Notes to Accounts of Kwality Pharmaceuticals Ltd.

Mar 31, 2025

j. Provisions, contingent liabilities, and contingent assets

Provisions are recognized when:

(i) The Company has a present obligation (legal or constructive) as a result of a past event,

(ii) It is probable that an outflow of resources embodying economic benefits will be required
to settle the obligation and a reliable estimate can be made of the amount of obligation.

When the Company expects some or all of a provision to be reimbursed, for example, under an
insurance contract, the reimbursement is recognized as a separate asset, but only when the

reimbursement is certain. The expense relating to a provision is presented in the statement of
profit and loss net of any reimbursement.

If the effect of the time value of money is material, provisions are determined by discounting the
expected future cash flows at a pre-tax rate that reflects current market assessments of the time
value of money and the risks specific to the liability. Where discounting is used, the increase in
the provision due to the passage of time is recognized as a finance cost.

Contingent liabilities and contingent assets

Contingent liability is disclosed for,

(i) Possible obligations that will be confirmed only by future events not wholly within the control
of the Company, or

(ii) Present obligations arise from past events where it is not probable that an outflow of
resources will be required to settle the obligation or a reliable estimate of the amount of the
obligation cannot be made.

Contingent assets are not recognized in the financial statements. A contingent asset is disclosed
where an inflow of economic benefits is probable. Contingent assets are assessed continually
and, if it is virtually certain that an inflow of economic benefits will arise, the asset and related
income are recognized in the period in which the change occurs.

k. Employee Benefits

(a) Defined Contribution Plans

The company’s contribution to the defined contribution plan paid/payable for the year is charged
to the Standalone Statement of Profit and loss.

(b) Defined Benefit Plans

• The Company has gratuity as a defined benefit plan where the amount that an employee will
receive on retirement is defined by reference to the employee’s length of service and final salary.
The cost of providing benefits under the defined benefit plan is determined based on actuarial
valuation using the projected unit credit method. The gratuity fund is administered through the
Life Insurance Corporation of India.

• The liability in respect of defined benefit plans is calculated using the projected unit credit
method (PUCM) with actuarial valuations being carried out at the end of each annual reporting
period.

• The current service cost of the defined benefit plan, recognised in the statement of profit and
loss as employee benefits expense, reflects the increase in the defined benefit obligation resulting
from employee service in the current year, benefit changes, curtailments and settlements.

• The Net Interest Cost on Defined Benefit Obligations is also included in the Statement of
Profit and Loss under the Head “Employees Benefit Expenses”.

• Actuarial gains and losses arising from experience adjustments and changes in actuarial
assumptions are charged or credited to OCI in the period in which they arise and are reflected
immediately in retained earnings and is not reclassified to profit or loss.

l. Taxes on Income
(a) Tax expense

• Tax expense consists of current and deferred tax. Income tax expense is recognized in the
profit or loss except to the extent that it relates to items recognized in OCI or directly in equity
as in that case it is recognized in OCI or directly in equity respectively. Current tax is the
expected tax payable on the taxable profit for the year, using tax rates enacted or substantively
enacted by the end of the reporting period, and any adjustment to tax payable in respect of
previous years. Current tax assets and tax liabilities are offset where the Company has a legally
enforceable right to offset and intends either to settle on a net basis or to realize the asset and
settle the liability simultaneously.

• Deferred tax resulting from “timing differences” between taxable and accounting income that
originate in one period and are capable of being reversed in one or more subsequent period is
accounted for using the tax rates and laws that are enacted or substantively enacted as on the
Balance Sheet date. The deferred tax asset is recognized and carried forward only to the extent
that there is a reasonable certainty that the assets can be realized in future. However, where there
is unabsorbed capital expenditure or carry forward losses under taxation laws, deferred tax assets
are recognized only if there is virtual certainty of realisation of such assets. Deferred tax assets
are reviewed as at each Balance Sheet date.

m. Exceptional Items

Exceptional items refer to items of income or expense,including tax items, within the statement
of profit and loss from ordinary activities which are non-recurring and are of such size, nature or
incidence that their separate disclosure is considered necessary to explain the performance of the
Company.

n. Leases

The Company assesses at contract inception whether a contract is, or contains, a lease. That is,
if the contract conveys the right to control the use of an identified asset for a period of time in
exchange for consideration.

The Company applies the short-term lease recognition exemption to its short-term leases (i.e.,
those leases that have a lease term of 12 months or less from the commencement date and do not
contain a purchase option). It also applies the lease of low-value assets recognition exemption to
leases that are considered to be low value. Lease payments on short-term leases and leases of
low-value assets are recognised as expense on a straight-line basis over the lease term.

o. Revenue Recognition

The Company recognizes revenue when the same can be reliably measured, it is probable that
future economic benefits will flow to the Company and specific criteria have been met for each
of the Company’s activities as described below. Revenue is measured at the value of the
consideration received or receivable, considering defined terms of payment and excluding taxes
or duties collected on behalf of the government. Amounts disclosed as revenue are exclusive of
GST and net of returns, trade allowances, rebates, discounts, and amounts collected on behalf of
third parties.

i) Sale of goods

Sales are recognized when substantial risk and rewards of ownership are transferred to customer,
in case of domestic customers, sales generally take place when goods are dispatched or delivery
is handed over to the transporter. In case of export customers, sales generally take place when
goods are shipped on-board based on bill of lading.

ii) Interest & Other Indirect Income

a) Interest income is recognized on time proportion basis considering the amount invested and
rate of interest.

b) Revenue in respect of other claims is recognized on an accrual basis to the extent the ultimate
realization is reasonably certain.

p. Impairment

(i) Financial Assets

The company’s financial asset is assessed at each reporting date to determine whether there is
any objective evidence that it is impaired. A financial asset is considered to be impaired, if
objective evidence indicates that one or more events have had a negative effect on the estimated
future cash flows of the asset.

(ii) Non-Financial Assets

The carrying amounts of the Company’s non-financial assets are reviewed at each reporting date
to determine whether there is any indication of impairment. If any such indication exists, then
the asset’s recoverable amount is estimated in order to determine the extent of the impairment
loss, if any.

An impairment loss is recognized in the Statement of Profit or Loss if the estimated recoverable
amount of an asset or its cash generating unit is lower than its carrying amount.

q. Financial Instruments

A financial instrument is any contract that gives rise to a financial asset of one entity and a
financial liability or equity instrument of another entity.

Financial Assets

Initial recognition and measurement:

Financial assets are classified into the following categories upon initial recognition:

(a) those measured at amortised cost

(b) those to be measured subsequently at fair value through Statement of Profit & Loss.

The classification depends on the entity’s business model for managing the financial assets and
the terms of cash flows. For assets measured at fair value, gains and losses will either be recorded
in profit or loss or other comprehensive income as the case may be.

All financial assets are initially recognized at fair value. Transaction costs of acquisition of
financial assets carried at fair value through profit and loss are expensed in the Statement of
Profit and Loss.

Amortized cost: Assets that are held for collection of contractual cash flows where those cash
flows represent solely payments of principal and interest are measured subsequently at amortized
cost. Interest income from these financial assets is included in Other income as per interest
received/receivable from Financial Institutions.

The Company derecognizes a financial asset only when the contractual rights to the cash flows
from the asset expires or it transfers the financial asset and substantially all the risks and rewards
of ownership of the asset.

Financial liabilities

Initial recognition and measurement:

All financial liabilities are recognized initially at fair value. The Company’s financial liabilities
majorly comprises trade and other payables.

Financial liabilities are classified as ‘FVTPL’ if they are held for trading or if they are designated
as financial liabilities upon initial recognition at fair value through profit or loss. Financial
liabilities are classified as held for trading if they are incurred for the purpose of repurchasing in
the near term.

