1. General Information

The Standalone Financial Statements of “Kwality Pharmaceuticals Limited” (“the Company”) are for the year ended 31^st March, 2026.

The Company is a domestic public limited company incorporated and domiciled in India and has its registered office at Village Nagkalan, Majitha Road, Amritsar, Punjab - 143601, India.

The company was incorporated as private limited company on 04/05/1983 under the Companies Act, 1956. The company was then converted into public limited company on 28/12/2015, subsequently name changed to Kwality Pharmaceuticals Limited. After that, the company obtained listing status of SME platform of Bombay Stock Exchange by making the Initial Public Offer and the shares of the company were listed on the SME platform of BSE on 18 ^th of July, 2016.

The Company made an application for Migration of the Company’s Equity Shares from SME Platform of BSE Limited to the Main Board of the BSE on 09th April 2022 and received the final approval from BSE Limited on 10th June, 2022. Accordingly, Equity Shares of the Company were listed on the Main Board of BSE Limited with effect from 13th June, 2022. The company is engaged in the business of manufacturers, buyers and sellers of and dealers in all kind of drugs intermediates, chemicals, extracts, alkaloids and other pharmaceutical goods, toilet requisites, medicines, beverages and other medical preparations.

2. Material Significant Policies 2.1 Statement of Compliance

These financial statements are Standalone Financial Statement of the Company that have been prepared in accordance with Indian Accounting Standards (Ind AS) notified under the Companies (Indian Accounting Standards) Rules,2015 (as amended) together with the comparative period data as at and for the year ended March 31, 2026 and the relevant provisions of Divisions II of Schedule III to the Companies Act,2013 (“the Act”) and guidelines issued by the Securities and Exchange Board of India (SEBI), as applicable.

2.2 Basis of Preparation and Presentation

The standalone financial statements have been prepared on the historical cost convention and on an accrual basis, except for:

(i) certain financial instruments that are measured at fair values at the end of each reporting period;

(ii) Defined benefit plans - plan assets that are measured at fair values at the end of each reporting period, as explained in the accounting policies below:

Historical cost is generally based on the fair value of the consideration given in exchange for goods and services

The standalone financial statements are presented in Indian Rupees (?) and all values are rounded to the nearest Lakhs (? 00,000) upto Two decimal, except when otherwise indicated.

All the Assets & Liabilities have been classified as current or non-current as per the Company’s normal operating cycle and other criteria as set out in Ind AS and Schedule III to the said Act.

a. Classification of Current and Non-current

An asset is treated as current when it is:

i) Expected to be realized or intended to be sold or consumed in normal operating cycle and company has identified twelve months as its normal operating cycle based on the time between the acquisition of assets for processing and their realization in cash and cash equivalents.

ii) Held primarily for the purpose of trading,

iii) Expected to be realized within twelve months after the reporting period, or

iv) Cash or Cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.

All other assets are classified as non-current.

A liability is current when:

i) It is expected to be settled in normal operating cycle,

ii) It is held primarily for the purpose of trading,

iii) It is due to be settled within twelve months after the reporting period, or

iv) There is no unconditional right to determine the settlement of the liability for at least twelve months after the reporting period.

The Company classifies all other liabilities as non - current.

b. Foreign Currency Transactions

On initial recognition, transactions in currencies other than the Company's functional currency (INR) are translated at exchange rates on the date of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are translated into the functional currency at the exchange rate on that date. Exchange differences arising on the settlement of monetary items or on translating monetary items at rates different from those at which they were translated on initial recognition during the year or in previous period are recognized in profit or loss in the period in which they arise.

c. Segment reporting

The Company operates in a Single segment of manufacturing of broad range of finished pharmaceutical formulations in a dosage form viz. Tablets, Capsules, Syrup, Dry Syrup, Injections etc. The product has the same risks and returns, which are predominantly governed by market conditions, namely demand and supply position. Thus, in the context of Ind AS 108 “Operating Segment”, issued by the Institute of Chartered Accountants of India, there is only one identified reportable segment.

d. Property, Plant and Equipment

Property, plant and equipment are stated at cost of acquisition or construction less accumulated depreciation/amortization and impairment losses, if any. The cost comprises of the purchase price (net of GST credit wherever applicable) and any attributable cost of bringing the property, plant and equipment to its working condition for its intended use.

Subsequent expenditures related to an item of property, plant, and equipment are added to its gross book value only if it increases the future benefits from the existing asset beyond its previously assessed standard of performance.

The Company identifies and determines separate useful life for each major component of property, plant and equipment, if they have useful life that is materially different from that of the remaining asset.

Items such as Laboratory items is recognized in accordance with Ind AS 16 “Property, Plant and Equipment” when they meet the definition of property, plant and equipment. Otherwise, such items are classified as Consumable expense or Inventories as per the nature of item.

