DIRECTORS' REPORT

TO

THE SHAREHOLDERS,

The Directors hereby present their 37th Annual Report together with the Audited Statement of Accounts of the Company for the year ended March 31, 2015.

Your Directors regret their inability to recommend payment of any dividend in view of loss during the year.  

Consolidated Results:

The Company's operations are organised through 7 subsidiaries and a joint venture company each of which represents a focused area of business strategy which led to better growth and consolidated operations.The combined revenue from operations gone up from 10,465 lakhs to Rs 12,450 lakhs showing a growth of nearly 20%,consequently the loss before tax reduced from nearly 2021 lakhs to 667 lakhs. Operations:

Pharma Formulations:

The Company continues to manufacture formulations under license and market these through established companies in the market. The Company also manufactures and sells a wide range of Formulation through its distributors. The Company has discontinued its Generics Marketing business in 2015 .

Sarabhai Chemicals (India) Pvt. Ltd. (SCPL),

Sarabhai Chemicals Specialties, a division of SCPL markets speciality pharmaceutical products for Oncology and Infertility . Inspite of adverse market scenario, the turn-over has increased by 13.5% during the year under review. SCPL has launched a new division viz. Uro - Gynaec in January, 2015 which has received good response from the market.

Asence Inc.

Asence Inc., a wholly-owned subsidiary of the Company, incorporated in US specializes in the supply of quality pharmaceuticals preparations (Finished Dosage Forms and Active Pharmaceutical Ingredients) to international markets.

Asence Pharma Pvt.Ltd.,(Asence)

Asence,a wholly owned subsidiary of Asence Inc. has grown significantly during the year . It has achieved gross turnover of Rs.3755.17 lacs with a Net profit of Rs.103.90 lacs for the year ended 31 st March 2015. Asence has made inroads into growth related projects through investment and partnerships in group companies as well as external manufacturing sites. This has shown increase in sales and relatively high impact on profitability. The Company is expected to grow well in the current year .

Asence is making full efforts to boost up the international activities as well as domestic sales and endeavors to improve the performance of all its products.

Vovantis Laboratories Pvt. Ltd., (Vovantis)

During the year,Vovantis , a joint venture company, has observed noteworthy growth in the operations as compared to previous years. Many new products in the form of Effervescent Tablets and powder packed in sachet have been developed and these products are very well accepted by the market. As a result, Vovantis could achieve considerable orders from market and booked significant increase in Sales.The gross sales increased to Rs 17.32 crores as compared to Rs.9 .61 crores in last year. Profit before tax increased to Rs.1.90 crores as against Rs 1.16 crores in last year.

In view of expecting much more demand in future from the existing as well as new customers, Vovantis is planning to enhance its production capacity by creating additional plant facilities near to the existing plant. The project evaluation is under finalization considering alternative sources of investment.

Vovantis is confident to create its distinguished presence in the international market by ensuring upward graphs in its growth.

Suvik HItek Private Limited (Suvik)

Suvik, a wholly owned subsidiary of the Company, has started new business activities of Generics marketing with effect from 1st January 2015. Suvik has already entered into necessary agreements with Manufacturers and Distributors and started generics marketing . Suvik would market these under the brand name of "Sarabhai" and its logo for which Suvik has executed license agreement with the company . Suvik expects to achieve better results in the current year due to increase in turnover from Generics business.

In the year under review, Suvik achieved a turnover of Rs 399 lakhs in comparision to Rs 52 lakhs in last year .The net loss has also come down to Rs 30.81 lakhs in the the year.

Bulk Drugs:

SYNBIOTICS LIMITED (Synbiotics)

During the year under report, there has been an increase of about 50% in the turnover of Synbiotics ,,another wholly owned subsidiary of the Company,. This has been mainly due to increased demand product- Amphotericin Oral grade and Lyophilized grade in the overseas market. Increased off take by overseas parties has also helped in stabilizing the demand for the products.

Synbiotics has successfully passed the audit inspection from various international and domestic companies. Synbiotics manufacturing facilities have got recognition from overseas authorities and also received approval from PMDA [Japan], WHO-GMP, EU, and USFDA.

