Your Directors are pleased to present this Fifth Annual Report of Aarti Pharmalabs Limited ("the Company" or "APL') together with the Audited Financial Statements for the financial year ended March 31, 2024 ("year under review" or "FY 2023-24").

1. FINANCIAL HIGHLIGHTS

(? In lakhs except EPS and Book Value)

2. COMPANY'S PERFORMANCE

On a standalone basis, the revenue for FY 2023-24 was ? 1,51,314 lakhs, higher by 0.04 % over the previous year's revenue of ? 1,51,253 lakhs in FY 2022-23. The Profit after Tax ("PAT") attributable to shareholders in FY 2023-24 was ? 20,065 lakhs registering a growth of 16.84 % over the PAT of ? 17,173 crores in FY 2022-23.

On a consolidated basis, the revenue for FY 2023-24 was ? 1,85,750 lakhs, lower by 4.62 % over the previous year's revenue of ? 1,94,755 lakhs. The PAT attributable to shareholders and non-controlling interests for FY 2023-24 and FY 2022-23 was '21,690 lakhs and ? 19,349 lakhs, respectively. The PAT attributable to shareholders for FY 2023-24 was ? 21,690 lakhs registering a growth of 12.10 % over the PAT of ? 19,349 lakhs in FY 2022-23.

3. CONSOLIDATED FINANCIAL STATEMENTS

Your Directors are pleased to attach the Consolidated

Financial Statements pursuant to Section 129(3) of the Companies Act, 2013 ("Act") and Regulation 34 of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 ("Listing Regulations"), prepared in accordance with the provisions of the Act and the Indian Accounting Standards ("Ind AS").

4. STATE OF COMPANY'S AFFAIRS

The state of your Company's affairs is given in the Management Discussion and Analysis, which forms part of this Annual Report.

5. RESERVES

The Board of Directors ("Board") of your Company has decided not to transfer any amount to the Reserves for the year under review.

6. DIVIDEND

During the year under review, your Board has declared an Interim Dividend of ? 2/- (@ 40%) each per share

aggregating to ' 1,812.52 lakhs. Further, a Final Dividend of ' 1/- (20%) per equity share was recommended by your Board, subject to approval of the Shareholders at the ensuing Annual General Meeting ("AGM"), aggregating to a total Dividend of ' 3/- (@ 60%) per share (of ' 5 each) for FY 2023-24, resulting in a total payout ' 2,718.78 lakhs (Previous Year: ' 1,812.52 lakhs).

The Dividend payout is in accordance with the Dividend Distribution Policy, which is available on the website of the Company. As per Regulation 43A of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 ("Listing Regulations"), the top 1,000 listed companies shall formulate a Dividend Distribution Policy. Accordingly, the Policy was adopted to set out the parameters and circumstances that will be taken into account by the Board in determining the distribution of dividend to its shareholders and/or retaining profits earned by the Company. The Policy is available on the website of the Company at https://www.aartipharmalabs. com/investors/dividend-distribution-policy-feb-2023.pdf

7. SHARE CAPITAL

Your Company's Equity Share Capital as on March 31, 2024 was as follows:

During the year under review, there was no change in the authorized and paid up share capital of the Company.

The Company has not defaulted on payment of any dues to the financial lenders.

During FY 2023-24, the Company's outlay towards capital expenditure was ' 18,913.79 lakhs for the standalone Company and ' 19,878.52 lakhs at the consolidated level.

8. SUBSIDIARY COMPANIES

As on March 31, 2024, the Company has two (2) direct subsidiaries, namely, Aarti Pharmachem Limited and Aarti USA Inc.

During the year, the Board of Directors reviewed the affairs of the subsidiaries. The consolidated financial statements of the Company and all its subsidiaries, which

form part of the Annual Report, have been prepared in accordance with Section 129(3) of the Act.

Aarti USA Inc. has generated during the previous financial year more than 10% of the consolidated income of the Company. Accordingly, the said Company is a material subsidiary of the Company. Except Aarti USA Inc., the Company does not have any material subsidiary whose net worth exceeds 10% of the consolidated net worth of the Company in the immediately preceding accounting year or has generated 10% of the consolidated income of the Company during the previous Financial Year. A Policy on Determination of Material Subsidiary had been formulated and is available on the website of the Company at https://www.aartipharmalabs.com/ investors/policy-on-determination-of-material-subsidiary-feb-2023.pdf

Further a statement containing salient features of the financial statement of our Subsidiaries/Jointly controlled entity in the prescribed Form AOC-1 is annexed as Annexure-A and forms an integral part of this Report.

9. CORPORATE SOCIAL RESPONSIBILITY

The Company has constituted a Corporate Social Responsibility ("CSR") Committee in terms of the requirements of Section 135 of the Act read with the rules made thereunder. The composition, detailed terms of reference of the CSR Committee, attendance at its meetings and other details have been provided in the Corporate Governance Report. The primary role of this Committee is to approve the CSR activities to be undertaken, allocate the necessary expenditure and oversee the execution and effectiveness of these initiatives.

