DIRECTORS REPORT

Dear Members,

Your Directors have immense pleasure in presenting the Twelfth Annual Report for the year ended on 31st March, 2016.

1.       FINANCIAL PERFORMANCE

                                                                                                                                     [Rs. in million]

During the year under review, the income from Healthcare services of the Company increased to Rs. 2858.38 million as compared to Rs. 2620.75 million in the previous year registering growth of 9%. Your Company has earned Net Profit of Rs. 296.85 million against Rs. 397.95 million in the previous year. The Company has carried net surplus of Rs. 1258.76 million to the next year.

During the year under review, the consolidated income from healthcare services increased to Rs. 2893.95 Millions as compared to Rs. 2747.33 in the previous year.

2.       DIVIDEND

In terms of issue of Preference Shares, your Directors are pleased to recommend 5% dividend on Preference Shares issued by the Company. As the Company is in process of expansion which requires to plough back the profits earned by the Company, your directors do not recommend any dividend on equity shares.

3.       SHARE CAPITAL & BONUS SHARES

Pursuant to the approval of composite Scheme of Arrangement by the Honorable High Court of Gujarat at Ahmedabad, for merger of Kusha Healthcare Limited and Shalby Surat Hospitals Private Limited, both the wholly owned subsidiaries of the Company with the Company, the authorized Share Capital of the Company was increased to 1012.50 Million comprising of 9,92,50,000 Equity Shares of Rs. 10/- each and 20,00,000 Preference Shares of Rs. 10/- each.

During the year in the month of May, 2015 the Company had issued 103,000 Preference Shares of Rs. 10 each at a price of Rs. 53 per share to the Doctors and Employees on preferential basis.

The Company has allotted 52,412,960 fully paid up equity shares of Rs. 10 each in the month of March, 2016 as Bonus Shares to the existing equity shareholders of the Company in the proportion of 3:2 and resultantly, paid up equity share capital increased to 873.54 Million.

4.       COMPOSITE SCHEME OF ARRANGEMENT

The Board of Directors of your Company, subject to requisite approvals, approved a Composite Scheme of Arrangement under Sections 391 to 394 of the Companies Act, 1956 for merger of Kusha Healthcare Limited and Shalby Surat Hospitals Private Limited, both the wholly owned subsidiary Companies with the Company. After requisite report from Regional Director and Official Liquidator, the Honorable High Court of Gujarat at Ahmedabad in the hearing held on 5th August, 2016 approved the Scheme. The appointed date for the amalgamation was 1st April, 2015. However, the Scheme became effective from 3rd September, 2016, being the date of filing of certified true copy of order of High Court with the Registrar of Companies, Gujarat at Ahmedabad.

The Board of Directors of your Company, approved a Composite Scheme of Arrangement under Section 391 to 394 of the Companies Act, 1956, for spin off of the Hospital Division of Kamesh Bhargava Hospital and Research Centre Private Limited (Transferor Company) and transfer to Shalby Limited (Transferee Company) subject to requisite approvals from the High Court of Punjab and Haryana and the High Court of Gujarat respectively, under whose jurisdiction the registered offices of both companies are situated, and for an order or orders thereof for carrying this Scheme into effect. The petition was presented before the High Court of Gujarat by the petitioner transferee company on 25th July, 2016 and by an order dated 5th August, 2016 the petition was admitted and fixed for hearing before the Honorable Judge taking Companys matter on 9th September, 2016. In the High Court of Punjab and Haryana, the application cum petition alongwith scheme was filed on 5th July, 2016 and the hearing is scheduled on 16th September, 2016.

5.       SUBSIDIARY COMPANY AND CONSOLIDATED FINANCIAL STATEMENTS (S-129(3))

The Company has four subsidiary companies viz. Vrundavan Shalby Hospitals Limited, Shalby (Kenya) Limited, Shalby International Limited (earlier known as Shalby Pune Limited) and Yogeshwar Healthcare Limited. In accordance with section 129(3) of the Companies Act, 2013, the Company has prepared Consolidated Financial Statements of the Company and all its subsidiaries, which form part of this Annual Report. Further a statement containing salient features of the Financial Statements of each subsidiary in Form AOC-1 as Annexure A is attached herewith.

