TO THE MEMBERS OF AARTI DRUGS LIMITED
Your Directors have pleasure in presenting the Thirty Second Annual Report togetherwith the Audited Financial Statements along with the Report of the Auditors for the yearended 31st March 2017.
COMPANYS FINANCIAL RESULTS
(Rs in Lakhs)
|Particulars ||Standalone ||Consolidated |
| ||2016-2017 ||2015-2016 ||2016-2017 ||2015-2016 |
|Net Sales/ Income from Operations ||108872 ||107073 ||119517 ||113488 |
|Other Operating Income ||353 ||476 ||400 ||496 |
|Total Income from Operations ||109226 ||107550 ||119917 ||113984 |
|Total Expenditure ||91455 ||90379 ||100952 ||96415 |
|Profit Before Depreciation Amortization Interest and ||17771 ||17171 ||18965 ||17569 |
|Tax Expenses || || || || |
|Less: Interest ||3448 ||4328 ||3642 ||4389 |
|Depreciation & Amortization ||3669 ||3558 ||3846 ||3653 |
|Profit/(Loss) before other income ||10654 ||9284 ||11477 ||9527 |
|Other Income ||- ||- ||- ||- |
|Profit/(Loss) Before Tax ||10654 ||9284 ||11477 ||9527 |
|Less: Provision for taxation - Current ||2753 ||2115 ||2913 ||2115 |
|- Earlier Year ||(203) ||- ||(203) ||- |
|- Deferred ||680 ||540 ||711 ||540 |
|Profit After Tax ||7424 ||6629 ||8056 ||6872 |
|Add: Surplus brought forward ||27059 ||23068 ||27314 ||23033 |
|Profit available for appropriation ||34483 ||29697 ||35371 ||29906 |
|Appropriations: || || || || |
|Transfer to General Reserve ||- ||670 ||- ||670 |
|Proposed Dividend ||- ||- ||- ||- |
|1st Interim Dividend ||- ||545 ||- ||545 |
|2nd Interim Dividend ||- ||363 ||- ||363 |
|3rd Interim Dividend ||- ||727 ||- ||727 |
|Tax on Dividend ||- ||333 ||- ||333 |
|Balance carried to Balance Sheet ||34483 ||27059 ||35371 ||27314 |
During the financial year 2016-17 the Company has bought back 360000 (Three LacsSixty Thousand) fully paid up Equity shares of face value of Rs 10/- (Rupees Tenonly) each representing up to 1.49% of the total no. of Equity shares at a price of Rs750/- per Equity share (including premium of Rs 740/- per share) for an aggregate amountof Rs 270000000/- (Rupees Twenty Seven Crores only) on a proportionate basis throughthe tender offer using stock exchange mechanism in accordance with the provisions of theCompanies Act 2013 and the SEBI (Buyback of Securities) Regulations 1998. Post Buy-backof shares the paidup Equity Share Capital as on 31st March 2017 was Rs238571000/-.
The Company has neither issued shares with differential rights as to dividend votingor otherwise nor issued sweat equity shares. There is no scheme for employee stock optionor provision of money for shares of the Company to employees or Directors of the Company.
Your Directors recommend a dividend of 10% i.e. Re. 1/- per Equity Share of Face Valueof Rs 10/- each aggregating to Rs 23857100/-. As per Regulation 43A of the Securitiesand Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations2015 top five hundred listed entities based on the market capitalization are required toformulate Dividend Distribution Policy. The listed entities other than top five hundredlisted entities based on market capitalization may formulate their Dividend DistributionPolicies on a voluntary basis. Accordingly the Company has formulated its DividendDistribution Policy and the details of which are available on the Companys websitewww.aartidrugs.com.
During the year under review Gross Sales of the Company is Rs1185.93 Crores (PreviousYear: Rs1166.10 Crores) registering a growth of 1.70%.
The Company has achieved Export Sales of Rs422.95 Crores as against Rs389.19 Crores forthe last year registering a growth of 8.67%.
EBITDA has been Rs177.71 Crores (Previous Year: Rs 171.70 Crores) registering a growthof 3.50%. PAT has been Rs74.24 Crores (Previous Year Rs66.29 Crores) registering a growthof 11.99%.
INTERNAL FINANCIAL CONTROLS AND THEIR ADEQUACY
Your Companys internal control systems commensurate with the nature and size ofits business operations. Your Company has maintained a proper and adequate system ofinternal controls. This ensures that all Assets are safeguarded and protected against lossfrom unauthorized use or disposition and that the transactions are authorised recordedand reported diligently.
