We present you the Thirty-Ninth Annual Report on business and operations along with theaudited financial statements and the auditor's report of your Company for the financialyear ended March 31 2017.
In Rs. Million (except EPS)
|Particulars ||Standalone Results ||Consolidated Results |
| ||FY17 ||FY16 ||FY17 ||FY16 |
|Total Revenue ||27172 ||25085 ||40787 ||34602 |
|Expenses ||21810 ||20552 ||32453 ||28912 |
|Share in net profit of joint venture ||- ||- ||163 ||217 |
|Profit before tax and exceptional items ||5362 ||4533 ||8497 ||5907 |
|Exceptional items ||- ||1061 ||- ||1606 |
|Profit before tax ||5362 ||5594 ||8497 ||7513 |
|Income tax ||1211 ||845 ||1538 ||1299 |
|Income tax on exceptional items ||(1042) ||1063 ||78 ||123 |
|Non-controlling interest ||- ||- ||760 ||587 |
|Profit for the year ||5193 ||3686 ||6121 ||5504 |
|Other comprehensive income net ||84 ||(10) ||764 ||(58) |
|Total comprehensive income ||5277 ||3676 ||6885 ||5446 |
|Earnings per Share (EPS) before exceptional item ||21.15 ||18.79 ||31.59 ||20.48 |
|Earnings per Share (EPS) after exceptional item ||26.45 ||18.78 ||31.18 ||28.04 |
Standalone and Consolidated Financial Statements
The standalone and consolidated financial statements of your Company have been preparedin accordance with Indian Accounting Standards (Ind AS') notified under theCompanies (Indian Accounting Standards) Rules 2015. For all periods up to and includingthe year ended March 31 2016 your Company along with subsidiaries associates and jointventures prepared its financial statements in accordance with accounting standardsnotified under the Section 133 of the Companies Act 2013 read together with paragraph 7of the Companies (Accounts) Rules 2014 (Indian GAAP'). These financial statementsfor the year ended March 31 2017 are the first that have been prepared by the Companyits subsidiaries and associates in accordance with Ind AS.
Further a statement containing the salient features of the financial statements of oursubsidiaries pursuant to subsection 3 of Section 129 of the Companies Act 2013 in theprescribed form AOC-1 is appended as Annexure 1 to the Board's report. Thestatement also provides the details of performance and financial positions of each of thesubsidiaries.
State of affairs
The highlights of your Company's standalone performance are as under:
Revenue from operations grew by 12% to Rs. 26184 mn from Rs. 23354 mn in FY16. Otherincome for FY17 at Rs. 988 mn (FY16 Rs. 1731 mn) primarily due to foreign exchange gainRs. 160 mn and dividend from subsidiaries Rs. 487 mn in FY16.
Core operating margins (EBIDTA excluding R&D forex and dividend from subsidiaries)remained at similar levels as compared to FY16.
During the previous year the Company had a gain net of tax from sale of equity sharesof the Company's subsidiary Syngene International Limited (Syngene). MAT credit on suchgain was not recorded in the previous year due to uncertainty of utilization. During thecurrent year pursuant to change in the Income tax law and other business restructuringthe Company believes that it will be able to utilize the MAT credit entitlement.Accordingly during the year ended March 31 2017 the Company has recorded MAT creditentitlement of Rs. 1042 mn in its standalone financial statements. However in theconsolidated financial statements such entitlement is recognised as a credit in equityalong with the underlying dilution gain on sale of equity stake in Syngene as it did notimpact Group's control.
Profit for the year stood atRs. 5193 mn up 41% from FY16. PAT excluding exceptionalincome net of tax was Rs. 5193 mn (FY16 Rs. 3688 mn).
Effective tax rate (ETR) for the year was 3% due to MAT credit recorded on exceptionalincome of FY16. ETR before exceptional item was 23%.
During the year our consolidated revenues registered a growth of 18% to Rs. 40787 mnfrom Rs. 34602 mn in FY16. From a segment perspective the small molecules recorded agrowth of 12% while the research services business registered a year-on-year increase of7%. Biologics and Branded Formulation recorded an annual growth of 43% and 24%respectively.
Consolidated profitsfor the year grew by 11% to Rs. 6121 mn from Rs. 5504 mn. Profitsof FY17 included tax on exceptional income ofRs. 78 mn as against an exceptional gain ofRs. 1483 mn (net of taxes) in FY16 which has been explained in detail under the sectionManagement Discussion and Analysis.
