TO THE MEMBERS
Your Directors have pleasure in presenting their Seventy-third Annual Report and theAudited Financial Statements of the Company for the financial year 2016-17.
(Rs. in Lakhs)
| ||For the year ended March 31 2017 ||For the year ended March 31 2016 |
|Sales ||290237.67 ||261305.95 |
|Other Operating Income ||3631.45 ||3258.22 |
|Other Income ||5764.28 ||5058.69 |
|Total Income ||299633.40 ||269622.86 |
|Profit Before Tax ||43649.17 ||39801.15 |
|Profit After Tax ||27664.88 ||25525.00 |
|Balance brought forward ||88985.66 ||74085.35 |
|Other adjustments to Equity ||(187.61) ||(100.11) |
|Profit available for appropriation ||116462.93 ||99510.24 |
|Appropriations : || || |
|Dividend - FY 2015-16 ||7437.26 ||- |
|FY 2014-15 ||- ||6587.28 |
|Corporate Dividend Tax ||1514.05 ||1341.02 |
|Transfer to Reserves ||2766.49 ||2596.28 |
|Balance carried forward ||104745.13 ||88985.66 |
Note : The above figures are as per Indian Accounting Standards (Ind AS). For thepurposes of transition to Ind AS the Company has followed the guidance prescribed in IndAS 101 First-Time Adoption of Indian Accounting Standards with April 1 2015 as thetransition date with IGAAP as the previous GAAP.
INDIAN ACCOUNTING STANDARDS (Ind AS)
The Company has adopted Indian Accounting Standards (Ind AS) as per thenotification dated February 16 2015 issued by the Ministry of Corporate Affairs (MCA).Ind AS has replaced the existing Indian GAAP prescribed under Section 133 of the CompaniesAct 2013 read with Rule 7 of the Companies (Accounts) Rules 2014. The Company haspublished financials using Ind AS for the year ended March 31 2017 along with comparableas on March 31 2016 and Opening Statement of Assets and Liabilities as on April 1 2015.Following are the major areas which had an impact on account of transition to Ind AS :
Fair Valuation of certain financial instruments
Employee costs pertaining to defined benefit obligations
Discounting of certain long term liabilities
Share based compensation to employees
Deferred taxes on above areas
Your Directors recommend a dividend of Rs. 40/- per share on 21249302 fully paid-upEquity Shares of Rs. 10/- each of the Company for the year ended March 31 2017. Theproposed dividend if approved at the Annual General Meeting will absorb a sum of Rs.8499.72 Lakhs (Previous year : Rs. 7437.26 Lakhs) and Corporate Dividend Tax of Rs.1730.34 Lakhs (Previous year : Rs. 1514.05 Lakhs). The Corporate Dividend Tax isprovided at the rate applicable on the day on which the accounts were approved by theBoard of Directors.
During the year Rs. 2766.49 Lakhs was transferred to General Reserve. The totalReserves as at March 31 2017 amounted to Rs. 136569.47 Lakhs comprising ofAmalgamation Reserve Rs. 37.82 Lakhs Capital Reserve Rs. 522.62 Lakhs Capital RedemptionReserve Rs. 252.48 Lakhs General Reserve Rs. 29678.98 Lakhs Share based Payment ReserveRs. 1332.44 Lakhs and Retained Earnings at Rs. 104745.13 Lakhs.
MANAGEMENT DISCUSSION & ANALYSIS ECONOMIC OVERVIEW
The World Economic outlook published in April 2017 retained India's growth rate at 6.8%for the year 2016-17. For 2017 India will maintain its tag as the fastest growingeconomy outperforming other emerging markets such as China Russia and Brazil with aprojected growth rate of 7.2% for the fiscal year. Comparatively the global economy isexpected to grow at 3.5% in 2017. The outlook also gave India a favorable growth forecastin the medium term stressing that 8% growth is within reach.
The IMS Health Market Prognosis Report highlighted that manufacturing and services willdrive GDP growth with the manufacturing sector benefiting from initiatives such asMake in India' and steps to liberalize FDI. India's population growth rate isexpected to slow although the numbers will still grow by almost 78 million by 2020 toreach 1.39 billion.
Goods and Services Tax (GST) brings in a paradigm change in the business environmentthat will impact the very core of how business is conducted. It is likely to trigger amajor business transformation. The taxation would shift from origin based toconsumption based. Various indirect taxes would be subsumed resulting in a simplified taxstructure which should lead to ease in doing business and the broadening of the tax base.
INDIAN HEALTHCARE ENVIRONMENT
In India healthcare is provided by a mix of both public and private facilities;however the private sector accounts for 80% of all outpatient consultations and over 60%of inpatient admissions. In March 2017 the Government of India released the NationalHealth Policy aiming to raise public health expenditure to 2.5% of the GDP by 2025 from1.15% of GDP in 2016 and also increase state sector health spending to more than 8% oftheir budget by 2020. There is an increased emphasis on the development of primary careand increased access to affordable essential medicines. In 2015 Ministry of Health hasrevised and included new drugs in the National List of Essential Medicines 2015 whichincreased the ambit and scope of the Drug Price Control Order 2013.
