DIRECTORS REPORT

Dear Members,

The Directors have pleasure in presenting the Eighteenth Annual Report of your Company along with the audited Statement of Accounts for the financial year ended 31^st March 2016. The Report also includes the Management Discussion and Analysis Report in accordance with the Guidelines on Corporate Governance and Financial Statements.

The highlights of the financial results for the year 2015-16 in comparison to the year 2014-15 are as follows:

Rs.In Lakhs)

Performance

We have been able to achieve a turnover of Rs.3285.54Lacs. The percentage increase in the turnover is 20% and increase in net profit is 60% respectively when compared to that of previous year.

Future Outlook

Celestial has already launched Cadalmin GAe (a drug to treat arthritis) in collaboration with CMFRI Cochin(a prestigious ICAR Institute). Cadalmin anti-diabities natural drug shall be launched shortly .Celestial plans to advertise these two product in addition to biovita ( A natural health Drink) and Trem ( A fairness herbal cream) in the leading newspaper in ten states to increase the business volume. Further initiatives of demerger of research and developmental activities and focused collaborative research commerce shall be of great advantage to shareholders. Many leading pharmaceuticals majors have already taken leading steps in this regard and got huge benefits. In the domain of herbal and enzyme research, our efforts may be treated as a leading and land mark steps. Initiatives have already been taken to establish collaborative commerce activities in herbal products research with German and Japanese institutions.

Dividend

The Company has not declared any dividend during the year.

Corporate Governance

As per Regulation 27(2) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, a separate section on Corporate Governance is enclosed herewith which forms part of the Annual Report. A certificate from the Auditors of the Company on compliance with the conditions of Corporate Governance as stipulated under the Schedule V of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 is annexed to this Report.

Management Discussion and Analysis

A detailed section of the Management Discussion and Analysis for the period under review as required under Schedule V of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 is given as a separate statement forming part of the Annual Report.

Directors’ Responsibility Statement:

Pursuant to the requirement under Section 134 of the Companies Act, 2013 with respect to the Director’s Responsibility Statement, it is hereby confirmed.

i. that in the preparation of the accounts for the financial year ended 31^st March 2016, the applicable accounting standards have been followed along with proper explanations for marking all departures, if any.

ii. that the directors have selected such accounting policies and applied them consistently and made judgments and estimates that were reasonable and prudent so as to give a true and fair view of the state of affairs of the company at the end of the financial year and of the profit or loss of the company for the year under review.

iii. that the directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of the company and from preventing and detecting fraud and other irregularities.

iv. that the directors have prepared the accounts for the financial year ended 31^st March 2016 on a going concern basis

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

vi. the Directors have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems are adequate and operating effectively

Directors& Key Managerial Personnel (KMP)

Directors

In accordance with the provisions of the Companies Act, 2013 and the Articles of Association of the Company, Dr.Jeetainder Roy Gour retired by rotation and being eligible has offered himself for reappointment.

Key Managerial Personnel

The company is taking steps to appoint Key Managerial Personnel as required under Section.203 of the Companies Act, 2013

Committees of the Board

Currently, the Board has three committees: the audit committee, the nomination and remuneration committee and the stakeholders relationship committee. A detailed note on the composition of the Board and its committees is provided in the Corporate governance report section of this Annual Report.

Declaration from Independent directors on Annual Basis

The Company has received necessary declaration from each independent director under Section 149(7) of the Companies Act,2013, that he / she meets the criteria of independence laid down in Section 149(6) of the Companies Act, 2013 and Regulation 25 of SEBI(Listing Obligations and Disclosure Requirements) Regulations, 2015.

Number of meetings of the board

The Board met Eight times during the financial year, the details of which are given in the Corporate governance report. The maximum interval between any two meetings did not exceed 120 days, as prescribed in the Companies Act, 2013.

Board Evaluation

SEBI (Listing Obligations and Disclosure Requirements) Regulations,2015, mandates that the Board shall monitor and review the Board evaluation framework. The framework includes the evaluation of directors on various parameters such as:

- Board dynamics and relationships

- Information flows

- Decision-making

- Relationship with stakeholders

- Company performance and strategy

- Tracking Board and committees’ effectiveness

- Peer evaluation

The Companies Act, 2013 states that a formal annual evaluation needs to be made by the Board of its own performance and that of its committees and individual directors. Schedule IV of the CompaniesAct,2013 states that the performance evaluation of independent directors shall be done by the entire Board of Directors, excluding the director being evaluated.

The evaluation of all the directors and the Board as a whole was conducted based on the criteria and framework adopted by the Board.

Policy on directors’ appointment and remuneration and other details

The Company’s policy on directors’ appointment and remuneration and other matters provided in Section 178(3) of the Act has been disclosed in the corporate governance report, which forms part of the directors’ report

Disclosure as required under Rule 5 of Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014

The Disclosure as required under Rule 5 of Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014 is given in Annexure - A to the Board Report.

Information as per rule 5(2) of Chapter XIII, the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014

There are no employees in the company whose remuneration is more than Rs.8.50 Lacs per month or Rs.102.00 Lacs per annum (or) any part thereof. The details of top 10 employees of the Company in terms of remuneration drawn during the year is given in Annexure - B to the Board Report.