During the year under review, our CSR initiatives were executed in accordance with the annual action plan previously approved by the Board. These activities, which are distinctly separate from our normal business operations, focus on pivotal and relevant areas such as livelihood and financial inclusion, animal welfare, agriculture, community development, education, and healthcare. Our aim is to continue focusing on these areas to achieve meaningful and positive outcomes that contribute to the Sustainable Development Goals.

The detailed Policy on CSR is available on the website of the Company at https://www.aartipharmalabs.com/ investors/csr-policy-feb-2023.pdf.

The CSR Annual Report which contains a brief note on various CSR initiatives undertaken during the year is annexed as Annexure-B and forms an integral part of this Report.

10. PARTICULARS OF LOANS, GUARANTEES AND INVESTMENTS

The particulars of loans given, investments made, guarantees given and securities provided during the year under review and as covered under the provisions of Section 186 of the Act have been disclosed in the Notes to the Standalone Financial Statements forming part of this Report.

11. MANAGEMENT DISCUSSION AND ANALYSIS

Pursuant to Regulation 34 read with Schedule V to the Listing Regulations, Management Discussion and Analysis for the year under review is presented in a separate section forming part of this Report.

12. BOARD OF DIRECTORS & KEY MANAGERIAL PERSONNEL

I. Board of Directors

Your Company actively seeks to adopt global best practices for an effective functioning of the Board and believes in having a truly diverse Board whose wisdom and strength can be leveraged for creating greater stakeholder value, protection of their interests and better corporate governance. The Company's Board comprises eminent persons with proven competence and integrity, who bring in vast experience and expertise, strategic guidance and leadership qualities. The Board fulfills its fiduciary responsibilities with a steadfast commitment to safeguarding the interests of the Company and its stakeholders.

The Board of the Company is carefully structured to achieve an optimal balance, consisting of Executive and Non-Executive Directors, including two (2) Women Independent Directors. This composition adheres strictly to the current provisions of the Act and the Listing Regulations ensuring compliance with governance standards. The details of the Board of Directors and Committees along with their composition, number of meetings held and attendance at the meetings during FY 2023-24 are provided in the Corporate Governance Report which forms part of this Report.

Additionally, all Directors of the Company have confirmed that they are not disqualified from being appointed as Directors, in accordance with Section 164 of the Act.

I n accordance with the regulatory requirements, Shri Rashesh C. Gogri (DIN: 00066291), NonExecutive Director of the Company retires by rotation in the ensuing Annual General Meeting and,

being eligible, offers himself for re-appointment. The Board recommends his re-appointment for the consideration of the Shareholders.

Your Company's Board at its meeting held on May 13, 2024, based on the recommendation of the Nomination and Remuneration Committee, approved the appointment of the following Directors;

1. Shri Pradeep Thakur (DIN: 00685992) as an Additional Director in the category of NonExecutive Independent Director; and

2. Smt. Nehal Garewal (DIN: 01750146) as an Additional Director in the category of NonExecutive Director.

The said appointments are subject to the approval of the Shareholders at the ensuing AGM.

Pursuant to Regulation 36 of the Listing Regulations read with Secretarial Standard-2 on General Meetings, a brief profile of the Directors proposed to be appointed/ re-appointed is made available, as a part of the Notice convening this AGM.

Pursuant to the provisions of Regulation 34(3) read with Schedule V to the Listing Regulations, the Company has obtained a Certificate from CS Sunil M. Dedhia (COP No. 2031), of Sunil M. Dedhia & Co. Company Secretary in Practice and the Secretarial Auditor of the Company, certifying that none of the Directors of the Company have been debarred or disqualified from being appointed or continuing as Directors of companies by the Securities and Exchange Board of India ("SEBI") or by the Ministry of Corporate Affairs or by any such statutory authority. The said Certificate is annexed to the Corporate Governance Report of the Company for the FY 2023-24.

Commission to Non-Execurtive Directors:

Your Directors at their meeting held on May 13, 2024, on the recommendation of the Nomination and Remuneration Committee, approved the proposal for payment of commission to Non-Executive Directors as a percentage of profit, subject to the approval of the shareholders at the ensuing AGM of the Company.

II. Key Managerial Personnel

As on the date of this Report, the Key Managerial Personnel of the Company, in accordance with the

provisions of Section 2(51) and Section 203 of the Act include;

1. Managing Director;

a. Smt. Hetal Gogri Gala (also designated as the Vice Chairperson)

b. Shri Narendra J. Salvi

2. Shri Nikhil P Natu, Company Secretary;

3. Shri Piyush P Lakhani, Chief Financial Officer.

During the year under review, there was no change in the Key Managerial Personnel of the Company.