6.       CREDIT RATING

CARE has rated the Companys long term bank facilities as A- indicating a high degree of safety.

7.       MANAGEMENT DISCUSSION AND ANALYSIS REPORT

Management Discussion and Analysis Report for the financial year 2015-16 is annexed to this annual report.

8.       AWARDS/RECOGNITION

Shalby, with the passage of time has ingrained its credibility as one of the most trusted multi-specialty hospital chains in India, delivering expert healthcare at par with world-class quality standards. During the financial year 2015-16 many reputed organizations applauded our   contributions in the Healthcare sector. We take pride in highlighting some of the prestigious awards and recognitions your Company has been bestowed with during the year.

Your Company was honored with the CNBC Bazaar Gujarat Ratna Award 2015-16 for Excellence in Healthcare Services. This award is instituted for saluting Indias Global ambassadors for their entrepreneurial spirit and contribution to the society and nation.

VCCircle Healthcare Award in the category Emerging Tertiary Care Hospital of the Year is yet another recognition your Company has been honored with during 2015-16.

9.       CONTINOUS MEDICAL EDUCATION (CME) PROGRAMMES

Your Company regularly holds CME Programmes, Workshops and Health Talk on specialities like Orthopedics, Cardiology, Neurology etc. The Hospital has been offering DNB Courses in Orthopedic specialty which was approved by the Central Government. All the seats are filled up with post-graduate medical professionals who are pursuing these Super Specialty Courses.

10.   EXTRACT OF ANNUAL RETURN

The extract of the annual return pursuant to section 92(3) of the Companies Act, 2013 and rule 12(1) of the Companies(Management and Administration) Rules, 2014, is enclosed as Annexure B to this report.

11.   PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS U/S 186

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

12.   PARTICULARS OF CONTRACTS OR ARRANGEMENT WITH RELATED PARTY U/S 188

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 are given in Annexure C in Form AOC-2 and the same forms part of this report.

13.   DIRECTORS AND KEY MANAGERIAL PERSONNEL

APPOINTMENT AND RESIGNATION

During the year under review, Mr. Shanay Shah has resigned from the post of Chief Finance Officer of the Company w.e.f 30th June, 2016 and Mr. Shantilal Kothari joined as Chief Financial Officer of the Company w.e.f 1st July, 2016 who is designated as Key Managerial Personnel as per the provisions of the Companies Act, 2013.

As on date, Dr. Vikram Shah, Chairman & Managing Director, Mr. Ravi Bhandari, Chief Executive Officer, Mr. Shantilal Kothari, Chief Financial Officer and Mr. Jayesh Patel, Company Secretary of the Company are the Key Managerial Personnel as per the provisions of the Companies Act, 2013.

DIRECTORS RETIRING BY ROTATION

Dr. Vikram Shah (DIN: 00011653), retires by rotation at the ensuing Annual General Meeting and being eligible, offers himself for reappointment. The Board of Directors recommends his re-appointment.

DECLARATION BY INDEPENDENT DIRECTORS

Pursuant to Section 149 (7) of the Companies Act, 2013, the Company has received necessary declaration from each Independent Director for FY 2015-16 confirming that they meet the criteria of independence as prescribed under the Act.

NUMBER OF MEETINGS OF THE BOARD

Being the apex body constituted by the shareholders for overseeing the overall functioning of the Company, the Board evaluates the proposals involving strategic decision making on a collective consensus basis. The Board meetings are usually held at the Companys Registered and Corporate Office in Ahmedabad, Gujarat.