Property, plant and equipment not ready for the intended use on the date of Balance Sheet are disclosed as “Capital work-in-progress”. Advances given towards acquisition of property, plant and equipment’s outstanding at each Balance Sheet date are disclosed as Capital Advances under “Other Non-Current Assets”.

Losses arising from the retirement of, and gains and losses arising from disposal of property, plant and equipment are measured as the difference between the net disposal proceeds and the carrying amount of the property, plant and equipment and are recognized in the statement of profit and loss when the property, plant and equipment is derecognized.

The residual values, useful lives and methods of depreciation of property, plant and equipment are reviewed at each financial year end and adjusted prospectively, if appropriate.

e. Intangible asset:

Intangible assets are identifiable non-monetary assets without physical substance, such as software, licenses, trademarks, and similar rights. An intangible asset is recognised only when it is identifiable, the Company has control over the asset, it is probable that future economic benefits will flow to the Company, and the cost of the asset can be measured reliably.

Intangible assets are initially measured at cost, which includes the purchase price and any directly attributable costs necessary to make the asset ready for its intended use. After initial recognition, intangible assets with finite useful lives are amortised on a straight-line basis over their estimated useful life. The Company generally assumes a nil residual value unless otherwise assessed. The amortisation method and the useful life are reviewed annually, and any changes are accounted for prospectively.

f. Depreciation &Amortization on Fixed asset:

Depreciation on fixed assets is calculated on written down value basis using the rates arrived at based on the useful life of the assets prescribed under Schedule II of the Companies Act, 2013 for the year ended on March 31, 2026.

The useful life of Property, Plant and Equipment as estimated by the Management on the basis of expert advice and past experience are as under:

*Freehold Land held by the company is not depreciated.

During the year ended March 31, 2026, the Company acquired an Intangible asset 'Bioequivalence Study The asset is being amortised over an estimated useful life of 5 years on a straight-line basis.

g. Investment in nature of equity in subsidiaries

The Company has elected to recognize its investments in equity instruments in subsidiaries at a cost in the standalone financial statements.

The Company records the Investment in equity instrument of Subsidiary at cost less accumulated impairment losses, if any. Where an indication of impairment exists, the carrying amount of the investment is assessed and written down immediately to its recoverable amount. On disposal of investment in the subsidiary, the difference between net disposal proceeds and the carrying amounts are recognized in the standalone statement of profit and loss.

h. Inventories

Inventories are stated at cost or net realizable value whichever is lower. Cost include purchase price, nonrefundable taxes and delivery and handling cost and all costs incurred in bringing the inventory to its present location and condition. Cost of raw materials, process chemicals, stores and spares, packing material, and another inventory is determined on weighted average basis.

Finished goods stock is valued at cost or net realizable value whichever is lower. Cost of finished goods comprises direct materials, direct labour and an appropriate proportion of variable and fixed overhead expenditure, the latter being allocated on the basis of normal operating capacity.

Net realizable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and costs necessary to make the sale.

The factors that the Company considers in determining the allowance for slow-moving, obsolete, and other non-saleable inventory include estimated shelf life, planned product discontinuances, price changes, ageing of inventory, and introduction of competitive new products, to the extent each of these factors impacts the Company’s business and markets. The Company considers all these factors and adjusts the inventory provision to reflect its actual experience periodically.

i. Statement of Cash Flows

Standalone Statement of Cash flows are reported using the indirect method, whereby profit before tax is adjusted for the effects of transactions of a non-cash nature, any deferrals or accruals of past or future operating cash receipts or payments and item of income or expenses associated with investing or financing cash flows. The cash flows are segregated into operating, investing and financing activities.

j. Provisions, contingent liabilities, and contingent assets

Provisions are recognized when:

(i) The Company has a present obligation (legal or constructive) as a result of a past event,

(ii) It is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of obligation.

When the Company expects some or all of a provision to be reimbursed, for example, under an insurance contract, the reimbursement is recognized as a separate asset, but only when the reimbursement is certain. The expense relating to a provision is presented in the statement of profit and loss net of any reimbursement.

If the effect of the time value of money is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognized as a finance cost.

Contingent liabilities and contingent assets

Contingent liability is disclosed for,

(i) Possible obligations that will be confirmed only by future events not wholly within the control of the Company, or

(ii) Present obligations arise from past events where it is not probable that an outflow of resources will be required to settle the obligation or a reliable estimate of the amount of the obligation cannot be made.

Contingent assets are not recognized in the financial statements. A contingent asset is disclosed where an inflow of economic benefits is probable. Contingent assets are assessed continually and, if it is virtually certain that an inflow of economic benefits will arise, the asset and related income are recognized in the period in which the change occurs.

k. Employee Benefits

(a) Defined Contribution Plans

The company’s contribution to the defined contribution plan paid/payable for the year is charged to the Standalone Statement of Profit and loss.

