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Natural Capsules Ltd.

BSE: 524654 | NSE: | Series: NA | ISIN: INE936B01015 | SECTOR: Pharmaceuticals

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Annual Report

For Year :
2018 2016 2015 2014 2013 2012 2011 2010 2009

Director’s Report

The Directors have pleasure in presenting their 25th Twenty Fifth Annual Report together with the Audited Accounts of the company for the year ended 31st March 2018.

Financial results:

The Company’s financial performance, for the year ended is31st March 2018.Summarized below:

(Rs. In Lakhs)


31stMarch, 2018

31 stMarch,2017

Gross Sales



Less : Excise duty& GST



Net Sales



Other Income






Profit before depreciation & taxation



Less : Depreciation



Less : Provision for taxation



Less: Prior period adjustment (Taxation)



Add: Deferred Tax withdrawn



Profit after taxation



Add: Balance brought forward from previous year/Other Equity



Surplus available for appropriation


General Reserve

Proposed Dividend



Tax on Dividend



Additional depreciation on fixed asset as per Companies Act, 2013

Balance carried to Balance sheet






The Change in the Nature of Business, if any:

There was no change in nature of business for the period under review.

Transfer to reserves:

The company does not propose to transfer any amount to the General Reserves.


Based on the performance of the Company and the need for conservation of internal accruals, while maintaining the dividend for the shareholders, your Directors are pleased to recommend a final dividend of Rs. 1 per equity share at the rate of 10 % subject to the approval of members. The dividend, if approved by the Members, will result in the out flow of Rs.62.33 lakhs from the company in addition to Rs. 12.69 lakhs by way of dividend distribution tax. Dividend if declared will be paid to the Members whose names appear in the Register of Members as on the record date as on 14th September 2018. Transfer of Unclaimed Dividend to Investor Education and Protection Fund

In terms of the Companies Act, any unclaimed or unpaid Dividend relating to the financial year 2010-11, will be transferred to the Investor Education and Protection Fund established by the Central Government, after the conclusion of 25th Annual General Meeting.

Share capital:

During the year under consideration, there was no change in the paid up capital. The present share capital stands at Rs. 6,23,27,000 Comprising of 62,32,700 Equity Shares of Rs. 10/- only each. Further, the company has not made any fresh issue of shares for the Financial Year 2017-18.

Extract of Annual Return:

As per the requirements of the Companies Act, 2013, the extract of annual return in the prescribed Form MGT 9 is annexed hereto as Annexure - 1 forming part of this report.

Board Meetings and Its Committees Conducted During The Period Under Review:

Board Meeting No. Present

Date of Board Meeting

Board Strength

No. of Director’s


Saturday, 27th May 2017




Wednesday, 9th August 2017




Saturday, 04th November 2017




Monday, 29th January 2018



Further details of the same have been enumerated in the Corporate Governance Report annexed in Annexure-5to this report.

Fixed Deposits:

Company has not accepted any deposits within the meaning of Section 73 of the Companies Act, 2013 and the Companies (Acceptance of Deposits) Rules, 2014.

Particulars of Loans, Guarantees or Investments:

The company has not given any loans or guarantees covered under the provisions of section 186 of the Companies Act, 2013. The details of the investments made by company are given in the notes to the financial statements.

Internal control systems and their adequacy:

Internal financial controls means the policies and procedures adopted by the company for ensuring the orderly and efficient conduct of its business, including adherence to 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 information; The Company has adequate internal control systems to monitor business processes, financial reporting and compliance with applicable regulations. The systems are periodically reviewed for identification of control deficiencies and formulation of time bound action plans to improve efficiency at all the levels. The Audit Committee of the Board constantly reviews internal control systems and their adequacy, significant risk areas, observations made by the internal auditors on control mechanism and the operations of the Company and recommendations made for corrective action through the internal audit reports. The Committee reviews the statutory auditors’ report, internal audit reports, secretarial audit reports, project repots, quarterly budgets, significant processes and accounting policies and other key issues from time to time.

Directors’ Responsibility Statement

The Directors confirm that -

(a) In the preparation of the annual accounts, the applicable accounting standards have been followed and there are no material departures from those standards.

