The Directors take pleasure in presenting the 81st Annual Report of the Company alongwith the audited financial statements for the year ended As at 31st March 2017.
Cipla is a leading global pharmaceutical company which uses cutting-edge technology andinnovation to meet the everyday needs of all patients. For over eight decades the Companyhas emerged as one of the most respected pharmaceutical companies in India as well as inover 80 countries. The Company's portfolio includes over 1500 products across a wide rangeof therapeutic categories with one uniform global standard of quality.
Whilst delivering a long-term sustainable business the Company recognises its duty toprovide a3ordable medicines. The Company's pioneering role in HIV/ AIDS treatment in 2001was recognised globally when it became the first pharmaceutical company to offcer a triplecombination anti-retroviral (ARV) therapy in Africa at less than a dollar a day therebyensuring access to lifesaving medicines for millions of patients. The Company's R&Dfocuses on developing innovative products and drug delivery systems.
|Financial Summary and Company A3airs || || || || |
| || || || ||(` in Crore) |
|Year ended 31st Standalone ||March 2016 Consolidated || ||Year ended 31st Standalone ||March 2017 Consolidated |
|12117.72 ||13790.10 ||Gross total revenue ||10974.58 ||14630.24 |
|1743.97 ||1727.03 ||Profit before tax ||1186.94 ||1222.17 |
|1462.30 ||1359.99 ||Profit for the year ||974.94 ||1006.39 |
|(7.00) ||(8.21) ||Other comprehensive Income for the year (not to be reclassified to P&L) ||6.93 ||7.46 |
|5870.61 ||5782.98 ||Surplus brought forward from last balance sheet ||7145.00 ||6953.84 |
|- ||- ||Adjustment of tax on dividend of previous year ||- ||- |
|7325.92 ||7134.76 ||Profit available for appropriation ||8126.87 ||7967.69 |
| || ||Appropriations: || || |
|(160.62) ||(160.62) ||Dividend ||(160.84) ||(160.84) |
|(20.30) ||(20.30) ||Tax on dividend ||(32.74) ||(32.74) |
|7145.00 ||6953.84 ||Surplus carried forward ||7933.29 ||7774.11 |
The details of the Company's operations have been further discussed in detail in theManagement Discussion and Analysis Report.
The Company adopted Indian Accounting Standards (Ind AS') from 1st April 2016 asprescribed under section 133 of the Companies Act 2013 read with the relevant rulesissued thereunder and other accounting principles generally accepted in India. Theadoptions were carried out in accordance with Ind AS 101 First-time Adoption of IndianAccounting Standards
During the year under review 1125792 equity shares were issued and allotted underEmployee Stock Option Schemes. Accordingly the issued share capital of the
Company as on As at 31st March 2017 stood at ` 161.10 crore divided into 805513469equity shares of ` 2/- each. The subscribed and paid-up share capital of the Company as onAs at 31st March 2017 stood at ` 160.90 crore divided into 804510074 equity shares of` 2/- each.
The Board recommend a final dividend of ` 2/- per equity share (i.e. 100%) for the FY2016-17. The dividend if approved at the Annual General Meeting (AGM) will be paid tothose members whose names appear in the Company's Register of Members on Thursday 27thJuly 2017. The total dividend pay-out will amount to approximately
` 161 crore (excluding dividend distribution tax) resulting in a pay-out of 16.50% ofthe standalone profit after tax of the Company.
The Company has not transferred any amount to the General Reserve for the financialyear ended As at 31st March 2017.
Management Discussion and Analysis Report
Pursuant to Regulation 34 of the Securities and Exchange Board of India (ListingObligations and Disclosure Requirements) Regulations 2015 (SEBI Listing Regulations) theManagement Discussion and Analysis Report for the year under review is presented in aseparate section forming part of the Annual Report.
Corporate Social Responsibility (CSR)
Cipla has remained both patient-centred and community-focused. Cipla Foundation upholdsthe OneCipla Credo of Caring for Life' to empower the most vulnerable in society.As a vibrant and thriving global foundation it endeavours to minimise gaps in access anda3ordability in quality healthcare education skill advancement and disaster responseinitiatives. Across geographies Cipla Foundation is united and aligned with Cipla'scommitment and approach to enhance the quality of life.
