TO THE MEMBERS OF AARTI DRUGS LIMITED
Your Directors have pleasure in presenting the Thirty First Annual Report together withthe Audited Financial Statements along with the Report of the Auditors for the year ended31st March 2016.
COMPANY'S FINANCIAL RESULTS
(Rs. in Lakhs)
| || |
|Particulars ||2015-2016 ||2014-2015 ||2015-2016 ||2014-2015 |
|Net Sales/Income from Operations ||107073 ||108448 ||113488 ||109427 |
|Other Operating Income ||476 ||274 ||496 ||261 |
|Total Income from Operations ||107550 ||108722 ||113984 ||109688 |
|Total Expenditure ||90379 ||91827 ||96415 ||92786 |
|Profit Before Depreciation Amortization Interest and Tax Expenses ||17170 ||16895 ||17569 ||16902 |
|Less: Interest ||4328 ||3888 ||4389 ||3893 |
|Depreciation & Amortization ||3558 ||3066 ||3653 ||3102 |
|Profit/(Loss) before other income ||9284 ||9941 ||9527 ||9907 |
|Other Income ||- ||65 ||- ||65 |
|Profit/(Loss) Before Tax ||9284 ||10006 ||9527 ||9972 |
|Less: Provision for taxation - Current ||2115 ||2000 ||2115 ||2000 |
|- Earlier Year ||- ||(154) ||- ||(154) |
|- Deferred ||540 ||400 ||540 ||400 |
|Profit After Tax ||6629 ||7760 ||6872 ||7725 |
|Add: Surplus brought forward ||23068 ||19626 ||23033 ||19626 |
|Profit available for appropriation ||29697 ||27386 ||29906 ||27351 |
|Appropriations: || || || || |
|Transfer to General Reserve ||670 ||780 ||670 ||780 |
|Proposed Dividend ||- ||727 ||- ||727 |
|1st Interim Dividend ||545 ||605 ||545 ||605 |
|2nd Interim Dividend ||363 ||605 ||363 ||605 |
|3rd Interim Dividend ||727 ||- ||727 ||- |
|Tax on Dividend ||333 ||390 ||333 ||390 |
|Bonus Share Issued ||- ||*1211 ||- ||*1211 |
|Balance carried to Balance Sheet ||27059 ||23068 ||27314 ||23033 |
* The Company has allotted 12108550 fully paid-up equity shares pursuant to a bonusissue in the ratio of 1:1.
The paid-up Equity Share Capital as on 31st March 2016 was '242171000/-. The Company has neither issued shares with differential rights as todividend voting or otherwise nor issued sweat equity shares. There is no scheme foremployee stock option or provision of money for shares of the Company to employees orDirectors of the Company.
During the year under review your Company had declared and paid three interimdividends aggregating to ' 6.75/- per equity share of ' 10/- each (Previous Year: ' 8/-per share ex-bonus including two interim and final dividends). Keeping in view the threeinterim dividends already declared by the Company the Board have not recommended anyfurther dividend.
Total cash outflow on account of dividend payments including dividend distribution taxwill be ' 1967.43 Lakhs for the financial year 2015-16 (Previous Year: ' 2327 Lakhs).
During the year under review Gross Sales of the Company is ' 1166.10 Crores (Previous' 1169.94 Crores) registering a decline of 0.33%.
The Company has achieved Export Sales of ' 389.19 Crores as against ' 411.71 Crores forthe last year registering a decline of 5.47%.
EBITDA has been ' 171.70 Crores (Previous Year: ' 168.96 Crores) registering a growthof 1.62%. PAT has been ' 66.29 Crores (Previous Year ' 77.60 Crores) registering adecline of 14.57%.