The Audit Committee and M/s. Raman S. Shah & Associates Chartered AccountantsIndependent Internal Auditors regularly review internal financial controls and operatingsystems and procedures for efficiency and effectiveness. The Internal AuditorsReports are regularly reviewed by the Audit Committee of the Board.
DIRECTORS RESPONSIBILITY STATEMENT
As required u/s. 134(3)(c) of the Companies Act 2013 your Directors hereby statethat-a) in the preparation of the Annual Accounts for the financial year ended 31st March2017 the applicable accounting standards have been followed. There are no materialdepartures from the applicable accounting standards; b) the Directors have selected suchaccounting policies and applied them consistently and made judgments and estimates thatare reasonable and prudent so as to give a true and fair view of the state of affairs ofthe Company as on 31st March 2017 and of the profit of the Company for that period; c)the Directors have taken proper and sufficient care for the maintenance of adequateaccounting records in accordance with the provisions of the Companies Act 2013 forsafeguarding the assets of the Company and for preventing and detecting fraud and otherirregularities; d) the Directors had prepared Annual Accounts on a going concern basis; e)the Directors had laid down internal financial controls to be followed by the Company andthat such internal financial controls are adequate and were operating effectively and f)the Directors had devised proper systems to ensure compliance with the provisions of allapplicable laws and such systems were adequate and were operating effectively.
BOARD OF DIRECTORS Composition
Aarti Drugs Limited (ADL) Board presently consists of 12 Directors out of which 7(Seven) are Non-Executive. Out of 7 (Seven) Non-Executive Directors 6 (Six) Directors areIndependent Directors.
Retirement by Rotation
In accordance with the provisions of the Companies Act 2013 and the Articles ofAssociation of the Company Shri Harshit M. Savla (DIN: 00005340) Jt. Managing Directorand Shri Prakash M. Patil (DIN: 00005618) Chairman Managing Director & CEO of theCompany retires by rotation and being eligible have offered themselves for re-appointmentas Directors.
The Independent Directors hold office for a fixed term upto 31st March 2019 and arenot liable to retire by rotation. In accordance with Section 149(7) of the Companies Act2013 each Independent Director has given a written declaration to the Company confirmingthat he/she meets the criteria of independence as mentioned under Section 149(6) of theCompanies Act 2013 and SEBI (Listing Obligations & Disclosure Requirements)Regulations 2015.
Number of Meetings of the Board
The Board of Directors met 5 (Five) times in the year 2016 17. The details ofBoard and Committee Meeting and the attendance of the Directors at such meetings areprovided in the Corporate Governance Report.
During the year the Board evaluated its performance and as well as that of itsCommittees and Individual Directors including the Chairman of the Board. Separateexercise was carried out to evaluate the performance of NonIndependent Directorsincluding the
Chairman of the Board who were evaluated on parameters such as Key achievements Shortterm and long term targets challenges faced Implementation of Strategic decisionsorganizational success participation and attendance in Board and Committee Meetings etc.
The evaluation of the Independent Directors was carried out by the entire Board andthat of the Chairman and NonIndependent Directors was carried out by the IndependentDirectors.
Independent Directors were evaluated on the parameters such as attendance andparticipations in the meetings and timely inputs on the minutes of the meetings adherenceto ethical standards & code of conduct of the Company disclosure ofnonindependence as and when exists and disclosure of interest interpersonalrelations with other Directors and Management understanding of the Company and theexternal environment in which it operates and contribution to strategic directionsafeguarding interest of whistleblowers under vigil mechanism and safeguard ofconfidential information.
The Directors were satisfied with the evaluation results which reflected the overallengagement of the Board and its Committees with the Company.
FAMILIARIZATION PROGRAMME FOR INDEPENDENT DIRECTORS
The Chairman and Managing Director have one to one discussion with all Directors tofamiliarize them with the Companys operations. Further the Company has put in placea system to familiarize the Independent Directors about the Company its productsbusiness and on-going events relating to the Company. The details of such familiarizationprogrammes for Independent Directors are posted on the website of the Company viz.www.aartidrugs.co.in/images/stories/details%20of%20familirisation%20programme.pdf.