The demonetization announced by the Government of India on November 8 2016 caused ashort term disruption at stockist level and the cash crunch led to a temporary capitalsqueeze in the supply chain leading to a decrease in sales in November-February period.
INDUSTRY STRUCTURE AND DEVELOPMENTS
The Indian Pharmaceutical Market (IPM) was estimated to be
Rs. 1179 billion in 2016 with a growth of 10.9%. India is the third largestpharmaceutical market in terms of volume and thirteen largest in terms of value globally.The market is highly fragmented with close to 10000 companies licensed by regulators andan average of 27 brands competing in every molecule. The top 10 therapies contribute 88%to the IPM with antibiotics continuing to be the biggest segment. The acute segmentcontributes approximately 66% of the market; however the chronic segment shows fastergrowth at 14% and has grown to 34% in 2016 from 29% in 2012.
OPPORTUNITIES AND THREATS
The following factors are likely to impact the IPM in the next few years :
Drug Price Controls - Drug Price Control is going to remain a big challenge inIndia. Ministry of Health is committed to revise the National List of Essential Medicinesperiodically which will keep on increasing the ambit of price control for drugs.Department of Pharmaceuticals through an inter-ministerial committee is contemplating apolicy to control the prices of patented drugs in India.
Uniform Code of Pharmaceutical Marketing Practices (UCPMP) - UCPMPcurrently voluntary is expected to become mandatory shortly. A mandatory Code isexpected to provide a level playing field and ethical marketing practices would befollowed by all companies. The Company has strong compliance processes in place and wouldbe in a good position under a more stringent regime.
Regulation of OTC Drugs - With no specific regulatory framework for OTCdrugs in India the Government recently announced plans to establish a legal framework forthe regulation of the same. The regulation will pave the way for drugs that are used forthe treatment of mild disorders to be classified as OTC products and will ensure stricterenforcement of regulations for prescription only products.
Increased Focus on Healthcare - As mentioned earlier in the recently announcedNational Health Policy 2017 by the Ministry of Health and Family Welfare theGovernment's aim to increase health expenditure as a percentage of GDP from the existing1.15% to 2.5% by 2025 was documented. The policy also announced several initiatives tostrengthen and prioritize the role of the Government in shaping health systems in all itsdimensions.
Increasing Digital Penetration - The exponential growth in the adoptionof mobile and digital media will see digital continue to be an important tool for patientengagement and a medium to raise disease awareness. We expect this trend to continue andgain importance.
REVIEW OF OPERATIONS
Financial performance Sales
Sales for the year ended March 31 2017 amounted to Rs. 290237.67 Lakhs registering agrowth of 11.1% over the previous year mainly driven by volumes.
Material Cost as a percentage of Sales has increased from 57.1% in financial year2015-16 to 59.0% in the current year. This is mainly because of decreased Salesrealisation on account of reduction in prices of price controlled products.
Employee Benefit Expenses
During the year under review the Company increased its people strength by 4.3% to3083. The increase in employee cost is mainly on account of merit increase. This increasewas partly offset by reduction due to few senior level vacancies for part of the year.
Other Expenses including depreciation and finance cost increased by 8.0% over the prioryear mainly on account of inflation marketing spend to support volume growth marketresearch projects and new product launches. The spend as a percentage of Sales was 17.3%compared to 17.8% for the year financial year 2015-16.
During the year Other Income grew by 13.9% mainly due to increase in Interest Incomefrom Bank Deposits. The Company continued to invest in Fixed Deposits with Banks havinghigh credit ratings with a view to safeguarding the principal and maintaining liquidity.Income from Bank Deposits grew by 21.0%. Investment strategy is reviewed periodically bythe Finance Committee.
The Company has an investment portfolio as at March 31 2017 of Rs. 104760.00 Lakhs.
Profit Before Tax and Dividend
Profit Before Tax for the year ended March 31 2017 stood at Rs. 43649.17Lakhs being 15.0% of Sales as compared to 15.2% in the previous year.
The Board of Directors has recommended a dividend of Rs. 40/- per equity share.
The Company operates in a single reportable business segment i.e."Pharmaceuticals". The Company's business operations are divided into fourdivisions i.e.
(i) Women's Health & Gastrointestine Gastroenterology and GI Prospera (erstwhileHepatic Care);
(ii) Specialty Care;
(iii) GenNext & Vaccines and
(iv) Consumer Care.