INTERNAL FINANCIAL CONTROLS AND THEIR ADEQUACY
Your Company's internal control systems commensurate with the nature and size of itsbusiness operations. Your Company has maintained a proper and adequate system of internalcontrols. This ensures that all Assets are safeguarded and protected against loss fromunauthorized use or disposition and that the transactions are authorised recorded andreported 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 Auditor's Reportsare 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 state that-
a) in the preparation of the Annual Accounts for the financial year ended 31stMarch 2016 the applicable accounting standards have been followed. There are no materialdepartures from the applicable accounting standards;
b) the Directors have selected such accounting policies and applied them consistentlyand made judgments and estimates that are reasonable and prudent so as to give a true andfair view of the state of affairs of the Company as on 31st March 2016 and ofthe 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 theCompany and that such internal financial controls are adequate and were operatingeffectively and
f) the Directors had devised proper systems to ensure compliance with the provisions ofall applicable laws and such systems were adequate and were operating effectively.
BOARD OF DIRECTORS
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 Rashesh C. Gogri (DIN: 00066291) Managing Director ofthe Company retires by rotation and being eligible offers his candidature forre-appointment as Director.
The Independent Directors hold office for a fixed term upto 31st March 2019and are not liable to retire by rotation. In accordance with Section 149(7) of theCompanies Act 2013 each Independent Director has given a written declaration to theCompany confirming that he/she meets the criteria of independence as mentioned underSection 149(6) of the Companies Act 2013 and SEBI (Listing Obligations & DisclosureRequirements) Regulations 2015.
Number of Meetings of the Board
The Board of Directors met 5 (Five) times in the year 2015-16. The details of Board andCommittee Meetings and the attendance of the Directors at such meetings are provided inthe Corporate Governance Report.
The details regarding the Board Meetings and the attendance of the Directors at theBoard Meeting/Committee Meeting during the year are set out in detail in the CorporateGovernance 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 Non-Independent Directorsincluding the Board Chairman who were evaluated on parameters such as Key achievementsShort term 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 of non-independenceas and when exists and disclosure of interest interpersonal relations with otherDirectors and Management understanding of the Company and the external environment inwhich it operates and contribution to strategic direction safeguarding interest ofwhistle-blowers under vigil mechanism and safeguard of confidential information.
The Directors were satisfied with the evaluation results which reflected the overallengagement of the Board and its Committees with the Company.
FAMILIARISATION PROGRAMME FOR INDEPENDENT DIRECTORS
The Chairman and Managing Director have one to one discussion with all Directors tofamiliarize them with the Company's operations. Further the Company has put in place asystem to familiarize the Independent Directors about the Company its products businessand 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.com.
KEY MANAGERIAL PERSONNEL
During the year under review Shri Sunny D. Pagare Company Secretary & ComplianceOfficer of the Company resigned w.e.f. 1st December 2015 and Shri Vibhav S.Ranade has been appointed as Company Secretary & Compliance Officer of the Companyw.e.f. 22nd February 2016.
DETAILS RELATING TO DEPOSITS COVERED UNDER CHAPTER V OF COMPANIES 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 2015-16 were on arm'slength basis and were in the ordinary course of business. All transactions with relatedparties are placed before the Audit Committee as also the Board for approval. Prioromnibus approval of the Audit Committee is obtained for the transactions which are of aforeseen and repetitive nature. The transactions entered into pursuant to the omnibusapproval so granted are audited and a statement specifying the nature value and terms& conditions of all related party transactions is placed before the Audit Committeeand the Board of Directors for their approval on a quarterly basis. The statement issupported by a certification from the Jt. Managing Director and the Chief FinancialOfficer (CFO). The details of related party transactions are provided in the accompanyingfinancial statements.
The Policy on Related Party Transactions as approved by the Board is available on theCompany's website and can be accessed through www.aartidrugs.com.
All transactions entered into with related parties during the year were on an arm'slength basis and were in the ordinary course of business. Accordingly there are notransactions that are required 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 subsidiary namely Pinnacle Life Science Private Limited. TheCompany has attached along with its financial statement a separate statement containingthe salient features of the financial statement of the said subsidiary in "FormAOC-1" which is annexed as "Annexure - B".
