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Bal Pharma Ltd.

BSE: 524824 Sector: Health care
NSE: BALPHARMA ISIN Code: INE083D01012
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VOLUME 2910
52-Week high 167.90
52-Week low 78.70
P/E 139.65
Mkt Cap.(Rs cr) 140.50
Buy Price 99.15
Buy Qty 60.00
Sell Price 99.35
Sell Qty 18.00
OPEN 98.95
CLOSE 98.25
VOLUME 2910
52-Week high 167.90
52-Week low 78.70
P/E 139.65
Mkt Cap.(Rs cr) 140.50
Buy Price 99.15
Buy Qty 60.00
Sell Price 99.35
Sell Qty 18.00

Bal Pharma Ltd. (BALPHARMA) - Director Report

Company director report

To the Members

Your Directors are pleased to present the Twenty Eighth (28th) Annual Report and theCompany’s audited financial statements for the financial year ended 31st March 2015.

FINANCIAL RESULTS

Following is the summary of the Company's consolidated financial performanceduring theyear under review:

(Rs. in Crores)

Particulars FY 2014-15 FY 2013-14
1) Total Income from operations 190.67 182.01
2) Earnings before Interest Tax 18.72 18.53
Depreciation & Amortisation
Less :
Depreciation & Amortisation 7.00 4.74
Finance cost 6.52 7.16
Profit before taxation and prior period adjustments. 5.20 6.63
Less :
3) Current Tax (Net) 1.79 1.55
4) Deferred Tax (0.61) 0.01
5) Extra Ordinary / Non Recurring items - -
6) Prior year Adjustments - -
7) Net Profit 4.02 5.07
Add :
8) Profit & loss account balance at the beginning of the year 18.93 15.16
9) Profit /(Loss) made available for appropriation 22.04 20.23
Less :
10) Proposed Dividend on Equity Shares 1.28 1.11
11) TaxonDividend 0.26 0.19
12) Surplus Carried to Balance sheet 20.50 18.93

Note : Previous year’s figures have been regrouped wherever necessary to confirmto this year’s classification.

2. DIVIDEND & APPROPRIATIONS

Your Directors are pleased to recommend dividend of ' 1.00/- (i.e. 10%) on each EquityShare of '10/- each thereby absorbing an amount of ' 1.28 Crores excluding DividendDistribution Tax of ' 0.26 Crores. The balance amount of profit is retained as surplus inthe Statement of Profit and Loss forming part of Reserves and Surplus.

3. SHARE CAPITAL:

The Company has allotted 1760984 Equity Shares of ' 10/- each for consideration of '21/- each on 16th April 2014 up on conversion of warrants. With this allotment the paidup Equity Share capital of the Company has increased to ' 128723720/-.

During the period under review the Company has not issued shares with differentialvoting rights nor granted stock options nor sweaty Equity Shares.

4. MANAGEMENT DISCUSSION AND BUSINESS ANALYSIS:

Indian Pharmaceutical Industry scenario and opportunities:

The Indian Pharma market is dominated majorly by branded generics which constitutenearly 70 to 80 per cent of the market share. Considered once to be a highly fragmentedindustryconsolidation has increasingly become an important feature of the Indianpharmaceutical market.

India continues to maintain its eminent global position in Pharma sector during 2014-15by retaining its third position in terms of volume and thirteen positions in terms ofvalue. The country also has a huge pool of scientists pharmacists and engineers who havethe potential to take the industry to the next level. Indian Pharma market continues toproliferate with increase in its population in the age bracket of 60+ growing awarenesson health insurance and improvement in the standard of living of the Indian middle class.

The Government of India has unveiled 'Pharma Vision 2020' aimed at making India aglobal leader in end-to-end drug manufacture. It has reduced approval time for newfacilities to boost investments. Further the government has also put in place mechanismssuch as the Drug Price Control Order and the National Pharmaceutical Pricing Authority toaddress the issue of affordability and availability of medicines.

Bal Pharma during the year under review has aimed at strengthening its presence both interms of its manufacturing capabilities and market share. The Company has ear marked anbudget of ' 31.27 Crores for the modernization and expansion of its manufacturingfacilities located at Bangalore (Unit 1&2) and Pant Nagar Uttarakhand (Unit 4).Modernization process is underway and expected to be completed by EY 2016.17. This willgive a big boost to the Company's manufacturing capabilities which helps in consolidatingits position in Indian Pharma Industry.