KEY MANAGERIAL PERSONNEL
Shri Prakash M. Patil Chairman Managing Director & Chief Executive Officer ShriRashesh C. Gogri Managing Director Shri Harshit M. Savla Jt. Managing Director ShriHarit P. Shah Whole-time Director Shri Uday M. Patil Whole-time Director Shri AdhishP. Patil Chief Financial Officer and Shri Vibhav S. Ranade Company Secretary &Compliance Officer of the Company are the Key Managerial Personnel of the Company as onthe date of this report.
DETAILS RELATING TO DEPOSITS COVERED UNDER CHAPTER V OF COMAPANIES ACT 2013
Your Company has not accepted any deposits within the meaning of Section 73 of theCompanies Act 2013 and the Companies (Acceptance of Deposits) Rules 2014 and no amounton account of principal or interest on public deposits was outstanding as on the date ofthe balance sheet.
PARTICULARS OF LOANS GUARANTEES AND INVESTMENTS
Details of Loans Guarantees and Investments covered under the provisions of Section186 of the Companies Act 2013 are given in the notes to the Financial Statements.
PARTICULARS OF CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES
All related party transactions made during the financial year 2016-17 were onarms length basis and were in the ordinary course of business. All transactions withrelated parties are placed before the Audit Committee as also the Board for approval.Prior omnibus approval of the Audit Committee is obtained for the transactions which areof a foreseen and repetitive nature. The transactions entered into pursuant to the omnibusapproval so granted are specifically certified by Statutory Auditors and statementspecifying the nature value and terms & conditions of all related party transactionsis placed before the Audit Committee and the Board of Directors for their approval on aquarterly basis. The statement is supported by a certification from the Jt. ManagingDirector and the Chief Financial Officer (CFO). The details of related party transactionsare provided in the accompanying financial statements.
The Policy on Related Party Transactions as approved by the Board is available on theCompanys website and can be accessed through www.aartidrugs.com All transactionsentered into with related parties during the year were on an arms length basis andwere in the ordinary course of business. Accordingly there are no transactions that arerequired to be reported in Form AOC-2.
EXTRACT OF ANNUAL RETURN
As required by Section 92(3) of the Companies Act 2013 and rules framed thereunderthe extract of the Annual Return in Form MGT-9 is enclosed as "Annexure- A".
The Company has one non material subsidiary namely Pinnacle Life SciencePrivate Limited. The Company has attached along with its financial statement a separatestatement containing the salient features of the financial statement of the saidsubsidiary in "Form AOC-1" which is annexed as "Annexure - B".
CONSOLIDATED FINANCIAL STATEMENTS
As stipulated under the provisions of the SEBI (Listing Obligations & DisclosureRequirement) Regulations 2015 the Consolidated Financial Statements have been preparedby the Company in accordance with the applicable Accounting Standards. The AuditedConsolidated Financial Statement together with Auditors Report form part of theAnnual Report.
MATERIAL CHANGES AND COMMITMENTS AFFECTING THE FINANCIAL POSITION
There are no material changes and commitments affecting the financial position of theCompany which have occurred between the end of the financial year of the Company to whichthe financial statement relate and the date of the report.
BUSINESS RISK MANAGEMENT
During the year under review the Company has identified and evaluated elements ofbusiness risk. Business risk inter-alia further includes fluctuations in foreignexchange Raw Material Procurement risk Environmental & Safety Risk Working CapitalRisk Market Risk and Business Operations Risk. The risk management framework defines therisk management approach of the Company and includes periodic review of such risk and alsodocumentation mitigating controls and reporting mechanism of such risks. The Board ofDirectors and senior management team currently assess the operations and operatingenvironment to identify potential risks and take necessary mitigation actions.
DISCLOSURES RELATED TO COMMITTEES & POLICIES
1. Audit Committee
The Audit Committee of Directors is constituted as per the provisions of Section 177 ofthe Companies Act 2013. The Composition of the Audit Committee is in conformity with theprovisions of the said section and SEBI (Listing Obligations & DisclosureRequirements) Regulations 2015. The composition & terms of reference of AuditCommittee of the Board of Directors of the Company is disclosed in the report of CorporateGovernance which forms part of this report.
During the year under review the Board of Directors of the Company had accepted allthe recommendations of the Audit Committee.
2. Nomination & Remuneration Committee
The Nomination & Remuneration Committee of Directors is constituted in accordancewith the requirements of Section 178 of the Companies Act 2013.
