Dear Shareholders,

The Directors have pleasure in presenting theTwenty Sixth Annual Report of the Company together with Audited Accounts of the Company for the financial year ended March 31, 2018.

1. FINANCIAL HIGHLIGHTS

2. COMPANY PERFORMANCE

The Company’s Standalone net revenue for the current year is Rs 6724.88 crores as compared to Rs 6131.27 crores in previous financial year. Profit before Tax is Rs. 144.11 crores as compared to that of last year of Rs. 233.71 Crores. Profit after Tax for the Financial Year 2017-2018 stood at Rs. 71.11 crores as compared to Rs. 164.30 crores in the previous financial year.

The Company’s Consolidated net revenue for the year is Rs 7319.36 crores as compared to Rs 6871.83 crores. Profit before Tax is Rs. 165.35 crores as compared to that of last year of Rs. 263.55 Crores.

Profit after Tax for the Financial Year 2017-2018 stood at Rs. 92.35 crores compared to Rs. 194.15 crores in the previous financial year.

3. CONSOLIDATED FINANCIAL STATEMENTS

As per Regulation 33 of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (hereinafter referred to as “Listing Regulations”) and applicable provisions of the Companies Act, 2013 read with the Rules issued thereunder, the Consolidated Financial Statements of the Company for the financial year 2017-18 have been prepared in compliance with applicable Accounting Standards and on the basis of Audited Financial Statements of the Company and its subsidiary.

The Consolidated Financial Statements together with the Auditors’ Report form part of this Annual Report.

4. SUBSIDIARIES

A separate statement containing the salient features of financial statements of all subsidiaries of the Company forms a part of consolidated financial statements in compliance with Section 129 and other applicable provisions, if any, of the Companies Act, 2013. In accordance with Section 136 of the Companies Act, 2013, the financial statements of the subsidiary and associate companies are available for inspection by the members at the Registered Office of the Company during business hours on all days except Saturdays, Sundays and public holidays upto the date of the Annual General Meeting (‘AGM’). Any member desirous of obtaining a copy of the said financial statements may write to the Company Secretary at the Registered Office of the Company. The financial statements including the consolidated financial statements, financial statements of subsidiaries and all other documents required to be attached to this report have been uploaded on the website of the Company (www.kwality.com).

The Company has formulated a policy for determining material subsidiaries. The policy may be accessed on the website of the Company (www.kwality.com)

Your Company has a wholly owned subsidiary under the name and style of”Kwality Dairy Products -FZE” in free trade zone of United Arab Emirates to increase its global foot print and to develop and cater to the new markets. Your Company has prepared Consolidated Financial Statements in accordance with Section 129(3) of the Companies Act, 2013, Regulation 33 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 and Accounting Standard as specified under Section 133 of Companies Act, 2013 read with Rule 7 of Companies (Accounts) Rules 2014.

The Board unanimously decided to close business operations of Kwality Dairy Products FZE Dubai-UAE (A wholly owned Subsidiary of the Company) in phased manner w.e.f 11th July, 2018 due to the issues connected with recession in Global Market specifically slowdown of Dairy Product business in UAE.

5. DIVIDEND

Based on the performance of your Company, the Directors are pleased to recommend a final dividend of Rs. 0.10 per equity share of Rs. 1 each i.e @ 10%, which will be paid after your approval at the ensuing Annual General Meeting.

The dividend will be paid to members whose names appear on the company’s register of members, after giving effect to all valid share transfers in physical form lodged with the Registrar and Transfer Agents (RTA) of the company on or before , and in respect of shares held in electronic form (demat mode), dividend will be paid to those”deemed members” whose names appear in the statement of beneficial ownership furnished by National Securities Depository Limited (NSDL) and Central Depository Services (India) Limited (CDSL) at the close of business hours on September 22, 2018.

6. CHANGE IN NATURE OF BUSINESS

There has been no change in the nature of business of the Company.

7. PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS

Loans, Guarantees and Investments covered under section 186 of the Companies Act, 2013 form part of the notes to the financial statements provided in the Annual Report.

8. TRANSFER TO RESERVE

Pursuant to section 123 of the Companies Act, 2013 the company is not mandatorily required to transfer any amount to the reserves. Accordingly the company has not transferred any amount to the reserves during the year.