The Company classifies all financial liabilities as subsequently measured at amortized cost,
except for financial liabilities at fair value through profit and loss.

A financial liability is derecognized when the obligation under the liability is discharged or
cancelled or expires. When an existing financial liability is replaced by another from the same
creditor on substantially different terms, or the terms of an existing liability are substantially
modified, such an exchange or modification is treated as the derecognition of the original liability
and the recognition of a new liability. The difference in the respective carrying amounts is
recognized in the statement of profit or loss.

Fair Value Measurement

The fair value of an asset or a liability is measured using the assumptions that the market
participants would use when pricing the asset or liability.

The Company uses valuation techniques that are appropriate in the circumstances and for which
sufficient data are available to measure fair value, maximizing the use of relevant observable
inputs and minimizing the use of unobservable inputs.

All assets and liabilities for which fair value is measured or disclosed in the financial statements
are categorized within the fair value hierarchy, described as follows, based on the lowest level
input that is significant to the fair value measurement as a whole:

Level 1 — Quoted (unadjusted) market prices in active markets for identical assets or liabilities

Level 2 — Valuation techniques for which the lowest level input that is significant to the fair
value measurement is directly or indirectly observable.

Level 3 — Valuation techniques for which the lowest level input that is significant to the fair
value measurement is unobservable.

For assets and liabilities that are recognized in the financial statements on a recurring basis, the
Company determines whether transfers have occurred between levels in the hierarchy by re¬
assessing categorization (based on the lowest level input that is significant to the fair value
measurement as a whole) at the end of each reporting year.

r. Investment in Subsidiary

The Company records the Investment in equity instrument of Subsidiary at cost less accumulated
impairment losses, if any. Where an indication of impairment exists, the carrying amount of the
investment is assessed and written down immediately to its recoverable amount. On disposal of
investment in subsidiary, the difference between net disposal proceeds and the carrying amounts
are recognised in the standalone statement of profit and loss.

s. Use of Judgment’s, Estimates and Assumptions

The preparation of the Company’s financial statements requires management to make judgments,
estimates and assumptions that affect the reported amounts of revenues, expenses, assets and
liabilities and the accompanying disclosures and the disclosure of contingent liabilities.
Uncertainty about these assumptions and estimates could result in outcomes that require a
material adjustment to the carrying amount of assets or liabilities affected in future periods.
Difference between actual results and estimates are recognised in the periods in which the results
are known / materialise. The estimates and associated assumptions are based on historical
experience and various other factors that are believed to be reasonable under the circumstances
existing when the financial statements were prepared. The estimates and underlying assumptions
are reviewed on an ongoing basis. Revision to accounting estimates is recognised in the year in
which the estimates are revised.

Judgements

In the process of applying the Company’s accounting policies, management has made the
following judgements which have a significant effect on the amounts recognised in the financial
statements:

> Defined benefit plans (Gratuity and Leave encashment benefits)

The cost of the defined benefit gratuity plan and other post-employment benefits and the present
value of the gratuity obligation and Leave encashment are determined using actuarial valuations.
An actuarial valuation involves making various assumptions that may differ from actual
developments in the future. These include the determination of the discount rate, future salary
increases and mortality rates. Due to the complexities involved in the valuation and its long-term
nature, a defined benefit obligation is highly sensitive to changes in these assumptions. All
assumptions are reviewed at each reporting date.

> Useful life of Property, plant and equipment

The Company reviews the useful life of Property, plant and equipment at the end of each
reporting period. This reassessment may result in change in depreciation expenses in the future
years.

*As on 31st March 2025, the Company is in possession of cheques amounting to Rs1050.00
Lakhs (Rupees Ten Crores Fifty Lakhs only), received towards settlement of trade receivables.
The management confirms that the cheques represent valid receivables, and there is no known
risk of non-realisation as on the date of signing the financial statements. Accordingly, the said
amount has been classified as Cheque in Hand under Cash and Bank Balances, in line with the
Company’s accounting policy and relevant guidance under Schedule III of the Companies Act,
2013. The Company has taken adequate internal controls to ensure realization of the said
cheques in the normal course of business.

a. Vehicle Loans are secured by hypothecation of vehicles in favor of the Bank. Similarly,
machinery term loans are secured by hypothecation of machinery in favor of the Bank.

b. Cash Credit, Term Loan, Pre-shipment, Post Shipment, FLC, PSL, PCFC and BG are secured
by hypothecation of all types of stocks and other material at factory/godown or at other places
as approved by the bank from time to time including goods in transit and receivables, i.e. stock
and book debts; hypothecation of plant and machinery and FDR margin.

c. All the Loans and Advances from the bank, including Working Capital limits and other credit
facilities from the Bank are collaterally secured by Equitable mortgage of the following
properties:

i. Industrial Property bearing killa no. 152/5 (6-17), 152 (8-0), Khewat Khatoni No. 368/435,
581/761, Rakba 14K, 17M situated at Nag Kalan Amritsar, owned by Mr. Ramesh Arora and
Mr. Ajay Arora, directors of the Company

ii. Industrial Property at Wakia 6 Mile Stone Village Nag Kalan, Majitha Road, Amritsar -
143001 owned by the Company.

iii. Industrial Property at Plot No. 1A, Raja Ka Bagh, Kangra, Himachal Pradesh on long term
lease from government of Himachal Pradesh.

iv. Industrial property at Hadbast No. 334, Situated at Rakba Village Nag-2, Tehsil Majitha,
Near Kwality Pharmaceuticals, Amritsar, Punjab, 143601.

v. Residential Property situated at House No. 32, Opposite Police line, R.B. Parkash Chand
Road, Amritsar, Panjab owned by Mr. Ramesh Arora and Mr. Ajay Arora.

vi. Immovable property at Bal kalan, Majitha Road, Amritsar, Panjab-143001.

(i) Details of security for the secured short-term borrowings:

Cash Credit, Pre-shipment, Post Shipment, FLC, PSL, PCFC and BG are secured by
hypothecation of all types of stocks and other material at factory/godown or at other places as
approved by the bank from time to time including goods in transit and receivables, i.e., stock and
book debts; hypothecation of plant and machinery and FDR margin and collaterally secured by
equitable mortgage of the properties.

> Pending Litigations

According to the information and explanations given to us, details of Income tax, Goods and
Service tax, Customs Duty, Excise Duty and Value Added Tax, the amounts that may be
required to be deposited on account of show cause notice or demands raised by the following
departments during the financial year 2024-2025. The Details are as under:

1. As informed to us and based on the records examined, an order bearing No.
14/GST/ADC/JAL/2024-2025 has been received by the Company under Section 74(9) of
the Central Goods and Services Tax Act, 2017, read with Section 20 of the Integrated
Goods and Services Tax Act, 2017, raising a demand of ^3,15,02,758/- towards alleged
erroneous refund of IGST for the financial years 2017-18 to 2022-23. Further, a penalty
of an equivalent amount of ^3,15,02,758/- has also been levied under the same provisions.
Interest under Section 74(9) read with Section 50 of the CGST Act, 2017 and Section 20
of the IGST Act, 2017 has also been levied, though not quantified in the said order.

As represented to us, the Company has filed an appeal before the appropriate appellate
authority under CGST Act, 2017 challenging the said order. Accordingly, the total disputed
amount of ?6,30,05,516/- (comprising tax and penalty) is under litigation and remains
pending as on the reporting date.