The key performance highlights of each business division for the year financial year2016-17 are as follows :
(i) Women's Health & Gastrointestine Gastroenterology and GI Prospera Division
This division has a mix of global and local brands present in the pregnancyconstipation and liver diseases segments. Several of the Company's largest brandsincluding Duphaston (Women's Health Hormone) Duphalac (Laxative) Udiliv (HepaticProtective) Cremaffin (Laxative) Cremaffin Plus (Laxative) Creon (Digestive Enzymes)Ledviclear (Hepatic Care) and Tenfoclear (Hepatitis B) are part of this division.
Women's Health & Gastrointestine
This segment posted strong growth of 15.9% during the year. Some of the key brandsDuphaston Udiliv and Creon have shown double-digit growth during the year and contributedsignificantly to overall segment growth.
This segment posted a strong growth of 14.2% during the year. This growth was mainlydriven by brands Cremaffin Cremaffin Plus and Librax.
This segment grew by 8.3% during the year. The growth was majorly driven by brandsCreon Ledviclear and Tenfoclear.
(ii) Specialty Care Division
This division consists of a comprehensive range of products in treatment of Metabolicdisorders and Central Nervous System. It is present in therapy areas like hypothyroidismvertigo epilepsy depression and migraine. The key brands are Th yronorm (thyroidpreparations) Vertin (antivertigo) Prothiaden (antidepressant) Surbex Gold(multivitamin antioxidants) and Inderal (migraine prophylaxis) which enjoy marketleadership position* in their respective therapeutic areas.
This segment grew by 7.6% during the year. The growth was mainly driven by Thyronormwhich retains flagship position* in its segment.
Central Nervous System
This segment grew by 3.4% during the year. In the vertigo treatment sub-segment Vertincontinues as the market leader* and has shown strong double digit growth.
(iii) GenNext and Vaccines Division GenNext
This division includes therapy areas including Pain Management and Vitamins. Itcomprises multi-specialty drugs and applications and is primarily aimed at generalphysicians. Key brands include Brufen (pain killer) Duvadilan (peripheral vasodilator)Zolfresh (sleep management) Arachitol (Vitamin D preparations) and Digecaine (antacidanaesthetic). This division has shown negative growth of 1.2%. Arachitol and Duvadilanhave shown positive growth. Zolfresh retains number 1 position* in its segment.
The Company has licensing arrangement with Bharat Biotech India Limited to marketvaccines in immunology segment. The key brands in vaccine portfolio are Influvac(Influenza vaccine) Enteroshield (typhoid vaccine) and Rotasure (rotavirus diarrheavaccine). This segment showed growth of 30.0% and contributed 2.4% of Sales for the year.The double digit growth was majorly driven by Enteroshield.
(iv) Consumer Care Division
Consumer Care Division is present in the Over The Counter (OTC) antacid segment. Thisdivision promotes all variants of Digene (antacid antiflatulent) tabletsliquids and powders. The segment focuses on connecting with patients through positioningof its products mainly through mass media social media and point of sale promotion. Newadvertisement and marketing strategies will help sustaining the growth of this portfolio.This segment showed growth of 10.4%.
New Product Launches
The Company launched 10 new products during the year in various therapy segments whichcontributed 0.7% of the Sales of the Company. These products are Colospa X (IBSManagement) PRO-9 (Preterm Labour) Actnew (Functional Dyspepsia) Cremalax Liquid(Constipation) Pankreoflat Liquid (Liquid formulation of Pankreoflat) Influvac Junior(Influenza vaccine for infants) two new flavours of Digene Fizz (Regular and Kaccha Aam)Snapit (Migraine) Rashfree (Baby Rash Cream) and CitroSoda (Urinary Alkaniser).
GOODS AND SERVICES TAX (GST)
GST is a major transformational reform which will have a significant impact on theeconomy across business sectors. Under GST simplified tax structure where severalcentral state municipal level taxes are subsumed will be a major catalyst forconsolidation across all levels of the Supply Chain. Major changes are expected in thedistribution sector paving the way for the emergence of larger wholesalers with broadergeographical reach. The announced rate of GST pending notification on drugs in generalis 12% and for life saving drugs is 5%. In the short term the market is likely toexperience some disruption due to transition challenges. The Company is geared up to beGST compliant and has made suitable changes across IT systems and Supply Chain operationswhile also continuously engaging with trade partners for a smooth transition.
The Company conducts both non-interventional real-world as well as interventional(Registration) studies.
Non-interventional Real World Studies
Real-World Evidence (RWE) research studies are conducted to answer scientific questionswhich may help bridge the gaps between in-clinic patients management and suggesttheraputic recommendations/guidelines.
The Company initiated Real-World studies were presented/ published at internationalcongresses during the year under review.
Studies supporting the Thyroid Therapy
i. The Thyroid Registry first analysis : Presented at European Thyroid Association.
Guidelines suggest a diagnosis of hypothyroidism based on TSH and T4 levels. Howevermost of the patients as observed in this registry received treatment based on TSH levelsalone thus highlighting the need for awareness and scientific education among cliniciansin India.
ii. The Thyroid KAP (Knowledge Attitude Practice) Study : Presented at The 12thAsia and Oceania Thyroid Abstract Association Congress.