13. INDEPENDENT DIRECTORS

The Company has received requisite declarations from all the Independent Directors of the Company confirming that they meet the criteria of independence prescribed under Section 149(6) of the Act read with Rule 5 of the Companies (Appointment and Qualification of Directors) Rules, 2014 and Regulation 16(1 )(b) of the Listing Regulations. The Independent Directors have also confirmed that they are not aware of any circumstance or situation that exists or may be reasonably anticipated that could impair or impact their ability to discharge their duties with an objective independent judgment and without any external influence. These declarations include confirmations that they are not barred from holding the office of Director by any SEBI order or any other authoritative body. In the opinion of the Board, all the Independent Directors satisfy the criteria of independence as defined under the Act, rules framed thereunder and the Listing Regulations, and that they are independent of the Management of the Company. Furthermore, they have affirmed their adherence to the Code of Conduct outlined in Schedule IV of the Act.

I n the opinion of the Board, all Independent Directors possess requisite qualifications, experience, expertise, proficiency and hold high standards of integrity for the purpose of Rule 8(5)(iiia) of the Companies (Accounts) Rules, 2014. In terms of the requirements under the Listing Regulations, the Board has identified a list of key skills, expertise and core competencies of the Board, including the Independent Directors, details of which are provided as part of the Corporate Governance Report.

As required under Rule 6 of the Companies (Appointment and Qualification of Directors) Rules, 2014, all the Independent Directors (including those appointed during the year) have registered themselves with the Independent Directors Databank and also completed the online proficiency test conducted by the Indian Institute of Corporate Affairs.

Familiarisation Programme for Independent Directors

All the Independent Directors of the Company are made aware of their roles and responsibilities through a formal letter of appointment, which also stipulates various terms and conditions of their engagement. Pursuant to Regulation 25(7) of the Listing Regulations, the Independent Directors of the Company were familiarised and the details of familiarization programmes imparted to them during the year, are placed on the website of the Company at https://www.aartipharmalabs.com/ investors/familiarization-programme-fy-2023-24.pdf

14. DIRECTORS' RESPONSIBILITY STATEMENT

Pursuant to Section 134(3)(c) of the Act, the Directors of your Company, to the best of their knowledge and based on the information and explanations received from the Company, confirm that:

a) in the preparation of the Annual Financial Statements for the year ended March 31, 2024, the applicable accounting standards have been followed along with proper explanation relating to material departures, if any;

b) the Directors had selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the Financial Year and of the profit and loss of the Company for that period;

c) the Directors had 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;

d) the Directors have prepared the annual accounts on a going concern basis;

e) the Directors had laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively;

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

15. ANNUAL PERFORMANCE EVALUATION

Pursuant to the provisions of the Act and the Listing Regulations, a structured questionnaire was prepared

after taking into consideration various aspects of the Board's functioning, composition of the Board and its Committees, culture, execution and performance of specific duties, obligations and governance.

The performance of the Committees and Independent Directors were evaluated by the entire Board of Directors except for the Director being evaluated. The performance evaluation of the Chairman, Non-Independent Directors and Board as a whole was carried out by the Independent Directors. The Board of Directors expressed their satisfaction with the outcome of evaluation and the process followed thereof.

16. AUDIT COMMITTEE

The details of the composition of the Audit Committee, terms of reference, meetings held, etc. are provided in the Corporate Governance Report, which forms part of this Report. During the year under review, there were no instances where the Board had not accepted any recommendation of the Audit Committee.

17. AUDITORS

a) Statutory Auditor and their Report

I n accordance with the provisions of Section 139 of the Act, Gokhale & Sathe, Chartered Accountants (Firm Registration. No. 103264W) were appointed as the Statutory Auditors of the Company at the 4^th AGM for a term of five (5) years to hold office till the conclusion of 9^th AGM to be held in the year 2028.

The Statutory Auditors' Report forms part of the Annual Report. The said report does not contain any qualification, reservation or adverse remark for the year under review. During FY 2023-24, there were no instances of fraud which required the Statutory Auditors to report the same to the Central Government under Section 143(12) of Act and Rules framed thereunder.

b) Cost Auditor and their records

I n terms of Section 148 of the Act read with the Companies (Cost Records and Audit) Rules, 2014, the Company is required to maintain cost accounting records and have them audited every year.

The Board has appointed Ketki D. Visariya, Cost Accountants, (Membership No. 16028), as the Cost Auditor of the Company for FY 25. The remuneration payable to the Cost Auditor is required to be placed before the Shareholders in the AGM for their approval. Accordingly, a resolution seeking Shareholder's approval for the remuneration payable to Ketki D. Visariya, Cost Accountants, is

included at Item No. 7 of the Notice convening the AGM.