2. The Company has received a Show Cause Notice bearing no. AE/51/2024-25 for the

financial years 2017-18 to 2022-23 under Section 74& 122 of the Central Goods and
Services Tax Act, 2017. The notice alleges wrongful availment and utilization of Input Tax
Credit (ITC) amounting to ^15,13,03,420/- (Rupees Fifteen Crores Thirteen Lakhs Three
Thousand Four Hundred Twenty only). Further, a penalty of ^15,13,03,420/- has been
proposed under Section 74(1) read with Section 122(2)(b). Accordingly, the total disputed
amount proposed in the Show Cause Notice is Rs. 30,26,06,840/- (Demand &Penalty)

The company has filed a civil writ petition in the Punjab and Haryana high court bearing
no CWP-34165-2024 against the said show cause notice. Hon’ble Punjab and Haryana high
court has stayed the passing of adjudication order in pursuance to the show cause notice
and the show cause notice is thus under litigation and remains pending as on the reporting
date.

3. As per the information and explanations given to us and based on the records examined, the
Company has received orders dated 30/12/2024 in Form DRC-07 from the Goods and Services
Tax (GST) Department under Section 74 of the Central Goods and Services Tax Act, 2017, in
respect of wrongly availed and passed on Input Tax Credit (ITC). The summary of the
demands raised is as follows:

• For the financial year 2017-18, no tax was levied; however, a penalty of ?2,80,695 /-was
imposed.

• For the financial year 2019-20, a demand of ?6,74,856 /-each towards tax and penalty was
raised.

• For the financial year 2020-21, a demand of ?12,62,160/- towards tax and ?12,70,485/-
towards penalty was raised.

The Company has filed appeals before the appropriate appellate authority under the GST
Commissionerate in all the above cases, and the proceedings are pending as on the date of
this report. The matter is currently under dispute and remains pending as on the reporting
date.

36. Financial Risk Management:

The Company’s activities expose it to a variety of financial risks, including market risk, credit
risk and liquidity risk. The Company’s risk management assessment and policies and processes
are established to identify and analyse the risks faced by the Company, to set appropriate risk
limits and controls, and to monitor such risks and compliance with the same. Risk assessment
and management policies and processes are reviewed regularly to reflect changes in market
conditions and the Company’s activities.

Credit Risk

Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial
instrument fails to meet its contractual obligations, and arises principally from the Company’s
receivables from customers, loans and investments. Credit risk is managed through credit
approvals, establishing credit limits and continuously monitoring the creditworthiness of
counterparty to which the Company grants credit terms in the normal course of business.

It is evident from the Note No. 10 of Notes forming Part of Standalone Financial Statements that
company is managing its credit risk efficiently.

Liquidity Risk

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as
they become due. The Company manages its liquidity risk by ensuring, as far as possible, that it
will always have sufficient liquidity to meet its liabilities when due, under both normal and
stressed conditions, without incurring unacceptable losses or risk to the Company’s reputation.
The Current ratio of the company calculated later in the report is the true indicator of the
management of the Liquidity risk by the company.

Foreign Exchange Risk

The Company’s foreign exchange risk arises from its foreign operations, foreign currency
revenues and expenses.

In the Current year, Company has charged Income due to Foreign Exchange Fluctuations of Rs
7.73 whereas there was loss of Rs. 3.62 Lacs in the previous year.

a) Defined Contribution Plans

The Company is regular in making contributions to Recognised Provident Fund (RPF),
Employees State Insurance Scheme (ESIC) and other funds including Labour Welfare Fund for
all regular employees or workers.

The amount of contributions to these funds are recognised as expense under the head “Employee
Benefit Expenses” in the Statement of Profit and Loss as under:

b) Defined Benefit Plans
Gratuity

The company made contributions to Life insurance Company in respect of the Gratuity. Under
Gratuity Act, Employees are entitled to specific benefit at the time of retirement or termination
of the employment on completion of five years or death while in employment.

Gratuity is classified as Defined Benefit plan as enterprise''s obligation is to provide agreed
benefits, subject to minimum benefits as subscribed by the Payment of Gratuity Act, to plan
members. Actuarial & Investment risks are borne by the enterprise.

The Net Defined Benefit Liability/(Asset) is the Net (Surplus)/Deficit in the plan netted off by
effect of Asset Ceiling, if any. It is arrived by deducting Fair Value of Plan Assets from the
Defined Benefit Obligation as on the date of valuation.

As required under Para 67 of Ind AS 19 actuarial valuation is done using Projected Unit Credit
Method. Under this method, only benefits accrued till the date of valuation (i.e. based on service
upto date of valuation) are to be considered for valuation. Present value of Defined Benefit
Obligation is calculated by projecting salaries, exits due to death, resignation and other
decrements, if any, and project the benefit till the time of retirement of each active member using
assumed rates of salary escalation, mortality & employee turnover rates. The expected benefit

40.ADDITIONAL REGULATORY INFORMATION REQUIRED BY SCHEDULE III
OF COMPANIES ACT, 2013:

a) The Company has complied with the number of layers prescribed under the Companies Act,
2013.

b) Details of Benami Property held - No proceeding has been initiated or pending against the
company for holding any Benami property under the Benami Transactions (Prohibition)
Act,1988 (45 of 1988) and the rules made thereunder.

c) There has been no income surrendered or disclosed as income during the current or previous
year in the tax assessments under the Income Tax Act, 1961, that has not been recorded in the
books of account.

d) Utilisation of Borrowed funds: The Company has not advanced or loaned or invested funds
(either borrowed funds or share premium or any other sources or kind of funds) to any other
person(s) or entity(ies), including foreign entities (Intermediaries) with the understanding
(whether recorded in writing or otherwise) that the Intermediary shall (i) directly or indirectly
lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of

the company (Ultimate Beneficiaries) or (11) provide any guarantee, security or the like to or on
behalf of the Ultimate Beneficiaries.

e) Willful Defaulter - The Company is not declared willful defaulter by any bank or financial
Institution or other lender during the year.

f) Registration of charges or satisfaction with Registrar of Companies - During the year, the
Company has complied with the requirements for registration of charges on the assets of the
company with the Registrar of Companies.

** Promoting Education & Healthcare, Eradication of Hunger & Poverty, Special education
and enhancing skills among differently abled children and Promoting Education of Poor
Children, protection of flora & fauna, animal welfare and skill development & enhancing
employment.

h) The Company does not have any transactions with struck-off companies.

i) The Company has not traded or invested in crypto-currency or virtual currency during the
current or previous year.

j) The previous year s figures have been regrouped wherever necessary to make them
comparable to the current year''s figures.

For VIJAY MEHRA & CO. For and on behalf of the Board of

directors

Chartered Accountants
(Firm’s Registration No. 001051N)

Sd/- Sd/- Sd/-

CA AMIT HANDA Ramesh Arora Ajay Kumar Arora

Partner Managing director Whole time

director

M. No: 502400 DIN:00462656 DIN:00462664

UDIN:- 25502400BMLEFT6298

Place: Amritsar Sd/- Sd/-

Date:19.05.2025 Gurpreet Kaur Aditya Arora

Company Secretary Whole time

Director

&CFO

DIN:07320410

---

Mar 31, 2024

14(b) Company has only one class of equity shares having par value of Rs. 10 per share. Each holder of the equity share is entitled to one vote per share. In the event of liquidation of the Company, the holders of equity shares will be entitled to receive remaining assets of the company, after distribution of all preferential amounts. The distribution will be in proportion to the number of equity shares held by the shareholders.

a. Vehicle Loans are secured by hypothecation of vehicles in favor of the Bank. Similarly, machinery term loans are secured by hypothecation of machinery in favor of the Bank.

b. Cash Credit, Term Loan, Pre-shipment, Post Shipment, FLC, PSL, PCFC and BG are secured by hypothecation of all types of stocks and other material at factory/godown or at other places as approved by the bank from time to time including goods in transit and receivables, i.e. stock and book debts; hypothecation of plant and machinery and FDR margin.

c. All the Loans and Advances from the bank, including Working Capital limits and other credit facilities from the Bank are collaterally secured by equitable mortgage of the following properties:

i. Industrial Property bearing killa no. 152/5 (6-17), 152 (8-0), Khewat Khatoni No. 368/435, 581/761, Rakba 14K, 17M situated at Nag Kalan Amritsar, owned by Mr. Ramesh Arora and Mr. Ajay Arora, directors of the Company

ii. Industrial Property at Wakia 6 Mile Stone Village Nag Kalan, Majitha Road, Amritsar -143001 owned by the Company.

iii. Industrial Property at Plot No. 1A, Raja Ka Bagh, Kangra, Himachal Pradesh on long term lease from government of Himachal Pradesh.