This Study emphasizes the need for continuous by the physicians/effective awarenessprograms for the management of hypothyroidism in India.
Study supporting the Vertigo Therapy
i. The One EPD Vertigo-Dizziness Registry : Presented at ASEAN Academy of Neuro-Otology& Audiology (AANOA) Congress.
The Study observed that Vertigo has a negative the patients' day-to-day activities andwork productivity thereby impacting the overall health-related quality of life. KAP studyrevealed that the knowledge attitude and practice patterns amongst Indian Vertigopatients is inadequate highlighting the need for awareness and scientific educationamongst these patients in India. Moreover the healthcare providers should be trained toprovide counseling to these patients effectively.
Study supporting the Constipation Therapy
i. SCI oN study : Presented at ANMA & JSNM Joint 2017.
The Study reported that Functional Constipation is more prevalent than Irritable BowelSyndrome Constipation (IBS-C) among the patients of constipation in Indian population(75.57% Vs 24.43%). Thus there is a definite need to highlight importance of appropriatepharmacotherapy for effective constipation management and overall improvement in QoL.
Study supporting the Vaccines Therapy
i. Influenza KAP Study : Published in JAPI
In this Study 50% of corporate employees who were surveyed had low level of knowledgeof Influenza which highlights the need for awareness programs.
Interventional (Registration) Studies
The registration studies are done as a part of Company's commitment for portfolioexpansion. These Studies are conducted for new indications and/or for new productintroductions.
i. Lotus II
Study Title : A Study Comparing the Efficacy and Tolerability of Oral Dydrogesteroneversus Crinone intravaginal progesterone gel for Luteal Support in In-Vitro Fertilization.
Out of the 37 sites globally 2 Indian sites were amongst the top five recruiters.
India was also second highest recruiter in the study.
ii. Influv ac Quadrivalent Vaccine (QIV)
Study Title : An Open-Label Baseline-Study in Subjects Aged 6 Months and Older toAssess the Immunogenicity Reactogenicity and Safety of a Quadrivalent Influenza Vaccinein India
IMS Health has forecasted the Indian Pharmaceutical Market to grow at a compoundedannual growth rate of 11% between counseling 2017 and 2021 reaching approximately Rs.2000 billion by 2021.
For the near future the Company has identified specific opportunities to leverage forgrowth capitalizing on its strengths and positioning itself as a leading science drivenpharmaceutical company. Some of these are :
Accelerate growth of existing brands through focused brand building innovativemarketing campaigns and impact on partnerships to help patients and physicians. This willensure we continue growing faster than the market and drive our therapy leadership.
Provide services that go beyond just the pill. We have targeted interventions at eachstage along the Continuum of Care' for patients that have a direct impact. Forexample we help drive compliance in the Vertigo space through our Vertigo mobile Appwhich has a pill reminder service.
Increased portfolio depth through the launch of new products in our existing therapyareas. In the last three Meeting years alone we have launched over 30 new products andhave a robust plan for future launches.
(FC)Focus on internal talent development engagement retention and capabilitybuilding. For example we have done a baselining exercise for all our first line managersand assessed all our head office marketing resources to help identify and develop keytalent.
Digital differentiation and the use of technology which complement our products todrive engagement with KOLs and patients. For example in-clinic engagement throughaugmented and virtual reality interfaces such as the Vertigo App and out-of-clinicengagement through campaigns such as the Digene Youtube campaign.
RISKS AND CONCERNS
The pharmaceutical regulatory environment across the world is becoming more stringentincluding that facing the Indian Pharmaceutical Industry and further reform of theframework governing pharmaceuticals is expected to be pursued. The span of price controlunder the Drug Price Control Order is also likely to increase as the National List ofEssential Medicines (NLEM) will be revised periodically by the Ministry of Health in 4years intervals. This will ensure the continuing relevance of listed products but also ameans of controlling drug prices. The 2015 NLEM had brought the total number of listeddrugs up from 348 to 376 and increased the number of therapeutic classes covered from 27to 29.
INTERNAL CONTROL AND ITS ADEQUACY
The internal controls of the Company operate through well documented standard operatingprocedures policies and process guidelines. The Company has an adequate system ofinternal financial controls commensurate with its size and nature of business which helpsin ensuring orderly and efficient conduct of its business. These systems provide areasonable assurance in respect of financial and operational information complying withapplicable statutes safeguarding of assets of the Company prevention & detection offrauds accuracy and completeness of accounting records and ensuring compliance withcorporate policies.
Significant internal audit observations and management actions thereon are reported tothe Audit Committee on a quarterly basis. The Audit Committee reviews the observations andassesses the adequacy of the actions proposed as well as monitors their implementation.Internal Auditors conduct a quarterly follow up for implementation/remediation of allaudit recommendations and the status report is presented to the Audit Committee regularly.