9. PREFERENTIAL ISSUE AND PRIVATE PLACEMENT

The Board of Directors of your Company, had during the financial year i.e 2017-18 allotted on preferential basis 21,69,762 Equity Shares at the price of Rs 115.22/- per share on conversion of 1 (One) Compulsorily Convertible Warrants aggregating to Rs 25 Crore to Bennett Coleman & Co Ltd (Non Promoter) and 12,15,066 Equity Shares at the price of Rs 115.22/- per share on conversion of 1 (One) Compulsorily Convertible Debentures aggregating to Rs 14 Crore to HT Media Limited (Non Promotor) on 19th February, 2018 as approved by the shareholders on 09th August, 2016 via postal ballot. Further the Equity shares allotted have received listing and trading approval from both the Stock Exchanges i.e. BSE Limited & National Stock Exchange of India Limited and are under the Lock-in period of 1 year from the date of trading approval.

10. TRANSFER TO INVESTOR EDUCATION AND PROTECTION FUND AUTHORITY

Pursuant to the applicable provisions of the Companies Act, 2013 read with the Investor Education and Protection Fund Authority (Accounting, Audit, Transfer and Refund) Rules, 2016 (“IEPF Authority”), all unpaid or unclaimed dividends are required to be transferred by the company to the IEPF established by the Government of India, after completion of seven years. Further according to the rules, the shares on which dividend has not been paid or claimed by the shareholders for seven consecutive years or more shall be transferred to the demat account of the IEPF Authority.

During the year 2017-18, unclaimed Dividend for financial year 2009-10 of Rs. 8,29,952/- were transferred to the Investor Education and Protection Fund (“IEPF”), as required under the Investor Education and Protection Fund Authority (Accounting, Audit, Transfer and Refund) Rules, 2016 (“IEPF Authority”). Further corresponding equity shares in respect of which dividend has not been claimed for the final dividend declared in financial year 2009-10 were transferred to the IEPF Authority pursuant to the provisions of Section 124(6) of the Companies Act, 2013 and the rules thereunder.

11. PARTICULARS OF CONTRACTS OR ARRANGEMENTS MADE WITH RELATED PARTIES

Particulars of contracts or arrangements with related parties referred to in Section 188(1) of the Companies Act, 2013, in the prescribed Form AOC-2, is appended as Annexure 1 to the Board’s report.

12. MATERIAL CHANGES AND COMMITMENTS AFFECTING FINANCIAL POSITION BETWEEN THE END OF THE FINANCIAL YEAR AND DATE OF REPORT.

During the Financial year 2017-18, the Company made huge investments in modernisation of its Softa Plant at Palwal (Haryana) to increase its milk processing capacity and enriching Research & Development works. However, a few of the Consortium Member Banks, though assured, did not release the enhanced working Capital facility. The Financial Position of the Company had been impacted for the said reason after March 2018, which resulted in delay in fulfilling financial obligations of its Bankers and Financers.

Globally, due to heavy crash in international price of SMP and AMF, the Company’s fully owned Subsidiary at Dubai (UAE) could not perform well, forcing Company to close its business operations in phased manner.

13. CORPORATE SOCIAL RESPONSIBILITY (CSR)

The Board of Directors formulated the Corporate Social Responsibility (CSR) Policy for your Company pursuant to the provisions of Section 135 of the Companies Act, 2013 read with the Companies (Corporate Social Responsibility Policy) Rules, 2014, (including any statutory modification(s) or re-enactment(s) thereof for the time being in force), on the recommendations of the CSR Committee. The CSR Policy outlines the CSR vision of your Company which is based on embedded tenets of trust, fairness and care. The initiatives undertaken by your Company during the financial year 2017-18 in CSR have been detailed in this Annual Report.

The Annual Report on CSR activities in accordance with the Companies (Corporate Social Responsibility Policy) Rules, 2014, is set out herewith as “Annexure [2]” to this Report.

14. CREDIT RATING

Brickwork Ratings were received with Rating Outlook downgraded from ‘Positive’ to ‘Negative’ for Fund Based Long Term rating as “BWR BBB- (Credit watch with Negative Implications)” for bank loan facilities for an amount of Rs 1463 crores, Non Fund Based Short Term rating as “BWR A3” for an amount of Rs 30 crores and assigned BWR BBB- (Credit watch with Negative Implications) “ for issue of Non-Convertible Debentures of Rs 94.45 crores.

15. AWARDS AND RECOGNITION

Our Managing Director, Mr. Sanjay Dhingra has been ranked 34th among the”Top 100 CEO’s of India” as published by the “Business Today” magazine in January 2018 edition.

During the year, Mr. Sidhant Gupta, Director has been awarded”25 of Delhi’s Most Influential Entrepreneurs of 2017”. The award was institute by”Elite Magazine” & the ceremony was held on October 04, 2017 at New Delhi.