The Company has convened at least one Board meeting in a quarter and the maximum time gap between any two meetings is not more than one hundred and twenty days. During the Financial year 2015-16, your Board met 8 times to transact various businesses.

POLICY ON DIRECTORS APPOINTMENT

The Company has a Nomination and Remuneration Committee of Directors in place. The Committee reviews and recommend to the Board for remuneration for Directors and Key Managerial Personnel and other employee up to one level below of Senior Management Personnel. The Company does not pay any remuneration to Independent and Non-Executive Directors of the Company.

The Company has devised the Nomination & Remuneration policy for the appointment, re-appointment and remuneration of Directors, Key Managerial Personnel and Senior Management Personnel. All the appointment, re-appointment and remuneration of Directors, Key Managerial Personnel and Senior Management Personnel are as per the Nomination & Remuneration policy of the company.

Criteria for appointment:

i. Proposed Director (Person) shall meet all statutory requirements and should:

      possess the highest ethics, integrity, value

      be willing to devote sufficient time and energy

      have demonstrated high level of leadership and vision

      not have direct/indirect conflict with present or potential business/ operations of the Company

      have expertise and relevant experience (In exceptional circumstances, specialization / expertise in unrelated areas may also be considered)

      have the balance and maturity of judgment

The Nomination and Remuneration Committee shall have discretion to consider and fix any other criteria or norms for selection of the most suitable candidate/s for appointing him/her as Directors of the Company.

ii. The appointment shall be in compliance with the Board Diversity Policy of the Company.

Process for Identification / Appointment of Directors:Board members may (formally or informally) suggest any potential person to the Chairman of the Company meeting the above criteria. If the Chairman deems fit, necessary recommendation shall be made by him to the NRC. Chairman of the Company can himself also refer any potential person meeting the above criteria to the NRC. NRC will process the matter and recommend such proposal to the Board. Board will consider such proposal on merit and decide suitably.

14.   CRITERIA FOR PERFORMANCE EVALUATION

The Board considered and approved the criteria for performance evaluation of itself, that of its Committees and Individual Directors as follows:

Criteria for Board EvaluationFocus on strategic and policy issues Effectiveness of Board process and information sharing Nature of discussions Quality of decisions

Criteria for Committee EvaluationAdequacy of terms of reference of the Committee Fulfillment of key responsibilities Frequency and effectiveness of meetings Quality / relevance and timeliness of information made available Committee dynamics, especially openness of discussions

Criteria for Evaluation of Independent DirectorsParticipation in terms of adequacy (time & content) Contribution through expertise and perspective Guidance / support to Management outside Board / Committee meetings

Criteria for Evaluation of Non-Independent DirectorsParticipation in terms of adequacy Transparency

REMUNERATION POLICY

POLICY ON APPOINTMENT AND REMUNERATION OF DIRECTORS:

REMUNERATION CRITERIATo ensure that the level and components of remuneration is reasonable and sufficient to attract, retain and motivate Directors, KMP and other employees of the quality required to run the Company successfully. No director/KMP/ other employee is involved in deciding his or her own remuneration. The trend prevalent in the similar industry, nature and size of business is kept in view and given due weightage to arrive at a competitive quantum of remuneration. It is to be ensured that relationship of remuneration to the performance is clear & meets appropriate performance benchmarks which are unambiguously laid down and communicated. Remuneration packages should strike a balance between fixed and incentive pay, where applicable, reflecting short and long term performance objectives appropriate to the Company's working and goals. Following criteria are also to be considered:- Responsibilities and duties ; Time & efforts devoted; Value addition; Profitability of the Company & growth of its business; Analyzing each and every position and skills for fixing the remuneration yardstick;

MANNER OF EVALUATION OF BOARD, ITS COMMITTEE AND INDIVIDUL DIRECTORS

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.

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 issues 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.

In a separate meeting of independent Directors, performance of non-independent directors, performance of the board as a whole and performance of the Chairman was evaluated, taking into account the views of executive directors and non-executive directors. The same was discussed in the board meeting that followed the meeting of the independent Directors, at which the performance of the Board, its committees and individual directors was also discussed.

