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Arvind Remedies Ltd.

BSE: 531823 Sector: Health care
NSE: ARVINDREM ISIN Code: INE211C01037
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OPEN 4.70
PREVIOUS CLOSE 4.94
VOLUME 2850
52-Week high 6.60
52-Week low 3.78
P/E
Mkt Cap.(Rs cr) 32.02
Buy Price 0.00
Buy Qty 0.00
Sell Price 4.70
Sell Qty 29739.00
OPEN 4.70
CLOSE 4.94
VOLUME 2850
52-Week high 6.60
52-Week low 3.78
P/E
Mkt Cap.(Rs cr) 32.02
Buy Price 0.00
Buy Qty 0.00
Sell Price 4.70
Sell Qty 29739.00

Arvind Remedies Ltd. (ARVINDREM) - Director Report

Company director report

Your Directors have pleasure in presenting the Twenty-seventh Annual Report togetherwith the Audited Statement of Accounts for the 15 months period ended 30th June 2015

1.STANDALONE FINANCIAL RESULTS (Rs. in Crores)
Particulars 2014-2015 2013-2014
(15 months period ended 30.6.2015) (Financial year ended 31.3.2014)
Gross Income 792.93 967.01
Profit before tax (327.35) 86.39
Profit after tax (322.10) 58.90
Profit available for appropriation (after considering the balance b/f from previous year and deferred tax liability) (207.76) 131.61
APPROPRIATIONS
Dividend of current year Nil 5.450
Corporate Dividend Tax - 0.926
Transfer to General Reserve - 10.000
Surplus carried to Balance Sheet (207.76)

2. OPERATIONS AND BUSINESS PERFORMANCE

During the 15 months period ended 30th June 2015 the net sales stood at 787.07 Croreswith a reported loss of Rs 320.03 Crores as against the sales of Rs.967.01 Crores andprofit before tax of Rs 86.39 Crore in the previous financial year.

3. DIVIDEND

Your Directors have not recommended any dividend for the financial year in view of thelosses incurred and the need to conserve resources of the company.

4. MANAGEMENT DISCUSSION AND ANALYSIS (MDA)

The Management Discussion and Analysis Report for the period under review asstipulated under Clause49 of the Listing Agreement is presented in a separate sectionforming part of this report.

5. MATERIAL CHANGES AND COMMITMENTS AFTER THE END OF THE FINANCIAL YEAR

No material changes or commitments affecting the financial position of the company haveoccurred between the end of the financial year to which financial statements in thisreport relate and the date of this report.

During the period under report the company's operations were affected adversely duestrike and liquidity problem.

During the period under report the Company's Bank accounts became NPA since thecompany could not pay the interest and installment with the limited source of funds andthe Company's Bankers have filed petition before Debt Recovery Tribunal for recovery oftheir dues during the current year. The company is attending the same. During the currentyear the Bankers have also issued notice under SARFAESI Regulations for recovery of dues.The company is in process of identifying strategic investors to meet with the fundsrequirements and to put into operations the Unit II at Irrungatukottai.

In view of losses for the year which has wiped out the reserves and of more than 50% ofthe net worth of the company the provisions of BIFR are applicable and accordingly thecompany is required to file necessary application for reference.

6. SHARE CAPITAL

The paid up equity share capital of the company as at 30th June 2015 was Rs.68.13Crores. The company currently has no outstanding shares issued with differential rightssweat equity or ESOS

7. CONSOLIDATED ACCOUNTS

Due to change in financial year and consequently different financial years theConsolidated financial statements have not been prepared by the company in accordance withthe requirements of Accounting Standards 21 issued by the Institute of CharteredAccountants of India (ICAI) and as per the provisions of Section 129(3) of Companies Act20133. As per the provisions of Section 136 of the Companies Act 2013 the Company willplace separately the audited accounts of its subsidiaries in its websitewww.arvindremedies.com and copy of audited financial statements of its subsidiaries willbe provided to the members on request. There are three subsidiaries viz. Arvind WellnessLtd. Arvind Remedies LLc US and Arvind Remedies Inc US.

During the financial year M/s. Coronet Labs P Ltd. ceased to be the subsidiary witheffect from 1st October 2014.

There has been no material change in the nature of the business of the subsidiaries.The company has no subsidiary which can be considered as material within the meaning ofClause 49(V)(E) of Listing Agreement.

In accordance with the provisions of Section 136(1) of the Companies Act 2013 thefollowing will be placed on the website of the company www arvindremedies.com

a) Annual report of the company containing therein its standalone financialstatements; and

b) audited annual accounts of the subsidiary companies will be placed on receipt.

