Your Directors have pleasure in placing before you the Twenty Sixth Annual Report ofthe Company together with the Audited Accounts for the year ended 31st March 2016.
The Company's financial performance for the year ended 31st March 2016 is summarizedbelow:
| || |
(Rs In Lakhs)
|Particulars || |
| ||2015-16 ||2014-15 ||2015-16 ||2014-15 |
|Total Revenues ||381573.13 ||312684.97 ||386119.74 ||315963.69 |
|Total Expenditure ||232347.19 ||192195.68 ||236260.70 ||194969.62 |
|Profit before depreciation interest and tax (PBDIT) ||149225.94 ||120489.29 ||149859.04 ||120994.07 |
|Depreciation ||11810.20 ||13585.22 ||11818.13 ||13599.84 |
|Finance Cost ||231.95 ||186.45 ||231.95 ||186.45 |
|Profit before Tax (PBT) ||137183.79 ||106717.62 ||137808.96 ||107207.78 |
|Provision for Tax ||26414.48 ||22012.09 ||26624.18 ||22055.60 |
|Profit after Tax (PAT) ||110769.31 ||84705.53 ||111184.78 ||85152.18 |
|Earnings per Share (EPS) Basic & Diluted (') ||41.73 ||31.91* ||41.88 ||32.08* |
RESULTS OF OPERATIONS
Revenues for the year increased by 22% to Rs 381573.13 lakhs.
Operating profit (PBDIT) for the year increased by 24% at' 149225.94 lakhs.
Profit before Tax(PBT) for the year amounted to Rs 137183.79 lakhs as against aPBT of Rs 106717.62 lakhs for the last year.
Tax Provision forthe current year amounted to Rs 24739.18 lakhs (net of MATcredit entitlement of Rs 3612.44 lakhs).
An amount of 1675.30 lakhs has been provided towards Deferred Tax Liability forthe year as against Rs 1077.96 lakhs during the previous year.
Profit after Tax (PAT) for the year amounted to Rs 110769.31 lakhs reflecting agrowth of31%.
Earnings Per Share of 2/- each works out to Rs 41.73 for the year as against Rs31.91 last year.
Out of the total revenue 32% came from North America 43% from Europe 11% fromAsia 12% from India and 2% from rest of the World.
Our total revenues on consolidated basis increased to Rs 386119.74 lakhs from Rs315963.69 lakhs in the previous year reflecting a growth of 22%.
The operating profit before depreciation finance charges and tax (PBDIT) amounted toRs 149859.04 lakhs as against Rs 120994.07 lakhs in the previous year. Profit after Taxfor the year accounted to Rs 111184.78 lakhs as against Rs 85152.18 lakhs in the previousyear.
Our subsidiaries viz. M/s. Divis Laboratories (USA) Inc. in USA and M/s. Divi'sLaboratories Europe AG in Switzerland are engaged in marketing/distribution ofnutraceutical products and to provide a greater reach to customers within these regions.
During the year the subsidiaries have achieved aggregate turnover of Rs 18856.54 lakhsas against previous year turnover of Rs 16835.44 lakhs reflecting a growth of12% for thenutraceutical products in North America and Europe.
Brief of financial results of the subsidiaries as per Indian GAAP are as under:
|Particulars || |
| || |
|Year ended ||31-03-16 ||31-03-15 ||31-03-16 ||31-03-15 |
|Turnover ||9714.25 ||10002.58 ||9142.29 ||6832.86 |
|Operating Profit ||1842.49 ||1367.93 ||2702.35 ||2465.75 |
|Profit / (Loss )before taxation ||99.99 ||(111.91) ||525.18 ||602.07 |
|Provision for taxation ||209.70 ||43.51 ||0 ||0 |
|Profit / ( Loss) after taxation ||(109.71) ||(155.42) ||525.18 ||602.07 |
Subsidiaries have achieved growth in operating profit. Loss on forex currencytranslation for the year accounted to Rs 482.41 Lakhs for US subsidiary and Rs 474.54Lakhs for Europe subsidiary. With the significant efforts having been made in stabilizingoperations market reach and qualifications from several customers the company isconfident of achieving profitability at the subsidiaries and recovery of theinvestments/advances made in the foreseeable future.
As per section 129(3) of the Companies Act 2013 read with Companies (Accounts) Rules2014 statement containing the salient features of the financial statement of Company'ssubsidiaries in form AOC-1 is annexed herewith as "Annexure I". Moreoverpursuant to provisions of Section 136(1) of the Companies Act 2013 audited financialstatements of the subsidiary companies are placed on the website of the company at www.divislaboratories.com. Shareholders whowish to have a copy of the full report and accounts of the subsidiaries will be providedthe same on receipt of written request from them. These documents will be available forinspection at the Registered Office of the Company on any working day during businesshours.