The Company's CSR Committee complies with the requirements of the Companies Act 2013.The composition and terms of reference of the CSR Committee are provided in the Report onCorporate Governance which forms part of the Annual Report. The Company's CorporateSocial Responsibility Policy is available on the Company's website athttp://www.cipla.com/templates/ home_tpl/images/Corporate_Social_Responsibility_Policy.pdf
The Annual Report on CSR initiatives as required under section 135 of the CompaniesAct 2013 and the Companies (Corporate Social Responsibility Policy) Rules 2014 asamended from time to time forms part of this report as Annexure I.
Business Responsibility Report
As mandated by the Securities and Exchange Board of India (SEBI) the BusinessResponsibility Report (BRR) forms part of the Annual Report. The BRR contains a detailedreport on business responsibilities vis--vis the nine principles of the NationalVoluntary Guidelines on Social Environmental and Economic Responsibilities of Businessframed by the Ministry of Corporate A3airs.
Pursuant to the SEBI Listing Regulations the Report on Corporate Governance for theyear under review is presented in a separate section forming part of the Annual Report.A certificate from M/s. BNP & Associates confirming compliance of conditions ofCorporate Governance as stipulated under the SEBI Listing Regulations is annexed asAnnexure II to this report.
Directors' Responsibility Statement
Pursuant to section 134(3)(c) of the Companies Act 2013 it is confirmed that theDirectors have:
i. Followed applicable accounting standards in the preparation of the annual accountsand there are no material departures for the same;
ii. Selected such accounting policies and applied them consistently and made judgementsand estimates that are reasonable and prudent so as to give a true and fair view of thestate of a3airs of the Company as on As at 31st March 2017 and of the profit of theCompany for that period;
iii. Taken proper and su3cient care for maintenance of adequate accounting records inaccordance with the provisions of the Companies Act 2013 for safeguarding the assets ofthe Company and for preventing and detecting fraud and other irregularities;
iv. Prepared the annual accounts on a going concern basis;
v. Laid down internal financial controls to be followed by the Company and that suchinternal financial controls are adequate and were operating effect ively; and
vi. Devised proper systems to ensure compliance with the provisions of all applicablelaws and that such systems were adequate and operating effect ively.
Conservation of Energy Technology Absorption Foreign Exchange Earnings and Outgo
The details of Energy Conservation Technology Absorption and Foreign Exchange Earningsand Outgo as required under section 134(3)(m) of the Companies Act 2013 read with Rule8(3) of the Companies (Accounts) Rules 2014 is annexed to this report as Annexure III.
Employee Stock Option Scheme
Presently the Company has one Employee Stock Option (ESOP) scheme namely"Employee Stock Option Scheme 2013-A" which helps the Company to retain andattract the right talent. The Nomination and Remuneration Committee monitors the Company'sESOP scheme. There is no change in the ESOP scheme during the financial year under review.The ESOP scheme is in compliance with the Securities and Exchange Board of India (ShareBased Employee Benefits) Regulations 2014.
As required under the Securities and Exchange Board of India (Share Based EmployeeBenefits) Regulations 2014 the applicable disclosures as on As at 31st March 2017 areavailable on the Company's website at http://www.cipla.com/en/investor-information/shareholder-information.html
Details of remuneration as required under section 197(12) of the Companies Act 2013read with Rule 5(1) of the Companies (Appointment and Remuneration of ManagerialPersonnel) Rules 2014 is annexed as Annexure IV.
Particulars of employee remuneration as required under section 197(12) of the CompaniesAct 2013 read with Rule 5(2) and Rule 5(3) of the Companies (Appointment and Remunerationof Managerial Personnel) Rules 2014 formspartofthisreport.Howeverpursuanttotheprovisionsofthe first proviso to section 136(1) ofthe Companies Act 2013 the Annual Report is being sent to shareholders excluding theaforementioned information. The information will be available on the Company's websitewww.cipla.com and is available for inspection at the registered Offce of the Companyduring working hours 21 days before the Annual General Meeting. Any member interested inobtaining such information may write to the Company Secretary at the Registered Offce ofthe Company.