CONSOLIDATED FINANCIAL STATEMENTS
As stipulated under the provisions of the SEBI (Listing Obligations & DisclosureRequirements) Regulations 2015 the Consolidated Financial Statements have been preparedby the Company in accordance with the applicable Accounting Standards. The auditedConsolidated Financial Statements together with Auditors' Report form part of the AnnualReport.
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 executive non-executiveand Independent Directors. In terms of provisions of Section 178 of the Companies Act2013 the Nomination and Remuneration Committee considers and recommends the Board onappointment and remuneration of Directors and Key Managerial Personnel and the Company'sNomination 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 Company's website and can be accessed throughwww.aartidrugs.com.
Your Company actively contributes to the following segments-
i. Education & Skill Development
iii. Rehabilitation in Disaster Affected areas
i. Education & Skill Development
Your Company through own trusts Aarti Foundation & Dhanvallabh Charitable Trust andvarious other NGO's has been doing work in this segments. In addition to this year Companyprovides direct help to schools located nearby all its manufacturing facilities by way ofconstructing schools grant/aid for fees etc.
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.
iii. Rehabilitation in Disaster Affected areas
Aarti Drugs which holds an expertise of working in collaboration with the governmentand local NGOs has carried out rehabilitation in drought affected areas of Aurangabadthrough Shree Siddhivinayak Sevabhavi.
I n addition to above your Company participates into a spectrum of CSR activitiesevolving around the general up-liftment of the economically backward class of people. YourCompany also makes active contribution to various local NGOs to assist in the reliefmeasures in the affected areas.
During the year the Company has spent ' 175.38 lakhs on CSR activities.
The Annual Report on CSR activities is annexed as "Annexure - D" andforms 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 Company's Auditors confirming compliance forms a part of thisAnnual 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 &Sathe Chartered Accountants (Firm Regn. No. 103264W) were appointed as Statutory Auditorsof the Company to hold office till the conclusion of the Thirty Second Annual GeneralMeeting (AGM).
In terms of the provisions of the Companies Act 2013 it is necessary to get theappointment ratified by the shareholders in every Annual General Meeting until the expiryof the period of original appointment.
In this regard the Company has received a certificate from the Auditors to the effectthat if they are reappointed it would be in accordance with the provisions of the Section141 of the Companies Act 2013.
In view of the above the Board of Directors recommends your ratification of theappointment of M/s. Gokhale & Sathe Chartered Accountants (Firm Regn. No. 103264W) asthe Statutory Auditors as mentioned in the Notice convening AGM.
There are no qualifications reservation or adverse remarks or disclaimers made by theStatutory Auditors in their Audit Report.
The Cost Auditor Mr. Girikrishna S. Maniar was re-appointed by the Company underSection 148 of the Companies Act 2013 and he attended the Audit Committee Meeting whereCost Audit Reports was discussed.
The due date for filing the Cost Audit Reports in XBRL mode for the financial yearended 31st March 2015 was 30th September 2015 and the Cost AuditReports were filed by the Cost Auditor on 15th January 2016. The due date forfiling the Cost Audit Reports for the financial year ended 31st March 2016 is30th September 2016.
The Company is seeking the ratification of the remuneration to be paid to Mr.Girikrishna S. Maniar Cost Auditor of the Company in respect of Cost Audit for thefinancial year ending 31st March 2017 as mentioned in the Notice conveningAGM.
The Secretarial Audit Report for the financial year ended 31st March 2016 issued by CSSunil M. Dedhia of Sunil M. Dedhia & Co. Practicing Company Secretaries SecretarialAuditor is annexed as "Annexure - F". The Secretarial Audit Report doesnot contain any qualification reservation or adverse remark.
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 2016 the Companyhad 1072 permanent 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 registered 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: 5th May 2016 ||DIN: 00005618 |