Industrial property at Hadbast No. 334, Situated at Rakba Village Nag-2, Tehsil Majitha, Near Kwality Pharmaceuticals, Amritsar, Punjab, 143601.

v. Residential Property situated at House No. 32, Opposite Police line, R.B. Parkash Chand Road, Amritsar, Panjab owned by Mr. Ramesh Arora and Mr. Ajay Arora.

vi. Immovable property at Bal kalan, Majitha Road, Amritsar, Panjab-143001.

(i) Details of security for the secured short-term borrowings:

Cash Credit, Pre-shipment, Post Shipment, FLC, PSL, PCFC and BG are secured by hypothecation of all types of stocks and other material at factory/godown or at other places as approved by the bank from time to time including goods in transit and receivables, i.e., stock and book

debts; hypothecation of plant and machinery and FDR margin and collaterally secured by equitable mortgage of the properties.

32. Contingent Liabilities and Pending Litigations
> Contingent Liabilities		(? in lakhs)
Pending Litigations	As at 31st March,2024	As at 31st March,2023
VAT Department, Lucknow	34.93	50.82

The Company is currently facing several ongoing litigations related to the marketing and quality of its products. These cases are being addressed in multiple forums. According to the management''s statement, the financial implications of these litigations remain indeterminate.

35. Exceptional Item:

The company has disclosed to SEBI regarding the fire incident occurred at the company''s plant situated at Village Nag Kalan, Majitha Road, Amritsar, Panjab on 5th October 2023. Further, the total impact of financial loss due to the stated fire incident has been assessed as Rs. 16.20 crore out of which net loss has been assessed as Rs. 709.93 lacs after adjustment of insurance claim. This loss has been recorded as exceptional item in Statement of Profit and Loss.

36. Financial Risk Management:

The Company''s activities expose it to a variety of financial risks, including market risk, credit risk and liquidity risk. The Company''s risk management assessment and policies and processes are established to identify and analyse the risks faced by the Company, to set appropriate risk limits and controls, and to monitor such risks and compliance with the same. Risk assessment and management policies and processes are reviewed regularly to reflect changes in market conditions and the Company''s activities.

Credit Risk

Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Company''s receivables from customers, loans and investments. Credit risk is managed through credit approvals, establishing credit limits and continuously monitoring the creditworthiness of counterparty to which the Company grants credit terms in the normal course of business.

It is evident from the Note No. 9 of Notes forming Part of Standalone Financial Statements that company is managing its credit risk efficiently.

Liquidity Risk

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they become due. The Company manages its liquidity risk by ensuring, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risk to the Company''s reputation. The Current ratio of the company calculated later in the report is the true indicator of the management of the Liquidity risk by the company.

Foreign Exchange Risk

The Company''s foreign exchange risk arises from its foreign operations, foreign currency revenues and expenses.

In the Current year, Company has charged Loss due to Foreign Exchange Fluctuations of Rs. 3.62 Lacs whereas there was income of Rs. 126.55 Lacs in the previous year.

The Company has below stated Foreign Exchange Exposure which was not hedged as on Balance Sheet date:

37. Employee Benefits

a) Defined Contribution Plans

The Company is regular in making contributions to Recognised Provident Fund (RPF), Employees State Insurance Scheme (ESIC) and other funds including Labour Welfare Fund for all regular employees or workers.

The amount of contributions to these funds are recognised as expense under the head "Employee Benefit Expenses" in the Statement of Profit and Loss as under:

b) Defined Benefit Plans

Gratuity

The company made contributions to Life insurance Company in respect of the Gratuity. Under Gratuity Act, Employees are entitled to specific benefit at the time of retirement or termination of the employment on completion of five years or death while in employment.

Gratuity is classified as Defined Benefit plan as enterprise''s obligation is to provide agreed benefits, subject to minimum benefits as subscribed by the Payment of Gratuity Act, to plan members. Actuarial & Investment risks are borne by the enterprise.

The Net Defined Benefit Liability/(Asset) is the Net (Surplus)/Deficit in the plan netted off by effect of Asset Ceiling, if any. It is arrived by deducting Fair Value of Plan Assets from the Defined Benefit Obligation as on the date of valuation.

As required under Para 67 of Ind AS 19 actuarial valuation is done using Projected Unit Credit Method. Under this method, only benefits accrued till the date of valuation (i.e. based on service upto date of valuation) are to be considered for valuation. Present value of Defined Benefit Obligation is calculated by projecting salaries, exits due to death, resignation and other decrements, if any, and project the benefit till the time of retirement of each active member using assumed rates of salary escalation, mortality & employee turnover rates. The expected benefit payments are then discounted back from the future date of payment to the date of valuation using the assumed discount rate.

''Service Cost'' is calculated seperately in respect of benefit accured during the current period using the same method as described above. However, instead of all accrued benefits, benefit accrued over the current reporting period is considered.

The scheme is funded through an ''Approved Trust''. The Trust has taken a Policy from the Life Insurance Corporation of India (LIC) and the management of the fund is undertaken by the LIC. We have been provided with the fund size of Rs.8,370,173 as of the valuation date.

40. ADDITIONAL REGULATORY INFORMATION REQUIRED BY SCHEDULE III OF COMPANIES ACT, 2013:

a) The Company has complied with the number of layers prescribed under the Companies Act, 2013.

b) Details of Benami Property held - No proceeding has been initiated or pending against the company for holding any Benami property under the Benami Transactions (Prohibition) Act,1988 (45 of 1988) and the rules made thereunder.

c) There has been no income surrendered or disclosed as income during the current or previous year in the tax assessments under the Income Tax Act, 1961, that has not been recorded in the books of account.

d) Utilisation of Borrowed funds: The Company has not advanced or loaned or invested funds (either borrowed funds or share premium or any other sources or kind of funds) to any other person(s) or entity(ies), including foreign entities (Intermediaries) with the understanding (whether recorded in writing or otherwise) that the Intermediary shall (i) directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the company (Ultimate Beneficiaries) or (ii) provide any guarantee, security or the like to or on behalf of the Ultimate Beneficiaries.

e) Willful Defaulter - The Company is not declared willful defaulter by any bank or financial Institution or other lender during the year.

f) Registration of charges or satisfaction with Registrar of Companies - During the year, the Company has complied with the requirements for registration of charges on the assets of the company with the Registrar of Companies.

h) The Company does not have any transactions with struck-off companies.

i) The Company has not traded or invested in crypto-currency or virtual currency during the current or previous year.

j) The previous year''s figures have been regrouped wherever necessary to make them comparable to the current year''s figures.

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Mar 31, 2023

The Exceptional items includes write off of inventory amounting to Rs 705.12 Lacs. The Inventory is written off as raw material pertaining to Covid related drugs and formulations which were assessed as unusable due to obsolescence by the company and recommended to be disposed and written off. Though the assessment of inventory obsolescence, excess and unmarketability is an ordinary business activity but as the value of inventory written off is of such size and amount it is separately disclosed under the head exceptional items under the profit and loss account.