9. HUMAN RESOURCE DEVELOPMENT

Your company has the necessary managerial band width to navigate the growthopportunities. The company has ensured that it has a strong team in manufacturingfacilities research labs supply-chain management and in every functional area. Howeverconsidering the potential opportunities and the organisational growth targets there is aconstant review being done to be ahead of the curve. Talent acquisition and talentretention are being given considerable emphasis in human resource management.

10. RESEARCH & DEVELOPMENT (R&D)

The company has always considered R&D as crucial for the sustained growth fo thecompany. The company has spent Rs.27.03 lacs on R&D as expenditure (0.03% of itsturnover) in the previous year to Rs. in the year under report.

Apart from development of new dosage forms and drug delivery systems improvement inprocess and yield as well as cost reduction are also focus areas.

11. WHISTLE BLOWER POLICY/ GIVIL MECHANISM

There is a whistle blower policy in the company and that no personnel has been deniedaccess to the Chairman of the Audit Committee The policy provides for adequate safeguardsagainst victimisation of persons who use vigil mechanism. The whistle blower policy isposted on the web site of the company.

12. POLCY ON SEXUAL HARASSMENT

The company has a policy n prevention & prohibition of sexual harassment atworkplace . However the company is in the process of constituting a committee for thesame. The policy provides for protection against sexual harassment of women at workplaceand for prevention and redressal of such complaints. During the year no complaints havebeen received under the policy.

13. MEETINGS OF THE BOARD AND COMMITTEES THEREOF

The Board and Committee meetings are pre-scheduled and a tentative calendar of themeetings finalized in consultation with the Directors to facilitate them to plan theirschedule. However in case of special and urgent business needs approval is taken bypassing resolutions through circulation. The information has been furnished under Reporton Corporate Governance which is annexed.

14. DIRECTORS

During the current year the term of Managing Director Dr B Arvind Shah is getting overand he is eligible for reappointment pursuant to Section 196 and other applicableprovisions of the Companies Act 2013. His reappointment is taken at item No.5 of theNotice of AGM.

During the year under report following directors resigned due to their preoccupations/age/ health conditions

Mr. Ankur Agarwal from 14th November 2014

Mr. R Rajamohan from 7th November 2014

Mr. VR Mehta from 21st March 2015

During the current year Dr. C M K Reddy resigned on 3rd October 2015 and Mr. SudhirChandra resigned on 5th November 2015

The Board places on record its sincere appreciation for the services rendered to theCompany by them during their tenure as Directors of the Company.

In the meeting of the Board of Directors of the Company held on 4th November 2015 Mr.Madhavyadav was appointed as an Additional/ independent Director of the company effectivefrom 1st October 2015. He holds the office of directorship till the conclusion of theensuing annual general meeting. Being eligible he has offered himself for appointment asan Independent director of the company. Pursuant to the provisions of Section 149 of theCompanies Act 2013 Mr. Madhavyadav has been appointed as Independent Director for aperiod of five years till 30th September 2020 and the same is to be approved at theensuing annual general meeting

Mr. MadhavYadav who are independent director has submitted a declaration that he meetsthe criteria of independence as provided in Section 149(6) of the companies Act 2013 andthere has been no change in the circumstances which may affect his status as independentdirector during the year.

In the opinion of the Board the independent director possesses appropriate balance ofskills experience and knowledge as required.

Mrs. Chandra Ravindran retires by rotation at the ensuing annual general meeting andbeing eligible offer herself for reappointment.

A brief note on Directors retiring by rotation and eligible for re-appointment as wellas independent director being appointed is furnished in the Report on CorporateGovernance.

15. KEY MANAGERIAL PERSONNEL

During the year under report Mr. Selven Daniel CFO resigned and in his place Mr. SRaghavan has been appointed. During the year under report the company has appointed thefollowing persons as Key Managerial Persons

Dr. B Arvind Shah Managing Director
Mr. S Raghavan CFO
Mr. P R Krishnan Company Secretary

16. BOARD EVALUATION

The Nomination and Remuneration Committee lays down the criteria for performanceevaluation of independent directors Board of Directors and Committees of the Board. Thecriteria for performance evaluation is based on the various parameters like attendance andparticipation at meetings of the Board and Committees thereof contribution o strategicdecision making review of risk assessment and risk mitigation review of financialstatements business performance and contribution to the enhancement of brand image of thecompany.