The Company strives to maintain an appropriate combination of executivenonexecutive and Independent Directors. In terms of provisions of Section 178 of theCompanies Act 2013 the Nomination and Remuneration Committee considers and recommendsthe Board on appointment and remuneration of Directors and Key Managerial Personnel andthe Companys Nomination and Remuneration Policy is enclosed as "Annexure -C".
3. Stakeholders Relationship Committee
Pursuant to Section 178 of the Companies Act 2013 the Board of Directors hasconstituted the Stakeholders Relationship Committee details of which are given in theCorporate Governance Report.
The Company Secretary acts as the secretary to the Committee.
4. Corporate Social Responsibility Committee
As per the provisions of Section 135 of the Companies Act 2013 read with Companies(Corporate Social Responsibility Policy) Rules 2014 the Board of Directors hasconstituted a Corporate Social Responsibility (CSR) Committee and the Board of Directorsof the Company has approved CSR Policy based on the recommendations of the CSR Committee.
The CSR Policy is available on the Companys website and can be accessed throughwww.aartidrugs.com. Your Company actively contributes to the following segments-
i. Education & Skill Development
iv. Social Welfare
v. Promotion of Sports and allied trainings
i. Education & Skill Development
Your Company through Aarti Foundation and various other NGOs has been doing workin this segments. In this year the Company has provided furniture to School located inthe state of Maharashtra. The Company has also actively contributed towards LiteracyEducation Programmes during the year under review.
Your Company through Aarti Foundation is in process of developing Medical College inthe State of Gujarat. Also the Company has provided various infrastructure facilities tothe Hospitals in the State of Maharashtra. iii. Environment
Your Company has entered into an agreement with The Governor Government of Maharashtrathrough Deputy Conservator of Forest Dahanu Forest Division Dahanu through local NGOM/s. Sudha Pratishthan Masvan Palghar to participate and assist Government inimplementing Afforestation Programme in the degraded forest land of Dahanu Forest Divisionspread over 100 Hectares Government Land over a period of 7 years. During the year underreview the Company has successfully completed plantation programme of 60000 trees in thePalghar District. iv. Social Welfare
During the year under review your Company has actively contributed for issuespertaining to Social Welfare in the District Palghar Maharashtra. v. Promotion ofSports and allied trainings
In order to impart trainings to promote rural sports the Company has conducted varioussports activities in the State of Sikkim during the year under review. In addition toabove your Company participates into a spectrum of CSR activities evolving around thegeneral up-liftment of the economically backward class of people. Your Company also makesactive contribution to various local NGOs to assist in the relief measures in the affectedareas.
Rs 185.07 Lakhs on CSR activities. There was a slight difference between estimatedexpenditure and actual expenditure on account of change in projects cost estimation.The Company is constantly evaluating various projects to fulfill its obligations towardsthe society. The Annual Report on CSR activities is annexed as "Annexure - D"and forms an integral part of the Report.
5. Vigil Mechanism / Whistle Blower Policy
The Company has a vigil mechanism/whistle blower policy to deal with instance of fraudand mismanagement. The details of the said policy is explained in the Corporate GovernanceReport and also posted on the website of the Company viz. www. aartidrugs.com
SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS
There are no significant material orders passed by the Regulators/Courts which wouldimpact the going concern status of the Company and its future operations.
A separate section on Corporate Governance practices followed by the Company togetherwith a certificate from the Companys Auditors confirming compliance forms a part ofthis Annual Report as per SEBI (Listing Obligations & Disclosure Requirements)Regulations 2015.
MANAGEMENT DISCUSSION AND ANALYSIS
Management Discussion and Analysis Report as required under the provisions of SEBIRegulations 2015 is annexed hereto forming part of this Report.
CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO
The information on conservation of energy technology absorption and foreign exchangeearnings and outgo as stipulated in Section 134(3)(m) of the Companies Act 2013 and rulesframed thereunder is enclosed herewith as "Annexure - E".