15.   COMMITTEES OF THE BOARD OF DIRECTORS

Your Company has several Committees which have been established as part of the best Corporate Governance practices and are in compliance with the requirements of the relevant provisions of applicable laws and statutes.

The Company has following Committees of the Board:

            Audit and Risk Management Committee

            Nomination and Remuneration Committee

            Corporate Social Responsibility Committee

16.   AUDIT AND RISK MANGEMENT COMMITTEE

The Audit Committee assists the Board in its responsibility for overseeing the quality and integrity of the accounting, auditing and reporting practices of the Company and its compliance with legal and regulatory requirements. It ensures the objectivity, credibility and correctness of the Companys financial reporting and disclosure processes, internal controls, risk management policies and processes, tax policies, compliance and legal requirements and associated matters.

The Act specifies that the Audit Committee should comprise of at least three directors with Independent Directors forming the majority. The Company has complied with the provisions of Section 177 of the Companies Act, 2013.  The Audit Committee consists of the following directors:

            Mr. Shyamal Joshi - Independent Director

            Mr. Nimish Vasa     Independent Director

            Dr. Vikram I Shah   Director

17.   NOMINATION AND REMUNERATION COMMITTEE

The Nomination and Remuneration Committee of the Board of Directors recommends and reviews compensation plans of the Managing Director, Whole-Time Directors and the senior management based on their performance, defined assessment criteria and job responsibilities along with the responsibilities of nomination of Directors and also deals with the Governance issues of the Company. It oversees the implementation of the Nomination and Remuneration Policies of the Company, reviews the effectiveness of such policies from time to time and recommends revisions as and when deemed necessary or expedient.

The Nomination and Remuneration Committee consists of the following directors:

            Mr. Shyamal Joshi

            Mr. Nimish Vasa

            Mr. Kirit Shah 

18.   CORPORATE SOCIAL RESPONSIBILITY

The Corporate Social Responsibility Committee (CSR Committee) of the Board of Directors was constituted on 30th June, 2015. The Committee is entrusted with the responsibility of formulating and monitoring the Corporate Social Responsibility policy of the Company.

The role and terms of reference of the Committee are in consonance with the requirements mandated under Section 135 of the Companies Act, 2013 and relevant rules made there under. The Details of CSR activities are enclosed herewith as Annexure D. The CSR committee has formulated and recommended to the Board, a Corporate Social Responsibility policy(CSR Policy) indicating the activities to be undertaken by the Company, which has been approved by the Board.

The Company has indentified the following activities as CSR

            Promoting preventive healthcare by free multi specialty Medical Camp

            Promoting employment enhancing vocational skill programme

            Providing treatment on concessional rate to lower section of the society

            Donation to charitable trust engaged in charitable activities

            Starting and maintaining old age home

19.   ANTI-SEXUAL HARASSMENT POLICY

The Company has in place an anti sexual harassment policy in line with the requirement of the Sexual Harassment of Women at the workplace (Prevention, Prohibition & Redressal) Act 2013. Internal Complaint committee has been set up to redress complaint received regarding sexual harassment. All employees are covered. There were no incidences of sexual harassment reported during the year under review, in terms of the provisions of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013.

20.   DEPOSITS

During the year, the Company has not accepted any deposits from the public within the meaning of Section 73 of the Companies Act 2013 and Rules made there under.

21.   DIRECTORS RESPONSIBILITY STATEMENT

Your Directors confirm:

a)       In the preparation of the annual accounts, the applicable accounting standards had been  followed along with proper explanation relating to material departures;

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 this Act for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities;

d)      The directors had prepared the annual accounts on a going concern basis; and

e)      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.

22.   INSURANCE

All the fixed assets are adequately insured.