Particulars of Loans Guarantees and Investments
Particulars of loans guarantees and investments under section 186 of the CompaniesAct 2013 are provided in Note No. 48 to the standalone financial statements.
Extract of Annual Return
As required under sections 92(3) and 134(3)(a) of the Companies Act 2013 read withRule 12 of Companies (Management and Administration) Rules 2014 the extract of AnnualReturn in Form MGT-9 forms part of this report as Annexure V.
Secretarial Audit Report
The Board had appointed M/s. BNP & Associates Company Secretaries Mumbai as theSecretarial Auditor for FY 2016-17. The Secretarial Audit Report for the financial yearended As at 31st March 2017 is annexed to this report as Annexure VI. The reportconfirms that the Company is in compliance with the applicable laws and does not containany qualification reservation or adverse remark.
The Company believes in upholding professional integrity and ethical behaviour in theconduct of its business. To uphold and promote these standards the Company has formulateda Vigil Policy which serves as a mechanism for its Directors and employees to reportgenuine concerns about unethical behaviour actual or suspected fraud or violation of theCode of Conduct without fear of reprisal. The details of the Vigil Policy are available onthe Company's website at http://www.cipla.com/templates/ home_tpl/images/Vigil_Policy.pdf
A brief note on the highlights of the Vigil Policy and compliance with the Code ofConduct is also provided in the Report on Corporate Governance which forms part of thisAnnual Report.
Contract and Arrangements with Related Parties
A detailed note on procedure adopted by the Company in dealing with contracts andarrangements with related parties is provided in the Report on Corporate Governance whichforms part of this Annual Report.
All contracts arrangements and transactions entered by the Company with relatedparties during FY 2016-17 were in the ordinary course of business and on an arm's lengthbasis. During the year the Company did not enter into any transaction contract orarrangement with related parties that could be considered material in accordance with theCompany's policy on related party transactions. Accordingly the disclosure of relatedparty transactions in Form AOC-2 is not applicable. However detailed disclosure on relatedparty transactions as per IND AS-24 containing name of the related party and details ofthe transactions have been provided under Note No. 45 of the standalone financialstatements on Page No. 150.
The policy on materiality of and dealing with Related Party transactions is availableon the Company's website at http://www.cipla.com/uploads/investor/1443000127_Policy-on-Related-Party-Transactions.pdf
Material changes and commitments affect ing financial position between end of financialyear and date of report
No material changes and commitments have occurred after the close of the year till thedate of this report which may affect the financial position of the Company.
Significant and Material Orders
No significant or material orders were passed by the regulators or courts or tribunalswhich could impact the going concern status of the Company and its future operations.
Internal Financial Controls
The Board has adopted policies and procedures for ensuring orderly and e3cient conductof its business including adherence to the Company's policies safeguarding its assetsprevention and detection of frauds and errors accuracy and completeness of the accountingrecords and timely preparation of reliable financial disclosures.
Cipla has aligned its current systems of internal financial control with therequirement of Companies Act 2013 on lines of globally accepted risk-based framework asissued by the Committee of Sponsoring Organizations (COSO) of the Treadway Commission. TheInternal Control Integrated Framework (2013) is intended to increase transparencyand accountability in an organisation's process of designing and implementing a system ofinternal control. The framework requires a company to identify and analyse risks andmanage appropriate responses. The Company has successfully laid down the framework andensured its effect iveness. During testing of such controls no reportable materialweaknesses in the design or operation were observed.
During the year under review there were no instances of fraud reported by the auditorsunder section 143(12) of the Companies Act 2013 to the Audit Committee or the Board ofDirectors.
Risk Management is embedded in Cipla's operating framework. The Company has a dulyapproved Risk Management Policy which lays down broad guidelines for the appropriateauthority to identify assess categorise and prioritise risks in a timely manner andformulate plans for mitigation of such risks.