(b) They 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 at the end of the financial year and of the profit of the Company for that period;

(c) They have taken proper and sufficient care for 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;

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

(e) The directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such system were adequate and operating effectively. Based on the framework of internal financial controls established and maintained by the Company, work performed by the Internal, Statutory and Secretarial Auditors, reviews performed by the management and the relevant Board Committees, the Board, in concurrence with the Audit Committee, is of the opinion that the Company’s internal financial controls were adequate and effective as on March 31, 2018.

(f) They have duly complied with Secretarial Standards issued by Institute of Company Secretaries of India (ICSI) from time to time.

Information Pertaining to Auditors and Other Allied Matters:-

Details In Respect Of Frauds Reported By Auditors under Section 143(12) Other Than Those Which Are Reportable To the Central Government

There were no instances of frauds identified or reported by the Statutory Auditors during the course of their audit pursuant to Section 143(12) of the Companies Act, 2013.

Explanation and Comments on Auditor Reports:

The reports of the Statutory Auditors (annexed elsewhere in the Annual Report) and that of the Secretarial Auditors (annexed hereto as Annexure - 2)and the explanations on the observations of Secretarial Audit Report is given below:

Comments/Observations of the Secretarial Auditor:

Company’s Response/Explanations:

a) The Company has not provided/spent the amount as prescribed under sec. 135 of the Companies Act 2013 and the rules framed thereunder, relating to Corporate Social Responsibility.

The company has spent part amount of Rs.1.5 Lakhs and is in the process of identifying proper areas of CSR.

b) There were some delays in filing of some of the e-forms with the Registrar of Companies.

Due to technical snag in the system, there was a delay in filing few e-forms with the Registrar of Companies, however the same was filed with additional fees and there was no instance of penalty/compounding.

c) The Company has received notice from Bombay Stock Exchange for delayed filing of some of the returns as per SEBI LODR Regulations, 2015 for non-compliance for earlier period 2013 to 2016 levying total penalty of Rs 49450/- which has since been paid by the Company.

The said delay was due to inadvertence and the penalty was paid within stipulated time.

Statutory Auditors:

M/sP. ChandrasekarLLP, Chartered Accountants, were appointed as the Statutory Auditors of the Company for a term of five consecutive years at the 24thAnnual General Meeting held on 29th August 2017 subject to annual ratification by shareholders. However with the advent of Companies (Amendment) Act, 2017 the requirement of annual ratification of the appointment of the Statutory Auditors of the Company by the shareholders at the Annual General meeting has been done away with. Accordingly,

M/s P. ChandrasekarLLP, Chartered Accountants will continue to be the Statutory Auditors of the Company for the FY 2018-19 and thereafter, hence, no resolution is proposed for ratification of the appointment of Auditors, who were appointed at the Annual General Meeting, held on 29th August 2017.

Secretarial Auditors:

Pursuant to the provisions of Section 204 of the Companies Act, 2013 and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 (as amended from time to time) the Company has appointed SriR. Parthasarathi, Company Secretary in practice to undertake the Secretarial Audit of the Company. The Secretarial Audit report is annexed herewith as Annexure - 2.

Cost Auditors

The provisions of Section 148 of the Companies Act, 2013 read with the Companies (Cost Records and Audit) Amendment Rules, 2014(as amended from time to time) is currently not applicable to the company.

Significant and Material Orders Passed By the Regulators or Courts:

There are no significant material orders passed by the Regulators / Courts which would impact the going concern status of the Company and its future operations.

Declaration of Independent Directors:

The Company has received declarations from all the Independent Directors of the Company confirming that they meet the criteria of independence as stipulated in Section 149(6) of the Companies Act, 2013 so as to qualify themselves to act as Independent Directors under the provisions of the Companies Act, 2013 and the relevant rules.


Shri.Laxminarayan Mundra and Smt. Jyoti Mundra, Directors retire by rotation and being eligible, offer themselves for re appointment.

All independent directors have given declarations that they meet the criteria of independence as laid down under section 149 (6) of the Companies Act, 2013 and Regulation 25(3) of SEBI (Listing Obligations and Disclosure Requirement) Regulations, 2015. All Directors have given declaration relating to compliance with code of conduct.