12b) Terms/ rights attached to equity shares

The Company has only one class of equity shares having par value of Rs. 10 per share. Each holder of the equity share is entitled to one vote per share.

In the event of liquidation of the Company, the holders of equity shares will be entitled to receive remaining assets of the company, after distribution of all preferential amounts. The distribution will be in proportion to the number of equity shares held by the shareholders.

Vehicle Loans are secured by hypothecation of vehicles in favor of the Bank. Similarly, machinery term loans are secured by hypothecation of machinery in favor of the Bank.

Cash Credit, Term Loan, Pre-shipment, Post Shipment, FLC, PSL, PCFC and BG are secured by hypothecation of all types of stocks and other material at factory/godown or at other places as approved by the bank from time to time including goods in transit and receivables, i.e. stock and book debts; hypothecation of plant and machinery and FDR margin.

All the Loans and Advances from the bank, including Working Capital limits and other credit facilities from the Bank are collaterally secured by equitable mortgage of the following properties:

i) Industrial Property bearing killa no. 152/5 (6-17), 152 (8-0), Khewat Khatoni No. 368/435, 581/761, Rakba 14K, 17M situated at Nag Kalan Amritsar, owned by Mr. Ramesh Arora and Mr. Ajay Arora, directors of the Company

ii) Industrial Property at Wakia 6 Mile Stone Village Nag Kalan, Majitha Road, Amritsar -143001 owned by the Company.

iii) Industrial Property at Plot No. 1A, Raja Ka Bagh, Kangra, Himachal Pradesh on long term lease from government of Himachal Pradesh.

iv) Industrial property situated at Hadbast No. 334 , Situated at Rakba Village Nag-2, Tehsil Majitha , Near kwality pharmaceuticals , Amritsar , Punjab, 143601.

(i) Details of security for the secured short-term borrowings: Cash Credit, Preshipment, Post Shipment, FLC, PSL, PCFC and BG are secured by hypothecation of all types of stocks and other material at factory/godown or at other places as approved by the bank from time to time including goods in transit and receivables, i.e. stock and book debts; hypothecation of plant and machinery and FDR margin and collaterally secured by equitable mortgage of the properties mentioned in note no. 14.

30. CONTINGENT LIABILITIES AND PENDING LITIGATIONS > CONTINGENT LIABILITIES (Rs. in Lacs)
	Particulars		As at 31st March 2023	As at 31st March 2022
	a) Corporate Guarantee given on behalf of related parties		Nil	Nil
	b) Guarantees given by bankers against Government tenders		Nil	4.91
	Pending Litigations:
	i) VAT Department, lucknow	50.82		-

> PENDING LITIGATIONS

The Company has certain other pending litigations against it with respect to marketing and quality of its products. The litigations are pending in various forums. As per management representation, the financial

impact of these litigations cannot be ascertained.

33. The Exceptional items includes write off of inventory amounting to Rs 705.12 Lacs and write off of Input Tax credit of Goods and services Tax Rs 947.82 Lacs. The company is carrying forward GST Input Tax Credit under the current assets as utilizable asset for payment of output GST Liabilities. The accumulated balance under input tax credit is rising every year even after utilization and refunds. So the company has assessed the prospects for utilization of availed Input Tax Credit based on its utilization requirement and also based on compliance record of purchase vendors under the Goods and Services Tax Act and has decided to write off the ITC to the extent of 947.82 Lacs.

34. FOREIGN EXCHANGE EXPOSURE:

The Company has booked Rs. 126.55 lacs (Previous year Rs. 166.22 lacs) in Statement of Profit & Loss on account of foreign currency exchange rate change.

*The previous year''s figures have been regrouped wherever necessary to make it comparable with the current year.

36. FAIR VALUE DISCLOSURES:

The Company uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique:

The categories used are as follows:

• Level 1: This hierarchy includes financial instruments measured using quoted prices. This includes listed equity instruments, traded bonds, ETFs and mutual funds that have quoted price.;

• Level 2: The fair value of financial instruments that are not traded in an active market is determined using valuation techniques which maximize the use of observable market data and rely as little as possible on entity-specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in level 2; and

• Level 3: If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3

The carrying value of all the financials assets and financial liabilities are a reasonable approximation of their fair values. Accordingly, the fair values of such financial assets and liabilities have not been disclosed separately.

36.1. Credit Risk

Credit risk is the risk that counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Company is exposed to credit risk primarily from trade receivables, cash and cash equivalents, and financial assets measured at amortised cost.

A. Trade Receivables:

Trade receivables of the Company are generally unsecured. The Company performs ongoing credit evaluations of its customers'' financial conditions and monitors the creditworthiness of its customers to which it grants credit terms in the normal course of business through internal evaluation. The allowance for impairment of trade receivables is created to the extent and as and when required, based upon the expected collectability of accounts receivables. The Company has no concentration of credit risk as the customer base is geographically distributed in India.

B. Cash and cash equivalents and bank deposits

Credit risk related to cash and cash equivalents and bank deposits is managed by only accepting highly rated banks and diversifying bank deposits and accounts in different banks across the country.

C. Other financial assets measured at amortised cost

Other financial assets measured at amortised cost includes loans and advances, security deposits and others. Credit risk related to these other financial assets is managed by monitoring the recoverability of such amounts continuously and is based on the credit worthiness of those parties.

Provision for expected credit losses

a) Expected credit losses for financial assets other than trade receivables

The Company does not have any expected loss based impairment recognised on such assets considering their low credit risk nature.

b) Expected credit loss for trade receivables under simplified approach

The Company recognizes lifetime expected credit losses on trade receivables using a simplified approach, wherein Company has defined percentage of provision by analyzing historical trend of default and such provision percentage determined have been considered to recognize life time expected credit losses on trade receivables (other than those where default criteria are met in which case the full expected loss against the amount recoverable is provided for). Based on such simplified approach,no allowance has been recognised

36.2. Liquidity Risk:

Liquidity risk is the risk that the Company will not be able to meet its financial obligation as they fall due. Liquidity risk arises because of the possibility that the Company could be required to pay its liabilities earlier than expected. Liquidity risk is managed by monitoring on a regular basis that sufficient funds are available to meet any future commitments. The Company manages its liquidity risk by maintaining sufficient working capital.

36.3. Market Risk

Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises three types of risk: interest rate risk, currency risk and other price risk, such as equity price risk and commodity risk. The Company is not exposed to other price risk whereas the exposure to currency risk is given as under:

a) Foreign Currency Risk

Foreign currency risk is the risk that the value of financial instruments will fluctuate due to changes in foreign exchange rates. It arises mainly where receivables and payables exist due to transactions entered in foreign currencies.

b) Foreign currency risk management

The Company undertakes transactions denominated in foreign currencies; consequently, exposures to exchange rate fluctuations arise. Exchange rate exposures are managed within approved policy parameters. Relevant reports are submitted to Board of Directors on the

unhedged foreign currency exposures. The carrying amounts of the Company''s foreign currency denominated monetary assets and monetary liabilities at the end of the reporting period are as follows:

37. GRATUITY AND OTHER POST-EMPLOYMENT BENEFIT PLANS:

The Company operates a gratuity plan covering qualifying employees. Under the gratuity plan, the eligible employees are entitled to post retirement benefit at the rate of 15 days salary for each year of service until the retirement age of 58, subject to a payment ceiling of Rs. 20 lakhs. The benefit vests upon completion of five years of continuous service as per "The Payment of Gratuity Act" and once vested it is payable to the employee on retirement or on termination of employment. The Company makes annual contribution to the group gratuity scheme administered by the Life Insurance Corporation of India through its Gratuity Trust Fund.