With a view to encouraging the participation of small investors by making equity sharesof the Company affordable increasing the liquidity of the equity shares and to expand theretail shareholders' base your directors at their meeting held on April 27 2017recommended issue of bonus shares of two equity shares for every one equity share held bythe members as on the record date to be determined by the Board of Directors (Board).Consequent to the proposal of issue of bonus shares the authorised share capital of theCompany was proposed to be increased from Rs. 110 crores (22 crores equity shares of Rs.5/- each) to Rs. 300 crores (60 crores equity shares of Rs. 5/- each). Your directors havedecided to seek the approval of the shareholders for the above proposals by way of postalballot.
Your Directors are pleased to recommend a finaldividend of Rs. 3/- (Pre-Bonus) perequity share on the face value of Rs. 5/- per equity share for the financial year endedMarch 31 2017 amounting to Rs. 600 mn. In view of net cash generated from operationsbeing substantially deployed in capex and taking into account the future capitalcommitments your Directors consider it prudent to propose the above dividend. Thedividend payout is subject to approval of members at the ensuing Annual General Meeting(AGM).
The dividend will be paid to members whose names appear in the Register of members ason the record date to be determined by the Board in respect of shares held indematerialised form it will be paid to members whose names are furnished by NationalSecurities Depository Limited and Central Depository Services (India) Limited asbeneficial owners as on the record date.
Dividend Distribution Policy
As per the provisions of regulation 43A of SEBI LODR the top 500 listed companiesshall formulate a dividend distribution policy. Accordingly the policy was adopted to setout the parameters and circumstances that will be taken into account by the Board indetermining the distribution of dividend to its shareholders and/ or retaining profitsearned by the Company. The policy is appended herewith asAnnexure 2 to the Board'sreport and is also available on the Company's website athttp://www.biocon.com/docs/Dividend_Distribution_Policy.pdf.
Transfer of Unpaid and Unclaimed Amounts to IEPF
Pursuant to the provisions of Section 124(5) of the Companies Act 2013 dividend whichremains unpaid or unclaimed for a period of seven years from the date of its transfer tounpaid dividend account is required to be transferred by the Company to Investor Educationand Protection Fund (IEPF) established by the Central Government under the provisions ofSection 125 of the Companies Act 2013. During the year under review the Company hascredited unpaid/ unclaimed dividends of financial year 2008-09 amounting toRs. 648003lying in the unpaid dividend account to the Investor Education and Protection Fund (IEPF).
Subsidiaries and Joint ventures
Your Company has formulated a policy for determining material' subsidiariespursuant to the provisions of the Listing Agreement. The said policy is available at theCompany's website http://www.biocon.com/docs/PolicyDocument_MaterialSubsidiary.pdf
During the year Biocon Biologics India Limited was incorporated on June 08 2016 as awholly owned subsidiary of Biocon Biologics Limited UK ("BUK"). As on March 312017 your Company has 10 subsidiaries. A report on the performance and financial positionof each of the subsidiaries is presented below.
Syngene International Limited India
Syngene International Limited ("Syngene") is one of India's leading contractresearch organisation offering and development services for novel molecular entities(NMEs) across industrial sectors including pharmaceutical biopharmaceutical andbiotechnology amongst others. Syngene helps its clients in conducting discovery (from hitto candidate selection) development (including pre-clinical and clinical studiesanalytical and bio-analytical evaluation formulation development and stability studies)and pilot manufacturing (scale-up pre-clinical and clinical supplies) each withdistinctive economic advantage. Unlike the traditional business models these services areoffered through flexible business models ranging from a full-time equivalent("FTE") to a fee-for-service ("FFS") model or a combination customizedon the client's specific requirement.
During the year ended March 31 2017 Syngene registered a revenue growth of 14% to Rs.12716 mn in FY17 (FY16 Rs. 11133 mn). EBIDTA margin for the year was 38% with theoperating margin at Rs. 4783 mn (FY16 - Rs. 3867 mn) registering a growth of 3%.
e incident on December 12 2016 at Syngene certain fixed assets inventory and othercontents in one of the buildings were damaged.fir Pursuanttoa
Syngene lodged an initial estimate of loss with the insurance company and the survey iscurrently ongoing. During the year ended March 31 2017 Syngene has written off the netbook value of assets aggregating toRs. 795 mn and recognised a minimum amount of insuranceclaim receivable for an equivalent amount. In addition the Group is in the process ofdetermining its claim for Business Interruption and has accordingly not recorded any claimarising therefrom at this stage.
On April 27 2017 the Board of Directors of Syngene recommended a dividend of Rs. 1/-(10%) per equity share for FY17 entailing a pay-out of Rs. 200 mn. The dividend payout issubject to approval of members at their ensuing Annual General Meeting (AGM).