(b) Defined Benefit Plans

• The Company has gratuity as a defined benefit plan where the amount that an employee will receive on retirement is defined by reference to the employee’s length of service and final salary. The cost of providing benefits under the defined benefit plan is determined based on actuarial valuation using the projected unit credit method. The gratuity fund is administered through the Life Insurance Corporation of India.

• The liability in respect of defined benefit plans is calculated using the projected unit credit method (PUCM) with actuarial valuations being carried out at the end of each annual reporting period.

• The current service cost of the defined benefit plan, recognised in the statement of profit and loss as employee benefits expense, reflects the increase in the defined benefit obligation resulting from employee service in the current year, benefit changes, curtailments and settlements.

• The Net Interest Cost on Defined Benefit Obligations is also included in the Statement of Profit and Loss under the Head “Employees Benefit Expenses”.

• Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or credited to OCI in the period in which they arise and are reflected immediately in retained earnings and is not reclassified to profit or loss.

l. Taxes on Income (a) Tax expense

• Tax expense consists of current and deferred tax. Income tax expense is recognized in the profit or loss except to the extent that it relates to items recognized in OCI or directly in equity as in that case it is recognized in OCI or directly in equity respectively. Current tax is the expected tax payable on the taxable profit for the year, using tax rates enacted or substantively enacted by the end of the reporting period, and any adjustment to tax payable in respect of previous years. Current tax assets and tax liabilities are offset where the Company has a legally enforceable right to offset and intends either to settle on a net basis or to realize the asset and settle the liability simultaneously.

• Deferred tax resulting from “timing differences” between taxable and accounting income that originate in one period and are capable of being reversed in one or more subsequent period is accounted for using the tax rates and laws that are enacted or substantively enacted as on the Balance Sheet date. The deferred tax asset is recognized and carried forward only to the extent that there is a reasonable certainty that the assets can be realized in future. However, where there is unabsorbed capital expenditure or carry forward losses under taxation laws, deferred tax assets are recognized only if there is virtual certainty of realisation of such assets. Deferred tax assets are reviewed as at each Balance Sheet date.

m. Exceptional Items

Exceptional items refer to items of income or expense, including tax items, within the statement of profit and loss from ordinary activities which are non-recurring and are of such size, nature or incidence that their separate disclosure is considered necessary to explain the performance of the Company.

On 21 November 2025, the Government of India notified the four Labour Codes - the Code on Wages, 2019, the Industrial Relations Code, 2020, the Code on Social Security, 2020, and the Occupational Safety, Health and Working Conditions Code, 2020 - consolidating 29 existing labour laws. The Ministry of Labour & Employment published draft Central Rules and FAQs to enable assessment of the financial impact due to changes in regulations. The Company has evaluated and disclosed the incremental impact of these changes using the best information currently available, consistent with the guidance provided by the Institute of Chartered Accountants of India. Considering the materiality and regulatory-driven, nonrecurring nature of this impact, the Company has presented such incremental impact amounting to ^82.94 lakhs as an exceptional item in the standalone financial results for the quarter and nine months ended 31 December 2025. The increase is primarily on account of past service cost for gratuity liability due to change in wage definition for employees and contract labour. The Company continues to monitor the finalisation of Central/State Rules and clarifications from the Government on other aspects of the Labour Code and would provide appropriate accounting effect on the basis of such developments as needed.

n. Leases

During the current year, the Company recognised the accounting impact of certain lease arrangements entered into in earlier years in accordance with the requirements of Ind AS 116 - Leases. Accordingly, the related Right-of-Use (ROU) assets and lease liabilities have been recognised in the financial statements.

Since these lease arrangements pertained to prior periods, the recognition has been accounted for as a prior period adjustment in accordance with Ind AS 8 - Accounting Policies, Changes in Accounting Estimates and Errors. Accordingly, the opening balances of the Right-of-Use assets, lease liabilities and retained earnings as at 1 April 2025 have been adjusted, and the corresponding net impact has been presented in the Statement of Changes in Equity.

The corresponding adjustments have also been made to the relevant balance sheet line items, wherever applicable. This adjustment relates only to the recognition and measurement of lease accounting under Ind AS 116 and does not affect the Company's cash flows.