The Consolidated Financial Statements presented by the Company include the financialresults of its subsidiary companies.
As stipulated in the listing regulations and Companies Act 2013 the consolidatedfinancial statements have been prepared by the Company in accordance with the relevantaccounting standards. The audited consolidated financial statements together with AuditorsReport thereon form part of the Annual report.
The Company has allotted equity shares of face value of Rs 2/- each as bonus shares inSeptember 2015 to the shareholders of the company in the proportion of 1:1 andconsequently the paid-up share capital of the Company increased from 132734290 to265468580 equity shares.
Board of Directors of the Company at its meeting held on 10th March 2016 have declaredand paid an interim dividend of Rs 10/- per equity share of Rs 2/- each for the year2015-16.
The total dividend payout for the current year amounts to Rs 31951.17 lakhs (inclusiveof tax of Rs 5404.31 lakhs) as against Rs 31951.17 lakhs in the previous year. Dividend(including dividend tax) as a percentage of profits is 29%.
Board of Directors now recommends the interim dividend as final dividend for thefinancial year 2015-16 for approval and ratification by the members.
TRANSFER TO GENERAL RESERVES
We propose to transfer an amount of Rs 10000 lakhs to General Reserve for the financialyear ended 31st March 2016.
Your Directors wish to inform that the Company has not accepted any deposits frompublic covered by provisions of Section 73 of the Companies Act 2013.
LOANS GUARANTEES OR INVESTMENTS
During the year the company has not given any loans or guarantees covered under theprovisions of Section 186 of the Companies Act 2013.
The details of investments made by company are given in the notes to the financialstatements.
RELATED PARTY TRANSACTIONS
There are no materially significant related party transactions made by the company withPromoters Key Managerial Personnel or other designated persons which may have potentiaialconflict with interest of the company at large. As a matter of policy your Companycarries out transactions with related parties on an arms' length basis. Statement of thesetransactions is given in other explanatory information attached in compliance ofAccounting Standard No.AS-18.
MANAGEMENT DISCUSSION AND ANALYSIS
In terms of provisions of regulation 34(2) of SEBI (Listing Obligations and DisclosureRequirements) Regulations 2015 report on Management Discussion & Analysis for theyear under review is provided in a separate section forming part of this Annual Report.
MATERIAL CHANGES AND COMMITMENTS
No material changes and commitments have occurred after the close of the year till thedate of this Report which affect the financial position of the company. Further there isno change in the nature of Business of the Company.
INTERNAL FINANCIAL CONTROLS
The Company has in place adequate internal financial controls with reference tofinancial statements. It has adopted necessary policies and procedures for ensuring theorderly and efficient conduct of its business including adherence to company's policiesthe safeguarding of its assets the prevention and detection of frauds and errors theaccuracy and completeness of the accounting records and the timely preparation ofreliable financial information.
During the year such controls were tested and no reportable material weakness in thedesign or operation was observed.
The company has an enterprise-wide approach to risk management which lays emphasis onidentifying and managing key operational and strategic risks. Through this approach thecompany strives to identify opportunities that enhance organisational values whilemanaging or mitigating risks that can adversely impact its future performance. The companyhas been addressing various risks impacting the company and the policy of the company onrisk management is provided elsewhere in this annual report in Management Discussion andAnalysis.
The risk management committee constituted by the Company constantly evaluates variousrisks - business customer concentration supplier concentration regulatory compliancesconfidentiality of processes consistency of cGMP practices environment employee healthand safety etc. monitoring the risks and deploy appropriate control systems aimed atmitigating such risks to the extent possible.
DIRECTORS RESPONSIBILITY STATEMENT
As required under Section 134 (5) of the Companies Act 2013
Directors of your company hereby state and confirm that:
a) the applicable accounting standards have been followed in the preparation of theannual accounts;
b) the accounting policies selected were applied consistently and the judgements andestimates made are reasonable and prudent so as to give a true and fair view of the stateof affairs of the Company as at 31st March 2016 and its profit for the year ended on thatdate;
c) proper and sufficient care has been taken for the maintenance of adequate accountingrecords in accordance with the provisions of the Act for safeguarding the assets of theCompany and for preventing and detecting fraud and other irregularities;
d) the annual accounts have been prepared on a going concern basis.
e) internal financial controls have been laid down and such controls are adequate andoperating effectively;
f) proper systems have been laid down to ensure compliance with the provisions of allapplicable laws and such systems are adequate and operating effectively.
NUMBER OF MEETINGS OF BOARD OF DIRECTORS
The Board meets at least four times in a year at quarterly intervals and morefrequently if deemed necessary to transact its business. During the financial year theBoard has met five times i.e. on 23rd May 2015 8th August 2015 31st October 2015 5thFebruary 2016 and 10th March 2016.