The Board has carried out evaluation of its own performance as well as that of theCommittees of the Board and all the Directors. The annual evaluation was carried out inthe following manner:

Sr No. Performance evaluation of Performance evaluation performed by
1 Board and individual directors Board after seeking inputs from all directors
2 Board Committees Board seeking inputs from all committee members
3 Individual directors Nomination and Remuneration Committee
4 Non-independent directors Board as a whole and the Chairman Separate meeting of independent directors after taking views from executive directors
5 Board its Committees and individual Directors At the Board meeting held after the meeting of the independent directors based on evaluation carried out as above

17. TRAINING OF INDEPENDENT DIRECTORS

Every new independent director of the Board attends an orientation program. Tofamiliarize the new inductees with the strategy operations and functions of our companythe executive directors/ senior managerial personnel make presentations to the inducteesabout the company's strategy operations product and service offerings marketsorganization structure finance human resources technology quality facilities and riskmanagement.

18. POLICY ON DIRECTORS' APPOINTMENT AND REMUNERATION AND OTHER DETAILS

The Nomination and Remuneration Committee has laid down the criteria for Directors'appointment and remuneration including criteria for determining qualification positiveattributes and independence of a Director. The following attributes/ criteria forselection have been laid by the Board on the recommendation of the Committee

• the candidate should possess the positive attributes such as leadershipentrepreneurship business advisor or such other attributes which in the opinion of thecommittee are in the interest of the company

• the candidate should be free from any disqualifications as provided underSection 164 and 167 of the Companies act 2013

• the candidate should meet the conditions of being independent as stipulatedunder the Companies Ac 2013 and Listing Agreement entered into with Stock Exchanges incase of appointment of an independent director and

• the candidate should possess appropriate educational qualification skillsexperience and knowledge in one or more fields of finance law management salesmarketing administration research corporate governance technical operationsinfrastructure medical social service professional teaching or such other areas ordisciplines which are relevant for the company's business.

19. REMUNERATION POLICY

The objective and broad framework of the Company's remuneration policy is to considerand determine the remuneration based on the fundamental principles of payment forperformance for potential and for growth. The Remuneration Policy reflects on certainguiding principles of the company such as aligning remuneration with the longer terminterests of the company and its shareholders promoting a culture of meritocracy andcreating a linkage to corporate and individual performance and emphasizing on lineexpertise and market competitiveness so as to attract the best talent. It also ensures theeffective recognition of performance and encourages a focus on achieving superioroperational results. The Nomination and Remuneration Committee recommends the remunerationof Directors and Key Managerial Personnel which is approved by the Board of Directorssubject to the approval of shareholders where necessary. The level and composition ofremuneration shall be reasonable and sufficient to attract retain and motivate thedirectors key managerial personnel and other employees of the quality required to run thecompany successfully. The relationship of remuneration to performance should be clear andmeet appropriate performance benchmarks. The remuneration to directors key managerialpersonnel and senior management personnel should also involve abalone between fixed andincentive pay reflecting short and long term performance objectives appropriate to theworking of the company and its goals The Remuneration Policy is placed on the company'swebsite www.arvindremedies.com

Information about elements of remuneration package of individual directors is providedin the extract of the Annual Return as provided under Section 92(3) of the Companies Act2013 which is enclosed.

20. FAMILIARISATION PROGRAM FOR INDEPENDENT DIRECTORS

Details of the familiarization program of independent directors are kept at theRegistered Office of the Company and will be also placed on the website of the Company.

21. DIRECTORS RESPONSIBILITY STATEMENT

Your Directors confirm:

i) that in the preparation of the annual accounts the applicable accounting standardshave been followed along with proper explanation relating to material departures

ii) that your Directors have selected such accounting policies and applied themconsistently and made judgments and estimates that are reasonable and prudent so as togive a true and fair view of the state of affairs of the company at the end of thefinancial year June 302015 and of the profit of the company or the financial year;

iii) that your Directors have taken proper and sufficient care for the maintenance ofadequate accounting records in accordance with the provisions of the Act for safeguardingthe assets of the company and for preventing and detecting fraud and other irregularities.

iv) that your Directors have prepared the annual accounts on a going concern basis

iv) that your directors have laid down internal financial controls to be followed bythe company and that such internal financial controls are adequate and were operatingeffectively; and

v) that your directors have devised proper systems to ensure compliance with theprovisions of all applicable laws and that such systems were adequate and operatingeffectively.

22. CORPORATE GOVERNANCE

As per the requirement of listing agreement with the Stock Exchanges the Company hascomplied with the requirements of Corporate Governance in all material aspects

A report on Corporate Governance (Annexure I) together with a certificate of itscompliance from a Practicing Company Secretary is attached.