Biocon Research Limited India
Biocon Research Limited ("BRL") a 100% subsidiary of the Company undertakesdiscovery and development research work in Biologics and provides scientific supportforvarious development programmes of the group.
BRL's current business is largely directed towards R&D services for Monoclonalantibody molecules and Proteins (mAbs) insulin Tregopil (formally referred to as IN-105)and other insulin products on behalf of other group companies. The research programsundertaken by BRL have made significant the next level of global clinical trials. BRLcontinues to hold 0.93% shareholding in Syngene.
During FY17 BRL registered a turnover of Rs. 1657 mn and reported a net profit of Rs.661 mn compared to a turnover of Rs. 4100 mn and a net profit of Rs. 832 mn in FY16. FY16turnover included out-licensing of development and commercialisation rights of mAbs to BUKfor a consideration of Rs. 2820 mn.
Biocon Pharma Limited India
Biocon Pharma Limited ("BPL") is a wholly owned subsidiary of the Company.BPL would be engaged in the development and manufacture of generic formulations for salein global markets especially opportunities in US and EU. BPL is in the process of settingup its formulations manufacturing facility for oral solid dosages at Biocon SEZBengaluru. During FY17 7 mn equity shares of face value of Rs. 10 each were issued toBiocon Limited at face value. As of March 31 2017 BPL has not commenced commercialoperations and had capital work-in-progress of Rs. 1130 mn (FY16 Rs. 150 mn).
Biocon Pharma Inc USA
Biocon Pharma Inc. ("BPI") a wholly owned subsidiary of Biocon PharmaLimited was incorporated in July 2015 in the United States of America. BPI will be engagedin commercialization of generic formulations in the United States. As at March 31 2017BPI has not commenced commercial operations.
Biocon Biologics Limited UK
Biocon Biologics Limited ("BUK") is a wholly owned subsidiary of the Company.Incorporated in the United Kingdom in March 2016 BUK houses Biocon's biosimilar biologicsbusiness. Biocon SDN. BHD. is a wholly owned subsidiary of BUK. During the year endedMarch 31 2017 BUK earned Rs. 1826 mn as revenue and reported a net loss of Rs. 189 mn.
Biocon SDN. BHD Malaysia
Biocon SDN. BHD. Malaysia is a step down subsidiary of the Company wholly owned byBUK. Biocon SDN. BHD. was established with an objective to set up the group's firstoverseas manufacturing facility at Malaysia. The facility is located within BioXcell abiotechnology park in Nusajaya Johor which is being promoted by the Malaysiangovernment.
The manufacturing facility designed to manufacture recombinant human insulin andinsulin analogs received local cGMP certification from the National Pharmaceutical ControlBureau. The plant was capitalised (Rs. 16851 mn) at the end of the current year based onits readiness to start commercial supplies. Average useful life of the plant is expectedto be 16 years. Biocon SDN BHD will seek approvals from leading regulatory agencies acrossthe globe for marketing its products in rest of the world from FY 18. Approval from thedeveloped markets are expected in the coming years.
Biocon SDN. BHD. will also continue the research and development activities pertainingto human insulin and analogues which it acquired from Biocon SA.
Biocon SDN. BHD. reported a total revenue of Rs. 998 mn and net profit ofRs. 5 mn inFY17.
Biocon Biologics India Limited India
Biocon Biologics India Limited ("BBIL") is a step down subsidiary of theCompany wholly owned by BUK. BBIL was incorporated on June 08 2016 in India with anobjective to set up green field biosimilar biologics facilities. As at March 31 2017BBIL has not commenced commercial operations.
Biocon SA Switzerland
Biocon SA a wholly owned subsidiary of the Company is primarily engaged inidentifying and developing other novel molecules into commercial products or licensableassets through strategic partnerships.
For the current year Biocon SA registered net profit of Rs. 684 mn against Rs. 1229mn in FY16. Exceptional gains as explained below resulted in increased net profits forFY16.
Exceptional items comprises of
(a) an amount of Rs. 2561 mn (net of tax) released from deferred balance pursuant tocontract with Laboratories PiSA S.A. de C.V (PiSA) of Mexico for the co-development andcommercialization of generic recombinant human insulin (rh-insulin) for the US market.
(b) impairment charge of Rs. 1078 mn of the marketing rights of T1H product for US andCanada region (Territory') due to uncertainties over commercialisation of theproducts in the Territory owing to OFAC sanctions.