The Company is also investing on strengthening its marketing and sales force both interms of adding to the head count and also by enhancing the parcapita output of its salesforce by adopting & implementing attractive incentive policies.

The Company has floated Lifezen Healthcare Private Limited during the year as itssubsidiary with an objective of marketing OTC (Over the Counter) branded products whichare high margin products. This Company is expected to be operating in a niche marketsegment with ample marketing and publicity support so that several brands can belaunched/built and in the process will contribute handsomely to the revenues of theCompany.

The Companies venture into heath care sector during the year through its subsidiaryi.e. Balance Clinics LLP is also yielding encouraging results and consolidation of thisbusiness may happen in the next 3to4 years.

The Company has launched an exclusive research foundation i.e. Bal Research Foundationwhich is a nonprofit making Company incorporated as per the provisions of Section 8 of theCompanies Act2013 with an objective for promoting research and development in the fieldof Allopathic Ayurvedic herbal formulations and API's ( Active Pharma Ingredients).

5. BUSINESS OPERATIONS

(i) Turnover and Net profit:

During the financial year 2014-15 your Company has achieved a gross turnover of '190.67 Crores as against' 182.01 Crores achieved during the previous financial year thusregistering a top line growth of 5%.

The net profit after tax of the Company during the financial year 2014-15 stands at '4.02 Crores as against the net profit of ' 5.07 Crores achieved in the previous financialyear 2013-14. The decline in profits is due to additional provision for depreciation of '1.73 Crores which was resended as for Schedule II of Companies Act 2013.

(ii) Formulations’ Business:

The formulations business of the Company has contributed a total revenue of ' 115.40Crores during the F.Y 14-15 as comparedto 119.75 Crores duringthe FY 13-14.

The turnover from export of formulations during the year under review stands at ' 73.51Crores as against ' 72.24 Crores achieved during the previous financial year thusregistering an moderate growth of 2%.

In the domestic market Branded formulations of the Company consisting of mainlyDiabetic Gynecology and Cardiac drugs have contributed to a revenue of ' 22.49 Croresduring the year under review as against ' 24.93 Crores achieved during the previous year.

(iii) Bulk Drug Business:

Bulk drug business continue to show its momentum in sales with a revenue of ' 75.26Crores during the year under

review as compared to ' 62.25 Crores achieved during the previous financial yearthereby registering a healthy growth of 17%.

Exports sales of bulk drugs during the year under review stands at ' 48.02 Crores asagainst ' 35.42 Crores registered during the previous financial year.

Domestic sales of the bulk drugs have registered a revenue of ' 27.24 Crores as againstthe revenue of' 26.75 Crores registered during the previous financial year.

(iv) Export Performance:

The overall exports of the Company during the year under review has increased to '121.53 Crores from ' 107.66 Crores achieved during the previous financial year thusregistering a growth of 12%.

Revenues from the export sales continue to consistently dominate the Company's overallturnover.

Your Company has won a prestigious award for its outstanding export performance duringthe year 2014-15 from Federation of Karnataka Chamber of Commerce and Industry (FKCCI).The Management wishes to attribute this honor to its employees vendors suppliers etc whoare instrumental in achieving this award.

(v) Domestic Performance:

Revenue from sales to Govt. Institutional business registered a turnover of ' 3.92crores during the year under review as against ' 2.88 crores achieved during the previousfinancial year. The Ayurvedic products division has contributed to a turnover of ' 4.31crores during the year under review as against ' 3.19 crores registered during theprevious year. Over all domestic turnover is ' 64.64 crores as compared to ' 68.88 croresduring previous year 13-14.

Diabetic and Cardiac drugs of the company continue to prove their prominence in theIndian markets.

6. MATERIAL CHANGES & COMMITMENTS AFFECTING THE FINANCIAL POSITION OF THE COMPANYBETWEEN THE END OF THE FINANCIAL YEAR AND THE DATE OF THE REPORT:

There are no material changes and commitments between the end of the Financial Year andthe date of the Report which affect the financial position of the Company.