23. FIXED DEPOSITS

During the year under review the company has not accepted any deposits and as such noamount of principal or interest on deposits from public was outstanding as on the date ofBalance Sheet.

24. AUDIT COMMITTEE

Details of the Audit Committee along with its constitution and other details areprovided in the Report on Corporate Governance.

25. AUDITORS AUDIT REPORT AND AUDITED ACCOUNTS

M/s. Vivekanandan & Associates (Firm Registration No.0052685)CharteredAccountants retire as auditors and being eligible offer themselves for re-appointment.

The Auditors report read with the notes to the accounts referred to therein are selfexplanatory and therefore do not call for any further comments.

Reply to the disclaimer of opinion in the report:

Disclaimer of Opinion

In our opinion and to the best of our information and according to the explanationsgiven to us consequent to the possible effects of the matter described in the Basis forour Disclaimer of Opinion paragraph we are unable to state whether the aforesaidstandalone financial statements give the information required by the Act in the manner sorequired and give a true and fair view in conformity with the accounting principlesgenerally accepted in India of the state of affairs of the Company as at 30th June 2015and its Profit& Loss and its cash flows for the period ended on that date.

1. The Company has destroyed pharmaceutical raw material stock-in-process andfinished goods of value Rs. 19729.67 lacs during the period under audit under selfcertification and no external agencies including Drug Control Authorities Central Exciseand Pollution Control Board were involved in the process. We have been informed that therewas strike by employees between third week of December 2014 to second week of February2015.

It is explained that due to strike of employees no person was allowed to go inside thefactory premises leading to failure in the environmental conditions directly affectingthe quality purity and usage of some of the products. Subsequently with the Court orderwhen the management was able to enter the factory he materials were analysed by highpowered technical committee of the company. Based on the assessment inventories valued atRs.19730.68 Lacs were identified as no longer usable and accordingly such products weredestroyed as per standard operating procedure under GMP so as to avoid any possible misuseand/or contamination with good products. Of this Rs.12617.51 Lacs was taken in theDecember 2014 quarter results and balance Rs.7113.17 Lacs could be ascertained thereafter.

2. During the period under audit the company has accounted for return forassets of capital expenditure as (part financed by the Banks by way of Term Loan) is setout below. Also confirmations from the equipment vendors acknowledging receipt of thereturned items were not available.

PARTICULARS

AMOUNT IN RS. LAKHS

Assets held under Fixed Assets – capitalized in FY 2013-14 gross block value

4348.83

Held under "Capital Expenditure on New Projects (Pending Allocation) "

5965.61

Total amount of capital assets returned to the supplier

10314.44

In order to make the Kakkalur unit II (which was partially capitalized last year andpartly lying in capital work in progress) compliant with international norms (USFDA &European Standards) certain modifications and upgradations were required. To completethis exercise major part of machinery (including items lying under capital work inprogress) were dismantled during the period and sent back to the suppliers.

The projects could not be completed for want of upgradation of machinery to meet withthe requirement of USFDA guidelines and hence the machinery were returned/ sold and theprofit Rs.219.84 Lacs was adjusted in the books.

3. Letters seeking confirmation of balances were sent to various Debtors aggregating toRs. 47749.64 lakhs representing substantial portion of total receivables.

o Replies confirming dues to the Company we received for Rs.38159.12 lakhs and Wehave not received replies for the balance.

Also we observe that Sales and Purchase transactions have been carried out with thesame business entities and the receivables and payables thereon are set off against eachother with minimum bank/cash transactions. And we observe that in several debtors'accounts (including state owned Enterprises) the receivables are netted with transfersentries to other parties or accounts.

The confirmations received constitute almost 80% of the debtors and management hopesthat remaining debtors will also be sending the confirmation.

4. For the Financial year 2013-14 the tax liability has been reported on bookprofit of Rs. 1847.51 lakhs as against Rs. 8639.43 lakhs though tax provisioning inaccounts was made for book profit of Rs.8639.43 lakhs.

Change in tax liability is yet to be computed and hence the total has been carriedforward under provisions.

5. In the absence of audited financial statement of the Company's subsidiaryArvind Remedies Inc USA and Arvind Remedies LLC USA we are unable to provide fordiminution in the value of investments should in case such subsidiary company hasincurred losses. Consequently we were unable to determine whether any adjustments tothese amounts were necessary.

The financial year ending of 2 subsidiary companies in US is December and currentlythere is no activity in these companies. Hence their balance sheets are yet to beprepared.

