remuneration of Directors, Key Managerial Personnel and Senior Management of the Company. The Remuneration and Nomination Policy of the Company is attached as "Annexure B" to this Report. This policy also lays down criteria for selection and appointment of Board members. The details of this policy are explained in the Corporate Governance Report and uploaded on the Company's website www. hikal.com/uploads/documents/remuneration- policy.pdf.

14. RELATED PARTY TRANSACTIONS

All related party transactions entered during the financial year, were at an arm's length basis and in the ordinary course of business. There were no materially significant related party transactions entered into by the Company with Promoters,

Directors, Key Managerial Personnel or other designated persons, which may have a potential conflict with the Company's interest at large. The disclosure of Related Party Transactions as required under Section 134(3)(h) of the Act in Form AOC-2 is attached as "Annexure C".

All related party transactions were placed before the Audit Committee for approval.

The policy on Related Party Transactions, as approved by the Board, is uploaded on the Company's website https://www.hikal.com/uploads/documents/ RelatedPartvTransactionPolicv.pdf.

15. SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS

In connection with a newspaper report published on 7 January 2022 in a daily newspaper about an unfortunate incident of gas leak at Surat, resulting in the loss of human life and hospitalization of few people, the Hon'ble Principal Bench of National Green Tribunal (NGT) took suo-moto cognizance of the said incident and vide its order dated 18 January 2022, constituted a nine-member Joint Committee to investigate the incident and submit its report. The Joint Committee, without providing the Company an opportunity to submit its case, submitted its reports dated 31 May 2022 and 4 June 2022. The Hon'ble Principal Bench of NGT at New Delhi had passed an order dated 24 March 2023 accepting the said reports submitted by the Joint Committee.

Hikal has filed an Appeal before the Hon'ble Supreme Court against the NGT (Principal Bench) Order dated 24 March 2023 accepting the Reports of the Joint Committee. The Hon'ble Supreme Court, vide its Order dated 9 April 2024 read with Order dated 24 April 2024, had directed the authorities not to take any coercive steps against Hikal and had further directed Hikal to deposit R5.00 Crore (Rupees Five Crore only). The Hon'ble Supreme Court has also further directed that fifty percent of the amount awarded to the deceased persons, by the NGT (Principal Bench), amounting to approx. R 98.00 Lakhs, be released to the legal representatives of the deceased from the deposit of R 5.00 Crore (Rupees Five Crore only). It is pertinent to mention here that the amount deposited by Hikal shall be without prejudice to the rights and contentions of the parties and subject to outcome of the appeal/ further orders of the Hon'ble Supreme Court. In compliance of the aforesaid direction of the Hon'ble Supreme Court, on 8 May 2024, Hikal has deposited the sum of R 5.00 Crore with the Hon'ble Supreme Court.

Further, vide its letter dated 10 July 2024, Gujarat Pollution Control Board (GPCB) has revoked its direction dated 21 July 2023 directing the Company to close operations of its plant located at GIDC Panoli, Dist. Bharuch. In the interim period, the Company's Panoli facility continued its operations as normal in pursuance of interim revocation orders issued by GPCB from time to time.

There were no significant and material orders passed by the Regulators/Courts that could impact the going concern status of the Company and its future operations, other than what is mentioned above.

16. RISK MANAGEMENT

The Company has a robust business risk management framework in place to identify and evaluate all business risks. The Company recognises risk management as a crucial aspect of the Company's management and is aware that identification and management of risk effectively is instrumental in achieving its corporate objectives.

The Company has identified the business risks and the business heads, who are termed as risk owners, assess, monitor and manage these risks on an ongoing basis. The risk owners assess the identified risks and continually identify any new risks that can affect the business. Different risks such as technological, operational, maintenance of quality, reputational, competition, geopolitical, environmental, foreign exchange, financial, human resource and legal compliances, among others, are assessed on a continuous basis.

The risks mentioned in the risk register are reviewed by the Risk Management Committee at regular intervals to assess and mitigate the risk from time to time. The findings of the Risk Management Committee along with the actions taken to mitigate the risks are sent to the Board for its reference.

The strategies are reviewed, discussed and allocation of appropriate resources is done as and when necessary. The risk management programme, internal control systems and processes are monitored and updated on an ongoing basis. A built-up mechanism has been established to identify, measure, control, monitor and report the risks. Business heads are responsible for rolling out the risk assessment and management plan within the organisation.

17. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Company has an internal control system, commensurate with the size, scale and complexity of its operations. To maintain its objectivity and independence, the Internal Audit function reports to the Chairman of the Audit Committee of the Board.