The Company has a formal system of internal control testing which examines both thedesign and operational effectiveness to ensure reliability of financial and operationalinformation and all statutory/regulatory compliances. The Company Management has assessedthe effectiveness of internal control over financial reporting for the year ended March31 2017 and based on the assessment believe that the Company's internal controls areadequate and working effectively. The Statutory Auditors have issued an audit report onthe adequacy and effectiveness of the internal financial control systems over financialreporting.
MATERIAL DEVELOPMENTS IN HUMAN RESOURCES
We are committed to building a future-ready organization to ensure that the currentgrowth rate is sustainable over the long term. Our team of 3000 colleagues remains ourbiggest advantage in the highly competitive pharma industry. The Human Resource (HR) teamhas built specific programs to encompass the entire employee lifecycle attracting besttalent both internally and externally retention via career management rewards anddevelopment across all cadres.
The integrated approach to Talent Strategy helped us to drive focus on two key facetsof people management - attracting the best talent and developing people within theorganization.
Attracting the Best Talent : We have driven differentiated talent hiring frommultiple channels including premier business schools in India and abroad.
Developing People : We have established a number of training programs for ouremployees across all functions within the organization. These help in grooming internaltalent for further growth and maintain continuity in operations. Some of such Programsconducted during the year include -
Field Training Programs :
New Field Employees on-boarding program (Genesis) to prepare new joinees to Abbott'sway of working; "Coaching Olympiad" first of it's kind program which isdesigned to serve multiple objectives - build coaching capabilities and reward andrecognise top coaches in the Company; Technology Enablement in Training (ASTA Online)robust E-Learning platform comprising 700+ learning modules for use by our field forcethereby providing opportunity to learn at own speed and convenience; Employee Health andSafety (EHS) Training to all the new employees on driving safety as part of theirinduction program through external experts.
Field Talent Development Programs :
Three Tier Certification Program (PRIMA MAGNA MAXIMA) for Field personneldevelopment aimed at grooming talent and identifying managers for promotions in the field;Sales Force Career Development (Tracks) an internal career development program to sourcetalent internally and establish career path for key functions/roles; First Line Manager(FLM) and Second Line Manager (SLM) Assessments structured assessment programs to createsuccession pipeline for First Line and Second Line high performing field managers.
Head Office Talent Acceleration Programs such as
Leadership Development Program : MBAs from premier business schools in India and aboardbring a fresh and international perspective to our business.
Business Analysts Program : Business Analysts with consulting background spend 2 yearsin the Company before joining business schools and play a key role in implementingcritical projects.
Future Leader Program : Freshers from reputed engineering schools (IITs) and MBAs fromleading business schools are groomed to take on managerial positions.
Prevention of Sexual Harassment at Workplace
The Company has Internal Complaints Committee (ICC) under the Sexual Harassment ofWomen at Workplace (Prevention Prohibition and Redressal) Act 2013.
Appropriate Training is imparted to all employees every year. This training also formspart of New Employee Orientation Program. There were no complaints received by theCompany/ICC during the year under the aforesaid Act.
Total Number of Employees : Total number of employees as on March 31 2017 is3083.
DIRECTORS' RESPONSIBILITY STATEMENT
Pursuant to Section 134 (5) of the Companies Act 2013 your Directors state that :
a) in the preparation of the Annual Accounts for the year ended March 31 2017 theapplicable accounting standards have been followed and there are no material departuresfrom the same;
b) they have selected such accounting Policies and applied them consistently and madejudgments and estimates that are reasonable and prudent so as to give a true and fair viewof the state of affairs of the Company as at March 31 2017 and of the profits of theCompany for that year;
c) they 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) they have prepared the Annual Accounts of the Company on a going concern basis;
e) they have laid down adequate Internal Financial Controls to be followed by theCompany and that such Internal Financial Controls are adequate and are operatingeffectively;
f) they have devised proper systems to ensure compliance with the provisions of allapplicable laws and that such systems are adequate and operating effectively.
DIVIDEND DISTRIBUTION POLICY
The Board approved the Dividend Distribution Policy in line with the Securities andExchange Board of India (Listing Obligations and Disclosure Requirements) Regulations2015. The said Policy is available on the Company's website at http://www.abbott.co.in/investor-relations/policies.html
RELATED PARTY TRANSACTIONS
Policy on dealing with Related Party Transactions and Materiality
As per the requirements of the Companies Act 2013 and the Securities and ExchangeBoard of India (Listing Obligations and Disclosure Requirements) Regulations 2015 theCompany has Policy on dealing with Related Party Transactions and Materiality which isalso available on the Company's website athttp://www.abbott.co.in/investor-relations/policies.html As per the said Policy allRelated Party Transactions are pre-approved by the Audit Committee and Board as and whenrequired. The same are also reviewed by the Audit Committee on a quarterly/annual basis.
