Divis Laboratories Ltd Directors Report

To

The Members,

Divis Laboratories Limited

Your Directors present the 34^th Annual Report of Divis Laboratories Limited (“the Company” or “Divis”) along with the audited financial statements for the financial year ended March 31, 2024. The consolidated performance of the Company and its subsidiaries (“Group”) has been referred to wherever required.

Financial summary and highlights

Financial performance of the Company for the financial year ended March 31, 2024 compared to previous financial year is summarized below:

( H in crores)

Particulars	Standalone		Consolidated
	2023-24	2022-23	2023-24	2022-23
Revenue	7,665	7,625	7,845	7,767
Other Income	337	349	339	345
Total Income	8,002	7,974	8,184	8,112
Expenditure before depreciation, interest	5,491	5,277	5,640	5,399
Profit before depreciation, interest and tax(PBDIT)	2,511	2,697	2,544	2,713
Depreciation	376	342	378	343
Finance Cost	3	1	3	1
Profit before Tax (PBT)	2,132	2,354	2,163	2,369
Tax Expense:
Current Tax	511	438	514	439
Deferred Tax	45	108	49	106
Total Tax	556	546	563	545
Profit after Tax (PAT)	1,576	1,808	1,600	1,824
Other comprehensive Income (net of tax)	(1)	2	-	12
Total Comprehensive Income	1,575	1,810	1,600	1,836
Earnings per Share of C 2/- each (EPS) Basic & Diluted (C)	59.37	68.11	60.27	68.69

Operations for the year

Highlights of the Companys financial performance for the year ended March 31, 2024 are as under:

Standalone

During the current year, we have been able to achieve a total income of C8,002 crores despite experiencing pricing pressures on some of our generic products. The current financial year has seen a double-digit growth ex the covid portfolio.

Our Profit Before Tax for the year is lower at C2,132 crores as against C2,354 crores during the last financial year primarily due to increase in staff cost and other expenses as well as higher depreciation.

Tax expense for the current year amounted to C556 crores as against a tax expense of C546 crores in the previous year.

Effective tax rate for the year has increased over the last year due to the changes in product mix and the resultant profitability across our manufacturing units.

Profit after tax for the year amounted to C1,576 crores as against C1,808 lakhs during the previous year.

Consolidated

The Groups consolidated total income amounted to C8,184 crores as against C8,112 crores in the previous year.

Profit before tax for the year is C2,163 crores as against C2,369 crores in the previous year. The Company earned a Profit after Tax of C1,600 crores for the year as against C1,824 crores in the previous year. The consolidated operations are reflective of standalone operations, as standalone operations are substantial part of our groups business.

Dividend

Your Directors are pleased to recommend a dividend of C30/- per equity share of C2/- each, i.e., 1,500% for the financial year ended March 31, 2024. The dividend is subject to approval of Members at the ensuing Annual General Meeting (AGM) and shall be subject to deduction of income tax at source. The dividend, if approved, will be paid to shareholders whose names appear in the Register of Members as on the record date.

The total dividend payout for the current year amounts to C 796 crore, which is same as in the previous year. Dividend payout for the year as a percentage of 44% in the previous year.

The dividend recommended is in accordance with the Companys Dividend Distribution Policy. The said Policy is available on the Companys website and can be accessed at https://www.divislabs.com/DividendDistributionPolicy.pdf.

Transfer to Reserves

We do not propose to transfer any amount to the general reserve on declaration of dividend.

Capital Expenditure

During the year, we have capitalised Property, Plant and Equipment (PPE) and Intangible Assets valuing C402 crores. Capital Work-in-progress as at the year-end amounted to C778 crores.

A major part of the capitalization is towards capacity expansion, plant upgradation and augmenting the utility/ support infrastructure at the manufacturing facilities.