Further Mr. Anand Ruhela, IT head of the Company has won the”Big CIO Award” for innovative use of technology in FMCG Industry. Also the efforts of IT transformation and intiatives of Kwality Limited are being recognized by Enterprise IT World ‘CIO200Tech Summit’ and ‘ChangeAgents 2017’ Awards which is an unprecedented milestone for the Indian IT industry where the award will recognize 200 of the top CIOs pan India.

Your Company has been conferred upon the prestigious”Iconic brand of the year (Dairy Products)” at a grand award ceremony held on 17th September 2017 in Mumbai. The recognition is primarily for the mega launch campaign which we did early this year, launch of the various value added products like UHT milk, flavoured milk fortified with Vitamin A & D based on the consumer/ market research that was conducted. This award is a consumer recognition of the efforts we as an organisation are putting on to become one of the leading consumer Dairy Brands of India in accordance to our on-going Business Transformation strategy.

Your company has been ranked at the 8th Position in India in FMCG (sector wise) & elevated to 185th position now as compared to 197th position (during last year) in growth (revenue wise) all across in “Fortune India Magazine” in December 2017 edition.

Further Mr. Pawan Kumar Sharma, Vice President & HR Head has been conferred as 100 HR Super Achievers. The event was organized by World HRD Congress on 16th February, 2018.

16. CASH FLOW STATEMENT

In conformity with the provisions of Regulation 34(2) (c) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Cash Flow Statement for the year ended on March 31, 2018 is attached as a part of the Financial Statement of the Company.

17. MANAGEMENT DISCUSSION AND ANALYSIS

Management Discussion and Analysis forms an integral part of this report and gives details of the overall industry structure, economic developments, performance and state of affairs of the Company’s businesses, internal controls and their adequacy, risk management systems and other material developments during the financial year 2017-18.

18. DIRECTORS AND KEY MANAGERIAL PERSONNELS (KMP):

The Companies Act, 2013 introduced the new concept of Key Managerial Personnel (KMP) which includes the Managing Director, Chief Executive Officer or Manager, Whole Time Director, Company Secretary and Chief Financial Officer. The Key Managerial Personnel would guide the Board to achieve their defined objectives and purposes by adhering to good Corporate Governance practices. KMP would also be looked upon by the Regulators for the non-compliances.

The Key Managerial Persons of the Company as at March 31, 2018 are:

DIRECTORS

INDUCTIONS

During the financial year 2017-18, the Board of Directors at their meeting held on October 25, 2017, had appointed Dr. Kuldeep Sharma (DIN: 07689428) as an Additional Director and further as Whole Time Director of the Company subject to the approval of members at the ensuing Annual General Meeting, pursuant to Section 161, 196, 197, 203 and any other Provisions, if any, of the Companies Act, 2013.

Ms. Swati Chaturvedi (DIN: 08187398) has been co-opted as Additional Director of the Company w.e.f. 28th July, 2018 to hold the office upto this Annual General Meeting pursuant to Section 161 of the Companies Act, 2013 and in respect of whom the Company has received a notice in writing from member(s) under Section 160 of the Companies Act, 2013 signifying their intension to propose her candidate for the office of a director of the Company. The Board recommends the said resolution.

RETIREMENT BY ROTATION AND SUBSEQUENT RE-APPOINTMENTS

As at March 31, 2018, the Board of your Company is constituted of Six Directors comprising of Dr. Rattan Sagar Khanna, Chairman and Non-Executive Independent Director, Mr. Sanjay Dhingra, Managing Director, Mr. Manjit Dahiya, Whole Time Director, Dr. Kuldeep Sharma, Whole Time Director, Mr. Sidhant Gupta, Non-Executive Director and Ms. Ankita Mehrotra, Non-Executive Independent Director.

Mr. Sanjay Dhingra, Managing Director, is liable to retire by rotation at the ensuing AGM, pursuant to Section 152 and other applicable provisions, if any, of the Companies Act, 2013, read with the Companies (Appointment and Qualification of Directors) Rules, 2014 (including any statutory modification(s) or re-enactment(s) thereof for the time being in force), the Articles of Association of the Company and being eligible has offered himself for re-appointment. Appropriate resolutions for his re-appointment are being placed for the approval of the shareholders of the Company at the ensuing AGM.

RESIGNATIONS

Due to some personal and unavoidable circumstances, Dr. Satyendra Kumar Bhalla,

Mr. Sidhant Gupta and Ms. Ankita Mehrotra had tendered their resignation from the position of Whole Time Director, Non-Executive Director and Women Independent Director of the Company w.e.f October 25, 2017, July 11, 2018 and July 28 July, 2018 respectively.