(c) During the year ended March 31 2017 Biocon SA and Biocon Sdn. Bhd. have enteredinto an Assignment and License Agreement pursuant to which Biocon SA transferred all ofits rights interests and obligations in Insulin Analogs (IPR) to Biocon SDN. BHD.Consequent to this transfer BSA recorded a gain of Rs. 1150 mn net of tax Rs. 78 mn.
Biocon FZ LLC UAE
Biocon FZ LLC is a wholly owned subsidiary of the Company based in Dubai. Incorporatedin June 2015 Biocon FZ LLC was established as a marketing entity for pharmaceuticalproducts to target markets in the Middle East and GCC. During the year ended March 312017 Biocon FZ LLC earned Rs. 1328 mn as revenue and reported a net loss of Rs. 21 mn.
Biocon Academy India
Biocon Academy spearheads Biocon's CSR initiatives in the technical / professionaleducation segment. The academy was established as a Centre of Excellence for AdvancedLearning in Biosciences in 2014. Biocon Academy leverages rich industry experience ofBiocon and subject matter expertise of international Education Partners such as KeckGraduate Institute of Claremont California (USA). The academy is dedicated exclusively toindustry oriented biosciences education. The programs offered by the academy aim toempower the Biotechnology and Engineering graduates with advanced learning and industrialproficiency through job-skills development essential to build a promising career in theBiotech industry.
Management discussion and analysis
In terms of the provisions of Regulation 34 of SEBI (Listing Obligations and DisclosureRequirements) Regulations 2015 (SEBI LODR) the Management's discussion and analysis isset out in this Annual Report.
Your Company is committed to maintain the highest standards of corporate governance. Webelieve sound corporate governance is critical to enhance and retain investor trust. Ourdisclosures seek to attain the best practices in corporate governance as prevalentglobally. We have implemented several best corporate governance practices in the Companyto enhance long-term shareholder value and respect minority rights in all our businessdecisions. Corporate governance report for FY 2016-17 forms part of this Annual Report.
The requisite certificate from the auditors of the Company confirming compliance withthe conditions of corporate governance as stipulated under SEBI LODR is annexed to thecorporate governance report.
Business Responsibility Report
The Business Responsibility Report' (BRR) of your Company for the year 2016-17forms part of this Annual Report as required under Regulation 34(2)(f) of the SEBI(Listing Obligations and Disclosure Requirements) Regulations 2015.
Employee Stock Option Plan (ESOP)
Nomination and Remuneration Committee of the Board inter alia administers and monitorsthe Company's employees' stock option plan (Plan) in accordance with SEBI (Share BasedEmployee Benefits) Regulations 2014 (SBEB Regulations). The Plan is implemented throughBiocon India Limited Employees' Welfare Trust (ESOP Trust).
During the year ended March 31 2017 a total of 499689 shares were transferred fromthe ESOP Trust to the eligible employees under the Company's prevailing ESOP plan. As atMarch 31 2017 the ESOP Trust held 3529870 equity shares of the Company. During theyear ended March 31 2017 there has been no material change in the Company's existingplan and the plan is in compliance with SBEB Regulations. Information as required underSBEB
Regulations read with SEBI Circular CIR/CFD/POLICY CELL/2/2015 dated June 16 2015 havebeen uploaded on the Company's website and can be accessed at the web-link:http://www.biocon.com/biocon_invrelation_annualreports.asp?subLink=finance
The applicable disclosures as stipulated under the SBEB Regulations as on March 312017 is appended herewith as Annexure 3 to the Board's report. The Company hasreceived a certificate from the statutory auditors that the scheme has been implemented inaccordance with SBEB Regulations and the resolutions passed by the shareholders. Thecertificate would be placed at the AGM for inspection by the members.
Your Company has not accepted any deposit and as such no amount of principal andinterest were outstanding as of the Balance Sheet date.
Loans Guarantees or Investments
Details of loans guarantees and investments covered under the provisions of Section186 of the Companies Act 2013 form part of the notes to the financial statements.
Policy on Directors' appointment and remuneration
The Company's current policy is to have an appropriate mix of Executive and IndependentDirectors to maintain the independence of the board and separate its functions ofgovernance and management. As on March 31 2017 the Board consists of 10 Directorsmajority of them being Independent Directors. Besides the Chairperson and ManagingDirector who is a Promoter the Board comprises of Vice Chairman who is a Whole-timeDirector a CEO & Joint Managing Director a Non- Executive Director and 6 IndependentDirectors. The Board periodically evaluates the need for change in its composition andsize. The policy of the Company on Director's appointment and remuneration includingcriteria for determining qualifications positive attributes independence of a directorand other matters as required under sub-section (3) of Section 178 of the Companies Act2013 are formulated by the Nomination and Remuneration Committee. The policy of theCompany on Director's appointment and remuneration is appended herewith as Annexure 4to the Boards' Report.