Gratuity is defined benefit plan and Company is exposed to following Risks:

Interest Rate Risk:

A fall in the discount rate which is linked to the Government Securities Rate will increase the present value of the liability requiring higher provision. A fall in the discount rate generally increases the mark to market value of the assets depending on the duration of asset.

Salary Risk:

The present value of the defined benefit plan liability is calculated by reference to the future salaries of members. As such, an increase in the salary of the members more than assumed level will increase the plan''s liability.

Investment Risk:

The present value of the defined benefit plan liability is calculated using a discount rate which is determined by reference to market yields at the end of the reporting period on government bonds. If the return on plan asset is below this rate, it will create a plan deficit. Currently, for the plan in India, it has a relatively balanced mix of investments in government securities, and other debt instruments.

Mortality Risk:

Since the benefits under the plan is not payable for the life time and payable till retirement age only, plan does not have any longevity risk.

The Valuation of the Gratuity has been made on the following assumptions:

39.a. The Company has complied with the number of layers prescribed under the Companies Act, 2013.

39.b. Utilisation of Borrowed funds: The company has not advanced or loaned or invested funds (either borrowed funds or share premium or any other sources or kind of funds) to any other person(s) or entity(ies), including foreign entities (Intermediaries) with the understanding (whether recorded in writing or otherwise) that the Intermediary shall (i) directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the company (Ultimate Beneficiaries) or (ii) provide any guarantee, security or the like to or on behalf of the Ultimate Beneficiaries.

39.c. Details of Benami Property held - No proceeding has been initiated or pending against the company for holding any benami property under the Benami Transactions (Prohibition) Act, 1988 (45 of 1988) and the rules made thereunder.

39.d. Wilful Defaulter - The company is not declared wilful defaulter by any bank or financial Institution or other lender during the year.

39.e. Registration of charges or satisfaction with Registrar of Companies - During the year, the company has complied with the requirements for registration of charges on the assets of the Company with the Registrar of Companies.

39.g. There is no income surrendered or disclosed as income during the current or previous year in the tax assessments under the Income Tax Act, 1961, that has not been recorded in the books of account.

39.h. The Company does not have any transactions with struck-off companies.

39.i. The Company has not traded or invested in crypto currency or virtual currency during the current or previous year.

39.j. The previous year''s figures have been regrouped wherever necessary to make it comparable with the current year.

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Mar 31, 2018

1. DISCLOSURES RELATING TO SHARE CAPITAL

Reference: Note 1 of the Standalone Financial Statements in relation to “Share Capital”

i) Rights, Preferences and Restrictions attached to Equity Shares

The Company has only one class of shares referred to as equity shares having a par value of Rs. 10 per share. Each holder of equity shares is entitled to one vote per share however no shareholder who has not paid call money on his/her shares shall be entitled to vote either personally or by proxy in respect of any of such partly paid shares.

2. TERMS OF BORROWINGS AND NATURE OF SECURITIES

Reference: Note 3 and Note 6 of the Standalone Financial Statements in relation to “Long Term Borrowings” and “Short Term Borrowings” respectively

Vehicle Loans are secured by hypothecation of vehicles in favor of the Bank. Similarly, machinery term loans are secured by hypothecation of machinery in favor of the Bank.

Cash Credit, Term Loan, Preshipment, Post Shipment, FLC, PSL, PCFC and BG are secured by hypothecation of all types of stocks and other material at factory/godown or at other places as approved by the bank from time to time including goods in transit and receivables, i.e. stock and book debts; hypothecation of plant and machinery and FDR margin.

All the Loans and Advances from the bank, including Working Capital limits and other credit facilities from the Bank are collaterally secured by equitable mortgage of the following properties:

i) Industrial Property bearing killa no. 152/5 (6-17), 152 (8-0), Khewat Khatoni No. 368/435, 581/761, Rakba 14K, 17M situated at Nag Kalan Amritsar, owned by Mr. Ramesh Arora and Mr. Ajay Arora, directors of the Company.

ii) Industrial Property at Noorpur, Himachal Pradesh on long term lease from government of Himachal Pradesh.

3. RECLASSIFICATION OF LIABILITES INTO CURRENT AND NON-CURRENT

Reference: Note 3, Note 8 and Note 25 of the Standalone Financial Statements in relation to “Long Term Borrowings”, “Other Current Liabilities” and “Finance Costs” respectively

Repayment of long term borrowings that are due within a year have been reclassified as current maturities of the long term borrowings, depicted under the head Other Current Liabilities in order to facilitate fair comparison between previous year and current year figures. Interest accrued but not due on long term borrowings has been shown in Finance Costs and depicted under the head “Other Current Liabilities” in the Balance Sheet.

4. TAXES ON INCOME AND TIMING DIFFERENCES

Reference: Note 4 of the Standalone Financial Statements in relation to “Deferred Tax Liabilities”

The timing difference mainly relates to difference in depreciation rates & methods as per Companies Act, 2013 and Income Tax Act, 1961, resulting in deferred tax asset as per Accounting Standard 22 on “Accounting for Taxes on Income” for the year 2015-16.

In accordance with the Accounting Standard 22 “Accounting for Taxes on Income issued by the ICAI, the company has accounted for deferred taxes during the year.

5. ACCOUNTING STANDARD (AS-15) ON EMPLOYEE BENEFITS

Reference Note 24 of the Standalone Financial Statements in relation to ““Employee Benefit Expenses”

6. TRADE PAYABLES AND MICRO AND SMALL ENTERPRISES’ DUES

Reference: Note 7 of the Standalone Financial Statements in relation to “Trade Payables”

Micro and Small Enterprises has been determined to the extent such parties have been identified on the basis of information available with the company. There are no cases of dues to micro and small enterprises as defined under the Micro, Small and Medium Enterprises Development, 2006. Outstanding Trade Payables as on March 31^st, 2018 are Rs. 2188.97 Lakhs and March 31^st, 2017 are Rs. 1274.37 Lakhs.

7. SHORT-TERM PROVISIONS

Reference: Note 9 of the Standalone Financial Statements in relation to “Short-term Provisions”

As per the best estimates and projections of the management, provision for income tax amounting to Rs. 260.00 Lakhs (Previous Year Rs. 230.00 Lakhs) has been made as per Accounting Standard 29 on “Provisions, Contingent Liabilities and Contingent Assets.”

8. INVESTMENT IN FOREIGN SUBSIDIARY

Reference: Note 11 and Note 21 of the Standalone Financial Statements in relation to “Non-Current Investments” and “Other income”

The Company has a foreign subsidiary in which the company holds 51% of share capital. The subsidiary Company named Kwality Pharmaceuticals Africa Limitada incorporated on 20.9.2013 under the laws of Africa have identification number as 100428873. The registered office of the Company is located at Mozambique, Maputo Cidade, Distrito Urbano 1, Bairro de Central, Africa. The company has invested in the share capital and granted loans to the foreign subsidiary. The subsidiary is incorporated with the intention of import export and marketing of pharmaceutical products of the company.

During the year, pharmaceutical products amounting to Rs. 215.31 Lakhs have been exported by the company to its foreign subsidiary in Mozambique. Further, interest on loan given to the subsidiary amounting to Rs. 36.99 Lakhs has been accrued and depicted under the head Other Income in the Statement of Profit & Loss.

9. TANGIBLE ASSETS AND DEPRECIATION

Reference: Note 10 of the Standalone Financial Statements in relation to “Tangible Assets”, and “Depreciation and Amortization Expenses”

Depreciation on fixed assets is calculated on written down value basis using the rates arrived at based on the useful life of the assets prescribed under Schedule II of the Companies Act, 2013 for the year ended on March 31, 2018.