26. COST AUDIT

Pursuant to the provisions of Section 148 of the Companies Act 2013 the company isrequired to appoint Cost Auditor to conduct audit of cost records of the company for thefinancial year 2014-15. The company is in the process to appoint new Cost Auditor for theyear.

The cost audit report for the financial year 2013-14 was due to be filed with theMinistry of Corporate Affairs by 29th September 2014 was filed on 30th September 2014

27. Management Discussion and Analysis (MDA):

The Management Discussion and Analysis Report for the year under review as stipulatedunder Clause 49 of the Listing Agreement is presented in a separate section forming partof this Annual Report.

28. SECRETARIAL AUDIT

Pursuant to the provisions of Section 204 and other applicable provisions of theCompanies Act 2013 M/s. Lakshmmi Subramanian & Associates as secretarial Auditor forauditing the secretarial records of the company for the 15 months period ended 30th June2015 and the report is Annexed hereto.

29. CORPORATE SOCIAL RESPONSIBILITY(CSR)

The company is committed to good corporate citizenship.

During the year under report the company has constituted a CSR Committee and framedpolicy.

In view of losses for the year 2014-15 no provision has been made towards expenditureto CSR activities.

30. SAFETY ENVIRONMENT AND HEALTH

The company considers safety environment and health as the management responsibilityRegular employee training programmes are carried out in the manufacturing facilities onsafety environment and health

31. PARTICULARS OF LOANS GUARANTEES AND INVESTMENTS

The company has not given any loans or guarantees or made investments in contraventionof the provisions of the Section 186 of the Companies Act 2013. The details of the loansand guarantees given and investments made by the company are provided in the notes to thefinancial statements.

32. RELATED PARTY TRANSACTIONS

All related party transactions that were entered into during the financial year were onarm's length basis and were in the ordinary course of company's business. The company hasnot entered into any contract arrangement or transaction with any related party whichcould be considered as material within the meaning of clause 49 of the listing agreement.

The Board has approved a policy for related party transactions.

As the related party transactions for the year are nil no details as per Section 134(3)are furnished in the report.

33. PARTICULARS OF EMPLOYEES

Pursuant to the provisions of Section 197 of the Companies Act 2013 read with Rule 5 ofthe Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014 duringthe year the Company did not have any employee drawing remuneration of amounts specifiedand hence the details are nil

34. CODE OF CONDUCT

The Board has laid down a code of conduct for board members and senior managementpersonnel of the company. The code incorporate the duties of independent directors as laiddown in the Companies Act 2013. The said code of conduct is posted on Company's websitewww.arvindremedies.com. The Board members and senior management personnel have affirmedcompliance with the said code of conduct. A declaration signed by the Managing Director/CEO is given at the end of the Corporate Governance Report

35. PREVENTION OF INSIDER TRADING

The company has also adopted a code of conduct for prevention of insider trading. Allthe directors senior management employees and other employees who have access to theunpublished price sensitive information of the company are governed by this code. Duringthe year under report there has been due compliance with the said code of conduct forprevention of insider trading based on the SEBI (Prohibition of Insider Trading)Regulations 2015.

The Board at its meeting held on 28th May 2015 has adopted revised code of preventionof insider trading based on the SEBI (Prohibition of Insider Trading) Regulations 2015.

36. BUSINESS RISK MANAGEMENT

Pursuant to the provisions of Section 134 of the Companies Act 2013 the company hasconstituted a Risk Management Committee. The details of the Committee and its terms ofreference are provided in the Report on Corporate Governance which is annexed.

37. SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS

There are no significant or material orders passed by any regulator tribunal or courtthat would impact the going concern status of the company and its future operations

38. PARTICULARS OF ENERGY CONSERVATION ETC.

The details of energy conservation technology absorption foreign exchange earning andoutgo are furnished in a separate statement attached to and forming7 part of this reportin accordance with Section 134 of the Companies Act 2013 read with The Companies(Disclosure of Particulars in the Report of Board of Directors) Rules 1988.

39. EXTRACT OF ANNUAL RETURN

The details are attached as MGT-9 form to this report.

40. LISTING:

The Company's shares are presently listed at Bombay Stock Exchange Ltd. and in NationalStock Exchange of India Ltd. The extract of Annual Return in form MGT9 are annexedherewith.

41. ACKNOWLEDGEMENTS

Your Directors wish to place on record their appreciation for the continuedco-operation of the banks and other financial institutions associated with the company.Your Directors also thank Medical fraternity for the trust reposed on the Company and thetrade the stockists and consumers for their patronage to the Company's products. YourDirectors also place on record their profound admiration and sincere appreciation of thecontinued hard work put in by the employees at all levels. We look forward to the samesupport in our future endeavours.