A diverse Board enables efficient functioning through differences in perspective andskill. It also fosters differentiated thought processes at the back of varied industrialand management expertise gender knowledge and geographical background. The Boardrecognises the importance of a diverse composition and has adopted a Board DiversityPolicy which sets out the approach to diversity. The policy is available at the web-link:http://www.biocon. com/docs/PolicyDocument_BoardDiversity.pdf
Declaration by Independent Directors
The Company has received necessary declaration from each Independent Director underSection 149(7) of the Companies Act 2013 that he/she meets the criteria of independencelaid down in Section 149(6) of the Companies Act 2013 and regulation 25 of SEBI LODR.
Pursuant to the provisions of the Companies Act 2013 and Regulation 19 of SEBI LODRthe Board has carried out the annual performance evaluation of its own performance thedirectors individually as well as the evaluation of the working of its various committees.A structured questionnaire was prepared after taking into consideration inputs receivedfrom the directors covering various aspects of the Board's functioning such as adequacyof the composition of the Board and its Committees Board culture execution andperformance of specific duties obligations independence governance ethics and valuesadherence to corporate governance norms Interpersonal relationships attendance andcontribution at meetings etc.
A separate exercise was carried out to evaluate the performance of individual directorsincluding the Chairperson of the Board who were evaluated on parameters such asparticipation and contribution commitment including guidance provided to the seniormanagement outside of Board / committee meetings effective deployment of knowledge andexpertise effective management of relationship with various stakeholders independence ofbehaviour and judgment etc. The performance evaluation of the Independent Directors werecarried out by the entire Board. The performance evaluation of the Chairperson &Managing Director was carried out by the Independent Directors. The evaluation process hasbeen explained in the corporate governance report. The Board reviewed the evaluationresults as collated by the Nomination and Remuneration Committee.
Appointment of Directors and Key Managerial Personnel
The members at the 38th AGM held on June 30 2016 appointed Mr. M. Damodaran as anIndependent Director for a period of three consecutive years for a term upto theconclusion of 41st AGM of the Company in the calendar year 2019. The members at the saidAGM also appointed Dr. Arun S Chandavarkar CEO & Joint Managing Director as adirector liable to retire by rotation. We thank the members for their support inconfirming the above mentioned appointments.
The Board on the recommendation of the Nomination and Remuneration Committeeappointed Mr. Rajiv Balakrishnan as the Company Secretary and Compliance Officer effectiveJanuary 24 2017 in place of Mr. Kiran Kumar. G who relinquished his post as the CompanySecretary of the Company to pursue other interests within the group. The Board places onrecord its appreciation for the services rendered by Mr. Kiran Kumar. G during his tenureas the Company Secretary.
Retirement and Re-appointment
As per the provisions of Section 152(6) of Companies Act 2013 Prof. Ravi Mazumdarretires by rotation at the ensuing AGM and being eligible seeks reappointment. The Boardrecommends his re-appointment.
The current term of appointment of Mr. Russell Walls Ms. Mary Harney and Mr. DanielBradbury Independent Directors of the Company shall come to an end at the ensuing AGM.Based on the outcome of the performance evaluation the Nomination and RemunerationCommittee has recommended to continue the term of appointment of the above IndependentDirectors and nominated to the Board re-appointment of Mr. Russell Walls Ms. Mary Harneyand Mr. Daniel Bradbury as Independent Directors for an additional term of fiveconsecutive years. The Company has received declarations from all the three IndependentDirectors confirming that they meet with the criteria of independence as prescribed undersub-section (6) of Section 149 of the Companies Act 2013 and regulation 25 of SEBI LODR.The Company has also received requisite notices in writing from members proposing Mr.Russell Walls Ms. Mary Harney and Mr.
Daniel Bradbury as Independent Directors of the Company.
The Board recommends the re- appointment of Mr. Russell Walls Ms. Mary Harney and Mr.Daniel Bradbury as Independent Directors.
Committees of the Board
Currently the Board has four Committees: Audit and Risk Committee Nomination andRemuneration Committee Corporate Social Responsibility Committee and Stakeholders'Relationship Committee. As required under the provisions of Section 177 (8) of theCompanies Act 2013 the composition of the Audit Committee is disclosed as under:
Mr. Russell Walls Chairman Mr. Daniel M Bradbury Dr. Jeremy M Levin and Mr. M.Damodaran.
A detailed note on the composition of the Board and other committees is provided in thecorporate governance report section of this annual report.