Kakinada Project

Work is in progress on implementation of the Project for setting up a manufacturing facility (Unit-III) at Ontimamidi (Kona) Village, Thondangi Mandal, Kakinada District of Andhra Pradesh. The estimated project cost for Phase-1 of the Project was C1,200 crores to C1500 crores depending upon options and opportunities available to the company and selection of capacities to be created for different products. We have spent an amount of C702 crores as at the end of the year. Major part of the Civil Works has since been completed and rest of the works are in progress.

Material Changes and Commitments

There have been no material changes and commitments, which affect the financial position of the Company which have occurred between the end of the financial year March 31, 2024 and the date of this Report. Further, there is no change in the nature of business of the Company.

Business Responsibility and Sustainability Report

Pursuant to Regulation 34 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (SEBI Listing

Regulations), Business Responsibility and Sustainability Report (BRSR) for the financial year 2023-24 is provided in a separate section forming part of this Annual Report.

Management Discussion and Analysis

In terms of provisions of Regulation 34(2) of SEBI Listing Regulations report on Management Discussion & Analysis(MDA) for the year under review is provided in a separateis50%ascomparedto section forming part of this Annual Report.

Corporate Governance Report

The report on Corporate Governance as per Regulation 34(3) read with Schedule V of the SEBI Listing Regulations is included as a part of this Annual Report. The certificate issued by the practicing Company Secretary confirming the compliance with the conditions of corporate governance is attached to the Report on Corporate Governance.

Credit rating

Details of credit rating ascribed by rating agencies are disclosed in Corporate Governance Report forming part of this Annual Report. The strong credit rating reaffirmed is a reflection of the Companys strong financial position and discipline.

Subsidiaries

The Companys wholly owned subsidiaries, viz., Divis Laboratories (USA) Inc., in USA and Divis Laboratories Europe AG in Switzerland, are engaged in marketing/distribution of nutraceutical ingredients used in the food, beverage, dietary supplement, feed and pet food industries; and they provide a greater reach to customers within these regions.

During the year, the subsidiaries have achieved aggregate revenue of C559 crore as against C515 crore in the previous year, reflecting a growth of 9% of revenue at the subsidiary level. The audited financial statements of the subsidiary companies are placed on the Companys website and can be accessed at https://www.divislabs.com/wp-content/ uploads/2023/09/Subsidiary-financials-2023-24.pdf. During the year, there was no significant change in the nature of business of the Subsidiaries.

As per Section 129(3) of the Companies Act, 2013 read with Companies (Accounts) Rules, 2014, statement containing the salient features of the financial statement of Companys subsidiaries in Form AOC-1 is annexed as Annexure-I to this Report.

Policy for determining Material Subsidiaries, is available on the Companys website and can be accessed at: https://www. divislabs.com/MaterialSubsidiaryPolicy.pdf. Presently, the Company does not have any material subsidiary.

Consolidated financial statements

In accordance with the provisions of the Companies Act, 2013 (“the Act”) and the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (“SEBI Listing Regulations”), the consolidated financial statements have been prepared by the Company in accordance with the relevant Indian Accounting Standards (“Ind AS”). The audited consolidated financial statements together with Auditors Report thereon form part of this Annual Report.

Directors and Key Managerial Personnel

The following are changes in the Board of Directors of the Company during the year and thereafter.

Appointments/Re-appointments during the year:

The following appointments/re-appointments were approved by the Member of the Company as recommended by the Nomination and Remuneration Committee and the Board:

• Dr. S. Devendra Rao was appointed as Additional Director of the Company designated as Whole-time Director (Manufacturing) effective from February 10, 2024. The members approved his appointment as Whole-time Director (Manufacturing) for a period of 5 years effective from February 10, 2024.

• Prof. Sunaina Singh was re-appointed as Independent Director of the Company for a second term of 5 years effective from March 28, 2024. In the opinion of the Board,Prof. Sunaina Singh possess requisite expertise, integrity and experience (including proficiency) for appointing her as Independent Director of the Company.