Nomination and Remuneration Committee and Policy:

As per the requirements of the provisions of the Companies Act, 2013, a Nomination and Remuneration Committee of Directors was constituted by the Board of Directors and the details of the Members of the Committee are disclosed elsewhere in this Annual Report. The Board has, on the recommendation of the Nomination and Remuneration Committee framed a policy on Director’s appointment and remuneration including criteria for determining qualification, positive attributes, independence of a Director and other matters provided under sub-section (3) of Section 178. The said Policy is available on the website of the Company, various web links of the company’s policy is detailed under the head Policy.

Related Party Transactions:

All transactions of the Company with the related parties were in the ordinary course of business and on an arm’s length pricing basis. There were no material significant related party transactions having potential conflict with the interest of company.

Name of the related party and nature of relationship where control exists:

Name of Related Party Nature of Relationship

M/s Mundra Enterprises Entity in which Director or KMP is related:

Shri.Sunil L Mundra

Shri.Laxminarayan Mundra

Shri.Sathyanaraya Mundra

(B) (i) Related Party Transactions:

Name of Related Party

Nature of Transaction

Amount of Transaction

Amount Outstanding at the end of year Credit (Rs.) Debit (Rs.) Current Year Current Year (Previous Year) (Previous Year)

M/s Mundra Enterprises

Operating Lease Rental Payments



Material Changes and Commitments Affecting the Financial Position ofthe Company:

There is no material change or commitments after the closure of the financial year as on 31st March 2018 and till the date of this report.

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

The information pertaining to conservation of energy, technology absorption, Foreign Exchange Earnings and Outgoas required under section 134 (3) (m) of the Companies Act, 2013 read with Rule 8(3) of the Companies (Accounts)Rules, 2014 (as amended from time to time) is attached herewith as Annexure - 3 to this report.

Risk Management:

The Company follows a comprehensive and integrated risk management process. The risk management process is designed to safeguard the organization from various risks through adequate and timely actions. It is designed to anticipate, evaluate and mitigate risks in order to minimize its impact on the business. The potential risks are inventoried and integrated with the management process such that they receive the necessary consideration during decision making and are periodically reviewed and revised by the Board of Directors.

Corporate Social Responsibility:

The Board has constituted a CSR Committee comprising of Shri Dr. C.M.Gurumurthy,Shri Sunil L Mundraand ShriSushil Kumar Mundra. The Annual Report on Company’s CSR activities of the Company is furnished in the prescribed format as Annexure - 4 and attached to this report.

Board 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 Companies act, 2013, states that the performance evaluation of independent directors shall be done by the entire Board of Directors, excluding the director being evaluated. Pursuant to the provisions of the Act, the Board has carried out an annual evaluation of its own performance, the individual Directors (including the Chairman) as well as an evaluation of the working of all Board Committees. The performance evaluation was carried out on the basis of inputs received from all the Directors / Members of the Committees, as the case may be.

The Independent Directors of the Company have also convened a separate meeting for this purpose. All the results of evaluation have been communicated to the Chairman of the Board of Directors.

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 evaluation process has been explained in the corporate governance report. The Board approved the evaluation results as collated by the nomination and remuneration committee.

Corporate Governance:

Pursuant to Regulation 34 of the SEBI (LODR) Regulations, 2015, Management Discussion and Analysis Report, Report on Corporate Governance and Auditors Certificate regarding compliance of conditions of Corporate Governance provided in Annexure-5 in this Report and the same forms part of the Directors’ Report.

Composition of Audit Committee and Vigil Mechanism / Whistle Blower Policy:

The Board has constituted an Audit Committee, details of which are enumerated in the Corporate Governance Report. The Company has devised a vigil mechanism in the form of a Whistle Blower Policy in pursuance of provisions of Section 177(10) of the Companies Act, 2013 and the policy is explained in corporate governance report. During the year under review, there were no complaints received under this mechanism.

Disclosure under the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013:

The Company has in place a policy on Sexual Harassment of Women at Workplace in line with the requirements of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. An Internal Compliant Committee has been set up to redress complaints received. All employees (permanent, contractual ,temporary, trainees) are covered under this policy. There were no complaints received from any employee during the financial year 2017 - 18.