At the Annual General Meeting held on 11th July 2014 M/s. Gokhale & SatheChartered Accountants (Firm Regn. No. 103264W) was appointed as Statutory Auditors of theCompany to hold office till the conclusion of the Thirty Second Annual General Meeting.Hence M/s. Gokhale & Sathe will retire as Companys Auditors at the conclusionof the ensuing 32nd Annual General Meeting. The Audit Committee of the Company hasproposed and the Board of Directors of the Company has recommended appointment of M/s.GBCA & Associates (Firm Registration No. 103142W) as the new Statutory Auditors of theCompany to hold office as such from the conclusion of 32nd Annual General Meeting to theconclusion of 33rd Annual General Meeting in terms of provisions of Section 139(2) of theCompanies act 2013. M/s. GBCA & Associates are proposed to be appointed for a periodof one year i.e. from the conclusion of 32nd Annual General Meeting till the conclusion of33rd Annual General Meeting of the Company. M/s. GBCA & Associates have informed theCompany that their appointment if made would be within the limits prescribed underSection 141 of the Companies Act 2013. M/s. GBCA & Associates have confirmed thatthey have subjected themselves to the peer review process of the Institute of CharteredAccountants of India (ICAI) and hold valid certificates issued by the Peer Review Board ofthe ICAI. M/s. GBCA & Associates have also furnished a declaration in terms of Section141 of the Companies Act 2013 that they are eligible to be appointed as auditors and thatthey have not incurred any disqualification under the Companies Act 2013. There are noqualifications reservation or adverse remarks or disclaimers made by the StatutoryAuditors in their Audit Report.
Mr. Girikrishna S. Maniar the Cost Auditor was re-appointed by the Company underSection 148 of the Companies Act 2013. The due date for filing the Cost Audit Reports inXBRL mode for the financial year ended 31st March 2016 was 30th September 2016 and theCost Audit Report was filed on 3rd November 2016. The due date for filing the Cost AuditReports for the financial year ended 31st March 2017 is 27th September 2017.
On the recommendation of Audit Committee the Board of Directors in its meeting held on23rd May 2017 has appointed GMVP & Associates LLP Cost Accountants as Cost Auditorof the Company for the Financial Year 2017 18. The Company is seeking theratification of the remuneration to be paid to GMVP & Associates LLP Cost Auditor ofthe Company in respect of Cost Audit for the financial year ended 31st March 2018 asmentioned in the Notice convening AGM.
The Secretarial Audit Report for the financial year ended 31st March 2017 issued by CSSunil M. Dedhia of Sunil M. Dedhia & Co. Practicing Company Secretaries SecretarialAuditor is annexed as "Annexure - F". In connection with theauditors observation in the report it is clarified that the non filing ofe-forms for board resolutions and changes in shareholding with Ministry of CorporateAffairs (MCA) are technical lapses that occurred inadvertently and necessary steps arebeing taken to file the same.
PARTICULARS OF EMPLOYEES
Disclosure pertaining to the remuneration and other details as required under Section197(12) of the Companies Act 2013 read with rule 5(2) of the Companies (Appointment andRemuneration of Managerial Personnel) Rules 2014 is enclosed as "Annexure -G". However as per the provisions of the section 136(1) of the Companies Act2013 this Report is sent to the shareholders excluding the said information. Anyshareholder interested in obtaining such particulars may write to the Company Secretary atthe Registered Office of the Company.
HUMAN RESOURCES ENVIRONMENT & SAFETY
Your Company recognizes its human resources as one of its prime & criticalresources. The relations between the Management and the Staff Members remained verycordial throughout the year under review. As on 31st March 2017 the Company had 1181permanent employees at its manufacturing plants and administrative office.
The Company has constituted an Internal Complaint Committee pursuant to the provisionsof Sexual Harassment of Women at Workplace (Prevention Prohibition and Redressal) Act2013 for prevention prohibition or redressal of complaints/grievances on the sexualharassment of women at work places.
Your Directors further states that during the year under review there were no casesfiled pursuant to the Sexual Harassment of Women at Workplace (Prevention Prohibition andRedressal) Act 2013.
Your Company has adopted green initiative to minimize the impact on the environment.The Company has been circulating the copy of the Annual Report in electronic format to allthose members whose email addresses are available with the Company. Your Company appealsother Members also to register themselves for receiving Annual Report in electronic form.
We place on record our sincere Green appreciation to the employees of the Company atall levels for their co-operation and dedicated services. We also thank all our customersand suppliers who are always co-operative.
We also express our sincere thanks to Bankers Financial Institutions and theShareholders for their continued support.
| ||For and on behalf of the Board of Directors of Aarti Drugs Limited |
| ||Sd/- |
| ||Prakash M. Patil |
|Place: Mumbai ||Chairman & Managing Director |
|Date: 23rd May 2017 ||DIN: 00005618 |