DIRECTORS AND KEY MANAGERIAL PERSONNEL
As per the provisions of the Companies Act 2013 Mr. Madhusudana Rao Divi Director -Projects will retire by rotation at the ensuing Annual General Meeting and beingeligible offers himself for reappointment.
DECLARATION BY INDEPENDENT DIRECTORS
The company has obtained declaration from all independent directors of the companyunder section 149(7) of the Companies Act 2013 confirming that they meet the criteria ofindependence as provided in Section 149(6) of the Companies Act 2013 and regulation 25 ofSEBI (Listing Obligations and Disclosure Requirements) Regulations 2015.
As per the provisions of the Companies Act 2013 and SEBI (Listing Obligations andDisclosure Requirements) Regulations 2015 the Nomination and Remuneration Committee laiddown criteria for performance evaluation of individual directors the board and itscommittees. Accordingly an annual evaluation was carried out for the Board's performanceits Committees and individual directors.
Board performance evaluation is carried out through a structured questionnaire whichprovides a powerful and valuable feedback for improving Board effectiveness maximisingstrengths and highlighting areas for further development.
The following are some of the broad issues that are considered in performanceevaluation:
Criteria for evaluation of Board and its Committees:
> Ability to act on a fully informed basis in good faith with due diligence andcare and in the best interest of the company and the shareholders.
> Optimum combination of knowledge skill experience and diversity on the Board aswell its Committees.
> Relationships and effective communication among the Board members.
> Effectiveness of individual non-executive and executive directors and Committeesof Board.
> Quality of the discussions general information provided on the company and itsperformance papers and presentations to the Board.
> Stakeholders' engagement.
> Risk and Crisis management as well processes for identifying and reviewing risks.
> Well- defined mandate and terms of reference of Committee.
Criteria for evaluation of Individual Directors:
> Attendance at Board as well as Committee Meetings
> Procurement of Information preparation for Board Meetings and value ofcontribution at meetings
> Relationships with fellow Board members the company secretary and seniormanagement and mutual trust and respect they stimulated within the Board.
> Keeping update with the latest developments in the areas of governance andfinancial reporting
Additionally Independent directors are expected to provide an effective monitoringrole and to provide help and advice for the executive directors. In evaluating independentDirectors it is necessary to address the following aspects as well:
> Willingness to devote time and effort to understand the company and its business
> Providing necessary guidance using their knowledge and experience in developmentof corporate strategy major plans of action risk policy and setting performanceobjectives.
> Independence exercised in taking decisions listening to views of others andmaintaining their views with resolute attitude
> Ability in assisting the Company in implementing the best corporate governancepractices.
> Capability in exercising independent judgement to tasks where there is a potentialfor conflict of interest.
> Commitment in fulfilling the director's obligations fiduciary responsibilities.
POLICY ON DIRECTORS APPOINTMENT AND REMUNERATION
The Policy on appointment and remuneration of Directors Key Managerial Persons andSenior Management including criteria for determining qualifications positive attributesand director's independence as required under section 178(3) of the Companies Act 2013and Regulation 19 read with schedule II Part D of SEBI (LODR) Regulations 2015 is annexedherewith as "Annexure II".
REMUNERATION DETAILS OF DIRECTORS AND KMP
Particulars required to be furnished under Rule 5(1) of the Companies (Appointment andRemuneration of Managerial Personnel) Rules 2014 are given in "Annexure - III"and forms part of this Report.
PARTICULARS OF EMPLOYEES
Particulars of employees required to be furnished under Rule 5(2) and 5(3) of theCompanies (Appointment and Remuneration of Managerial Personnel) Rules 2014 are given in"Annexure - IV" and forms part of this Report.
CORPORATE SOCIAL RESPONSIBILITY
The Board of Directors has constituted Corporate Social Responsibility Committee (CSRCommittee) consisting of members Mr. R. Ranga Rao (Chairman) Dr. Murali K. Divi Mr. N.V. Ramana and Mr. Madhusudana Rao Divi.
Corporate Social Responsibility Policy (CSR Policy) indicating the activities to beundertaken by the Company was adopted by the Board on the recommendation of the CSRCommittee.
Report on Corporate Social Responsibility as Per Rule 8 of Companies (Corporate SocialResponsibility Policy) Rules 2014 is prepared and the same is enclosed as "Annexure- V" to this Report.