The Company has maintained cost records as specified under section 148(1) of the Act.

c) Secretarial Auditor and their Report

Pursuant to Section 204 of the Act read with the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Board had appointed CS Sunil M. Dedhia (COP No. 2031), Proprietor of Sunil M. Dedhia & Co, Company Secretary in Practice as the Secretarial Auditor of the Company to conduct audit of the secretarial records of the Company.

Pursuant to provisions of Section 204(1) of the Act and Regulation 24A of the Listing Regulations, the Secretarial Audit Report for the Financial Year ended March 31, 2024 issued by CS Sunil M. Dedhia (COP No. 2031), of Sunil M. Dedhia & Co., Company Secretary in Practice and the Secretarial Auditor of the Company in Form MR-3 is annexed as Annexure-C and forms an integral part of this Report. During the year under review, the Secretarial Auditor had not reported any fraud under Section 143(12) of the Act and therefore disclosure of details under Section 134(3)(ca) of the Act is not applicable.

There is no qualification, reservation or adverse remark or disclaimer made by the Auditor in their report.

18. RISK MANAGEMENT

Risk Management is an integral and important aspect of Corporate Governance. Your Company believes that a robust Risk Management Framework ensures adequate controls and monitoring mechanisms for smooth and efficient running of the business. A risk-aware Company is better equipped to maximize shareholder value.

Your Company has always worked to be contemporary in the application of technology for its business processes and its interface, both within and outside the Company. Towards this end, review of business process, applications available and the digitisation of process with adequate controls is an ongoing work in progress. This calls for seamless integration with our consumers, customers and stakeholder operating ecosystems that can lead to a superior experience by improving agility and responsiveness across the business.

Cybersecurity is essential for any organisation to protect its digital assets from cyber-attacks, data breaches, and

other security threats. Technology plays a critical role In cybersecurity and your Company has implemented several measures to enhance its Cybersecurity measures on the principles of identify, Protect, Detect, Respond and Recover.

Your Company has constituted a Risk Management Committee ("RMC"), which assists the Board in monitoring and overseeing implementation of the Risk Management Policy, including evaluating the adequacy of risk management systems and such other functions as mandated under the Listing Regulations and as the Board may deem fit from time to time.

Your Board has adopted a Risk Management Policy, which is available on the Company's website at https:// www.aartipharmalabs.com/investors/APL Risk%20 Management%20Policy.pdf

The details of the composition of the RMC, terms of reference, meetings held, etc. are provided in the Corporate Governance Report, which forms part of this Report.

19. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

Your Company has clearly laid down policies, guidelines and procedures that form part of internal control systems, which provide for automatic checks and balances. Your Company has maintained a proper and adequate system of internal controls. The Company has appointed Manish Modi and Associates, Chartered Accountants as the internal Auditor, who periodically audits the adequacy and effectiveness of the internal controls laid down by the management and suggests improvements. This ensures that all assets are safeguarded and protected against loss from unauthorised use or disposition and that the transactions are authorised, recorded and reported diligently. Your Company's internal control systems are commensurate with the nature and size of its business operations. internal Financial Controls are evaluated and internal Auditors' Reports are regularly reviewed by the Audit Committee of the Board.

The Statutory Auditors Report on internal Financial Controls as required under Clause (i) of sub-section 3 of Section 143 of the Act is annexed with the independent Auditors' Report.

20. RELATED PARTY TRANSACTIONS

The Company has a Policy on Materiality of Related Party Transaction(s) and dealing with Related Party Transaction(s) which is uploaded on the Company's website at https://www.aartipharmalabs.com/

investors/rpt-policy-feb-2023.pdf. The Policy captures framework for Related Party Transactions and intends to ensure due and timely identification, approval, disclosure and reporting of transactions between the Company or its subsidiaries on one side and Related Parties on the other, in compliance with the applicable laws and regulations as may be amended from time to time.

All transactions with related parties and subsequent material modifications, if any, are placed before the Audit Committee for its review and approval. An omnibus approval from the Audit Committee is obtained for the related party transactions which are repetitive in nature, based on the criteria approved by the Audit Committee. A statement of related party transactions is presented before the Audit Committee on a quarterly basis, specifying the nature, value and terms and conditions of transactions. A report of factual findings arising out of the accepted procedures carried out in regard to transactions with Related Parties is given by the Statutory Auditors on quarterly basis and the same is placed before the Audit Committee.

There are no materially significant related party transactions made by the Company with Promoters, Key Managerial Personnel or other Designated Persons which may have potential conflict with interest of the Company at large.

Since all related party transactions entered into by the Company were in ordinary course of business and were on an arm's length's basis, Form AOC-2 is not applicable to Company. Further, there were no material related party transactions in terms of the Listing Regulations requiring approval of the Shareholders during the year under review.