23.   CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO

Information relating to conservation of Energy, Technology, Absorption and Foreign Exchange earnings and outgo is as under

(i) Energy conservation, research & development and Technology absorption:

As the company is in a service industry the particulars required under this clause are not applicable. However the Company has taken initiative to conserve the energy wherever possible.

(ii) Foreign exchange earnings and expenditure:

                                 [Rs in Million]

(iii) Technology absorption, adaption and innovation:

24.   PARTICULARS OF EMPLOYEES

The information required pursuant Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, given in the table below:

25.   ADEQUACY OF INTERNAL FINANCIAL CONTROL 

The Company has adopted and implemented the Internal Financial Control policy and procedures  for ensuring the orderly and efficient conduct of its business, including adherence to companys 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 information.

26.   RISK MANAGEMENT

The Company has implemented the process of understanding, evaluating and addressing the risks associated with the business, to mitigate the risk and maximize the chances of objectives being achieved and ensuring organizations, individuals and communities are sustainable. Risk management also exploits the opportunities uncertainty brings, allowing organizations to be aware of new possibilities. Essentially, effective risk management requires an informed understanding of relevant risks, an assessment of their relative priority and a rigorous approach to monitoring and controlling them.

27.   AUDITORS

STATUTORY AUDITORS

M/s. G. K. Choksi & Co., Statutory Auditors of the Company, retires at the ensuing Annual General Meeting and are eligible for re-appointment. Your directors recommend their reappointment up to the conclusion of fourteenth Annual General meeting subject to the ratification by members in every Annual General meeting. The notes to the accounts referred to in the Auditors Report are self-explanatory and, therefore, do not call for any further comments.

COST AUDITORS

M/s. Board Sanjay B & Associates has been appointed as Cost Auditors by the Board of Directors for audit of Cost Accounts for the year ended on 31st March, 2016 and recommended the members for their ratification.

SECRETARIAL AUDITOR

Pursuant to the provisions of Section 204 of the Companies Act, 2013 and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, your Company had appointed Mr. Shambhu J. Bhikadia, Practicing Company Secretary to undertake the Secretarial Audit of the Company for the FY 2015-16. The Report of the Secretarial Audit Report for the FY 2015-16 is annexed to this Annual Report as Annexure-E. As Secretarial Audit Report do not call for further explanation or comments it may be treated as the adequate compliance of Section 134 of the Companies Act, 2013.

INTERNAL AUDITOR

M/s. T. R. Chadha & Co, Chartered Accountants, Ahmadabad has been Internal Auditors of the Company for Financial Year 2015-16 and for further period until otherwise resolved by the Board of Directors on the recommendation of the Audit Committee.

28.   ACKNOWLEDGEMENTS

Your Directors would like to express their appreciation for the valuable co-operation and assistance received from all Doctors and their team, Bankers, Government Authorities, Auditors and Shareholders during the year under review. Your Directors also wish to place on record their deep sense of appreciation for the devoted services of employees of the Company at all level for its success and look forward their continued support.

Annexure A

Form No. MGT-9

EXTRACT OF ANNUAL RETURN

as on the financial year ended on 31.03.2016

[Pursuant to section 92(3) of the Companies Act, 2013 and rule 12(1) of the Companies (Management and Administration) Rules, 2014]REGISTRATION AND OTHER DETAILS:

All the business activities contributing 10 % or more of the total turnover of the company shall be stated:-

Equity Shareholding

Preference Shareholding

i)                    Equity

ii)                  Preference

Indebtedness of the Company including interest outstanding/accrued but not due for payment

                                                                                                                                                                                           (Rs. In Millions)

VI.   REMUNERATION OF DIRECTORS AND KEY MANAGERIAL PERSONNEL

A. Remuneration to Managing Director, Whole-time Directors and/or Manager: NA

B. Remuneration to other directors: NIL

C. REMUNERATION TO KEY MANAGERIAL PERSONNEL OTHER THAN MD/MANAGER/WTD:

VII. PENALTIES / PUNISHMENT/ COMPOUNDING OF OFFENCES: NA

FOR AND ON BEHALF OF

SHALBY LIMITED

Dr. Vikram Shah

Chairman and Managing Director

(DIN: 0011653)