Synbiotics R &D department is constantly working for improving yield of EP Grade product for which there is a good potential market both at domestic and international level. Synbiotics has planned to invest about Rs. 100 lakhs in seting up facilities to increase yield efficiency of the product securing high productivity. Synbiotics achieved a turnover of Rs.1203.41 lacs for the year ended 31 st March,2015.

ELECTRONICS:

Systronics( India) Limited: (Systronics)

During the year under report, the turnover of Systronics , a wholly owned subsidiary of the Company has decreased from Rs 51.72 lakhs to Rs 47.93 lakhs . Systronics is exploring the possibilities of expansion /diversification to achieve better results and expecting to make progress in the forthcoming years.

Corporate Governance:

Pursuant to clause 49 of the Listing Agreement with the BSE Ltd, Management Discussion and Analysis Report, Corporate Governance Report and Auditors' Certificate regarding Compliance of Conditions of Corporate Governance are made as a part of the Annual Report.

Subsidiaries:

A statement pursuant to Section 129 of the Companies Act, 2013 in respect of Subsidiary companies is appended to the balance sheet. The report and the accounts of the Company may be treated as abridged accounts as contemplated under Section 136 of the Companies Act, 2013. Those shareholders, who are desirous of receiving full reports and accounts including the report and the accounts of the Subsidiaries of the Company, will be provided the same on receipt of written request / requisition in this regard. This will help to save considerable cost in connection with printing and mailing of the report and accounts in respect of the various subsidiaries of the company.

In order to ease the distribution of Annual Report, shareholders are requested to register their email address with the Company or its STA in order to get the Annual Report through email.

Consolidated Financial Statement:

In compliance of the Accounting Standard AS-21 on Consolidated Financial Statements, the Consolidated Financial Statements, which form part of the Annual Report and Accounts, are attached herewith.

Directorate:

Pursuant to the provisions of Section 152 of the Companies Act, 2013, Mr. K. Mohandas, who retires by rotation and being eligible offer himself for re-appointment.

Declaration by Independent Directors

The Independent Directors have submitted the declaration of independence, as required pursuant to Section 149 (7) of the Companies Act, 2013 stating that they meet the criteria of independence as provided in sub-section (6).

Board Evaluation

The Board of Directors has carried out an Annual Evaluation of its own performance, Board Committees and individual Directors pursuant to the provisions of the Act and the Corporate Governance requirements as prescribed by Securities and Exchange Board of India (SEBI) under clause 49 of the Listing Agreements ("Clause 49") .

The performance of the Board was evaluated by the Board after seeking inputs from all the Directors on the basis of the criteria such as the Board composition and structure, effectiveness of board processes, information and functioning, etc.

The performance of the Committees was evaluated by the Board after seeking inputs from the Committee members on the basis of the criteria such as the composition of committees, effectiveness of committee meetings, etc.

The Board and the Nomination and Remuneration Committee ("NRC") reviewed the performance of the individual Directors on the basis of the criteria such as the contribution of the individual Director to the Board and Committee Meetings like preparedness on the issue to be discussed, meaningful and constructive contribution and inputs in meetings etc. In addition, the Chairman was also evaluated on the key aspects of his role.

Particulars of loans, Guarantees or Investments.

Information regarding loans, guarantees and investments covered under the provisions of Section 186 of the Companies Act, 2013 are detailed in the financial statements.

Related Party Transactions.

Since all the related party transactions are carried out in the ordinary course of business on arms' length basis such transactions entered into by the Company during the financial year did not attract the provisions of Section 188 of the Companies Act, 2013. There being no 'material' related party transactions as defined under clause 49 of the Listing Agreement, there are no details to be disclosed in Form AOC-2 in that regard.

During the year 2014-15, pursuant to Section 177 of the Companies Act, 2013 and clause 49 of the Listing Agreement, all RPTs were placed before Audit Committee for its prior/omnibus approval.

Material Changes and Commitments.

There have been no material changes and commitments, affecting the financial position of the Company, which have occurred between the end of the financial year of the Company and the date of this Report.

Extract of Annual Return

The extract of Annual Return as provided under sub-section (3) of section 92 of the Companies Act, 2013 in the prescribed Form MGT-9 is annexed to this report.