Pursuant to Regulation 23(9) of the Listing Regulations, your Company has filed the reports on related party transactions with the Stock Exchanges within statutory timelines. Besides, the details of related party transactions are provided in the accompanying financial statements.

21. NOMINATION AND REMUNERATION COMMITTEE ("NRC") AND NRC POLICY

Your Company has constituted the Nomination and Remuneration Committee of the Board, which performs the functions as mandated under Section 178 the Act, Regulation 19 of Listing Regulations and such other functions as prescribed by the Board from time to time. The composition of the Committee, attendance at its meetings and other details have been provided as part of the Corporate Governance Report.

Your Company has adopted a Nomination and Remuneration Policy ("Policy") which lays down a

framework in relation to remuneration of Directors, Key Managerial Personnel and Senior Management of the Company as well as the criteria for selection and appointment of Board Members. The said Policy has been posted on the website of the Company at https:// www.aartipharmalabs.com/investors/nomination-and-remuneration-policy-feb-2023.pdf

22. PARTICULARS OF EMPLOYEES AND RELATED DISCLOSURES

The information required under Section 197(12) of the Companies Act, 2013 read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is annexed as Annexure-D and forms an integral part of this Report. As per first proviso to Section 136(1) of the Act and second proviso of Rule 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the report and financial statements are being sent to the members of the Company excluding the statement of particulars of employees under Rule 5(2). However, these are available for inspection during business hours up to the date of the forthcoming AGM at the registered office of the Company. Any Member interested in obtaining a copy of the said statement may write to the Company Secretary at the Registered Office address of the Company.

23. MATERIAL DEVELOPMENTS IN HUMAN RESOURCES/INDUSTRIAL RELATIONS FRONT, INCLUDING NUMBER OF PEOPLE EMPLOYED

At APL, our focus is "Right person for right job at right time", keeping this in mind we recruit people with the relevant experience and academic background and ensure long term engagement brings results in win-win situations for both employees as well as the organisation. We believe our people are assets in the organisation and invest quality time in nurturing their talent, improving productivity consistently and providing growth paths for them. People at APL are proud of their association with the company.

At APL, employee well-being and growth form the core of everything we do and we consistently strive to co-create a culture that helps us in building a world-class experience for our people. We have many cases of promotion within the organisation. Employees have joined as a fresher and grown as leader taking functional responsibilities, over a period of time. We identify potential employees for future leadership and provide them the platform for growth, putting them on fast-track career growth. This has helped strengthening employees bonding thus during the last year employee turnover has come down by ~ 0.37% i.e. from 11.08% in the year 202223 to 10.71% in the year 2023-24. To meet our growth

aspirations, we on-boarded around 368 bright talents during the last year and created various growth avenues for our internal talent.

We believe fairness and equal treatment to all the employees across the organisation. We have well defined performance evaluation and rewarding systems. We consistently foster performance culture. We identify the training needs during the PMS and plan for the necessary training during the year and monitor the same through the annual training calendar. The basic philosophy is organisation grows if the people grow.

We also enter into an agreement with our Union Employees from time to time; to maintain a healthy and peaceful environment. We recognise the right of employees to collective bargain.

Recognition and Reward for Bright Stars - "Employee of the Month"

Employees play a pivotal role in ensuring success of the organisation. Nurturing their talent, innovations, rewarding and recognising their contributions appropriately encourages employees to give their best to the organisation. Every month the Recognition and Reward Committee assesses the deserving employees based upon their contributions / suggestions for bringing effectiveness in the processes with respect to productivity improvement, innovation and self- initiatives etc.

Skills & Capability Building Programme

A skilled employee is an integral part of meeting changing business needs. The best results of employees' endeavour will determine the excellence in Product Quality and Services to the customer. We have invested 16,000 man-hours on Skills and Competencies Building Programme, enabling employees to meet with future challenges. The special Skill development programme is designed for Operative Staff with a focus on the right combination of knowledge and practical execution.

Employee Engagement

An engaged workforce is a productive source for the organization's success. It delivers to the best of its abilities and fosters a greater sense of belongingness and commitment in their jobs. We at APL believe every small step contributes value to employees' Work-Life-Balance. Celebrating employees' special moments (Birthdays / Anniversary / Regional Festivals), extending support to foster intellectual growth through various Learning and Development initiatives help to nurture conviviality and happiness at workplace.

24. ENERGY CONSERVATION, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO

The information on conservation of energy, technology absorption and foreign exchange earnings and outgo stipulated under Section 134(3)(m) of the Act read with Rule 8(3) of the Companies (Accounts) Rules, 2014 is given in Annexure -E and forms an integral part of this Report.

25. AARTI PHARMA PERFORMANCE STOCK OPTION PLAN 2023

Aarti Pharma Performance Stock Option Plan 2023 ("PSOP 2023") was approved by the shareholders at the 4^th AGM of the Company held on September 14, 2023, under which stock options would be granted to the eligible employees in compliance with the provisions of the SEBI (Share Based Employee Benefits and Sweat Equity) Regulations, 2021. Further, the Company had received in-principle approval during FY 2023-24 from the Stock Exchanges for listing of the shares to be issued under the said Scheme.