Date:  05.09.2016   

Place: Ahmedabad

Annexure D

ANNUAL REPORT ON CSR ACTIVITIES

1.     A brief outline of the companys CSR policy, including overview of projects or programmes proposed to be undertaken and a reference to the web-link to the CSR policy and projects or programmes:

The CSR activities we pursue will be in line with our stated Vision and Mission, focused not just around our plants and offices, but also in other geographies based on the needs of the communities \ societies.

The major focus areas where special Community Development programmes would be run are:

         Promoting Health care including Preventive Health care through awareness programmes, health check-ups, free or concessional Medical Camps, provision of medicine & treatment facilities, providing pre natal & post natal healthcare facilities, prevention of female foeticide through awareness creation, program for preventing diseases and building immunity.

         Healthcare we aspire to deliver facilities to communities and other sections of the society in the form of primary health care support through diagnosis and treatments, promoting preventive healthcare, building awareness about sanitation and medical camps, creating awareness through various programs, etc.

         The company may undertake projects or programs or activities aimed at improving the health and hygiene of the socially or economically weaker sections, families in the below poverty line (BPL) by providing free or subsidized medicine, clinical laboratory facilities, free or concessional treatments at hospitals, setting up of medical and diagnostic camps, projects or programs aimed at eradicating poverty or malnutrition of women and children, pain and palliative care etc.

         Employment enhancing vocational skill development programmes and promoting education.

         Company may undertake projects or programs or activities for the protection of elderly citizens by establishing, funding or otherwise supporting old age homes and day care facilities including medical aid.

2.     The composition of the CSR committee:

The composition of the members of the Corporate Social Responsibility Committee is as follows:

1.      Mr. Shyamal Joshi

2.      Mr. Kirit Shah 

3.      Dr. Vikram Shah

3.     Average net profit of the company for last three financial years for the purpose of computation of CSR: Rs. 418.81 Millions

4.         Prescribed CSR Expenditure (two per cent of the amount as in item 3 above): Rs. 8.38 Millions

5.     Details of CSR spent during the financial year:

a)   Total amount to be spent for the financial year: Rs. 8.38 Millions

b)    Amount unspent: Rs. 8.38 Million

c)   Manner in which the amount spent during the financial year:

                                                                                                                                (Rs. in Millions)

6.     In case the company has failed to spend the two per cent of the average net profit of the last three financial years or any part thereof, the company shall provide the reasons for not spending the amount in its Board report:

The Companys CSR initiatives include conducting various programs viz day care facilities, preventive healthcare, health check-ups, free Medical Camps, provision of medicine & treatment facilities and getting feedback from community. Though all such initiatives undertaken by the Company qualifies as CSR activities under schedule VII under the Companies Act, 2013 but since your Company is engaged in providing healthcare services, the same is not eligible. The Company intends to set up Old Age Homes for under privileged class which requires enormous resources being capital intensive. The Company proposes to accumulate the CSR corpus to a sizable level and then undertake such capital intensive project. 

7.     We hereby declare that implementation and monitoring of the CSR policy are in compliance with CSR objectives and policy of the Company.

FORM NO. MR-3

Secretarial Audit Report

(For the financial year ended 31st March, 2016)

[Pursuant to Section 204(1) of the Companies Act, 2013 and Rule No. 9 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014]

To,

The Members

SHALBY LIMITED

Opp: Karnawati Club,

Sarkhej Gandhinagar Highway,

Nr. Prahladnagar Garden

Ahmedabad-380015

Gujarat

I have conducted the secretarial audit of the compliance of applicable statutory provisions and the adherence to good corporate practices by SHALBY LIMITED (hereinafter called the Company). Secretarial Audit was conducted in a manner that provided me a reasonable basis for evaluating the corporate conducts/statutory compliances and expressing my opinion thereon.

