To,

The Members,

The Directors are pleased to present the 35^th Annual Report with the Audited Accounts for the financial year ended 31 March 2023.

1. FINANCIAL RESULTS

H in million

2. COMPANY PERFORMANCE

The Company achieved revenue of H20,284 million in

2022-23, against H19,476 million in the previous year, recording a growth of 4%. The sales of the pharmaceutical business recorded a decline of 1% to H11,152 million, while the sales of the Crop Protection saw a growth of 12% to H9,079 million.

The EBIDTA margins stood at around 12.9%, decreased from H3,454 million in the previous year to H 2,625 million in 2022-23. Absolute EBITDA also decreased by H 829 million (24.0%). The Profit before Tax (PBT) reduced by 52% from H2,185 million in the previous year to H1,054 million in 2022-23. Profit After Tax (PAT) witnessed a decline of 51% from H1,605 million in the previous year to H784 million in 2022-23. The Earning per Share (EPS) also decreased from H13.02 in the previous year to H6.36 in 2022-23.

The Company is incurring substantial capital expenditure for growth in the Pharmaceutical and Crop Protection businesses to augment capacities for existing products and to create capacities for new products, as well as investments in Research & Technology.

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 1.42 for 2022-23, as against 1.25 in the previous year. The net Debt to Equity Ratio slightly increase from 0.59 in the previous year to 0.61 in 2022-23, while the Debt

Service Coverage Ratio (DSCR) declined from 1.96 in the previous year to 1.77 in 2022-23.

3. EXPORTS

Exports for the year 2022-23 were H13,684 million (68% of total sales) as compared to H14,141.98 million (73% of total sales) in the previous year. The decrease in exports can be attributed to a larger market share gained by our Indian customers selling in global markets, primarily in the US and Europe.

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

The Board declared an interim dividend of 30% (H0.60 per share), which was paid to shareholders in February 2023, and recommended a final dividend of 30% (H0.60 per share) for the year 2022-23. If approved by the shareholders, the dividend for the financial year 2022-23 shall aggregate to 60% (previous year: 80%).

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 2023, stood at H246.60 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 2023, none of the Company's Directors held 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.

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. 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.

In accordance with the provisions of Section 152 of the Companies Act, 2013, and the Company's Articles of Association, Mr. Amit Kalyani (DIN - 00089430), Director, retires by rotation at the forthcoming Annual General Meeting (AGM), and being eligible, offers himself for re-appointment.

Based on the recommendation of the Nomination and Remuneration Committee, the Board has, in its meeting held on 16 August 2023, approved the appointment of Mr. Berjis Minoo Desai (DIN: 00153675) and Mr. Ramachandra Kaundinya Vinnakota (DIN: 00043067) as Independent Directors for respective terms of 5 (Five) years each, with effect from 1 October 2023, subject to the approval of the members of the Company at the 35^th Annual General Meeting.

Details of the number of Board meetings, held during the financial year 2022-23, are mentioned in the Corporate Governance Report, which forms part of this Annual Report.

Pursuant to the provisions of the Companies Act, 2013, and Securities and Exchange Board of India (Listing Obligations & Disclosure Requirements) Regulations, 2015, 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 completed. In a separate meeting of Independent Directors, performance of Non-Independent 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.

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.

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 criterion 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.

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 made 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/ RelatedPartyTransactionPolicy.pdf.

In connection with a newspaper report published on 7 January 2022 in the daily “Indian Express” titled “Gujarat: At least 06 dead, 20 sick after gas leak at industrial area in Surat”, the Hon'ble Principle Bench of National Green Tribunal (NGT) took suo-moto cognizance of the said incident and vide its order dated 18 January 2022, the Hon'ble Principal Bench of NGT at New Delhi constituted a nine-member joint Committee headed by Retired Chief Justice of Hon'ble Delhi High court, 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. Vide order dated 23 September 2022, the Hon'ble Principal Bench of NGT at New Delhi took the said reports of the joint committee on record and sought the response of the Company in this regard. Aggrieved by the said order of NGT, New Delhi, the Company filed a writ petition bearing number 35496 of 2022, before the Hon'ble Bombay High Court, challenging, among other matters, the jurisdiction of NGT, New Delhi and to set aside the impugned reports submitted by the joint Committee. While the writ petition no. 35496 of 2022 was pending before the Hon'ble Bombay High Court, the Hon'ble Principal Bench of NGT at New Delhi passed an order dated 24 March 2023 accepting the said reports submitted by the joint Committee. The Hon'ble Bombay High Court vide its order dated 24 March 2023 directed the authorities not to act on the said order of NGT, New Delhi Bench and the said direction is still continuing as on the date of this Report.