19. DIRECTORS’ RESPONSIBILITY STATEMENT

Pursuant to the requirement of Section 134(3) (c) of the Companies Act, 2013 with respect to Director Responsibility statement, and based on the representation received from operating management, the Directors hereby confirm that:

a) in the preparation of the annual accounts for the period ended on March 31, 2018, the applicable accounting standards have been followed and there are no material departures from the same;

b) 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 at the end of the financial year March 31, 2018 and the profit and loss of the Company for the financial year ended March 31, 2018;

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 for the period ended on March 31, 2018 as on going concern basis;

e) the directors have laid down internal financial controls, which are adequate and are operating effectively; and

f) The directors had devised proper systems to ensure compliance with provisions of all applicable laws and that such systems were adequate and operating effectively.

20. DEPOSITS

Your company has not raised any public deposit during the period under review. Therefore, there was no public deposit outstanding as at the beginning or at the end of the period.

21. INTERNAL FINANCIAL CONTROL SYSTEM

The Company has adopted the policies and procedures 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.

Internal Control System has designed to provide reasonable assurance with regard to recording and providing reliable financial and operational information, complying with applicable Accounting Standards. The internal financial controls with reference to the financial statements were adequate and operating effectively.

22. RISK MANAGEMENT

The Company has well defined process in place to ensure appropriate identification and treatment of risks. The identification of risk is done at strategic, business, operational and process levels. All significant risks are well integrated with the functional and business plans and are reviewed on a regular basis.

Further details form part of Corporate Governance Report.

23. AUDITORS STATUTORY AUDITORS

M/s MSKA & Associates, Chartered Accountants, (Firm Registration Number: 105047W) were appointed as Statutory Auditors of the company at the Annual General Meeting held on September 29, 2017 to hold office till the conclusion of Annual General Meeting to be held in the year 2022. In terms of the first proviso to Section 139 of the Companies Act, 2013, the appointment of the auditors shall be placed for the ratification at every Annual General Meeting. Accordingly, the appointment of M/s MSKA & Associates, Chartered Accountants is placed at the AGM for ratification by the shareholders. In this regard, the Company has received a certificate from the auditors to the effect that if they are reappointed, it would be in accordance with the provisions of Section 141 of the Companies Act, 2013.

The Auditors’ Report for the financial year ended March 31, 2018 on the financial statements of the Company is a part of this Annual Report. The Auditor’s Report for the financial year ended March 31, 2018 does not contain any qualification, reservation or adverse remark.

COST AUDITOR

The Board of Directors of the Company, on the recommendations made by the Audit Committee, at their meeting held on May 28, 2018, has approved the appointment of M/s. M K Jha & Co., Cost Accountants, (Firm Registration No. 101333) as the Cost Auditor of the Company to conduct the audit of cost records for the financial year 2017-18. The remuneration proposed to be paid to the Cost Auditor, subject to ratification by the shareholders of the Company at the ensuing 26th AGM, would not exceed 1 lakh (Rupees One lakh only) excluding taxes and out of pocket expenses, if any.

The Company has received consent from M/s. MK Jha & Co., Cost Accountants, to act as the Cost Auditor for conducting audit of the cost records for the financial year 2017-18 along with a certificate confirming their independence and arm’s length relationship.

SECRETARIAL AUDITOR

M/s. Mukun Vivek & Company, Company Secretaries, were appointed to conduct the secretarial audit of the Company for the financial year 2017-18, as required under Section 204 of the Companies Act, 2013 and Rules made thereunder. The secretarial audit report for FY 2017-18 forms part of the Annual Report as Annexure 3 to the Board’s Report.

24. EXTRACT OF ANNUAL RETURN

In accordance with Section 134(3)(a)of the Companies (Amendment) Act, 2017, the copy of annual return in the prescribed form has been placed at our website www.kwality.com.

25. SECRETARIAL STANDARDS OF ICSI

Your Company complies with the Secretarial Standards specified by the Institute of Company Secretaries of India on Meetings of the Board of Directors (SS-1) and General Meetings (SS-2) and notified by Ministry of Corporate Affairs.

26. LISTING

The equity shares of the Company continue to be listed on the BSE Limited (BSE) and National Stock Exchange of India Limited (NSE). The annual listing fees for the current year have been paid to the BSE Limited (BSE) and National Stock Exchange of I ndia Limited (NSE).