Based on my verification of the books, papers, minute books, forms and returns filed and other records maintained by the Company and also the information provided by the Company, its officers, agents and authorized representatives during the conduct of secretarial audit, I hereby report that in my opinion, the Company has, during the audit period covering the financial year ended on 31st March, 2016 (Audit Period) complied with the statutory provisions listed hereunder and also that the Company has proper Board-processes and compliance-mechanism in place to the extent, in the manner and subject to the reporting made hereinafter:

I have examined the books, papers, minute books, forms and returns filed and other records maintained by SHALBY LIMITED (The Company) for the financial year ended on 31st March, 2016 according to the provisions of:

I.                    The Companies Act, 2013 (the Act) and the Rules made there under;

II.        The Securities Contracts (Regulation) Act, 1956 (SCRA) and the Rules made there under;

III.        The Depositories Act, 1996 and the Regulations and Bye-laws framed there under;

IV.     Foreign Exchange Management Act, 1999 and the Rules and Regulations made thereunder to the extent of Foreign Direct Investment, Overseas Direct Investment and External Commercial Borrowings;

V.       The following Regulations and Guidelines prescribed under the Securities   and Exchange Board of India Act, 1992 (SEBI Act) to the extent applicable to the Company :-

a.      The Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers)Regulations, 2011-[Not Applicable to the Company during the Audit Period] ;

b.      The Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 1992 and The Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 2015; [Not Applicable to the Company during the Audit Period];

c.       The Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009-[Not Applicable to the Company during Audit Period];

d.     The Securities Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 and The Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, 2014-[Not Applicable to the Company during Audit Period];

e.      The Securities and Exchange Board of India (Issue and listing of Debt Securities) Regulations, 2008-[Not Applicable to the Company during Audit Period];

f.       The Securities and Exchange Board of India (Registrars to an Issue and Share Transfer Agents) Regulations, 1993 regarding the Companies Act and dealing with client;

g.      The Securities and Exchange Board of India (Delisting of Equity Shares) Regulations, 2009-[Not Applicable to the Company during Audit Period]; and

h.     The Securities and Exchange Board of India (Buyback of Securities) Regulations, 1998-[Not Applicable to the Company during Audit Period];

VI.     Other Laws those are applicable specifically to the Company :

1.         Employees Provident Fund and Miscellaneous Provisions Act, 1952.

2.         Employees State Insurance Act, 1948.

3.         Environment Protection Act, 1986 and other applicable environmental laws.

4.         Payment of Bonus Act, 1965.

5.         Payment of Gratuity Act, 1972 and such other applicable labour laws.

6.         The Bombay Nursing Homes Registration Act, 1949.

7.         Pre-natal Diagnostic Technique (Regulation and Prevention of misuse) Act, 1994.

8.         Atomic Energy Act, 1962.

9.         Drugs and Cosmetic Act, 1940 and Rules 1945.

10.     Medical Termination of Pregnancy Act, 1971

11.     Narcotic Drugs and Psychotropic Substance Act, 1985.

12.     Transplantation of Human Organs Act, 1994.

13.     Bio-medical Waste (Management and Handling) Rules, 1998.

I have also examined compliance with the applicable clauses of the following:

1.         Secretarial Standard issued by The Institute of Company Secretaries of        India notified with effect from 1st July, 2015;

2.         The Listing Agreements entered into by the Company with the         Stock exchanges and The Securities Exchange Board of India (Listing    Obligations and Disclosure Requirements) Regulation, 2015 [Clauses           of Listing Agreement were not applicable as Securities of the       Company is not listed on any recognized stock exchange]

During the period under review the Company has complied with the provisions of the Act, Rules, Regulations, Guidelines, Standards, etc. mentioned above.