Reconciliation of the Net Prior-Period Adjustment:

o. Revenue Recognition

The Company recognizes revenue when the same can be reliably measured, it is probable that future economic benefits will flow to the Company and specific criteria have been met for each of the Company’s activities as described below. Revenue is measured at the value of the consideration received or receivable, considering defined terms of payment and excluding taxes or duties collected on behalf of the government. Amounts disclosed as revenue are exclusive of GST and net of returns, trade allowances, rebates, discounts, and amounts collected on behalf of third parties.

i) Sale of goods

Sales are recognized when substantial risk and rewards of ownership are transferred to customer, in case of domestic customers, sales generally take place when goods are dispatched or delivery is handed over to the transporter. In case of export customers, sales generally take place when goods are shipped onboard based on bill of lading.

ii) Interest & Other Indirect Income

a) Interest income is recognized on time proportion basis considering the amount invested and rate of interest.

b) Revenue in respect of other claims is recognized on an accrual basis to the extent the ultimate realization is reasonably certain.

p. Impairment

(i) Financial Assets

The company’s financial asset is assessed at each reporting date to determine whether there is any objective evidence that it is impaired. A financial asset is considered to be impaired, if objective evidence indicates that one or more events have had a negative effect on the estimated future cash flows of the asset.

(ii) Non-Financial Assets

The carrying amounts of the Company’s non-financial assets are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated in order to determine the extent of the impairment loss, if any.

An impairment loss is recognized in the Statement of Profit or Loss if the estimated recoverable amount of an asset or its cash generating unit is lower than its carrying amount.

q. Financial Instruments

A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.

Financial Assets

Initial recognition and measurement:

Financial assets are classified into the following categories upon initial recognition:

(a) those measured at amortised cost

(b) those to be measured subsequently at fair value through Statement of Profit & Loss.

The classification depends on the entity’s business model for managing the financial assets and the terms of cash flows. For assets measured at fair value, gains and losses will either be recorded in profit or loss or other comprehensive income as the case may be.

All financial assets are initially recognized at fair value. Transaction costs of acquisition of financial assets carried at fair value through profit and loss are expensed in the Statement of Profit and Loss.

Amortized cost: Assets that are held for collection of contractual cash flows where those cash flows represent solely payments of principal and interest are measured subsequently at amortized cost. Interest income from these financial assets is included in Other income as per interest received/receivable from Financial Institutions.

The Company derecognizes a financial asset only when the contractual rights to the cash flows from the asset expires or it transfers the financial asset and substantially all the risks and rewards of ownership of the asset.

Financial liabilities

Initial recognition and measurement:

All financial liabilities are recognized initially at fair value. The Company’s financial liabilities majorly comprises trade and other payables.

Financial liabilities are classified as ‘FVTPL’ if they are held for trading or if they are designated as financial liabilities upon initial recognition at fair value through profit or loss. Financial liabilities are classified as held for trading if they are incurred for the purpose of repurchasing in the near term.

The Company classifies all financial liabilities as subsequently measured at amortized cost, except for financial liabilities at fair value through profit and loss.

A financial liability is derecognized when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same creditor on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognized in the statement of profit or loss.

Fair Value Measurement

The fair value of an asset or a liability is measured using the assumptions that the market participants would use when pricing the asset or liability.

The Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs.

All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorized within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:

Level 1 — Quoted (unadjusted) market prices in active markets for identical assets or liabilities

Level 2 — Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable.

Level 3 — Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable.

For assets and liabilities that are recognized in the financial statements on a recurring basis, the Company determines whether transfers have occurred between levels in the hierarchy by re-assessing categorization (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting year.

r. Investment in Subsidiary

The Company records the Investment in equity instrument of Subsidiary at cost less accumulated impairment losses, if any. Where an indication of impairment exists, the carrying amount of the investment is assessed and written down immediately to its recoverable amount. On disposal of investment in subsidiary, the difference between net disposal proceeds and the carrying amounts are recognised in the standalone statement of profit and loss.

s. Use of Judgment’s, Estimates and Assumptions

The preparation of the Company’s financial statements requires management to make judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities and the accompanying disclosures and the disclosure of contingent liabilities. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities affected in future periods. Difference between actual results and estimates are recognised in the periods in which the results are known / materialise. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances existing when the financial statements were prepared. The estimates and underlying assumptions are reviewed on an ongoing basis. Revision to accounting estimates is recognised in the year in which the estimates are revised.

Judgements

In the process of applying the Company’s accounting policies, management has made the following judgements which have a significant effect on the amounts recognised in the financial statements:

> Defined benefit plans (Gratuity and Leave encashment benefits)

The cost of the defined benefit gratuity plan and other post-employment benefits and the present value of the gratuity obligation and Leave encashment are determined using actuarial valuations. An actuarial valuation involves making various assumptions that may differ from actual developments in the future. These include the determination of the discount rate, future salary increases and mortality rates. Due to the complexities involved in the valuation and its long-term nature, a defined benefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date.

> Useful life of Property, plant and equipment

The Company reviews the useful life of Property, plant and equipment at the end of each reporting period. This reassessment may result in change in depreciation expenses in the future years.