Retirement(s) and resignation during the year:

• Mr. Madhusudana Rao Divi expressed his intention to retire as a Director as well as Whole-time Director of the Company in view of his age and health situation, and submitted his resignation with effect from August 28, 2023. The Board approved his intention for retirement and placed on record its appreciation for the leadership, assistance, guidance and invaluable services provided during his tenure as Whole-time Director of the Company for over 28 years.

• Dr. G. Suresh Kumar and Mr. R. Ranga Rao on completion of their second term as Independent Directors of the Company retired from the Board on March 31, 2024. The Board placed on record its appreciation for the services rendered by them during their tenure as Independent Directors.

Retirement by rotation:

• Mr. N.V. Ramana and Dr. Kiran S. Divi retire by rotation at the forthcoming 34^th AGM and being eligible, offer themselves for re-appointment.

Appointments/Re-appointments, subject to approval of Members

The following appointments/re-appointments of Directors approved by the Board of Directors on the recommendation of the Nomination and Remuneration Committee, are subject to the approval of the Members at the ensuing 34^th AGM:

• Dr. Rajendra Kumar Premchand was appointed as the Additional Director (Independent Director) of the Company with effect from May 25, 2024 for a period of 5 years subject to approval of Members of the Company by way of a special resolution. In the opinion of the Board, Dr. Rajendra Kumar Premchand possess requisite expertise, integrity and experience (including proficiency) for appointing him as

Independent Director of the Company.

• Mr. K.V. Chowdary, Independent Director of the Company, whose term is expiring on January 03, 2025, has been reappointed as an Independent Director of the Company for a second term of 5 years with effect from January 04, 2025, subject to approval of the Members of the Company by way of a special resolution. In the opinion of the Board, Mr. K.V. Chowdary possesses requisite expertise, integrity and experience (including proficiency) for appointing him as Independent Director of the Company.

• Dr. Murali K. Divi, Managing Director of the Company, whose term is expiring on October 09, 2024, has been re-appointed as the Managing Director of the Company for a period of 5 years with effect from October 10, 2024, subject to approval of Members of the Company by way of a special resolution.

• Mr. N.V. Ramana, Executive Director of the Company, whose term is expiring on December 25, 2024, has been re-appointed as the Executive Director of the Company for a period of 5 years with effect from December 26, 2024, subject to approval of Members of the Company by way of a special resolution.

Details with respect to the said appointment and reappointments form part of the notice of the 34^th AGM of the Company forming part of this Annual Report.

Key Managerial Personnel:

The details of Key Managerial Personnel and the changes during the year are as under:

Name	Designation	Change during the year, if applicable
Dr. Murali K. Divi	Managing Director	-
Mr. N. V. Ramana	Executive Director	-
Dr. Kiran S. Divi	Whole-time Director and Chief Executive Officer	-
Ms. Nilima Prasad Divi	Whole-time Director (Commercial)	-
Dr. S. Devendra Rao	Whole-time Director (Manufacturing)	Appointed with effect from February 10, 2024.
Mr. Madhusudana Rao Divi	Whole-time Director (Projects)	Resignedwitheffectfrom . August 28, 2023
Mr. L. Kishore Babu	Chief Financial Officer	-
Mr. M. Satish Choudhury	Company Secretary and Compliance Officer	-

Declaration by Independent Directors

The Company received declaration from all the Independent Directors of the Company under Section 149(7) of the Act and Regulation 25 of the SEBI Listing Regulations, confirming that they meet the criteria of independence as provided in Section 149(6) of the Act and Regulation 16(1)(b) of SEBIListing Regulations and there has been no change in the circumstances affecting their status as Independent Directors of the Company. Further, they have confirmed compliance to the code of conduct for Independent Directors as prescribed in Schedule IV of the Act. In the opinion of the Board, the Independent Directors of the Company possess necessary expertise, integrity and experience.

Number of Meetings of Board of Directors

During the financial year, the Board has met five times, i.e. May 20, 2023, July 07, 2023, August 14, 2023, November 06, 2023 and February 10, 2024.