Particulars of Employees:

Disclosures with respect to the remuneration of Directors and employees as required under Section 197 of Companies Act, 2013 and Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 has been appended as Annexure - 6to this Report.

Subsidiaries, Joint Ventures and Associate Companies:

The Company does not have any joint venture, subsidiary or associate company.

Management Discussion and Analysis Report:

Industry structure and developments:

During the year under review, Indian Pharma Industry has faced challenges in both domestic and international fronts. However despite these challenges, industry has grown by around 3 %. On domestic front, industry faced challenges due to Introduction of GST during first quarter of Financial Year-2018; price control on many finished formulations had impacted the industry. Bigger Pharma companies had faced challenges of pricing in regulated markets, however stiff competition in these markets has given increased market share to Indian companies who have been more adept in handling the pricing pressure. At the same time exports to other countries were affected due to challenges of currency depreciation, hard currency availability etc. Your company during the Financial Year 2017-18 had a gross turnover of Rs. 5232.32Lakhs as against Rs. 5136.66Lakhs in the previous year, a marginal growth of 1.82%. Profit before depreciation and taxation was Rs. 168.22 Lakhs as against Rs.90.00 lakhs in the previous year. The net profit of the Company for the year under review was placed at Rs. 111.111Lakhs as against Rs. 62.78Lakhs previous year. Due to continuing challenges on export front and pricing pressure in domestic front and increase in other input costs, margins remained in lower percentages. Despite these challenges Profit after tax has increased by 43.49 % during the year under review.

Opportunities and threats:

a). Opportunities

1. Opening of export opportunities for HPMC capsules in various countries.

2. Increase in demand for HPMC capsules within the country due to trend of conversion of many products from gelatin to HPMC capsules.

3. New dosage formulations using hard capsules.

4. Company‘ new API project will market products which are currently being imported and hence will have good demand and margins.

b). Threats:

1. Aggressive expansion & price competition from Chinese suppliers.

2. Increase in prices of raw material due to short supply in domestic market and higher import costs due to devaluation of Indian currency.

3. Slowdown in exports due to challenges in international economy.

Segment -wise or product wise performance is not relevant in view of the company having single product.

c). Outlook:

Based on the company’s performance up to the date of this report, orders on hand and realizing the incremental capacity post up gradation of machines, your company is hopeful of achieving a turnover of around Rs. 58 to 60 crores in the current year. However due to increase in input costs, company may still earn lower margins as compared to earlier years. New API project once commissioned will give a big boost to company‘s revenue and profits.

d.) Risks & Concerns

Risk of competition and exchange fluctuations may have an adverse impact on the projections. Risk of delay in receiving payments for both local & international customers can lead to higher finance cost. Risk of short supplies of raw material can cause loss of business to some extent. Internal Control Systems and Their Adequacy:

The Company has an adequate Internal Control System commensurate with its size and operations. Management has overall responsibility for the Company’s Internal Control System to safeguard the assets and to ensure reliability of financial records. Audit Committee reviews all financial statements and ensures adequacy of internal control systems. The Company has engaged the services of an Independent Chartered Accountant to carry out the internal audit and ensure that recording and reporting are adequate and proper, the internal controls exist in the system and that sufficient measures are taken to update the internal control system. The system also ensures that all transaction are appropriately authorized, recorded and reported. Exercises for safeguarding assets and protection against unauthorized use are undertaken from time to time. The company has also installed an extensive CCTV Surveillance system to cover the entire factory premises. All these measures are continuously reviewed by the management and as and when necessary improvements are affected.

Discussions on financial performance with respect to operational performance:

The Net Sales during the year was Rs.5475.52lakhs and your Company could make Net Profit of Rs.111.11 Lakhs after tax.

No. of Employees:




































The Board acknowledges the continued assistance from the Bankers, State Governments, Local Bodies, Customers, Suppliers, Executives, Staffs, workers at all levels and the Shareholders for their continuous cooperation and assistance.

For and on Behalf of the Board

Sd/- Sd/-

Place: Bengaluru Sunil L Mundra S Gopalan

Date : May 18th 2018 Managing Director Chairman

Director’s Report