The Risk Management framework is reviewed periodically by the Board and the Investment& Risk Management Committee which includes discussing the overall risk managementframework key risks mitigation plans etc with the Management. The Internal Auditfunction is responsible for assisting the Investment & Risk Management Committee on anindependent basis with a full status of the risk assessments and management.Operationally management process to identify key risks across the organisation andprioritise relevant action plans to mitigate these risks.
Detailed discussion on Risk Management is part of the Threats Risks andConcerns' section of the Management Discussion and Analysis which forms part of thisAnnual Report. At present in the opinion of the Board of Directors there are no riskswhich may threaten the existence of the Company. However the top risks and theirmitigation plans are set out in the Management Discussion and Analysis Report.
During FY 2016-17 the Company did not accept any deposit within the meaning ofsections 73 and 74 of the Companies Act 2013 read together with the Companies (Acceptanceof Deposits) Rules 2014 and therefore no amount of principal or interest was outstandingas on the balance sheet closure date.
Pursuant to the provisions of the Companies Act 2013 and the SEBI Listing Regulationsthe Board has carried out an annual performance evaluation of its own performance theDirectors individually and that of its Committees. A detailed disclosure on the manner ofthe Board evaluation undertaken by the Board has been provided in the Corporate GovernanceReport.
Subsidiaries Associates and Joint Ventures
The Company had 54 subsidiaries joint ventures and associates as on As at 31st March2017. Details of these subsidiaries joint ventures and associates are set out on Page 270of the Annual Report. Pursuant to section 129(3) of the Companies Act 2013 read with Rule5 of the Companies (Accounts) Rules 2014 a statement containing salient features of thefinancial statement of the subsidiary associate and joint venture companies is given onPage 270 of the Annual Report. The statement also provides details of the performance andthe financial position of each of the subsidiaries joint ventures and associates. Theconsolidated financial statements presented in this Annual Report include financialresults of the subsidiary companies.
During FY 2016-17 Cipla BioTec South Africa (Pty) Limited and CIPLA Algrie becamesubsidiaries of the Company and Four M Propack Pvt. Ltd. Cipla Canada Inc. andCipla Medpro Research and Development Proprietary Ltd. ceased to be subsidiaries of theCompany.
There was no change in the joint venture / associate companies during FY 2016-17.
Copies of the financial statement of the subsidiary companies will be available on theCompany's website www.cipla.com and will also be available for inspection by any member atthe registered Offce of the Company during business hours. Copies of the said financialstatements will be made available to any member of the Company and those of the respectivesubsidiary companies upon request.
The Policy for Determining Material Subsidiaries is available on the Company's websiteat http://www.cipla.com/ uploads/investor/1443000071_Policy-for-determining-Material-Subsidiaries.pdf
Directors and Key Managerial Personnel
Ms. Samina Vaziralli was elevated to the position of Executive Vice-Chairperson by theBoard w.e.f. 1st September 2016. In view of the change in her role and responsibilitiesthe Board on the recommendation of the Nomination and Remuneration Committee and subjectto the approval of the shareholders had approved revision to the terms of her appointmentincluding remuneration structure. The Board recommends the revision in the terms ofappointment of Ms. Samina Vaziralli including remuneration structure for approval ofshareholders.
During the year Mr. Subhanu Saxena resigned as Managing Director and Global ChiefExecutive Offcer w.e.f. close of business hours on 31st August 2016. Mr. Umang Vohrarelinquished Offce as Global Chief Financial Offcer w.e.f. 1st August 2016 and wasappointed as Managing Director and Global Chief Executive Offcer w.e.f. 1st September2016.