Performance Evaluation

The Board of Directors carried out an annual evaluation of its own performance, of the Committees of the Board and of the individual directors including Independent Directors, pursuant to the provisions of the Companies Act, 2013 and SEBI Listing Regulations.

Performance evaluation was carried out on the basis of criteria evolved, as provided by the Guidance Note on Board Evaluation issued by Securities and Exchange Board of India, seeking inputs from the Directors individually and the Committees through a structured questionnaire which provides a valuable feedback for contribution to the Board, improving Board effectiveness, maximising strengths and highlighting areas for further improvement, etc.

In a separate meeting of the Independent Directors, performance of the Chairman, non-independent directors and the Board as a whole was evaluated taking into account the views of the non-independent directors and the same was discussed in the Board Meeting. Performance evaluation of Independent Directors is done by the entire Board of Directors (excluding the Directors being evaluated).

The details of the separate meeting of the Independent Directors are reported in the Report on Corporate Governance which forms part of the Boards Report.

Policy on Directors Appointment and Remuneration

The Policy on appointment and remuneration of directors, key managerial persons (KMP) and senior management including criteria for determining qualifications, positive attributes and directors independence as required under Section 178(3) of the Act, and Regulation 19 read with Schedule II Part D of SEBI Listing Regulations has been formulated by the Company, inter-alia includes:

• To identify persons who are qualified to become directors and who may be appointed in senior management positions in accordance with the criteria laid down.

• To ensure a transparent board nomination process keeping in view the diversity of thought, experience, knowledge, perspective and gender in the Board.

• To determine remuneration based on the Companys size and financial position, limits prescribed in the Companies

Act, and trends and practices on remuneration prevailing in peer companies, in the Pharma industry besides qualifications, experience, skills, capabilities, contributions made by the individual, etc.

• To carry out evaluation of the performance of Directors, as well as Key Managerial and Senior Management Personnel.

• To provide them rewards linked directly to their effort, performance, dedication and achievement relating to the Companys operations.

• To retain, motivate and promote talent and to ensure long term sustainability of talented managerial persons and create competitive advantage.

Policy on Nomination and Remuneration of Directors, Key/ Senior Managerial Personnel may be accessed on the Companys website at: https://www.divislabs.com/NominationRemunerationPolicy.pdf.

Board Committees

The Board has constituted Audit Committee, Nomination and Remuneration Committee, Stakeholders Relationship Committee, Corporate Social Responsibility Committee and Risk Management and Sustainability Committee as per the applicable provisions of the Act and SEBI Listing Regulations. The details of the composition of each of the committees including changes during the year, details pertaining to the role, objective, details of the meetings held during the year are provided in the Corporate Governance Report forming part of this Annual Report.

Remuneration details of Directors & KMP and particulars of employees

Pursuant to Section 197(12) of the Act, read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the prescribed particulars pertaining to remuneration and other details are given in “Annexure · II” to this Report.

The non-executive directors of the Company had no pecuniary relationship or transactions with the Company, other than sitting fees, annual remuneration and reimbursement of expenses, if any.

In terms of the provisions of Section 197(12) of the Act read with Rules 5(2) and 5(3) of the Rules, a statement showing the names and other particulars of employees drawing remuneration in excess of the limits set out in the said Rules forms part of this report. Further, the report and the annual accounts are being sent to the Members excluding the aforesaid statement.

In terms of Section 136 of the Act, the said statement will be open for inspection upon request by the Members. Any Member interested in obtaining such particulars may write to the Company Secretary at cs@divislabs.com.

Deposits

The Company has not accepted any deposits from public covered by provisions of Section 73 of the Act.

Loans, Guarantees or Investments

The Company has not given any loans or guarantees to persons covered under the provisions of Section 186 of the Act. The details of investments made by the Company are given in the notes to the financial statements forming part of this annual report.