Code of conduct for the prevention of insider trading

The Board of Directors has adopted the Insider Trading Policy in accordance with the requirements of the SEBI (Prohibition of Insider Trading) Regulation, 2015. The Insider Trading Policy of the Company lays down guidelines and procedures to be followed, and disclosures to be made while dealing with shares of the Company, as well as the consequences of violation. The policy has been formulated to regulate, monitor and ensure reporting of deals by employees and to maintain the highest ethical standards of dealing in Company securities.

The Insider Trading Policy of the Company covering code of practices and procedures for fair disclosure of unpublished price sensitive information and code of conduct for the prevention of insider trading, is available on our website.

Listing Agreement

The Securities and Exchange Board of India (SEBI), on September 2,2015, issued SEBI (Listing Obligations and Disclosure Requirements)Regulations, 2015 with the aim to consolidate and streamline the provisions of the Listing Agreement for different segments of capital markets to ensure better enforceability. The said regulations were effective December 1, 2015. Accordingly, all listed entities were required to enter into the Listing Agreement within six months from the effective date. The Company entered into Listing Agreement with BSE Limited and the National Stock Exchange of India Limited during February, 2016.

Internal Control System & Internal financial control and its adequacy

The Board has adopted policies and procedures for ensuring the orderly and efficient conduct of its business, including adherence to the Company’s policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial disclosures.

Your Company has established a robust system of internal controls to ensure that assets are safeguarded and transactions are appropriately authorized, recorded and reported. The Audit Committee of the Board addresses significant issues raised by both, the Internal Auditors and the Statutory Auditors. The Company believes that the overall internal control system is dynamic and reflects the current requirements at all times, hence ensuring that appropriate procedures and controls, in operating and monitoring practices are in place. Your Company is proactively identifying the areas for further improvement which shall remain an ongoing process.

Significant and material orders

There are no significant and material orders passed by the regulators or courts or tribunals impacting the going concern status and Company’s operations in future.

Particulars of contracts or arrangements with related parties referred in Sub - Section (1) of Section 188

Details of transactions with related parties falling under the scope of Section 188(1) of the Act & Information on transactions with related parties pursuant to Section 134(3)(h) of the Act read with rule 8(2) of the Companies (Accounts) Rules, 2014 (Form No. AOC.2) is given in Annexure - C to the Board Report.

Auditors

Pursuant to the provisions of Section 139 of the Act and the rules framed the reunder, M/s Lakshmi Purna & Associates, Chartered Accountants, were appointed as statutory auditors of the Company from the conclusion of the sixteenth annual general meeting (AGM) of the Company held on November 15, 2014 till the conclusion of the nineteenth Annual General Meeting to be held in the year 2017, subject to ratification of their appointment at every AGM. Accordingly, the appointment of M/s Lakshmi Purna & Associates, Chartered Accountants, as statutory auditors of the Company, is placed for ratification by the shareholders.

Secretarial Auditor

Pursuant to the provisions of Section 204 of the Act and the rules framed there under, M/s. GMVDR& Associates, Company Secretaries were appointed as Secretarial Auditors of the Company and the Secretarial Audit Report issued by them for the financial year 2015-16 is made a part of this Report.

Extract of the annual return of the Company

As provided under Section 92(3) of the Act, the extract of annual return is given in Annexure - D in the prescribed Form MGT-9, which forms part of this report.

Qualifications in Auditors’ report and secretarial auditors’ report

The auditors’ report does not contain any qualifications, reservations or adverse remarks. Replies to qualifications in Secretarial Audit Report are annexed to this report.

Particulars of loans, guarantees or investments

The particulars of loans, guarantees and investments have been disclosed in the financial statements

Material changes and commitments if any affecting the financial position of the company

There are no material changes and commitments affecting the financial position of the Company from the date of closure of financial year to the date of Board Report.

Charges

The Company has not availed loans from any Bank / Financial Institutions during the financial year under review.

Fixed Deposits

The Company has not accepted any fixed deposits during the year under review. As such no amount of principal or interest was outstanding on the date of the Balance Sheet.

Unpaid / Unclaimed Dividend

The company is in the process of transferring Dividend which is unclaimed for a period of 7 years to Investor Education & Protection Fund (IEPF).

Vigil Mechanism

Your Company has adopted a Whistle Blower Policy to report to the management about instances of unethical behaviors, actual or suspected fraud or violation of the Company’s code of conduct or ethics policy. Under the policy, the employees can approach Company’s Ethics Counselor/ Chairman of Audit Committee directly.

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

Additional information on conservation of energy, technology absorption and foreign exchange earnings and outgo as required to be disclosed in terms of Section 134(3)(m) of the Companies Act, 2013 read with the Companies (Accounts) Rules, 2014 is given in Annexure - E and forms part of this report.

Employee Relations

During the year under review, the company has enjoyed cordial relationship with all section of employees. The company believes that the employees play a vital role in increasing the turnover and profitability of the company and the strength of the company lie in harnessing the manpower in achieving sustained long-term growth in all spheres.

Acknowledgements

Your Directors would like to express their sincere appreciation for the assistance and co-operation received from the financial institutions, banks, Government authorities, customers, vendors and members during the year under review. Your company wishes to place on record its appreciation of employees at all levels for their dedicated contribution towards growth of the company.

For and on behalf of the Board of Directors

For Celestial Biolabs Limited

Place: Hyderabad Dr A N Singh

Date : 30.11.2016 (Chairman & Managing Director)

DIN:01756827