10. SHARE ISSUE EXPENSES

Reference: Note 13 and Note 19 of the Standalone Financial Statements in relation to “Other NonCurrent Assets” and “Other Current Assets”

The Company has incurred share issue expenses amounting to Rs. 17.30 Lakhs during the year ended 31.03.2017 for the purpose of bringing an Initial Public Offer in the stock market. Expenses incurred during the year in connection with issue of shares is accumulated and amortized over a period of five years from the year of issue of shares. Share issue expenses amortized in the current year have been depicted under the head “Other Expenses” and balance amount has been shown under the head “Non-Current Assets and other current assets”.

11. TRADE RECEIVABLES

Reference: Note 16 of the Standalone Financial Statements in relation to “Trade Receivables”

Outstanding Trade Receivables as on March 31^st, 2018 i.e. Rs. 3716.04 Lakhs and March 31^st, 2017 i.e. Rs. 2270.09 Lakhs do include Trade Receivables in foreign currency to such extent as depicted as under:

As at the year end, the out of the aforementioned trade receivables 700000 Dollars have been hedged by forward contract or otherwise. The closing rate of exchange has been taken for the conversion purposes for both the years.

12. COST OF MATERIALS CONSUMED

Reference: Note 22 of the Standalone Financial Statements in relation to “Cost of Materials Consumed”

The following is the information in relation to cost of materials consumed and percentage of consumption:

13. EXCHANGE GAIN/(LOSS)

Reference: Note 21 of the Standalone Financial Statements in relation to “Other Income”

The net exchange gain/(loss) included under Revenue from Operations, Other income, Cost of Materials consumed and other expenses in the Statement of Profit and Loss Account aggregates to Rs. 4,48,805.18/- [Previous Year Rs. (1,91,280.31/-)].

Future cash outflows in respect of the above matters are determinable only on receipt of judgements/decisions pending at various forums/authorities. The Company does not expect the outcome of the matters stated above to have material adverse impact on the Company’s financial condition, results of operation or cash flows.

* ACIT Circle IV - Amritsar vide an order U/s 143(3) of the Income Tax Act 1961 dated 28-09-2016 made certain additions and computed the total income of the Assessee company at Rs 4,04,00,070/- against the total income declared by the company at Rs 88,99,070/- for the Assessment year 2012-2013. The assessee company went in appeal against this order of the assessing officer with CIT (Appeals) Amritsar. CIT( Appeals) vide its order u/s 250(6) dated 26/10/2016 partly deleted additions amounting to Rs.2,00,00,000/- and confirmed the part additions amounting to Rs 1,15,01,000/-. The assessee Company has filed further appeal to Income Tax Appellate Tribunal on 25/11/2016 vide ITA 587/Asr/2016 for deleting the additions confirmed by the CIT(Appeals). Similarly the Income Tax Department has also filed a parallel appeal against CIT (Appeals) order deleting the additions of Rs 2,00,00,000/- on 05/12/2016 vide ITA 623/Asr/2016. The order of the ITAT is pending till date and as per the information received the final hearings for both the appeals are on 18.09.2018.

The total additional tax demand of Rs 1,33,53,680/- created vide order of assessing officer stands reduced proportionately by deletion of additions amounting to Rs 2,00,00,000/- against total additions of Rs 3,15,01,000/-. The assessee company though filed appeal against that CIT (Appeals) order, as stated above, but however has already deposited in protest demand proportionately to the total assessment made.

- Pending Litigations

The Company has certain pending litigations against it with respect to marketing and quality of its products. The litigations are pending in various forums. As per management representation, the financial impact of these litigations cannot be ascertained.

According to the AS-20 In case of a bonus issue, equity shares are issued to existing shareholders for no additional consideration. Therefore, the number of equity shares outstanding is increased without an increase in resources. The number of equity shares outstanding before the event is adjusted for the proportionate change in the number of equity shares outstanding as if the event had occurred at the beginning of the earliest period reported. Since the bonus shares in the case of the company are issued in financial year ending 31.03.2018, the number of shares outstanding before the event of issue i.e. during financial year ending 31.03.2017 is adjusted to determine the comparable adjusted EPS.

14. SEGMENT REPORTING

The Company is mainly engaged in manufacturing and trading of pharma products and no other business is carried on by the company, all the business activity located in India, hence there is no separate reportable segment in accordance with ‘Accounting Standard 17- Segment Reporting’.

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Mar 31, 2016

1. DISCLOSURES RELATING TO SHARE CAPITAL

Reference: Note 1 of the Standalone Financial Statements in relation to "Share Capital"

i) Rights, Preferences and Restrictions attached to Equity Shares

The Company has only one class of shares referred to as equity shares having a par value of Rs.10 per share, Each holder of equity shares is entitled to one vote per share however no shareholder who has not paid call money on his/her shares shall be entitled to vote either personally or by proxy in respect of any of such partly paid shares.

iv) During the year ended 31^st March, 2016, the Company has received unpaid call of Rs.5 per share on 12,00,000 equity shares amounting to Rs.60 Lakhs. The share premium at the rate of Rs.12 per share was received on the aforementioned shares, amounting to Rs.144.00 Lakhs.

2. PRIOR PERIOD ITEMS AND THEIR IMPACT ON RESERVES AND SURPLUS

Reference: Note 2 of the Standalone Financial Statements in relation to "Reserves and Surplus"

Previous year financial statements have been restated to comply in all material respects with the provisions of Part I of Chapter III of the Companies Act, 2013 read with Companies (Prospectus and Allotment of Securities) Rules, 2014, Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009 ("the SEBI Guidelines") issued by SEBI and Guidance note on Reports in Companies Prospectus (Revised). In order to give the impact of the aforementioned restatements in the current year standalone financial statements, net effect of changes in fixed assets, deferred tax and provision for gratuity due to restatement has been given in the Reserves and Surplus Account, thereby reducing the balance of Reserves and Surplus Account by 105.56 Lakhs in the current period financial statements.

3. TERMS OF BORROWINGS AND NATURE OF SECURITIES

Reference: Note 3 and Note 6 of the Standalone Financial Statements in relation to "Lone Term Borrowings" and "Short Term Borrowings" respectively

Vehicle Loans are secured by hypothecation of vehicles in favor of the Bank. Similarly, machinery term loans are secured by hypothecation of machinery in favor of the Bank.

Cash Credit, Term Loan, Pre-shipment, Post Shipment, FLC, PSL, PCFC and BG are secured by hypothecation of al! types of stocks and other material at factory/go down or at other places as approved by the bank from time to time including goods in transit and receivables, i.e. stock and book debts; hypothecation of plant and machinery and FDR margin.

All the Loans and Advances from the bank, including Working Capital limits and other credit facilities from the Bank are collaterally secured by equitable mortgage of the following properties:

i) Industrial Property bearing killa no. 152/5 (6-17), 152 (8-0), Khewat Khatoni No. 368/435, 581/761, Rakba 14K, 17M situated at Nag Kalan Amritsar, owned by Mr. Ramesh Arora and Mr. Ajay Arora, directors of the Company.

ii) Industrial Property at Noorpur, Himachal Pradesh, owned by the Company in its name.

4. RECLASSIFICATION OF LIABILITES INTO CURRENT AND NON-CURRENT

Reference: Note 3. Note 8 and Note 25 of the Standalone Financial Statements in relation to "Long Term Borrowings", "Other Current Liabilities" and "Finance Costs" respectively

Repayment of long term borrowings that are due within a year have been reclassified as current maturities of the long term borrowings, depicted under the head Other Current Liabilities in order to facilitate fair comparison between previous year and current year figures. Interest accrued but not due on long term borrowings has been shown in Finance Costs and depicted under the head "Other Current Liabilities" in the Balance Sheet.