Details of Related Party Transactions
All contracts/arrangements/transactions entered into by the Company during thefinancial year 2016-17 with Related Parties were in the ordinary course of business and onarm's length basis. No material related party transactions i.e. transaction exceeding 10%of the annual turnover as per the last audited financial statements were entered duringthe year by the Company.
Details of Related Party Transactions entered into by the Company during the financialyear 2016-17 are provided in Note 42 to the Financial Statements.
CORPORATE SOCIAL RESPONSIBILITY (CSR)
Corporate Social Responsibility (CSR) Policy
The CSR Policy of the Company is available on its website athttp://www.abbott.co.in/investor-relations/policies.html
CSR initiatives undertaken during the financial year 2016-17
During the year the Company spent an amount of Rs. 713.95 Lakhs on various CSRactivities.
The Annual Report of CSR activities undertaken by the Company during the financial year2016-17 is annexed as "Annexure I" and forms part of this Report.
RISK MANAGEMENT FRAMEWORK
The Company recognizes Risk Management as an integrated forward-looking andprocess-oriented approach. It has developed a Risk Framework that broadly encompasses :aligning risk appetite and strategy; enhancing risk response and reducing operationalsurprises. During the year Risk Management Core Team comprising of representatives ofvarious functions and business had carried out risk assessment exercise to identify thevarious significant risks associated with the business operations and mitigation plans toaddress such risks. Material risks and mitigation plans were reviewed by the RiskManagement Committee and then presented to the Board.
The Board of Directors of the Company based on the recommendation of Nomination andRemuneration Committee appointed Mr Ambati Venu (DIN : 07614849) as Additional Directorand Managing Director of the Company for a period of 5 (five) years effective fromSeptember 29 2016 subject to approval of the Central Government and Members at theensuing Annual General Meeting.
In compliance with provisions of Section 152 of the Companies Act 2013 Mr BhaskerIyer (DIN : 00480341) and Mr Sachin Dharap (DIN : 00785700) retire by rotation at theensuing Annual General Meeting and being eligible offer themselves for re-appointment.
Based on the recommendation of the Nomination and Remuneration Committee yourDirectors recommend appointment/re-appointment of Mr Ambati Venu Mr Bhasker
Iyer and Mr Sachin Dharap on the Board of the Company.
Declaration of Independence
The Company has received declarations from all the Independent Directors confirmingthat they meet with the criteria of independence prescribed under sub-section (6) ofSection 149 of the Companies Act 2013 and the Securities and Exchange Board of India(Listing Obligations and Disclosure Requirements) Regulations 2015.
Number of Meetings of the Board
Six Board Meetings were held during the year on May 25 2016; July 18 2016; August 262016; September 29 2016; November 28 2016 and February 6 2017.
Policy on Nomination and Appointment of Directors/ Criteria for appointment of SeniorManagement and the Remuneration Policy
Policy on Nomination and Appointment of Directors/Criteria for appointment of SeniorManagement and Remuneration Policy as formulated under Section 178 (3) of the CompaniesAct 2013 is annexed as "Annexure II" and forms part of this Report.
Performance Evaluation of the Board Board Committees and Directors
Pursuant to the requirements the Companies Act 2013 read with Rules framed thereunderand the Securities and Exchange Board of India (Listing Obligations and DisclosureRequirements) Regulations 2015 the Company has adopted Performance Evaluation Frameworkand Policy which interalia contains various parameters for evaluation of BoardCommittees and individual Directors. The said Policy is available athttp://www.abbott.co.in/investor-relations/policies.html The Nomination and RemunerationCommittee and the Board conducted performance evaluation of each individual directors theBoard and Committees through self-assessment and group discussions. Evaluation was donebased on the parameters stated under the aforesaid Framework and after taking intoconsideration Guidance Note issued by the Securities and Exchange Board of India onJanuary 5 2017. Independent directors at their separate meeting also evaluatedperformance of non-independent directors the Board as a whole and the Chairman.
KEY MANAGERIAL PERSONNEL
Mr Ambati Venu Managing Director Mr Rajiv Sonalker Chief Financial Officer and MsKrupa Anandpara Company Secretary are the Key Managerial Personnel of the Company.
The Audit Committee comprises of Mr R A Shah (Chairman) Mr Ranjan Kapur Mr KrishnaMohan Sahni and Mr Munir Shaikh. Role of the Committee is provided in the CorporateGovernance Report forming part of this Report. All the recommendations made by the AuditCommittee during the year were accepted by the Board.