Number of Meetings of the Board.

There were 6 meetings of the Board held during the year. Detailed information is given in the Corporate Governance Report.

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 followed by Nomination and Remuneration Committee while recommending appointment of Directors or key Managerial Personnel. They have fixed criteria for appointment of directors and key Managerial Persons. Every year their performance is evaluated by the committee and accordingly suitable recommendation is made .

Internal financial control systems and their adequacy.

The company has an Internal control System, commensurate with size, scale and complexity of its operations. During the year the company got its Internal Audit done through its own Internal Audit Department..This department works according to policies and rules framed to monitor and control financial transactions within the company .Since the Company has its own Internal Auditor, it has not appointed any outside Auditor for Internal Audit work.

Audit Committee.

The details pertaining to composition of audit committee are included in the Corporate Governance Report which forms part of this report.

Auditors' Report and Secretarial Auditors' Report.

Auditors' Report does not contain any qualifications, reservations or adverse remarks. Report of the Secretarial Auditor is given as an annexure which forms part of this report. Regarding appointment of CFO, the company had selected one person for the post of CFO in the last accounting year, who did not join for his personal reasons. Thereafter the company is in the process of looking for a right person for appointment of CFO and it is expected that CFO will be appointed soon by the Company.

Risk Management

The Audit committee of the company is assigned the task to frame, implement and monitor the risk management plan for the Company. The Committee is responsible for reviewing the risk management plan and ensuring its effectiveness. The Audit Committee has additional oversight in the area of financial risks and controls. Major risks identified by the business and functions are systematically addressed through mitigating actions on a continuing basis.

Corporate Social Responsibility

Since the company has been incurring losses for last more than three years, the provisions relating to Corporate Social Responsibility are not attracted .

Particulars of Employees

The information required under Section 197 of the Act read with rule 5 (1) of the Companies ( Appointment and Remuneration of Managerial Personnel) Rules, 2014 will be provided upon request.In terms of section 136 of the Act, the reports and accounts are being sent to the members and others excluding the information on employees' particulars , which is available for inspection by members at the registered office of the company during 11.00 a.m. to 4.00 p.m.on working days of the company upto the date of AGM.If any member is interested in obtaining a copy thereof, he may write to Secretarial Department of the Company.

Fixed Deposits:

The Company has not accepted any fixed deposit during the year.

Energy Conservation, Technology Absorption and Foreign Exchange earnings and outgo:

Particulars of Energy Conservation, Technology Absorption and Foreign Exchange Earnings and outgo required to be given , are given in the Annexure to this Report in the prescribed format.

Directors' Responsibility Statement.

As required under Section 134 (5) of the Companies Act, 2013, we hereby state:

i) That in the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures, if any.

ii) That the Directors have 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 as at 31st March, 2015.

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 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities.

iv)That the Directors have prepared the annual accounts on a going concern basis.

V ) That the directors have laid down Internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively.

Vi) That the Directors have devised proper systems to ensure compliances with the provisions of all applicable laws and the systems are adequate and operating effectively.

Insurance:

Building, Plant and machinery and stocks, have been adequately insured. The Company carries a risk for certain assets like goods in transit in respect of which any loss resulting from non-insurance is small because of fairly large drop in production and sales.

Statutory Auditor:

Pursuant to Section 139 of the Companies Act, 2013 and the Rules made thereunder, the existing Auditors M/s. Sorab S. Engineer & Co., Chartered Accountants, Mumbai, ( Reg. No. 110417W) were appointed by the shareholders at 36th Annual General Meeting to hold office until the conclusion of the 38th Annual General Meeting, subject to the ratification by Shareholders at each Annual General Meeting.

Acknowledgement:

Your Directors would like to take this opportunity to express their deep sense of gratitude to the Banks, Government Authorities, Customers and Shareholders for their continuous guidance and support. Further, they would also like to place on record their sincere appreciation for the dedication and hard work put in by one and all members of Sarabhai Pariwar including workers.

For and on behalf of the Board

Kartikeya V. Sarabhai

Chairman

Date: 28.7.2015

Place: Ahmedabad