BUSINESS RESPONSIBILITY REPORT
Pursuant to regulation 34(2)(f) of SEBI (LODR) Regulations 2015 the annual reportshall contain a Business Responsibility Report (BRR) describing the initiatives taken bythe Company from an environmental social and governance perspective. BRR has beendesigned as a tool to help companies understand the principles and core elements ofresponsible business practices and start implementing improvements which refiecttheiradoption in the manner the company undertakes its business. In compliance with theregulation we have provided the BRR as part of our Annual Report
CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS & OUTGO
Particulars required under Section 134 (3) (m) of the Companies Act 2013 read withRule 8(3) of the Companies (Accounts) Rules 2014 is given in the "Annexure -VI" to this report.
The primary objective of the Audit Committee of the company is to monitor and provideeffective supervision of the management's financial reporting process with a view toensure accurate timely and proper disclosures and transparency integrity and quality offinancial reporting. Composition of the Audit Committee is as follows:
|Name ||Category ||Designation |
|Mr. K. V. K. Seshavataram ||Independent Director ||Chairman |
|Dr. G. Suresh Kumar ||Independent Director ||Member |
|Mr. R. Ranga Rao ||Independent Director ||Member |
The Company has established a vigil mechanism and accordingly formulated a WhistleBlower Policy to provide mechanism for directors and employees of the company to reporttheir concerns about unethical behaviour actual or suspected fraud or violation of thecompany's code of conduct or ethics policy and disclosed the details of establishment ofsuch mechanism on its website.
This mechanism also provides for adequate safeguards against victimization ofdirector(s) / employee(s) who avail of the mechanism and also provide for direct access tothe Chairman of the Audit Committee in exceptional cases. The Whistle Blower Policy may beaccessed on the Company's website at the link: http://www.divislabs.com
At the Annual General Meeting held on 25th August 2014 M/s. P.V.R.K. Nageswara Rao& Co. Chartered Accountants Hyderabad (Firm's Regn. No 002283S) were appointed asstatutory auditors of the Company to hold office for three consecutive years till theconclusion of the 27th Annual General Meeting. In terms of first proviso to Section 139 ofthe Companies Act 2013 the appointment of the auditors shall be placed for ratificationat every Annual General Meeting.
Accordingly the appointment of M/s. P.V.R.K. Nageswara Rao & Co. CharteredAccountants as statutory auditors of the company is placed for ratification byshareholders.
The Auditor's Report for the financial year 2015-16 does not contain any qualificationreservation adverse remark or disclaimer.
Pursuant to provisions of section 204 of the Companies Act 2013 and the Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 the Board of Directorsof the Company has appointed Mr. V. Bhaskara Rao Company Secretary in practice (PCSRegistration No. 4182) as the Secretarial Auditor of the Company to conduct theSecretarial audit for the financial year 2015-16.
The Secretarial Audit report for the financial year 2015-16 is annexed herewith as"Annexure VII". The Secretarial Audit Report does not contain any qualificationreservation adverse remark or disclaimer..
Pursuant to the Section 148 of the Act and rule 3 of the Companies (Cost Records andAudit) Rules 2014 as amended the company maintains cost records in its books of account.As per Rule 4 of the said rules the requirement for cost audit is not applicable to acompany which is covered under rule 3 and whose revenue from exports in foreignexchange exceeds seventy five per cent of its total revenue or which is operating from aspecial economic zone. However company has voluntarily opted for audit of cost recordsand appointed M/s. E.V.S & Associates Cost Accountants as cost auditors.
CORPORATE GOVERNANCE REPORT
The report on Corporate Governance as per regulation 34(3) read with Schedule V of theSEBI (LODR) Regulations 2015 is included as a part of this Annual Report. The requisitecertificate from the Practicing Company Secretary Mr. V. Bhaskara Rao confirming thecompliance with the conditions of Corporate Governance is attached to the report onCorporate Governance.
EXTRACT OF ANNUAL RETURN
An Extract of Annual Return in Form MGT-9 as per the provisions of Section 92 of theCompanies Act 2013 and Rule 12 of Companies (Management and Administration) Rules 2014is enclosed as "Annexure VIII" to this report.
No company has become or ceased to be its Subsidiary joint venture or associatecompany during the year
No significant and material orders were passed by the regulators or courts ortribunals impacting the going concern status and company's operations in future.
No cases were filed pursuant to the Sexual Harassment of Women at Work Place(Prevention Prohibition and Redressal) Act 2013 during the year under review.
The Board expresses its grateful appreciation for the continued assistance andco-operation received from Government authorities financial institutions bankscustomers suppliers and investors.
The Board also wishes to place on record its appreciation for the dedication andcommitment extended by its employees at all levels and their contribution towards thegrowth and progress of the company.
| ||For and on behalf of the Board |
|Hyderabad ||Dr. Murali K. Divi |
|28.05.2016 ||Chairman & Managing Director |
| ||(DIN: 00005040) |