VIGIL MECHANISM/WHISTLE BLOWER POLICY
The Vigil Mechanism/Whistle Blower Policy called "Abbott India Limited Procedure for Internal Investigations" lays down a mechanism for reporting andinvestigation of all unethical behavior alleged violations or potential violations oflaws regulations or Abbott's Code of Business Conduct policies procedures or otherstandards. The said Policy is available on the website of the Company athttp://www.abbott.co.in/investor-relations/policies.html Employees have numerous ways tovoice concerns and are encouraged to report concerns internally for resolution. Thesaid Policy provides for adequate safeguards against retaliation and access to theChairman of the Audit Committee.
Any concerns can be communicated through various sources as provided under the saidPolicy or via toll free number 0008001001058 or online at http://speakup.abbott.com
S R B C & CO LLP Chartered Accountants (ICAI Firm Registration No :324982E/E300003) were appointed as the Statutory Auditors for a term of 5 years at theSeventieth Annual General Meeting of the Company held on August 1 2014. In terms ofprovisions of Section 139(1) of the Companies Act 2013 the continuation of theappointment of S R B C & CO LLP as Statutory Auditors shall be subject to ratificationby the Members at the ensuing Annual General Meeting. The Company has received aconfirmation from S R B C & CO LLP regarding their eligibility and willingnessto continue as the Statutory Auditors.
The Auditors' Report for the financial year 2016-17 does not contain any adverseremarks qualifications or reservations or disclaimer which require explanation/commentsby the Board.
M/s Kishore Bhatia & Associates Cost Accountants (Registration No. : 00294)having its office at 701/702 D wing 7th Floor Neelkanth Business ParkNethani Road Vidhyavihar (West) Mumbai 400 086 are appointed as the Cost Auditors of theCompany for the financial year 2017-18 at a remuneration of Rs. 6.65 Lakhs plus taxes asapplicable and reimbursement of out-of-pocket expenses.
The said remuneration to the Cost Auditors shall be subject to ratification by theMembers at the ensuing Annual General Meeting.
Cost Audit Report along with the Compliance Report for the financial year 2015-16issued by M/s N I Mehta and Associates then Cost auditors was filed on August 2 2016(due date of filing was September 27 2016).
M/s KPMG Chartered Accountants (ICAI Firm Registration No. : BA62445) are theInternal Auditors of the Company.
SECRETARIAL AUDIT REPORT
The Secretarial Audit Report issued by Ms Neena Bhatia Practicing Company Secretary(Membership No. : ACS 11950 and Certificate of Practice No. 2661) for the financial yearended March 31 2017 does not contain any adverse remark qualifications or reservationsor declaimer which requires any explanation/comments by the Board. The said Report isannexed as "Annexure III" and forms part of this Report.
HEALTH SAFETY AND ENVIRONMENT
Health and Safety :
Providing a safe workplace and keeping the employees healthy is the Company's toppriority. Safe working is a condition for employment. The Employee Health and Safety (EHS)policy laid the foundation for our EHS philosophy and performance expectations. The policyhas been implemented through our Global EHS Standards supported by a well-defined EHSorganizational structure EHS Standard Operating Procedures and EHS specific programs. TheCompany has a dedicated Safety Officer and a Safety Committee comprising representativesfrom the workforce and management which meet regularly to review issues impacting plantsafety and employee health. Routine self-audits and third party safety audits areconducted to verify compliance with the regulatory and internal safety requirements.
To build technical capabilities training programs are conducted at the Plant on healthand safety issues. Employees are also encouraged to attend external training programs.Some training topics included regulatory requirements ergonomics machine guarding hotwork safety road safety industrial hygiene and so on. A cross-functional team foremergency response and firefighting is in place. Mock drills for fire-fighting and rescueoperations are conducted to keep the staff in a state of preparedness for any emergencies.The Company has a detailed Business Continuity plan in place. Behavior Based Safety (BBS)program was launched this year to further improve the safety culture at the Plant.
The Plant has a well-appointed first-aid room with a full-time nurse and OccupationalHealth Physician catering to employee needs as well as a fully-equipped ambulance van.Each employee undergoes annual medical examination to include various tests over and abovethe local regulatory requirement.
The Plant celebrated National Safety Week from 4th to 11th ofMarch 2017. Safety week 2017 emphasized on the Leadership in Safety and Health to EnhanceBusiness Sustainability. Key functions and events like Safety slogan Drawing competitionSpot the hazard Monologue competition EHS quiz were organized at the Plant with anintent to raise the leadership drive involvement and participation from all employees inday to day safety activities. Health Training Programs for employees well-being were alsoconducted during the year.
A responsibility towards the environment is part of Abbott's mandate. We continuouslyendeavor to minimize adverse environmental impact and demonstrate our commitment toprotecting the environment through everything we do. The Company has a state-of-the-arteffluent treatment plant at the Goa unit with parameters of treated effluents well belowthe limit set by the local State Pollution Control Board. Our Goa plant is a"ZERO" discharge plant. The treated water from our waste water treatment Plantis recycled for horticulture within the site. The site has achieved more than 30% absolutewater reduction over the period of last 5 years. Our rain water harvesting projectinitiated three years ago was effectively continued at the Plant this year as well whichresulted in 480 KL of water-saving during the monsoons.