Pursuant to the PSOP 2023, the Company had granted 31,700 options to eligible employees as per the recommendation of the Nomination and Remuneration Committee, at its meeting held on January 04, 2024.

Your Company has received a certificate from CS Sunil M. Dedhia (COP No. 2031), of Sunil M. Dedhia & Co. Company Secretary in Practice and the Secretarial Auditor of the Company that PSOP 2023 has been implemented in accordance with the provisions of the SEBI (Share Based Employee Benefits and Sweat Equity) Regulations, 2021 and the resolution passed by the shareholders. Any request for inspection of the said Certificate may please be sent to investorrelations@ aartipharmalabs.com.

The details of the stock options granted under the PSOP Scheme and the disclosures in compliance with Securities and Exchange Board of India (Share Based Employee Benefits and Sweat Equity) Regulations, 2021 is available on the website of the Company at https:// www.aartipharmalabs.com/other-disclosures.

26. CORPORATE GOVERNANCE

Your Company believes that effective leadership, robust policies, processes and systems and a rich legacy of values form the hallmark of our best corporate governance framework. The Board, in conjunction with the management, sets values of your Company and drives the Company's business with these principles. These ethics and values are reflected in the Company's

culture, business practices, disclosure policies and relationship with its stakeholders and are at par with best international standards and good corporate conduct.

Your Company has complied with the mandatory Corporate Governance requirements stipulated under the Listing Regulations. Pursuant to Regulation 34 of the Listing Regulations, a separate Report on Corporate Governance is annexed hereto forming part of this Report. The requisite certificate from Gokhale & Sathe, Chartered Accountants is attached to the Report on Corporate Governance.

27. HEALTH AND SAFETY

Aarti Pharmalabs Limited (APL) is dedicated to maintaining world-class standards in health, safety, security, human rights, environmental protection, product quality, and processes across all business operations, services, and expansion activities. To achieve these objectives, the company has made significant investments in process automation to enhance safety and reduce human error, comprehensive training on process and behaviour-based safety requirements, and the adoption of safe and environmentally friendly production processes.

APL has implemented ISO45001 standards and established comprehensive safety programs, including EHS policies and corporate safety guidelines. These programs provide thorough training for employees on chemical handling, personal protective equipment (PPE) usage, and emergency response protocols. The company regularly conducts safety drills, audits, monthly safety campaigns, toolbox talks and inspections to identify and mitigate potential workplace hazards, ensuring a safe working environment for all employees.

Safety Performance Leading Indicators

The company has established a Process Hazard Analysis (PHA) system to analyse processes and identify potential hazards, aiming to minimise or eliminate them during the R&D phase. Additionally, we ensure powder safety by implementing necessary precautions when handling powder-based materials, such as dust or combustible liquids, achieving over 100% compliance in powder safety this year. We have also eliminated the risk of fire in flammable storage areas by implementing effective control measures.

The company conducts cross-site audits to ensure compliance with safety regulations and standards. These audits enhance safety standards by identifying potential hazards and improving the skills of EHS professionals. A third-party regulatory audit was performed, and the

company has complied with all recommendations. Furthermore, a Behavioral-Based Program, 'Near Miss Reporting,' has been established using advanced technologies to eliminate potential risks that could lead to incidents.

To ensure the safety and well-being of our employees, contractors, and visitors, the company has developed and implemented a robust Occupational Health and Safety Management System under the Aarti Pharma Management System. All individuals are covered under this comprehensive system, ensuring a safe and healthy working environment.

Process Safety Management

APL has well-established process safety procedures, practices, and systems to evaluate the risks associated with manufacturing hazardous chemicals. The company features a state-of-the-art centralised Process Safety Lab, equipped with the latest version of the Reaction Calorimeter (RCImx) and two Thermal Screening Units (TSu). The Chemical Reaction Hazard as well as Fire & Explosion Hazard testing data, essential for informed decision-making during plant design and processing, are generated in-house through our advanced infrastructure and capabilities. Additionally, the company conducts comprehensive Powder Safety studies, including Minimum ignition energy (MIE), Minimum ignition temperature (MIT), Layer ignition temperature (LIT) and impact sensitivity tests for all new and existing powder handling operations.

This lab is fully operational and dedicated to in-house powder safety testing. During the year under review, 501 TSu samples were analysed, and 104 RCImx tests were performed, alongside 53 powder safety tests conducted for various manufacturing processes within the company.