FINANCIAL HIGHLIGHTS

Sales

The gross sales revenue decreased by 18% % to Rs.79293 Lakhs in 2014-15.

Operating expenses

Material cost:

The consumption of materials and finished goods (net after goods destroyed) increasedby Rs 85476 Lacs at Rs.74390 Lacs. Total consumption as a % to net sales increased to83.46% from 76.10% last year.

Personnel costs

The personnel cost decreased by 8.2% y-y to Rs.1598.62 Lacs due to retrenchment ofcertain employees

Manufacturing selling distribution and General Administration expenses

The manufacturing selling distribution and other general administration expensesdecreased by 27.37% y-y to Rs.2407.03 Lacs. Overall MSGA as % to net sales were at 3.06%compared to 3.64% last year. This is mainly on account of certain measures implementedduring the year to compensate the increase in raw material prices.

Profits and margins

The EBITDA (earnings before interest tax depreciation and amortization excluding nonoperating income) was loss of Rs. -23665.65 lacs against profit Rs.17739.84 Lacs. TheEBITDA margin as % to total operating income has declined to -30.06% compared to previousyear's level of 19%L

The profit before tax before exceptional items was Rs -32734.81 as agaianst profit ofRs.8639.43 Lacs of previous year. After tax the company slipped to loss of Rs 32003.86lacs as against profit of Rs.5889.84 Lacs of last year.

Net worth

The net worth as at 30th June2015 stood negative at Rs -4434.58 lacs as againstRs.27947.22 Lacs previous year. From Reserves Rs.21134.13 lacs has been utilised anduncovered loss is Rs. 11076.73 Lacs

The book value per share as at 30th June 2015 was negative Rs.-46.98 as against Rs41.02 last year.

Fixed assets and capital expenditure

The gross block at the end of 2014-15 was reduced at Rs 28368.20 Lakhs as against lastyear's Rs 42597.73 Lacs due to return of machinery related to Beta Cepha projects to thesuppliers.

Working capital and liquidity

Working capital level at the end of 2014-15 was lower compared to Rs 14067.42 Lakhs ofprevious year.

Risk identification Risk Mitigation and Internal Controls.

The company's business comprises of marketing of pharma products . Its presence exposesit to various risks which are explained below:

Risk of fluctuation in prices of key inputs

Prices of the key ingredients used in the products marketed by the company remainvolatile due to several market factors including changes in government policies andfluctuations in the foreign exchange rates. The company has entered into long termcontracts with the suppliers of these inputs to minimize the risk of fluctuation in theinput prices on its margins.

Risk of competition and price pressure

Though the company's products enjoy a leading position in their respective categoriesthe risk of entry of newer players in the market always exists. The company's strength inthe market place coupled with its continuous thrust on improving quality of its productsand offering newer products in the wellness segment gives it an edge over thecompetition. The company has presence in both retail as well as institutional segments.Both segments have their own nuances in terms of customer expectations competition andpricing. However the company is well focused in increasing its shares in all segmentsthrough balanced approach.

Risk of litigation related to quality of products intellectual properties and otherlitigation

Any deviation from prescribed regulations or any variation in quality from standardslaid down by regulatory authorities can lead to actions from these authorities orlitigation from its customers against the company. The company always strives to ensurehighest standards of quality of its products and processes. The company also faces a riskof unauthorized and illegitimate use of its brand name packing style and otherintellectual properties related to its products. The company ensures protection of itsintellectual property through appropriate registrations and other legal means

Risk management

The company has established a well defined process of risk management wherein theidentification analysis and assessment of the various risks measuring of the probableimpact of such risks formulation of risk mitigation strategy and implementation of thesame takes place in a structured manner.

Industrial relationship

Industrial relations at all the works of the Company remained cordial and harmoniousduring the period under review. Despite severe competition the enthusiasm and unstintingefforts of the employees have enabled the company to remain at the forefront of theindustry.

There is no transaction conflicting with the interest of the Company

Corporate social events

The management of ARL has social consciousness by taking part with the help motive tothe Pinjrapole veterinary hospital & farm which is shelter for more than 2500 olddisabled and abandoned cattle. This institution provide care and free treatment toanimals. Also the Mother's hall at Govt. Children Hospital Chennai the maintenance of itis being looked after with the help of NGOs.