Meetings of the Board
The meetings of the Board are scheduled at regular intervals to decide and discuss onbusiness performance policies strategies and other matters of significance. The scheduleof the meetings are circulated in advance to ensure proper planning and effectiveparticipation in meetings. In certain exigencies decisions of the Board are also accordedthrough circulation.
The Board during the financial year 2016-17 met four times. The maximum intervalbetween any two meetings did not exceed 120 days as prescribed in the Companies Act2013. Detailed information regarding the meetings of the Board are included in the reporton Corporate Governance which forms part of the Board's Report.
Related party contracts or arrangements
All transactions entered into with Related Parties as defined under Companies Act 2013during the year were in the ordinary course of business and on an arm's length basis. TheCompany has formulated a policy on "materiality of related party transactions"and the process of dealing with such transactions which are in line with the provisionsof the Companies Act 2013 and SEBI LODR. The same is also available on the web-link:http://www.biocon.com/docs/ PolicyDocument_RelatedPartyTransaction_2015.pdf
Prior omnibus approval from the Audit and Risk Committee are obtained for transactionswhich are repetitive and also normal in nature. Further disclosures on related partycontracts and arrangements are made to the Audit and Risk Committee and the Board on aquarterly basis.
During the year under review there were no material related party transactions underregulation 23 (4) of SEBI LODR entered into by the Company which necessitates approval ofshareholders. Particulars of contracts or arrangements with related parties referred to inSection 188 (1) of the Companies Act
2013 in the prescribed Form AOC 2 is appended herewith as Annexure 5 tothe Board's report.
CRISIL and ICRA continued to reaffirm their rating of "AA+/ Stable" and"A1+" for various banking facilities throughout the year enabling your Companyto avail facilities from banks at attractive rates indicating a very strong degree ofsafety for timely payment of financial obligations.
Conservation of energy technology absorption foreign exchange earnings & outgo
The particulars as prescribed under sub-section (3)(m) of Section 134 of the CompaniesAct 2013 read with the Companies (Accounts) Rules 2014 is appended herewith as Annexure6 to the Board's report.
Messrs B S R & Co. LLP Chartered Accountants (ICAI Registration No.101248W/W-100022) were appointed as the Statutory Auditors of the Company to hold officefrom the conclusion of the 38th AGM held on June 30 2016 until the conclusion of the 43rdAGM of the Company to be held in the calendar year 2021 (subject to ratification of theirappointment by the members at every AGM).
As required under the provisions of Section 139(1) of the Companies Act 2013 theCompany has received a written consent from B S R & Co. LLP Chartered Accountants totheir appointment and a certificate to the effect that their appointment if made wouldbe in accordance with the Companies Act 2013 and the Rules framed thereunder and thatthey satisfy the criteria provided in Section 141 of the Companies Act 2013.
The members are requested to ratify the appointment of the Statutory Auditors at theensuing AGM.
The Auditors' Report on the financial statements of the Company for the year endingMarch 31 2017 is unmodified i.e. it does not contain any qualification reservation oradverse remark. The Auditors' Report is enclosed with the financial statements formingpart of the annual report.
The Board of Directors on the recommendation of the Audit and Risk Committee appointedMessrs Rao & Murthy Cost Accountants (Firm Registration Number 000065) as the CostAuditors of the Company for the FY 2017-18 under Section 148 of the Companies Act 2013.Messrs Rao & Murthy Cost Accountants have confirmed that their appointment is withinthe limits of section 141(3) (g) of the Companies Act 2013 and have also certified thatthey are free from any disqualifications specified under Section 141(3) and
The Audit and Risk Committee has also received a certificate from the Cost Auditorscertifying their independence and arm's length relationship with the Company.
As per the provisions of the Companies Act 2013 the remuneration payable to the CostAuditors is required to be placed before the members in a General Meeting for theirratification.Accordingly ratificationfor the remuneration payable to Messrs Rao& Murthy Cost Accountants resolutionseekingmembers' is included in the noticeconvening the 39th AGM.
Pursuant to the provisions of Section 204 of the Companies Act 2013 and rulesthereunder M/s Sreedharan & Co Practicing Company Secretaries was appointed toconduct the secretarial audit of the Company for the FY 2016-17. The secretarial auditreport for FY 2016-17 is appended herewith as Annexure 7 to the Board's report. Thesecretarial audit report does not contain any qualification reservation or adverseremark.
The Board has appointed Mr. M. Damodaran of M/s. Damodaran & Associates PractisingCompany Secretaries as secretarial auditor of the Company for the financial year 2017-18.