7. RESEARCH & DEVELOPMENT

During the year under review Bal Research Foundation was incorporated as per theprovisions of Section 8 of the Companies Act 2013 with the following main objectives:

I. To initiate carry out execute implement aid and assist in research and study inAllopathic Ayurvedic and Herbal formulations.

ii. To initiate conduct study and research in Active Pharmaceutical Ingredients(API’s) and in other allied fields of scientific research.

iii. To collaborate with the existing research institutions labs governmentdepartments and research departments in educational institutions for sharing of knowledgeskill study materials manpower and other intellectual properties.

iv. To conduct seminars lectures classes and other training programmes in the held ofPharma research at the educational institutions universities for developing the skilledmanpower in research activities.

v. To dedicate its resources either tangible or intangible for study and research inPharma and allied fields.

8. AUDIT COMMITTEE

The Audit Committee a sub-committee of Board consists of Dr G.S.R Subba RaoIndependent Director Mr. Shrenik Siroya Non-executive Director Mr. Pramod Kumar SIndependent Director.

This Committee is chaired by Dr.GSR Subba Rao. Audit Committee has been discharging itsduties under SEBI Guidelines read with the Listing Agreement. The said Committee is alsofunctioning as Audit Committee under Section 177 of the Companies Act 2013.

9. AUDITORS AND AUDITORS REPORT :

Statutory Auditors:

Messrs T.D Jain and D I Sakaria Chartered accountants will hold the office of thestatutory auditors till the conclusion of ensuing annual general meeting of the Companyand are eligible for reappointment. The Company has received a certificate under Section141 of the Companies Act 2013 from them stating that their appointment would be withinthe limits specified therein.

There are no qualifications or reservations or adverse remarks by the auditors in theirreport.

Cost Auditors:

The Board has appointed Mr. MR Krishna Murthy Cost Accountant as Cost auditor forconducting audit of cost records of the Company for the financial year 2014-15.

Secretarial Auditors:

The Board has appointed Mr. Parameshwar G BhatPractising Company Secretary to conductSecretarial Audit of the Company for the F.Y 2014-15. The Secretarial Audit Report for theF.Y. 201415 is annexed to this report. The Secretarial Audit Report does not contain anyqualifications reservations or adverse remarks.

Internal Auditors:

Messrs Abhishek Jain and Dheeraj Bafna Chartered Accountants were appointed asInternal Auditors of the Company for the financial year 2014-15 and their Internal AuditReports are periodically reviewed by the Audit Committee and recommends to the Board forits noting. The Internal Audit Reports do not contain any qualifications reservations oradverse remarks.

Risk Management:

During the year under review The management of the Company has constituted a RiskAssessment and Minimization Committee with functional heads and the Company Secretary asits members. The Committee will submit its periodical report to the Board about themeasures taken for mitigation of risk in the organization.

The Risk Management Policy devised by the Committee is available on our website i.e.www.balpharma.com.

10. INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY:

Your Company has adequate system of internal controls with clearly defined authoritylimits. They ensure that the Company’s assets are protected against loss fromunauthorised use or disposition and all transactions are authorized recorded and reportedin conformity with generally accepted accounting principles. These systems are designed toensure accuracy and reliability of accounting data promotion of operational efficiencyand adherence to the prescribed management policies. These policies are periodicallyreviewed to meet current business requirements.

11. DIRECTORS' RESPONSIBILITY STATEMENT

In compliance to the provisions of Section 134(5) of the Companies Act 2013 yourDirectors wish to confirm with reference to Statement of Accounts for the financial yearended on 31st March 2015:

a) that in preparing the Annual Accounts all the applicable Accounting Standards havebeen followed;

b) that the Directors had 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 and of the Profit &Loss of the Company for that period.

c) thatthe 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/detecting fraud and other irregularities;

d) that the Directors have prepared the annual accounts on 'going concern basis.'

e) that the Directors have laid down internal financial controls to be followed by theCompany and that such internal financial controls are adequate and operating effectively.

f) that the Directors have devised proper systems to ensure compliance with theprovisions of all applicable laws and that such systems were adequate and operatingeffectively.

12. CONTRACTS AND ARRANGEMENTS WITH RELATED PARTIES:

All contracts/arrangements/transactions entered by the Company during the financialyear with related parties were in the ordinary course of business and on arm's lengthbasis. During the year the Company had not entered into any contract/arrangement/transaction with related parties that could be considered material (5% of turn over or 25%of the net worth of the Company) as defined in the ListingAgreement.