Related Party Transactions

There are no materially significant related party transactions entered into by the Company with related parties which may have potential conflict of interest with the Company at large. As a matter of policy, your Company carries out transactions with related parties on an arms length basis and only during the normal course of business strictly following applicable provisions of the Companies Act, 2013 and SEBI Listing Regulations. Statement of transactions with related parties during the year is given at Note No. 31 of the Notes to standalone financial statements.

In accordance with Section 134(3)(h) of the Act, and Rule 8(2) of the Companies (Accounts) Rules, 2014, the particulars of the contracts or arrangements with related parties referred to in Section 188(1) of the Act, in Form AOC-2 is attached as Annexure - III to this Report.

The Policy on Materiality of Related Party Transactions and on dealing with Related Party Transactions as approved by the Board is available on the Companys website and can be accessed at https://www.divislabs.com/RPT-Policy.pdf.

Internal Financial Controls

Information in respect of internal financial controls and their adequacy is included in the Management Discussion and Analysis, which forms part of this Annual report.

Risk Management

The Company has a Risk Management Committee of the Board. The brief of terms of reference, composition and names of members and chairperson are set out in the Corporate Governance Report forming part of the Report.

The Company has an enterprise-wide approach to risk management, which lays emphasis on identifying and managing key operational and strategic risks. The aim is to avoid or minimise risks that pose a threat to Divis continued existence and to make improved managerial decisions to create value. The Company has been addressing various risks impacting the Company pursuant to the Risk Management Policy.

The Risk Management Committee constantly evaluates various risks · business, customer concentration, supplier concentration, regulatory compliances, confidentiality of processes, consistency of cGMP practices, environment, employee health and safety etc., monitors risks and deploy appropriate control systems aimed at mitigating such risks to the extent possible. The focus areas of Risk Management Committee included review of cyber security and data protection, business continuity, various ESG risks.

Further details on the Risk Management activities including key risks identified, and their mitigations are covered in Management Discussion and Analysis Report, forming part of this Annual Report.

The Audit Committee reviews the risk elements of the companys business, finance, operations and compliance, their respective mitigation strategies.

Directors Responsibility Statement

As required under Section 134 (5) of the Companies Act, 2013 (the Act), Directors of your Company hereby state and confirm that: a) the applicable accounting standards read with requirements of Schedule III to the Act have been followed in the preparation of the annual accounts for the year ended March 31, 2024 and there are no material departures from the same; b) accounting policies selected were applied consistently and the judgements and estimates made are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at the end of the financial year and of the profit of the Company for the period; c) proper and sufficient care has been taken 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 annual accounts have been prepared on a going concern basis. e) internal financial controls have been laid down and such controls are adequate and operating effectively; f) proper systems have been laid down to ensure compliance with the provisions of all applicable laws and such systems are adequate and operating effectively.

Corporate Social Responsibility (CSR)

The Company has been carrying out CSR activities for over the past 3 decades. The CSR initiatives of the Company during the year include promoting education, safe drinking water, preventive healthcare, village development, environmental sustainability, support to differently abled, Swatch Bharath, livelihood enhancement, promotion of rural sports, woman empowerment, etc.

Corporate Social Responsibility Policy (CSR Policy) indicating the activities to be undertaken by the Company was adopted by the Board on the recommendation of the CSR Committee. The policy can be accessed at https://www.divislabs.com/wp-content/uploads/2022/12/Divis-CSR-Policy-1.pdf.

Report on Corporate Social Responsibility as per Rule 8 of Companies (Corporate Social Responsibility Policy) Rules, 2014 is prepared and the same is enclosed as “Annexure · IV” to this Report.

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

Particulars required under Section 134 (3) (m) of the Act read with Rule 8(3) of the Companies (Accounts) Rules, 2014 is given in the “Annexure · V” to this report.