Customer Health & Safety

The health and safety of our customers are of paramount importance to us, and we are fully committed to ensuring it. The company adheres to GHS labelling and MSDS protocols to accurately document and communicate product specifications, hazards, and mitigation measures. Additionally, APL follows the best practices prescribed by the European Union's REACH (Registration, Evaluation, Authorization, and Restriction of Chemicals) regulations. During the year under review, we did not receive any major complaints regarding health and safety issues from our customers.

Contractor Health & Safety

To ensure our contractors' health and safety, the company has established several key measures.

These include thorough screening and evaluation of contractors for medical fitness before they are permitted to commence work. Contractors are also provided with comprehensive training to understand and follow the necessary safety protocols while on the job. Additionally, the implementation of a work permit system ensures that only authorised personnel can access the site and perform their duties safely.

ENVIRONMENT

Energy Conservation & Consumption

In the fiscal year under review, our energy consumption totaled 12,06,530.01 gigajoules (GJ). As part of our commitment to sustainability, we have fully transitioned several of our facilities from furnace oil to cleaner fuels. Additionally, we have initiated a project to install solar panels at our Maharashtra located in the Akola district to further diminish our reliance on fossil fuels and promote renewable energy sources.

Hazardous Waste Management

All hazardous and non-hazardous wastes generated at our facilities are meticulously segregated, recovered, recycled, and disposed of in accordance with their specific characteristics and regulatory requirements.

Water & Wastewater Management

I n FY 2023-24, our total water consumption amounted to 5,60,655 kiloliters (KL), comprising both fresh and recycled/recovered water sources. Over 30.0% of our total water consumption is sourced from recycled water, with industrial bodies serving as our primary freshwater source. The company continuously enhances its wastewater management processes and outcomes. We have installed advanced wastewater treatment and water recovery plants, featuring cutting-edge technologies such as reverse osmosis units (RO), multiple effect evaporators (MEEs), Mechanical Vapour Recompression (MVR) systems, and agitated thin film dryers (ATFD) to reclaim water from wastewater streams. Moreover, a stringent zero liquid discharge policy is implemented across all our units to further minimise our environmental footprint.

Product End Life

The company has established a comprehensive process for managing products at the end of their lifecycle. Each product manufactured at our facility undergoes a thorough shelf life assessment based on research and development studies. Upon customer request, we assist in the proper treatment of products reaching the end of their shelf life. Notably, in FY 2023-24 there were no instances requiring product end-of-life treatment, resulting in zero environmental impact from this aspect of our operations.

28. BUSINESS RESPONSIBILITY & SUSTAINABILITY REPORTING ("BRSR")

The Listing Regulations mandate the inclusion of the Business Responsibility & Sustainability Reporting as part of the Annual Report for top 1,000 listed entities based on market capitalisation. BRSR for the year under review, as stipulated under Regulation 34(f) of Listing Regulations read with SEBI Circular No. SEBI/HO/CFD/ CMD-2/P/ CIR/2021/562 dated May 10, 2021 is in a separate section forming part of the Annual Report.

29. VIGIL MECHANISM

The Vigil Mechanism as envisaged in the Act and the Rules prescribed thereunder and the Listing Regulations is implemented through the Company's Vigil Mechanism Policy. The said Policy of your Company is available on the Company's website at https://www.aartipharmalabs.com/investors/vigil-mechanism-policy-feb-2023.pdf

It enables the Directors, employees and all stakeholders of the Company to report genuine concerns (about unethical behaviour, actual or suspected fraud, or violation of the Code) and provides for adequate safeguards against victimisation of persons who use such mechanism and makes provision for direct access to the Chairman of the Audit Committee.

No whistleblower complaints have been received during the year under review.

30. THE SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION AND REDRESSAL) ACT, 2013

The Company believes that every woman employee should have the opportunity to work in an environment free from any conduct which can be considered as Sexual Harassment. The Company has Zero Tolerance towards sexual harassment at the workplace.

The Company is committed to treating every employee with dignity and respect. The Policy for Prevention of Sexual Harassment at Workplace ("POSH") framed by the Company in this regard provides for protection against sexual harassment of women at workplace and for prevention and redressal of such complaints with complete anonymity and confidentiality. The said Policy of your Company is available on the Company's website at https://www.aartipharmalabs.com/investors/ prevention-of-sexual-harrasment-policy.pdf.

I nternal Complaints Committees (ICC) has been set up to redress complaints received regarding sexual harassment.

31. SECRETARIAL STANDARDS

The applicable Secretarial Standards, i.e. SS-1 and SS-2, relating to 'Meetings of the Board of Directors' and 'General Meetings' respectively issued by the Institute of Company Secretaries of India and notified by the Ministry of Corporate Affairs, have been duly complied by your Company.

32. DETAILS OF DEPOSITS

During the year under review, your Company has neither invited nor accepted any deposits from the public falling within the ambit of Section 73 of the Act and the rules framed thereunder. The requisite return for FY 2023-24 with respect to amount(s) not considered as deposits has been filed.