I further report that:

The Board of Directors of the Company is duly constituted with proper balance of Executive Directors, Non-Executive Directors and Independent Directors. The changes in the composition of the Board of Directors that took place during the period under review were carried out in compliance with the provisions of the Act.

Adequate notice is given to all directors to schedule the Board Meetings, agenda and detailed notes on agenda were sent at least seven days in advance, and a system exists for seeking and obtaining further information and clarifications on the agenda items before the meeting and for meaningful participation at the meeting.

All the Decisions at the Board meeting and committee Meetings are carried out unanimously as recorded in the Minutes of the Meetings of the Board of Directors or committee of the Board, as the case may be.

I further report that there are adequate systems and processes in the company commensurate with the size and operations of the Company to monitor and ensure compliance with applicable laws, rules, regulations, guidelines.

I further report that during the Audit period there were following Specific events/actions having a major bearing on companys affairs in pursuance of the above referred Laws, Rules, regulations, guidelines, Standards, etc. which are :The Company has on 26th March, 2016 issued and allotted 52412960 equity shares as Bonus equity shares in the ratio of Three Bonus shares for every two existing equity shares held by the shareholders of the company. The company has on 21st May, 2015 issued and allotted 103000 Preference shares of Rs.10/- each at the premium of Rs.43/- per share aggregating to Rs. 54,59,000/-. The Board of directors at their meeting held on 5th January, 2016 has considered and approved Scheme of arrangement in the nature of De-merger and transfer of Hospital Division of Kamesh Bhargava Hospital & Research Centre Private Limited to Shalby Limited pursuant to the Provisions of Section 391 to 394 read with Section 100 to 103 of the companies Act, 1956, all other applicable provisions, if any of the companies Act, 1956.  The Board of directors at their meeting held on 26th March, 2016 has considered and approved Scheme of Amalgamation pursuant to the Provisions of Section 391 to 394 and other applicable provisions, if any, of the companies Act, 1956 of Shalby Surat Hospitals Private Limited and Kusha Healthcare Private Limited be amalgamated with Shalby Limited. Hari Om Healthcare Private Limited was amalgamated with the Company pursuant to the order passed by Honble High Court of Gujarat dated 30th April, 2015.

This Report is to be read with my letter of even date which is annexed as Appendix A and Forms an integral part of this report.

APPENDIX A

To,

The Members

SHALBY LIMITED

Opp: Karnawati Club,

Sarkhej Gandhinagar Highway,

Nr. Prahladnagar Gardern

Ahmedabad-380015

My report of even date is to be read along with this letter.

1.      Maintenance of Secretarial record is the responsibility of the management of the Company. My responsibility is to express an opinion on these secretarial records based on my audit.

2.      I have followed the audit practices and process as were appropriate to obtain reasonable assurance about the correctness of the contents of the Secretarial records. The verification was done on test basis to ensure that correct facts are reflected in Secretarial records. I believe that the process and practices, I followed provide a reasonable basis for my opinion.

3.      I have not verified the correctness and appropriateness of financial records and Books of Accounts of the Company.

4.      Wherever required, I have obtained the Management representation about the Compliance of laws, rules and regulations and happening of events etc.

5.      The Compliance of the provisions of Corporate and other applicable laws, rules, regulations, standards is the responsibility of the management. My examination was limited to the verification of procedure on test basis.

6.      The Secretarial Audit Report is neither an assurance as to the future viability of the Company nor of the efficacy or effectiveness with which the management has conducted the affairs of the Company.           

As the company is in a service industry the particulars required under this clause are not applicable. However the Company has taken initiative to conserve the energy wherever possible.    

Because of tabular form please refer Text Block Data.   

Because of tabular form please refer Text Block Data.   

Your Directors confirm:   a)       In the preparation of the annual accounts, the applicable accounting standards had been  followed along with proper explanation relating to material departures;   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 this Act for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities;   d)      The directors had prepared the annual accounts on a going concern basis; and   e)      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.