The Internal Audit Department monitors and evaluates the efficacy and adequacy of the internal control system in the Company, its compliance with operating systems, accounting procedures and policies at all locations of the Company and its subsidiaries. Based on the report of internal audit function, process owners undertake corrective action in their respective areas and thereby, strengthen the controls. Significant audit observations and corrective actions thereon are presented to the Audit Committee.

The Audit Committee actively reviews the adequacy and effectiveness of the internal control systems and suggests improvements to strengthen them. The Company has a robust management information system, which is an integral part of the control mechanism.

18. KEY MANAGERIAL PERSONNEL

Pursuant to the provisions of Section 203 of the Act, following were the Key Managerial Personnel of the Company as on 31 March 2024:

Mr. Jai Hiremath, Executive Chairman (WTD)

Mr. Sameer Hiremath, Managing Director

Mr. Sarangan Suresh, Whole time Director (with effect from 1 April 2024)

Mr. Kuldeep Jain, Chief Financial Officer

Mr. Rajasekhar Reddy, Company Secretary.

19. PARTICULARS OF LOANS, GUARANTEES AND INVESTMENTS BY THE COMPANY

The details under Section 186 of the Companies Act, 2013, are given in Note No. 54 to the notes to the financial statements.

20. DIRECTOR'S RESPONSIBILITY STATEMENT

Your Directors state that:

(i) In the preparation of the annual accounts, the applicable accounting standards read with requirements set out under Schedule III to the Companies Act, 2013, were followed and there are no material departures from the same;

(ii) The Directors have selected such accounting policies and applied them consistently and made judgements and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year 2023-24, and of the profits of the Company for that year;

(iii) The Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

(iv) The annual accounts have been prepared on a going concern basis;

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

(vi) The Directors have devised a proper system to ensure compliance with the provision of all applicable laws and that such systems are adequate and are operating effectively.

21. AUDITOR

At the 31st Annual General Meeting held on 1 August 2019, S R B C & CO. LLP, Chartered Accountants, Mumbai, (FRN: 324982E/E300003), were appointed as the Statutory Auditors of the Company to hold office from the conclusion of 31st Annual General Meeting of the Company till the conclusion of the 36th Annual General Meeting to be held in the year 2024.

As per the recommendation of the Audit Committee, the Board of Directors at their meeting held on August 1, 2024, recommended to the members of the Company the reappointment of S R B C & CO. LLP, Chartered Accountants, Mumbai, (FRN: 324982E/E300003), as the Statutory Auditors of the Company for a second term of 5 years i.e. to hold office from the conclusion of 36th Annual General Meeting of the Company till the conclusion of the 41st Annual General Meeting to be held in the year 2029.

The Auditor's report prepared by S R B C & CO. LLP, to the members on the accounts of the Company for the year ended March 31, 2024, does not contain any qualifications, adverse or disclaimer remarks. No fraud has been reported by the Auditors to the Audit Committee or the Board.

22. COST AUDITOR

The Company has re-appointed M/s. V. J. Talati & Co., (FRN: R00213) as the Cost Auditor to carry out the audit of cost accounts for the Financial Year 2024-25. The requisite resolution for ratification of remuneration payable to Cost Auditors for the year 2024-25, by the shareholders has been set out in the Notice of AGM. The cost audit report for the financial year 2022-23 was filed with the Ministry of Corporate Affairs, Government of India on August 25, 2023.

23. SECRETARIAL AUDITOR

Pursuant to Section 204 of the Companies Act, 2013 read with Rules made thereunder, the Board had appointed M/s Dhrumil M. Shah & Co. LLP, Practicing Company Secretaries, to conduct the Secretarial Audit of the Company.

The Secretarial Audit Report for the financial year ended 31 March 2024, is annexed to this report as "Annexure D" and forms an integral part of this Report. The Secretarial Audit Report does not contain any qualifications, reservations or adverse remarks.

24. CORPORATE SOCIAL RESPONSIBILITY (CSR)

Based on the recommendation of the Corporate Social Responsibility Committee (CSR Committee) the Board has adopted a CSR Policy that provides guiding principles for selection, implementation and monitoring of CSR activities and formulation of Annual Action Plan. The CSR Policy may be accessed on the Company's website https://www. hikal.com/uploads/documents/corporate-social- responsibilitv-polic-sriian.pdf

The Annual Report on CSR activities is annexed herewith marked as "Annexure E" and forms an integral part of this Report.

25. PREVENTION OF SEXUAL HARASSMENT OF WOMEN AT WORKPLACE

Pursuant to the provisions of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013, ("POSH Act"), the Company adopted a ‘Policy on Appropriate Social Conduct at Workplace'. The policy is applicable for all employees of the organisation, which includes corporate office and manufacturing units. The policy is applicable to non employees as well, i.e. business associates, vendors and trainees among others.