5. TAXES ON INCOME AND TIMING DIFFERENCES

Reference: Note 4 of the Standalone Financial Statements in relation to "Deferred Tax Liabilities"

The timing difference mainly relates to difference in depreciation rates & methods as per Companies Act, 2013 and Income Tax Act, 1961, as well as provision for gratuity, not allowable as deduction under the Income Tax Act, 1961 resulting in deferred tax asset as per Accounting Standard 22 on "Accounting for Taxes on Income" for the year 2015-16.

In accordance with the Accounting Standard 22 "Accounting for Taxes on Income issued by the ICAI, the company has accounted for deferred taxes during the year.

Balance of Deferred Tax Liability as on March 31^st, 2015 as per the audited financial statements for the financial year 2014-2015 was Rs. 3,53 Lakhs, which was restated to Rs, 51.98 Lakhs on account of difference between restated WDV of fixed assets as on March 31^st, 2015 and audited WDV balance of fixed assets. Appropriate treatment has been given in order to incorporate the aforementioned prior period items in the Financial Statements for the year ended March 31^st, 2016 through Reserves and Surplus head in the Balance Sheet for the year ended March 31^st, 2016.

6.ACCOUNTING STANDARD (AS-1S) ON EMPLOYEE BENEFITS

Reference: Note 5 and Note 24 of the Standalone Financial Statements in relation to "Lone Term Provisions" and "Employee Benefit Expenses"

Provision for gratuity for the year ended March 31^st, 2016 has been prepared on the basis of actuarial valuation report for calculation of gratuity for the period ending December 31^st, 2015. Financial Statements for the year ended March 31^st, 2016 have also been restated in order to incorporate prior period provision for gratuity for earlier years and appropriate accounting treatment for the same has been done under the Reserves and Surplus head in the Balance Sheet.

7. TRADE PAYABLES AND MICRO AND SMALL ENTERPRISES'' DUES

Reference: Note 7 of the Standalone Financial Statements in relation to "Trade Payables"

Micro and Small Enterprises has been determined to the extent such parties have been identified on the basis of information available with the company. There are no cases of dues to micro and small enterprises as defined under the Micro, Small and Medium Enterprises Development, 2006. Outstanding Trade Payables as on March 31^st, 2016 are Rs.966.68 Lakhs and March 31^st, 2015 are Rs.418,56 Lakhs.

8. SHORT-TERM PROVISIONS

Reference: Note 9 of the Standalone Financial Statements in relation to "Short-term Provisions”

As per the best estimates and projections of the management, provision for income tax amounting to Rs. 125.00 Lakhs (Previous Year Rs. 58.00 Lakhs) has been made as per Accounting Standard 29 on "Provisions, Contingent Liabilities and Contingent Assets." Another short-term provision for gratuity amounting to Rs. 2.68 Lakhs (Previous Year Rs. Nil) has also been made during the year in respect of the present obligation as a result of past event that could lead to probable outflow of resources, which would be required to settle the obligation. However, the advance tax and TDS as per books of accounts aggregates to Rs. 110.48 Lakhs.

9. INVESTMENT IN FOREIGN SUBSIDIARY

Reference: Note 11 and Note 21 of the Standalone Financial Statements in relation to "NonCurrent Investments"

The Company has a foreign subsidiary in which the company holds 51% of share capital. The subsidiary Company named Kwality Pharmaceuticals Africa Limitada incorporated on 20.9.2013 under the laws of Africa have identification number as 100428873. The registered office of the Company is located at Mozambique, Maputo Cidade, Distrito Urbano 1, Bairro de Central, Africa. The company has invested in the share capital and granted loans to the foreign subsidiary. The subsidiary is incorporated with the intention of import export and marketing of pharmaceutical products of the company.

During the year, pharmaceutical products amounting to Rs.176.00 Lakhs have been exported by the company to its foreign subsidiary in Mozambique. Further, interest on loan given to the subsidiary amounting to Rs.19.81 Lakhs has been accrued and depicted under the head Other Income in the Statement of Profit & Loss.

10. TANGIBLE ASSETS AND DEPRECIATION

Reference: Note 10 and Note 26 of the Standalone Financial Statements in relation to "Tangible Assets”, "Depreciation and Amortization Expenses” as well as "Other Expenses”respectively

Depreciation on fixed assets is calculated on written down value basis using the rates arrived at based on the useful life of the assets prescribed under Schedule II of the Companies Act, 2013 for the year ended on March 31, 2016. Tangible Assets for the year ended 31^il March 2016 have been restated downward to the extent of 42.44 Lakhs in order to comply with the relevant provisions of Companies Act and SEBI (ICDR) Regulations. Relevant adjustment has also been made under the heads "Reserves and Surplus" and "Deferred Tax Liabilities" in the Balance Sheet.

Certain Laboratory Equipments, Plant & Machinery and Vehicles were sold by the Company during the year, after incurring net loss on sale of fixed assets amounting to Rs.36.36 Lakhs, being depicted under the head "Other Expenses" in Statement of Profit & Loss.

11. RECLASSIFICATION OF ASSETS INTO CURRENT AND NON-CURRENT

Reference: Note 11. Note 12, Note 14 and Note 18 of the Standalone Financial Statements in relation to "Non-Current Investments". "Long Term Loans and Advances". ''''Current Investments" and "Short Term Loans and Advances" respectively

CDRs amounting to Rs. 7.20 Lakhs, depicted under the head Non-Current Investments in the preceding year have been regrouped under the head Current Investments during the current year standalone financial statements in order to facilitate fair comparison between previous year and current year figures. Security Deposits have also been reclassified into current and non-current assets based upon current & non-current classification as required by Schedule III of the Companies Act, 2013

12. SHARE ISSUE EXPENSES

Reference: Note 13 and Note 19 of the Standalone Financial Statements in relation to "Other Non-Current Assets" and "Other Current Assets"

The Company has incurred share issue expenses amounting to Rs.17.30 Lakhs during the year for the purpose of bringing an Initial Public Offer in the stock market. Expenses incurred during the year in connection with issue of shares is accumulated and amortized over a period of five years from the year of issue of shares. As the shares have been issued during the year 2016-17, the same has not been expensed for during the current financial year. Share issue expenses to be amortized in the next year have been depicted under the head "Other Current Assets" and balance amount has been shown under the head "Non-Current Assets"

13.TRADE RECEIVABLES

Reference: Note 16 of the Standalone Financial Statements in relation to "Trade Receivables"

As at the year end, the aforementioned trade receivables have not been hedged by a derivative instrument or otherwise. The closing rate of exchange has been taken for the conversion purposes for both the years,

14 .CQST OF MATERIALS CONSUMED

Reference: Note 22 of the Standalone Financial Statements in relation to "Cost of Materials Consumed"

The following is the information in relation to cost of materials consumed and percentage of consumption:

15. EXCHANGE GAIN/(LOSS)

Reference: Note 26 of the Standalone Financial Statements in relation to "Other Expenses"

The net exchange gain/{loss) included under Revenue from Operations, Other income, Cost of Materials consumed and other expenses in the Statement of Profit and Loss Account aggregates to Rs.89,693.66/- [Previous Year (Rs. 3,08,181.46/-)].

16. CONTINGENT LIABILITIES AND PENDING LITIGATIONS

Future cash outflows in respect of the above matters are determinable only on receipt of judgments/decisions pending at various forums/authorities. The Company does not expect the outcome of the matters stated above to have material adverse impact on the Company''s financial condition, results of operation or cash flows. The Company doesn''t envisage any likely reimbursement in respect of the above.

- Pending Litigations

The Company has certain pending litigations against it with respect to marketing and quality of its products. The litigations are pending in various forums. As per management representation, the financial impact of these litigations cannot be ascertained.