Companies Policy on the related party transactions as approved by the Board can beaccessed from our website i.e.www.balpharma. com.

Please refer to the note # 34 to the financial statements which sets outrelated party disclosures.

13. SUBSIDIARY JOINT VENTURE AND ASSOCIATE COMPANIES:

During the year under review the companies listed below have become Company'ssubsidiaries joint ventures or associate companies. A report on the performance andfinancial position of each of the subsidiaries associates joint venture companies as perthe Companies Act20l3 is provided as Annexure - A to the consolidated financial statementand hence not repeated here for the sake of brevity.

Sl. No. Name of the Company/LLP Nature of Business % of stake as on 31.03.2015
01 Lifezen Healthcare Private Limited Marketing of Over the counter (OTC) products. 98%
02 Bal Research Foundation. Research and Development in Pharma & health care. 80%
03 Balance Clinics LLP Diabetic care 80%

14. DIRECTORS AND KEY MANAGERIAL PERSONNEL:

In accordance with the provisions of the Companies Act and the Articles of Associationof the Company Dr. Subba Rao Prasanna Whole Time Director of the Company retires byrotation and being eligible offer himself for reappointment.

The Board has appointed Mrs. Sarika Bhandari as an Additional and Independent Directorof the Company on 27.03.2015 in compliance with the provisions of Section 149(1) ofCompanies Act2013 and Clause 49 II A of the Listing agreement. It is proposed to appointher as regular Director and also as Independent Director of the Company for the tenure of5 years at the ensuing Annual General Meeting of the Company.

The Company has received declarations from all the Independent Directors of the Companyconfirming that they meet the criteria of independence as prescribed under Section 149 (6)of the Companies Act 2013 and Clause 49 of the Listing Agreement.

The Company has devised a policy for familiarization of Independent Directors with theCompany their roles rights responsibilities in the Company etc and the same is put upon the website of the Company i.e.www.balpharma.com

The Company has also devised a policy for Nomination and Remuneration of KMP's SeniorManagerial personnel and Directors of the Company in compliance with Section 178 of theCompanies Act 2013 and Clause 49 of the Listing Agreement. The said policy is availableon the website of the Company.

15. VIGIL MECHANISAM:

The vigil mechanism of the Company which also incorporates a whistle blower policy asper the Listing Agreement includes compliance task force comprising of senior executivesof the Company. The complete text on the vigil mechanism and whistle blower policy can beaccessed from the Company's website

i.e.www.balpharma.com

16. CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION FOREIGN EXCHANGE EARNINGS ANDFOREIGN EXCHANGE OUTGO:

As per provisions of Section 134(m) of the Companies Act 2013 read with the rule 8 ofthe Companies (Accounts) Rules 2014 details relating to the Conservation of Energy andTechnology Absorption and Foreign Exchange Earnings and Outflow are given in Annexurewhich forms part of the Board’s Report.

17. PARTICULARS OF EMPLOYEES:

Details of employees as per Section 197 of the Companies Act 2013 and rule 5 (1) and(2) of the Companies (Appointment & remuneration of managerial personnel) Rules 2014is furnished as annexure to this report.

18. CORPORATE GOVERNANCE AND SHARE HOLDERS INFORMATION:

A detailed report on the Corporate Governance System and practices of the Company aregiven in a separate section in this Annual Report.

Outstanding Un-paid dividend amount for the financial year 2006-07 that is due fortransfer to the Investor Education and Protection Fund has been duly transferred duringthe year.

19. PARTICULARS OF LOANS GIVEN INVESTMENTS MADE GUARANTEES GIVEN OR SECURITY PROVIDEDBY THE COMPANY:

The Company has not given any loan or guarantees covered under the provisions ofSection 186 of the Companies Act 2013

20. EXTRACT OF ANNUAL RETURN:

Extract of the Annual Return of the Company for F.Y 2014-15 in Form MGT-9 is annexed tothis report.

21. CORPORATE SOCIAL RESPONSIBILITY:

The Board has constituted a Corporate Social Responsibility Committee consisting of Dr.G.S.R Subba Rao Mr. Pramod Kumar. S Dr. S. Prasanna and Mr. Shailesh Siroya as itsmembers.