A Complaints Committee has also been set up to redress complaints received on sexual harassment

as well as other forms of verbal, physical, written or visual harassment.

During the financial year 2023-24, the Company did not receive any complaints of sexual harassment and no cases were filed under the POSH Act.

26. TRANSFER TO INVESTOR EDUCATION AND PROTECTION FUND ("IEPF")

• Transfer of Unclaimed Dividend to IEPF

During the financial year, the dividend relating to the year ended 31 March 2016 and the interim dividend for the year ended 31 March 2017, amounting to 'T 558,612/- that had not been claimed by the shareholders were transferred to the Account of IEPF as required under Sections 124 and 125 of the Act.

• Unclaimed dividend as on 31 March 2024

The Shareholders are requested to lodge their claims with the Registrar and Share Transfer Agents of the Company i.e. Link Intime India Pvt. Ltd., for unclaimed dividend.

Pursuant to the provisions of Investor Education and Protection Fund Authority (Accounting, Audit, Transfer and Refund) Rules, 2016, the Company has uploaded the details of unpaid and unclaimed amounts lying with the Company as on 31 March 2024, on the website of the Company https://www. hikal.com/documents/dividend-shares. The same are also available on the website of the IEPF Authority www.iepf.gov.in.

• Transfer of Equity Shares

As required under Section 124 of the Act, during the financial year, 10,283 Equity Shares, in respect of which dividend has not been claimed by the members for seven consecutive years or more, were transferred by the Company to the IEPF Authority. Details of such shares transferred have been uploaded on the website of the Company https://www. hikal.com/documents/dividend-shares. The same are also available on the website of the IEPF Authority www.iepf.gov.in.

27. SAFETY AND ENVIRONMENT

The Company continued to maintain the highest standards in environment, health and safety. The Company has become the first Indian life sciences company to receive the Responsible Care certification. It is applicable to all manufacturing and research sites of the Company. Continuous training and awareness programmes for the employees are undertaken on a frequent basis.

28. DEPOSITS

The Company did not accept any deposits and as such there were no overdue deposits outstanding as on 31 March 2024.

29. EMPLOYEES

The Company considers its human capital an invaluable asset. The Company continued to have cordial relationships with all its employees. Management and employee development programmes and exercises were conducted at all sites. Employees had various team building exercises and were sponsored for various external seminars and other developmental programmes to enhance their skill sets. The total workforce of the Company stood at 3008 as on 31 March 2024, including 2061 permanent employees

The statement containing particulars of employees as required under Section 197(12) of the Companies Act, 2013, read with Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, forms a part of this Report. Further, the Report and the financial statements are being sent to the members, excluding the aforesaid statement. In terms of Section 136 of the Companies Act, 2013, the said statement is open for inspection. Any member interested in obtaining such particulars may write to the Company Secretary at secretarial_agm@hikal.com.

30. CONSERVATION OF ENERGY, RESEARCH & DEVELOPMENT, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO

I n accordance with the requirements of Section 134(3)(m) of the Companies Act, 2013, read with Rule 8(3) of the Companies (Accounts) Rules, 2014, a statement showing particulars with respect to Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo, forming a part of the Directors' Report, is given in the enclosed "Annexure F" which forms a part of this Report.

31. CORPORATE GOVERNANCE

A report on Corporate Governance, along with a certificate from M/s Dhrumil M. Shah & Co. LLP, Practicing Company Secretaries regarding the compliance of the requirements of Corporate Governance, as stipulated under the provisions of Regulation 34 of the Securities and Exchange

Board of India (Listing Obligations & Disclosure Requirements) Regulations, 2015, is annexed to this Annual Report.

32. COMPLIANCE WITH SECRETARIAL STANDARDS

The Company has complied with the applicable Secretarial Standards issued by the Institute of Company Secretaries of India, during the Financial Year 2023-24.

33. AWARDS & RECOGNITIONS

The details of the Awards and Recognitions earned by the Company during the financial year 202324 have been provided as part of this Integrated Annual Report at page no. 27

34. ACKNOWLEDGEMENTS

The Board of Directors place on record their appreciation of the contribution and sincere support extended to the Company by our bankers, financial institutions and valued customers and suppliers.

The Board also places on record its appreciation for the impeccable service and generous efforts rendered by its employees at all levels, across the Board, towards the overall growth and success of the Company.

35. CAUTIONARY STATEMENT

Statements in the Board's Report and the Management Discussion and Analysis describing the Company's objectives, expectations or forecasts may be forward looking within the meaning of applicable securities laws and regulations. Actual results may differ materially from those expressed in the statement. Important factors that could influence the Company's operations include global and domestic demand and supply conditions affecting selling prices of finished goods, input availability and prices, changes in Government regulations, tax laws, economic developments within the country and other factors such as litigation and industrial relations.