Risk Management Policy
The Company has put in place an enterprise wide Risk Management Framework with anobject of timely identification of risks assessment and evaluation of the same in linewith overall business objectives and define adequate mitigation strategy. On a quarterlybasis the Audit and Risk Committee reviews critical risks on a rotation basis in linewith the mitigation progress/ effectiveness and its impact on overall risk exposure of thecompany all the critical risk areas are covered at least once a year. Annually allcritical risk areas identified are re-evaluated.
Internal Financial Control
The Company has laid down certain guidelines processes and structures which enableimplementation of appropriate internal financial controls across the organisation. Suchinternal financial controls encompasses policies and procedures adopted by the Company forensuring the orderly and efficient conduct of business including adherence to itspolicies safeguarding of its assets prevention and detection of frauds and errors theaccuracy and completeness of accounting records and the timely preparation of reliablefinancial information. These include control processes both on manual and IT applicationsincluding the ERP applications wherein the transactions are approved and recorded.Appropriate review and control mechanisms are built in place to ensure that such controlsystems are adequate and are operating effectively.
Because of the inherent limitations of internal financial controls including thepossibility of collusion or improper management override of controls materialmisstatements in financial reporting due to error or fraud may occur and not be detected.Also evaluation of the internal financial controls are subject to the risk that theinternal financial control may become inadequate because of changes in conditions or thatthe compliance with the policies or procedures may deteriorate.
The Company has in all material respects an adequate internal financial controlssystem and such internal financial controls were operating effectively based on theinternal control criteria established by the Company considering the essential componentsof internal control stated in the guidance note on audit of internal control overfinancial reporting issued by the Institute of Chartered Accountants of India.
The Vigil Mechanism as envisaged in the Companies Act 2013 the rules prescribedthereunder and SEBI LODR is implemented through the Company's Whistle Blower Policy toenable the Directors employees and all stakeholders of the Company to report genuineconcerns to provide for adequate safeguards against victimisation of persons who use suchmechanism and make provision for direct access to the Chairman of the Audit and RiskCommittee.
Whistle Blower Policy of your Company is available on the Company's website and can beaccessed at the web-link:http://www.biocon.com/docs/Biocon_Group_Integrity_Whistle_Blower_Policy.pdf
Directors' Responsibility Statement
Pursuant to the requirement under Section 134 (3) (c) of the Companies Act 2013 yourDirectors confirm that:
(a) In the preparation of the annual accounts the applicable accounting standards hadbeen followed along with proper explanation relating to material departures.
(b) they have selected such accounting policies and applied them consistently and madejudgements and estimates that are reasonable and prudent so as to give a true and fairview of the state of affairs of the Company at the end of the financial year and of theprofit and loss of the Company for that period.
(c) they have taken proper and sufficient care for the maintenance of adequateaccounting records in accordance with the provisions of the Act for safeguarding theassets of the Company and for preventing and detecting fraud and other irregularities.
(d) they have prepared the annual accounts on a going concern basis.
(e) they have laid down internal financial controls based on internal controlsframework established by the Company which were adequate and are operating effectivelyand
(f) they have devised proper systems to ensure compliance with the provisions of allapplicable laws and that such systems were adequate and operating effectively.
Particulars of Employees
The statement containing particulars in terms of Section 197 (12) of the Companies Act2013 read with rule 5(1) of the Companies (Appointment and Remuneration of ManagerialPersonnel) Rules 2014 forms part of this report and is appended herewith as Annexure 8to the Boards' report.
The statement containing particulars in terms of Section 197(12) of the Companies Act2013 read with rule 5(2) and 5(3) of the Companies (Appointment and Remuneration ofManagerial Personnel) Rules 2014 forms part of this report.
Considering the first proviso to Section 136(1) of the Companies Act 2013 the AnnualReport excluding the aforesaid information is being sent to the members of the Companyand others entitled thereto. The said information is available for inspection at theregistered office of the Company during business hours on working days of the Company upto the date of the ensuing Annual General Meeting. Any shareholder interested in obtaininga copy thereof may write to the Company Secretary in this regard.
Corporate Social Responsibility (CSR)
At Biocon CSR has been an integral part of our business since its inception. With theincorporation of Biocon Foundation in 2004 the Company formally structured its CSRactivity. Today the Company span its CSR efforts through Biocon Foundation BioconAcademy and some partnership programs with like-minded private organizations andgovernment. The Company promotes social and economic inclusion for the marginalizedcommunities with its integrated system focussing largely in the following areas:
Health Care services: The Company firmly believes that the use of technology can makehealthcare delivery in rural areas more efficient and therefore we have developed anintegrated and holistic healthcare delivery service which seeks to address critical gapsin the delivery of healthcare in rural India. Our efforts are targeted at enabling lastmile reach of preventive and primary health services in rural areas.