Vigil Mechanism

The Company has established a vigil mechanism and formulated a Whistle Blower Policy to provide mechanism for directors and employees of the Company to report their concerns about any unethical behavior, actual or suspected fraud or violation of the Companys code of conduct or ethics policy. The Policy provides that the Company investigates such incidents, when reported, in an impartial manner and takes appropriate action to ensure that requisite standards of professional and ethical conduct are always upheld. This mechanism also provides for adequate safeguards against victimisation of director(s)/employee(s) who avail the mechanism and also provide for direct access to the Chairman of the Audit Committee in exceptional cases. The Whistle Blower Policy may be accessed on the Companys website at: https://www.divislabs.com/WhistleBlowerPolicy.pdf.

Audit Reports

• Report of the Statutory Auditors on the financial statements for the year does not contain any qualification, reservation or adverse remarks.

• The Secretarial Audit Report does not contain any qualification, reservation or adverse remark or disclaimer.

• The Auditors have not reported any instances of frauds to the Audit Committee as prescribed under Section 143(12) of the Act.

Statutory Auditors

M/s. Price Waterhouse Chartered Accountants LLP (Firm Registration No. 012754N/N500016), Chartered Accountants, has been appointed as statutory auditors of the Company to hold office till the conclusion of the 37 ^th AGM to be held in the year 2027.

Secretarial Audit

Pursuant to provisions of Section 204 of the Act and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Board of Directors of the Company has appointed Mr. V. Bhaskara Rao, Practicing Company Secretary (CP No. 4182) as the Secretarial Auditor of the Company to conduct the Secretarial audit for the financial year 2023-24. The Secretarial Audit report for the financial year 2023-24 is annexed herewith as “Annexure - VI”.

Cost Audit

Pursuant to the Section 148 of the Act and Rule 3 of the Companies (Cost Records and Audit) Rules, 2014 as amended, the Company maintains cost records in its books of account. As per Rule 4 of the said rules, the requirement for cost audit is not applicable to a company which is covered under Rule 3, and whose revenue from exports, in foreign exchange, exceeds seventy five per cent of its total revenue or which is operating from a special economic zone. Being satisfied all these criteria, cost audit is not mandatory for the Company. However, the Company is opting voluntarily for audit of cost records and appointed M/s. E.V.S & Associates, Cost Accountants as Cost Auditors.

Annual Return

In terms of Section 92(3) of the Act and Rule 12 of the Companies (Management and Administration) Rules, 2014, the Annual Return of the Company as on March 31, 2024 is available on the Companys website and can be accessed at https://www.divislabs.com/wp-content/uploads/2024/04/ Annual-Return_2023-24.pdf.

Other Disclosures

• Information on Unclaimed Dividend and transfer to IEPF is provided in the Corporate Governance Report.

• No Company has become or ceased to be its subsidiary, joint venture or associate company during the year.

• No significant and material orders were passed by the regulators or courts or tribunals impacting the going concern status and Companys operations in future.

• The Company has complied with provisions relating to the constitution of Internal Complaints Committee under the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 and rules made thereunder and during the year under review, there were no complaints received or pending.

• The Company has followed the applicable Secretarial Standards, i.e. SS-1 and SS-2, relating to ‘Meetings of the Board of Directors and ‘General Meetings respectively.

• There was no application made or proceeding pending against the Company under the Insolvency and Bankruptcy Code, 2016 (31 of 2016) during the year under review.

Acknowledgements

Your Directors take this opportunity to thank the customers, shareholders, suppliers, bankers, business associates, financial institutions and Central and State Governments for their consistent support and encouragement to the Company. We are sure you will join our Directors in conveying our sincere appreciation to employees at all levels of the Company and its subsidiaries, for their hard work, dedication and commitment and for their participation in the growth of the Company.

	For and on behalf of the Board
	Dr. Ramesh B.V. Nimmagadda	Dr. Murali K. Divi
Place: Hyderabad	Chairman	Managing Director
Date: May 25, 2024	DIN: 07854042	DIN: 00005040