MANAGEMENT DISCUSSION AND ANALYSIS

Global trend

The Global Pharma market is estimated to be US $ 1 trillion and is growing at anaverage rate of 4 to 5% per annum. Increased penetration of specialized drugs andcontinued rise of emerging markets are key trends that will shape the global pharmamarkets in the coming years

The research based pharma industry is entering an exciting new era in medicinedevelopment. The research methods are evolving and the innovative pharma industry aims toturn fundamental research into innovative treatments that are widely available andaccessible to patients with less side effects directly addressing the site of action.

Outlook

India is ranked 3rd in volume by value and ranks 13th. Branded generics constitute 70%OF Indian pharma market. Indian exports have increased to US$ 10 billion in 2014. Indianpharma industry is estimated to grow at nearly 20% over next 5 years. There are around 500indian pharma manufacturing facilities registered with USFDA . Govt. of India has unveiledpharma vision 2020 aiming at making india a global leader in drug manufacturing

Indian companies are focusing on global generic and API business. R&D activitiesand contract research and manufacturing alliances is also fast emerging as preferredlocation. Several large selling drugs going off patent over next few years and reducedhealth care cost will provide attractive growth opportunities and is poised foraccelerated growth in the coming years.

During the year under report there was no change in the nature of company's business.

Domestic market

The Indian pharma industry during 2014-15 grew by mere 6.1% and reached size of approxRs.823 bn. However it has been globally ranked third in terms of volume and tenth in termsof value. The market is expected to grow at a compounded Annual Growth Rate of 12% overthe next five years.

The key factors influence growth of healthcare sector are growth in populationincreasing incidence of diseases increasing affordability rise in insurance andgovernment schemes.

Future scope

Increasing investment by MNCs reflect at their renewed interest in the Indian marketwith the implementation of the product patent regime and strong growth prospects. Seriesof major acquisitions steady growth in new product introductions especially in thebranded segment and expansion in field force clearly indicates their renewed interest inthe Indian market.

Indian generics to benefit from the ongoing wave of patent expiries. Most of theleading players have significantly expanded their ANDA filings in line with the patentexpiration cycle. Hence US generics market has become significant contributor to therevenues of most leading Indian companies.

Keeping the above in mind ARL can play vital role by going for registration of offpatented products for exports and developing the outsourcing market. Key strategy will beto focus on the new and latest molecules approved by the authorities and share with topcompanies who can market these products focus on additional dosages - injectible andsoftjel apart from tablets capsules liquid and ointments. ARL is focusing chronic diseasessegments in ayurveda diabetics anti arthiritis and obesity segments. This will help toidentify the new formulations without side effect. Also these alternate therapies can verywell prevent the recurrence by addressing the root cause of the ailment so that thedisease is totally eradicated rather than symptomatic elimination.

SWOT ANALYSIS

Strength

The industry has seen growth at CAGR about 15% in the last five years and it isexpected that same trend will continue. Investment on R&D has increased. The Asiancountries will emerge as fastest growing hub due to low cost and favourable regulatoryenvironment. Sales is expected to grow at faster rate in India China and South Korea dueto rising disposable income health insurance scheme availability of manpower and lowercost competencies. ARL can have its production planning to utilize the above opportunitiesin the domestic & global markets

Opportunities

Indian pharma has the potential to transform itself over the next decade. If spendingin new drug discovery has increased to desired level domestic firms could corner majorshare of global generics market in coming years. With highly talented manpower and costadvantage India generic manufacturers are well positioned to seize opportunities arisingout of patent. Indian pharma companies are already in the process to get registered for USFDA approval as the size of US drug market is around 45% of global market. Companies whoobtain US FDA approval for new drug application will save lot of money and time spent ifgo for off patented products on development of new drugs.

Threats & weakness

Greatest challenge and threat is too many players focused on similar bio equivalentproducts in the same market and thereby competition Government Regulations and pricecontrols and increasing R&D costs result in providing low margins. There is also riskrelated to economic and political conditions in the world which in turn limits financialbenefit of growth. Another threat is risk related to exposure to the Rupee US$ exchangerate.

Internal control system and their adequacy

The company has adequate system of internal controls based on well-defined individualroles and responsibilities with their limit of authority at various levels as well aseffective feedback flow. The Board of Directors of your Company has constituted aqualified and independent Audit Committee that reviews the adequacy of internal control atregular intervals.

The Company has appointed Cost Auditor as per the requirements of the provisions ofSection 233(1B) of the Companies Act 1956 and for the year 2012-13 the requirements havebeen complied with.

Human Resources

Human resource as always has been the major strength in the consistent development ofthe Organization. The HR department takes care to understand the work place phenomenon andrelationships through comprehensive research. This helps the company to explain the roleof work force in the organizational success in minute detail.