The Committee has formulated a Corporate Social Responsibility Policy and the Board hasapproved the Policy for its implementation. The CSR policy may be accessed from theCompany's website

i.e.www.balpharma.com .

You Directors wish to place on record that during the year under review due toinadequate time and avenues and this being the first year of this requirement the Companycould not spent any amount

under CSR activities as specified in Section 135 of Companies Act20l3. But the Companycontinued its socially beneficial activities like conducing free health checkupsdistribution of medicines for the flood affected victims of Uttarakhand etc.

22. DISCLOSURE UNDER THE SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTIONPROHIBITION AND REDRESSAL) ACT 2013:

The Company has in place an Anti Sexual Harassment Policy in line with the requirementsof the Sexual Harassment of Women at the Workplace (Prevention Prohibition &Redressal) Act 2013. Internal Complaints Committee (ICC) has been set up to redresscomplaints received regarding sexual harassment. All employees (permanent contractualtemporary trainees) are covered under this policy.

The following is a summary of sexual harassment complaints received and disposed offduring the year 2014-2015:

No of complaints received: NIL No of complaints disposed off: NIL

23. NUMBER OF MEETINGS OF THE BOARD OF DIRECTORS:

The Meetings of the Board are held at regular intervals with a time gap of not morethan 120 days between two consecutive Meetings. Additional Meetings of the Board ofDirectors are held when necessary. During the year under review 8 (Eight) Board Meetingswere held on 28th May 2014 11th August 2014 20th October

2014 8th November 2014 12th January 2015 12th February

2015 20th March 2015 and 27th March 2015.

The Agenda of the Meeting is circulated to the Directors in advance. Minutes of theMeetings of the Board of Directors are circulated amongst the Members of the Board fortheir perusal.

Members are requested to refer to page no. 26 of this Annual Report for a report onCorporate Governance.

24. HUMAN RESOURCES:

The human resources of the Company continue to contribute its share in the growth ofthe Company. Human Resource agenda of the company for the year continued to focus onbuilding a talent pipeline enhancing individual and organizational capabilities forfuture readiness driving greater employee engagement and strengthening employeerelations though progressive people management.

There was no complaint lodged by any woman employee under Sexual Harassment of Women atWorkplace (Prevention Prohibition and Redressel) Act 2013 with the Company during theperiod under report.

25. CEO & CFO CERTIFICATION:

The Board has acknowledged the Managing Director as the CEO of the Company and AVPFinance & Accounts as the CFO for the purpose of compliance under the ListingAgreement. The CEO and CFO have certified to the Board in terms of Clause 49 of theListing Agreement that the financial statements present a true and fair view of thecompany's affairs and are in compliance with accounting standards.

26. INSURANCE COVERAGE:

The Board of Directors reports that your Company has adequate and comprehensiveinsurance cover on all the movable and immovable assets of the Company.

27. MATERIAL ORDER PASSED BY ANY COURT OR REGULATOR OR TRIBUNALS IMPACTING GOINGCONCERN STATUS OF COMPANY:

No order was passed by any court or regulator or tribunal during the period underreview which impacts going concern status of the Company.

28. GENERAL:

Your Directors state that no disclosure or reporting is required in respect of thefollowing items as there were no transactions on these items during the year under review:

1. Details relating to deposits covered under Chapter V of the Act.

2. Issue of equity shares with differential rights as to dividend voting etc.

3. Issue of shares (including sweat equity shares) to the employees of the Companyunder any scheme.

4. Neither the Managing Director nor the whole time Directors of the Company receiveany remuneration or commission from any of its subsidiaries.

5. No significant or material orders were passed by the regulators or courts ortribunals which impact the going concern status and Company's operations in the future.

29. APPRECIATION:

Your Directors wish to express their sincere appreciation on significant contributionsmade by the employees through their dedication hard work and commitment. Your Directorsalso place on record their sincere thanks on the trust reposed on the Company by themedical fraternity and the patients. We also acknowledge the support extended by CanaraBank Punjab National Bank EXIM Bank Corporation Bank and other Banks & financialinstitutions government agencies shareholders and investors at large. We look forward tothe continued support from all the quarters in our endeavor to help people lead healthierlives.

For and on behalf of the Board of Directors

Bangalore Dr. S. Prasanna Shailesh D Siroya
13th August 2015 Whole Time Director Managing Director

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