Further, the Company has received a communication from the Gujarat Pollution Control Board (GPCB) on 22 July 2023, directing the Company to close operations of its plant located at GIDC Panoli, Dist. Bharuch, within 15 days from the order date. This directive comes in light of an alleged technical violation reported to have occurred in 2021. After considering the clarifications provided by the company in this regard, GPCB vide communication dated 05 August 2023, revoked the closure direction dated 21 July 2023 for an initial period of 3 months, as per the procedure. The Company's Panoli facility continues to operate as normal, with no interruption in production activities.

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.

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 to achieving its corporate objectives. The Company has identified the business risks, and the business heads, who are termed as risk owners, to 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, environmental, foreign exchange, financial, human resource, and legal compliances, among others, are assessed on a continuous basis. The Risk Management Committee and Audit Committee review and submit to the Board of Directors their findings in the form of risk register at regular intervals. At the Board meetings, the members have a detailed discussion to assess each risk and the measures that are in place to lower them to acceptable limits.

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.

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.

During the year, a thorough audit of the internal financial controls was carried out by an independent firm of chartered accountants.

Pursuant to the provisions of Section 203 of the Act, following were the Key Managerial Personnel of the Company as on 31 March 2023: Mr. Jai Hiremath, Executive Chairman (WTD) Mr. Sameer Hiremath, Managing Director Mr. Kuldeep Jain, Chief Financial Officer Mr. Rajasekhar Reddy, Company Secretary.

The details under Section 186 of the Companies Act, 2013, are given in Note No. 55 to the notes to the financial statements.

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 2022-23, 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.

At the 31^st 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 31^st Annual General Meeting of the Company till the conclusion of the 36^th Annual General Meeting to be held in the year 2024.

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 31 March 2023, does not contain any qualifications, adverse or disclaimer remarks. No fraud has been reported by the Auditors to the Audit Committee or the Board.

The Company has re-appointed M/s. V. J. Talati & Co., as the Cost Auditor to carry out the audit of cost accounts for the financial year 2023-24. The requisite resolution for ratification, of remuneration payable to Cost Auditors for the year 2023-24, by the shareholders has been set out in the Notice of AGM. The cost audit report for the financial year 2021-22 was filed with the Ministry of Corporate Affairs, Government of India, on 5 September 2022.

The Board had appointed Dhrumil M. Shah & Co. LLP, Practicing Company Secretaries, to conduct the Secretarial Audit for the financial year 2022-23.

The Secretarial Audit Report for the financial year ended 31 March 2023, is annexed to this report as “Annexure D”. The Secretarial Audit Report does not contain any qualifications, reservations, or adverse remarks.

The Corporate Social Responsibility Committee (CSR Committee) has formulated and recommended to the Board, a Corporate Social Responsibility Policy (CSR Policy) indicating the activities to be undertaken by the

Company, which has been approved by the Board. The CSR Policy may be accessed on the Company's website www.hikal.com/uploads/documents/corporate-social-responsibility-polic-srijan.pdf.

The Annual Report on CSR activities is annexed herewith marked as “Annexure E”.

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 2022-23, the Company did not receive any complaints of sexual harassment and no cases were filed under the POSH Act.

• Transfer of Unclaimed Dividend to IEPF

During the financial year, dividend, relating to the year ended 31 March 2015, amounting to H337,322/- that had not been claimed by the shareholders, was transferred to the credit of IEPF as required under Sections 124 and 125 of the Act.

• Unclaimed dividend as on 31 March 2023

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

Pursuant to the provisions of Investor Education and Protection Fund Authority (Accounting, Audit, Transfer and Refund) Rules, 2016 (as amended), the Company has uploaded the details of unpaid and unclaimed amounts lying with the Company as on 31 March, 2022, on the website of the Company 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, 4970 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 www.hikal.com/documents/dividend-shares. The same are also available on the website of the IEPF Authority www.iepf.gov.in.

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.

The Company did not accept any deposits and as such there were no overdue deposits outstanding as on 31 March 2023.

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 3211 as on 31 March 2023, including 2142 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.

In 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.

A report on Corporate Governance, along with a certificate from 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.

The Company has complied with the applicable Secretarial Standards, issued by the Institute of Company Secretaries of India, during the Financial Year 2022-23.

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.

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.

For and on behalf of the Board of Directors