ARL has a programme of periodical review of its key employees performance along withtheir output. This enables them to realize their strengths and further enhances them withtheir awareness.

This is what enables ARL work together as an interdependent team for enhancingcompany's productivity and profits.

ARL continues to lay strong emphasis on Sales Training for its field force both at theinduction level and through refresher programs to enable front-line medicalrepresentatives and managers for availing their field efforts products.

For and on behalf of the Board
Place : Chennai
Dr. B. ARVIND SHAH RAVINDRAN Dr. CHANDRA
Date : 11/03.2016 Managing Director Whole time
Director

Annexure To The Directors' Report Annexure A

Information pursuant to the Companies (Disclosure of particulars in the Report of theBoard of Directors) Rules 1988.

A. CONSERVATION OF ENERGY

a) Energy Conservation measures taken:

The company has taken measures wherever possible to maintain the power factor on anon-going basis.

Steps are being taken by energy audit for cost saving and reduction in energy cost fromthe current year.

b) Total Energy Consumption and energy consumption per unit of production: givenbelow in Form A

FORM A POWER AND FUEL CONSUMPTION:

2014-15 2013-14
(upto June 2015)
1. Electricity
a) Purchase Unit (Nos.) 707402 809933
Total amount (Rs. '000s) 6413.39 7053.81
Rate / Unit (Rs.) average 9.07 8.70
b) Own Generation
i) Through Diesel Generation
Unit (Nos) 4287 334952
Unit per ltr. Of Diesel Oil (Nos) 3.10 9.45
Cost / Unit (Rs.) 19.10 10.70
ii) Through Steam / Wind Turbine / Generator -
Unit (Nos) -
Cost / Unit (Rs.) -
Amount (Rs.) -
2. Coal N.A N.A
Qty. (Tonnes) -
Total Cost -
Average Rate -
3. Furnace Oil N.A N.A
Qty. (K.Ltrs.) -
Total Amount -
Average Rate (Rs.)
4. Other / Internal Generation Steam by LDO N.A N.A
Quantity (in '000 kgs) -
Total Cost (Rs. '000) -
Rate per kg. (Rs.) -

Consumption per unit of production

There is no specific standard as the consumption per unit depends on the product mix offormulations (Capsules Tablets Ointments and Liquids) and disclosure of consumptionfigures per unit of production is insignificant.

B.TECHNOLOGY ABSORPTION

FORM B 1. Research and Development

Specific areas in which R & D carried out by the Company

Ongoing projects

• Development of a drug substance for Arthritis -- Research Associates

• Department Of Science And Technology (Govt. Of India)- DST

• Sri Ramachandra Medical University -SRMU

• And clinical trials at Ayurvedic hospital Bangalore to prove the effect at thehuman level drug product for Obesity Related Cardiovascular Diseases -- Research

Development of Associates

• Department Of Science And Technology (Govt. Of India)- DST

• Sri Ramachandra Medical University –SRMU

• Initial study to prove its effectiveness at the cellular level.

• SRMC Chief of Cardiology

Development of drug product for Viral Diseases -- Research Associates

• Department Of Science And Technology (Govt. Of India)- DST

• Presidency College -Dept of Microbiology

• Tamil Nadu Veterinary University – initial study to prove its Toxicity

effects.

• Indian Institute Of Integrative Medicine - Jammu

Development of Generic Drug substance ( ANDA )

Selected products for ANDA development

Non steroidal anti inflammatory drug with AA category

Anti hypertensive drug with AB category

Central nervous system drug with AB category

Skeletal muscle relaxant with AB category

Respiratory dieses drug with AB category

2. Benefits derived as a result of the above R & D

• The Company has the advantage to come out with new formulations

• The Company is able to proceed further operations in Phases.

• The Company has new plant at Irrungatukottai which is equipped with facility tomanufacture tablets capsules liquid ointment injectibles and soft jel can bemanufactured under one roof.

3. Expenditure on Research and Development

Total R & D expenditure as percentage to the total turnover for the year 2014-115is Rs.27.03 lacs ( 0.03% of the turnover)

4. Technology Absorption Adoption and innovation

No new technology has been imported or adopted

5. Foreign Exchange Earnings and outgo

During the year foreign exchange earnings were Rs.360.25 Lacs as against the outgo ofRs Nil.

For and On behalf of the Board
Place : Chennai Dr. .B. ARVIND SHAH Dr. CHANDRA RAVINDRAN
Date : 11/03.2016 Managing Director Whole-time Director

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