Ms. Ireena Vittal and Mr. Peter Lankau were appointed as Additional Directors of theCompany to hold Offce as Independent Directors with effect from 1st December 2016 and10th January 2017 respectively. They hold Offce up to the date of the ensuing AGM. TheCompany has received requisite notice from a member proposing the appointment of Ms.Ireena Vittal and Mr. Peter Lankau as Independent Directors of the Company for a period offive years with effect from the date of their respective appointment. Mr. S. Radhakrishnanretires by rotation and being eligible offcer s himself for re-appointment. The Boardrecommends the appointment of Ms. Ireena Vittal and Mr. Peter Lankau as IndependentDirectors and re-appointment of Mr. S. Radhakrishnan as Director liable to retire byrotation.
A brief resume of the Directors seeking appointment/ re-appointment is providedin the Notice of AGM.
Mr. Kedar Upadhye was appointed as Global Chief Financial Offcer w.e.f. 1st August2016. Mr. Mital Sanghvi relinquished Offce as Company Secretary w.e.f. 9thFebruary 2017 as part of the planned transition and has now moved into a senior businessfinance role in the Company. Mr. Rajendra Chopra was appointed as Company Secretary w.e.f.9th February 2017.
The criteria for determining qualification positive attributes and independence of aDirector have been set out as Annexure VII.
The Remuneration Policy has been disclosed in the Report on Corporate Governance.
Declaration by Independent Directors
All Independent Directors of the Company have submitted requisite declarationsconfirming that they continue to meet the criteria of independence as prescribed undersection 149(6) of the Companies Act 2013 and Regulation 16(1)(b) of the SEBI ListingRegulations. The Independent Directors have also confirmed that they have complied withthe Company's Code of Conduct.
Neither the Managing Director nor the Whole-time Directors received any remunerationor commission from any of the Company's subsidiaries during the previous year.
Committees of Board Number of Meetings of the Board and Board Committees
The Board currently has six committees namely Audit Committee Nomination andRemuneration Committee Corporate Social Responsibility Committee StakeholdersRelationshipCommitteeInvestmentandRiskManagement Committee and Securities IssuanceCommittee. All the recommendations made by the Committees of Board including the AuditCommittee were accepted by the Board.
During the year under review the Board met seven times. A detailed update on theBoard its composition detailed charter including terms of reference of various BoardCommittees number of Board and Committee meetings held during FY 2016-17 and attendanceof the Directors at each meeting is provided in the Report on Corporate Governance whichforms part of this report.
Pursuant to the provisions of section 148 of the Companies Act 2013 Mr. D. H. Zaveripractising Cost Accountant (Fellow Membership No. 8971) has been re-appointed to conductthe audit of Company's cost records for the financial year ended As at 31st March 2017.Pursuant to section 148(6) of the Companies Act 2013 and Rule 6(6) of the Companies (CostRecords and Audit) Rules 2014 the Cost Audit Report for the year ended As at 31stMarch 2016 was filed with the Central Government within the prescribed time.
In accordance with the provisions of section 148 of the Companies Act 2013 read withthe Companies (Audit and Auditors) Rules 2014 since the remuneration payable to the CostAuditors for FY 2017-18 is required to be ratified by the shareholders the Boardrecommends the same for approval by shareholders at the ensuing AGM.
Walker Chandiok & Co LLP Chartered Accountants was appointed as the StatutoryAuditor of your Company at the last AGM held on 28th September 2016 to hold the Offcetill the conclusion of 85th AGM. As per the provisions of section 139 of the CompaniesAct 2013 the appointment of Statutory Auditor is to be ratified by members at every AGM.The Company has received a certificate from the Statutory Auditor confirming thatratification of their appointment if made will be in accordance with the provisions ofsection 141 of the Companies Act 2013. The Board recommends the ratification of theappointment of Walker Chandiok & Co LLP Chartered Accountants as the StatutoryAuditor of the Company.
The Auditor's Report for FY 2016-17 does not contain any qualification reservation oradverse remark.
The Board wishes to place on record its appreciation to government authorities banksbusiness partners shareholders medical practitioners and other stakeholders for theassistance co-operation and encouragement extended to the Company. The Board would alsolike to place on record its deep sense of appreciation to the employees for theircontribution and services.
|On behalf of the Board |
|Y. K. Hamied |
|Date: 25th May 2017 |
|Place: Mumbai |