27. PARTICULARS OF REMUNERATION OF DIRECTORS, KMPs AND EMPLOYEES

The table containing the names and other particulars of employees in accordance with the provisions of Section 197(12) of the Companies Act, 2013, read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, is appended as Annexure 4 to the Board’s Report.

Details of employees, employed for the whole year and are in receipt of remuneration of Rs. 1,02,00,000/- or more, or if employed for the part of the year and in receipt of Rs. 8,50,000/or more a month, under rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014.

28. POLICY ON DIRECTORS’ APPOINTMENT AND REMUNERATION

The Remuneration, Compensation and Nomination Committee has framed a policy for selection and appointment of Directors including determining qualifications and independence of a Director, Key Managerial Personnel, Senior Management Personnel and their remuneration and other matters provided under Section 178(3) of the Companies Act, 2013 and Regulation 19 of the Listing Regulation (including any statutory modification(s) or re-enactment(s) thereof for the time being in force) and appended as Annexure 5 of the Board’s Report.

The Nomination and Remuneration Policy can be accessed on the website of the Company (www.kwality.com).

29 DECLARATION BY INDEPENDENT DIRECTORS

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

30. PERFORMANCE EVALUTION OF THE BOARD

Pursuant to applicable provisions of the Companies Act, 2013 and the Listing Regulations, the Board, in consultation with its Remuneration, Compensation and Nomination Committee has formulated a framework containing, inter-alia, the criteria for performance evaluation of the entire Board of the Company, its Committees and individual Directors, including Independent Directors.

The Directors carried out the annual performance evaluation of the Board, Committees of Board and individual Directors along with assessing the quality, quantity and timeliness of flow of information between the Company management and the Board that is necessary for the Board to effectively and reasonably perform their duties. The details of evaluation process of the Board, its Committees and individual Directors, including Independent Directors have been provided under the Corporate Governance Report which forms part of this Report.

31. NUMBER OF MEETINGS OF THE BOARD OF DIRECTORS

During the Financial Year 2017-18 the Board met Six times. The dates of the meetings are as under:

32. “KWALITY EMPLOYEE STOCK OPTION PLAN 2014” (“ESOP 2014”)

The details of the grants allotted under KWALITY EMPLOYEE STOCK OPTION PLAN 2014” (“ESOP 2014”) and also the disclosures in compliance with SEBI (Share Based Employee Benefits) Regulations, 2014 and Section 62 (1) (b) read with Rule 12(9) of the Companies (Share Capital & Debentures) Rules, 2014 is as follow:

Note 1- Employee wise details of options granted during the year:-I. Senior Managerial Personnel

II. Any other employee who receives a grant of options in any one year of option amounting to five percent or more of options granted during the year

III. Identified employees who were granted option, during any one year, equal to or exceeding one percent of the issued capital (exceeding outstanding warrants and conversions) of the company at the time of grant: None

33. ENERGY CONSERVATION, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO

Information required under Section 134(3)(m) of the Companies Act, 2013, read with the Rule 8 of the Companies (Accounts) Rules, 2014 is set out in an Annexure 6 to this report.

34. CORPORATE GOVERNANCE

A separate section on Corporate Governance and a certificate from the statutory auditors of the Company regarding compliance with the conditions of Corporate Governance as stipulated under SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 forms part of this Annual Report.

35. POLICY TO PREVENT SEXUAL HARASSMENT AT WORK PLACE

As required under the provisions of Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013, the Company has constituted a Sexual Harassment Policy.

We follow a gender neutral approach in handling complaints of sexual harassment. All employees are of equal value with no discrimination between individuals at any point on the basis of race, colour, gender, religion, political opinion, national extraction, social origin, sexual orientation or age. The Company is committed to providing a safe and conducive work environment to all its employees and associates. No complaints were received by the Company during the year under review.

36. GREEN INITIATIVES

Electronic copies of the Annual Report 2017-18 and the Notice of the 26th Annual General Meeting are sent to all the members whose email addresses are registered with the Company/ depository participant(s). For members who have not registered their email addresses, physical copies are sent in the permitted mode.

37. APPRECIATION

The Board conveys its appreciation for its customers, shareholders, suppliers as well as vendors, bankers, business associates, regulatory and government authorities for their continued support, cooperation and encouragement. Your Directors also wish to place on record their sincere thanks and gratitude for the contribution made by our employees at all levels and in ensuring an excellent all around operational performance.

For & on behalf of the Board of Directors

Place: New Delhi

Date: September 01, 2018 Sd/-

Dr. Rattan Sagar Khanna

Chairman

DIN:03073914