33. BANK LOAN FACILITIES

Your Company continues to manage its treasury operations efficiently and has been able to borrow funds for its operations at competitive rates. During the year under review, your Company had below rating for its bank loan facilities of '400 Crores, which were revalidated from time to time;

34. ANNUAL RETURN

Pursuant to Section 134(3)(a) of the Act, the annual return for FY 2023-24 prepared in accordance with Section 92(3) of the Act read with Companies (Management and Administration) Amendment Rules, 2014 is made available on the website of the Company at https://www. aartipharmalabs.com/annual-reports

35. INVESTOR EDUCATION AND PROTECTION FUND (“IEPF")

Pursuant to the demerger of pharma undertaking of Aarti Industries Limited during FY 2022-23, proportionate number of shares (i.e.3,13,656 shares) held by the shareholders of Aarti Industries Limited, which were then lying in the IEPF account, were credited to the IEPF account of the Company. The Interim Dividend for FY 2022-23 and FY 2023-24 accrued on such shares was credited to the designated bank account of the IEPF authority. Further, the final dividend for FY 2023-24, if approved by the shareholders at the ensuing AGM, shall be credited to the designated bank account of the IEPF authority.

Except for the above, no amount is due to be transferred to the IEPF Account.

36. COMPLIANCE MANAGEMENT SYSTEM

The Company with its sheer focus is committed to achieve 100% compliance. We have adopted a third party

managed IT-based Compliance Management System. it has a repository of all applicable regulations and requisite compliances. It has an in-built alert system that intimates concerned personnel about upcoming compliances.

37. SWAYAM INVESTOR SELF-SERVICE PORTAL

'SWAYAM' is a secure, user-friendly web-based application, developed by Link Intime India Private Limited our Registrar and Share Transfer Agents, that empowers shareholders to effortlessly access various services. This application can be accessed at https:// swayam.linkintime.co.in

38. SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS

During the year under review, no significant material orders were passed by the Regulators or Courts or Tribunals impacting the going concern status and the Company's operations.

39. MATERIAL CHANGES AND COMMITMENTS, IF ANY, AFFECTING THE FINANCIAL POSITION OF THE COMPANY OCCURRED BETWEEN THE END OF THE FINANCIAL YEAR TO WHICH THIS FINANCIAL STATEMENTS RELATE AND THE DATE OF THE REPORT

There were no other material changes and commitments affecting the financial position of the Company, which had occurred between the end of the Financial Year to which these financial statements relate and the date of the Report.

40. DETAILS OF APPLICATION MADE OR ANY PROCEEDING PENDING UNDER THE INSOLVENCY AND BANKRUPTCY CODE, 2016 DURING THE FINANCIAL YEAR ALONGWITH THEIR STATUS AS AT THE END OF THE FINANCIAL YEAR

During the FY 2023-24, there was no application made and proceeding initiated / pending by any Financial and/ or Operational Creditors against your Company under the Insolvency and Bankruptcy Code, 2016 ("Code").

Further, there is no application or proceeding pending against your Company under the Code.

41. DETAILS OF DIFFERENCE BETWEEN THE AMOUNT OF VALUATION AT THE TIME OF ONE TIME SETTLEMENT AND THE VALUATION

DONE AT THE TIME OF TAKING A LOAN FROM THE BANKS OR FINANCIAL INSTITUTIONS ALONG WITH THE REASONS THEREOF

During the FY 2023-24, the Company has not made any settlement with its bankers for any loan/ facility availed or/and still in existence.

42. GENERAL DISCLOSURES

The Managing Director(s) have not received any remuneration or commission from the subsidiary of your Company.

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

1. Issue of equity shares with differential rights as to dividend, voting or otherwise.

2. Issue of Shares (including Sweat Equity Shares) to employees of the Company under any Scheme save and except PSOP 2023 referred to in this Report.

3. Voting rights which are not directly exercised by the employees in respect of shares for the subscription / purchase of which loan was given by the Company (as there is no scheme pursuant to which such persons can beneficially hold shares as envisaged under section 67(3)(c) of the Act.

4. There has been no change in the nature of business of your Company.

5. There was no revision of financial statements and Board's Report of your Company during the year under review.

43. ACKNOWLEDGEMENT

The Board of Directors place on record its sincere appreciation for the dedicated services rendered by the employees of the Company at all levels and the constructive cooperation extended by them. Your Directors would like to express their grateful appreciation for the assistance and support by all Shareholders, Government Authorities, Auditors, Financial Institutions, Customers, Employees, Suppliers, other business associates and various other stakeholders.

For and on behalf of the Board

Narendra J. Salvi Hetal Gogri Gala

Place: Mumbai Managing Director Vice Chairperson and Managing Director

Date: May 13, 2024 DIN: 00299202 DIN:00005499