Education: While the Company projects address experiential learning in basic mathscomputer skills and language skills of the underserved young people in rural areas italso imparts advanced training necessary and skills required for gainful employment in theBiopharma sector to young graduates through Biocon Academy.
Promote Art & Culture: India has a rich heritage of Art and Culture across the landwhich needs to be preserved and promoted. Our various forms of music and dance style ofpaintings and sculptures have intrigued many across the globe yet a large pool of ourartistes have not gained enough recognition. Biocon Foundation believes in creating aplatform to promote art & culture encourage artists and share this knowledge with themarginalized communities through various initiatives to help them develop a keen sense ofappreciating fine arts.
Safety of women and children: Biocon believes that the safety of women and children isthe collective responsibility of society. The Company provides safe transport for pregnantwomen to come to primary health centres for ante natal check-ups and for childrenattending our "Aata Paata Wadi". It also provides vehicles for the police tosupport their work in managing the safety of citizens.
Gender Equality: Gender Equality and equity is basic human right and your Company workstowards this in all its communities. The Company works towards gender equality byproviding vocational skills and assisting with employment opportunities. The Companycounsel mentor and protect young women at risk from sexual trafficking and assist womenand girls with life skills coaching and employment opportunities.
Rural Development: The Company is working to build townships schools sanitation andwater supply systems that can fulfil the basic needs of underprivileged rural and urbancommunities. The Company has adopted a township in North Karnataka and is also providingsupport infrastructure including a school safe drinking water a health centre andcommunity hall in the village. The Company has installed solar lights rain waterharvesting systems and household and community toilets to enable clean sanitationfacilities for the rural communities.
In compliance with the provisions of Section 135 of the Companies Act 2013 the Boardhas formed a Corporate Social Responsibility Committee which monitors and overseesvarious CSR initiatives and activities of the Company. The CSR Committee comprises of Ms.Mary Harney (Chairperson) Dr. Vijay Kuchroo and Prof. Ravi Mazumdar.
A detailed report regarding Corporate Social Responsibility is appended herewith as Annexure9 to the Boards' report.
Sexual Harassment of Women at Workplace (Prevention Prohibition and Redressal) Act2013
The Company has in place an Anti-Sexual Harassment Policy in line with the requirementsof the Sexual Harassment of Women at Workplace (Prevention Prohibition and Redressal)Act 2013. Internal Complaints Committee (ICC) has been set up to redress complaintsreceived regarding sexual harassment. All employees (permanent contractual temporarytrainees) are covered under this Policy. The Policy is gender neutral. During the yearunder review 7 complaints with allegations of sexual harassment were filed all of whichwere disposed-off as per the provisions of Sexual Harassment of Women at Workplace(Prevention Prohibition and Redressal) Act 2013.
Significant and material orders
There are no significant and material orders passed during the year by the regulatorscourts or tribunals impacting the going concern status and operations in the future.
None of the Directors of your Company are disqualified as per the provisions of Section164(2) of the Companies Act 2013. Your Directors have made necessary disclosures asrequired under various provisions of the Act and SEBI LODR.
Material changes and commitments
No material changes and commitments affecting the financial position of the Companyhave occurred between March 31 2017 and the date of this report.
Change in nature of business
There has been no change in the nature of business of the Company. Your Companycontinues to be a pioneer biopharmaceutical company engaged in manufacturing activepharmaceutical ingredients and formulations including biosimilar drugs for diabeticsoncology and autoimmune diseases with sales in markets across the globe.
Extract of Annual Return
In accordance with the provisions of Section 134(3) (a) of the Companies Act 2013 anextract of the annual return in the prescribed format is appended herewith as Annexure10 to the Board's report.
We place on record our appreciation for the committed services by every member of theBioconfamilygloballywhosecontributionwassignificantto the growth and success of theCompany. We would like to thank all our clients partners vendors investors bankers andother business associates for their continued support and encouragement during the year.
We also thank the Government of India and Malaysia Government of Karnataka Governmentof Telangana Ministry of Information Technology and Biotechnology Ministry of Commerceand Industry Ministry of Finance Department of Scientificand Industrial ResearchMinistry of Corporate Affairs Customs and Excise Departments Income Tax DepartmentCSEZ LTU Bengaluru and all other regulatory agencies for their assistance andco-operation during the year and look forward to their continued support in the future.
| ||For and on behalf of the Board |
|Bengaluru ||Kiran Mazumdar -Shaw |
|April 27 2017 ||Chairperson & Managing Director |