Emissions from boiler and generator stacks are monitored regularly and are well belowthe limits set by the State Pollution Control Board. Ambient air quality is monitored on aregular basis to confirm to air quality standards. There is also a vermi-composting unitto convert canteen waste into organic manure which is used in the lawns and plantationinside the factory premises. The site retains its certification of Zero Waste to landfillin purview of waste disposal. In 2016 56% of our waste was sent for recycling 42 % forincineration and 2% for composting. Installation of a Filter Press System for drying ETPsludge will help in reducing the generation of ETP sludge.
Environmental Key Performance Indicators are shared and discussed with employees on aregular basis in order to continuously minimize the impact on environment. The site isworking proactively in reducing its Environmental footprint. Use of alternative energysources is being explored and plans are in place to implement the same in near future.
CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO
The particulars as required under the provisions of Section 134 (3) (m) of theCompanies Act 2013 read with Rule 8 of the Companies (Accounts) Rules 2014 in respect ofConservation of Energy Technology Absorption Foreign Exchange Earnings and Outgo etc.are annexed as "Annexure IV" and forms part of this Report.
EXTRACT OF ANNUAL RETURN
Extract of Annual Return as provided under sub-section (3) of Section 92 is annexed as"Annexure V" and forms part of this Report.
DISCLOSURE UNDER SECTION 197 (12) OF THE COMPANIES ACT 2013 AND OTHER DISCLOSURES ASPER RULE 5 OF THE COMPANIES (APPOINTMENT AND REMUNERATION OF MANAGERIAL PERSONNEL) RULES2014
Disclosures required in accordance with the provisions of Section 197 (12) of theCompanies Act 2013 read with Rule 5 (1) of the Companies (Appointment and Remunerationof Managerial Personnel) Rules 2014 is annexed as "Annexure VI" and forms partof this Report.
Statement containing Particulars of Employees pursuant to Section 197 (12) of theCompanies Act 2013 read with Rule 5 (2) of the Companies (Appointment and Remuneration ofManagerial Personnel) Rules 2014 forms part of this Report. However as per theprovisions of Sections 134 and 136 of the Companies Act 2013 the Report and FinancialStatements are being sent to the Members and others entitled thereto excluding theStatement containing Particulars of Employees which is available for inspection by theMembers at the Registered Office of the Company during business hours on all working days(except Saturdays) upto the date of ensuing Annual General Meeting. Any Member interestedin obtaining a copy of such Statement may write to the Company Secretary at the RegisteredOffice of the Company.
CORPORATE GOVERNANCE REPORT
Corporate Governance Report along with a Certificate from the Auditors of the Companyregarding compliance of the conditions of Corporate Governance pursuant to therequirements of the Securities and Exchange Board of India (Listing Obligations andDisclosure Requirements) Regulations 2015 forms part of this Report.
BUSINESS RESPONSIBILITY REPORT
In compliance with Regulation 34(2)(f ) of the Securities and Exchange Board of India(Listing Obligations and Disclosure Requirements) Regulations 2015 BusinessResponsibility Report forms part of this Report.
DISCLOSURES OF ORDERS PASSED BY REGULATORS OR COURTS OR TRIBUNAL
No orders have been passed by any Regulator or Court or Tribunal which can have impacton the going concern status and the Company's operations in future.
No fixed deposits were accepted during the year.
PARTICULARS OF LOANS INVESTMENTS AND GUARANTEES
The Company has not granted any loan or provided any guarantees to or invested insecurities of any other body corporate during the year.
No disclosure or reporting is required in respect of the following items as there wereno transactions relating to these items during the year under review :
1. Issue of equity shares with differential rights as to dividend voting or otherwise;
2. Issue of shares (including sweat equity shares) to employees of the Company underany scheme;
3. The Company does not have any joint venture or subsidiaries.
AWARDS AND RECOGNITIONS
The Company's Annual Report for the year ended March 31 2016 won the most prestigious"Gold Shield" Award by The Institute of Chartered Accountants of India forExcellence in Financial Reporting.
During the year the Company also won several other prestigious awards and recognitionssuch as CMO ASIA National awards and CMO Healthcare Excellence awards Business WorldDigital Pharma Excellence awards UBM India Pharma awards AWACS awards in MarketingExcellence Flame awards Asia 2016 for its innovative and digital marketing initiativesand training and development initiatives.
Your Board places on record its sincere appreciation for the dedication hard work andsignificant contributions made by the employees across the Company.
Your Board sincerely thanks all business partners institutions banks and inparticular the Members for their continued support to and trust in the Company.
For and on behalf of the Board
|Munir Shaikh ||Ranjan Kapur |
|Chairman ||Director |
|DIN : 00096273 ||DIN : 00035113 |