Your Directors are pleased to present 25th Annual Report and theCompanys audited financial statements for the financial year ended March 31 2016.
The Companys financial performance both standalone and consolidated for theyear ended March 31 2016 is summarised below:
| || || || ||(Rs. In Lakhs) |
|Particulars ||Standalone ||Consolidated |
| ||Year ended March 31 2016 ||Year ended March 31 2015 ||Year ended March 31 2016 ||Year ended March 31 2015 |
|Revenue from operations ||132849.38 ||121487.25 ||143118.43 ||129368.14 |
|Other income ||628.70 ||140.20 ||602.56 ||358.40 |
|Total income ||133478.08 ||121627.45 ||143720.99 ||129726.55 |
|EBITDA ||27572.58 ||21274.75 ||28439.44 ||21295.73 |
|Less: Finance costs ||3666.34 ||3092.94 ||3991.94 ||3234.60 |
|Less: Depreciation ||5824.71 ||4955.87 ||6432.99 ||5265.10 |
|Profit before tax ||18081.53 ||13225.94 ||18014.51 ||12796.04 |
|Less: Tax expenses ||5985.09 ||3703.30 ||6167.75 ||3705.26 |
|Net profit after tax ||12096.44 ||9522.64 ||11846.76 ||9090.78 |
|Less: Adjustment pursuant to amalgamation ||- ||(601.51) ||- ||(430.60) |
|Less: Net book value of the assets whose remaining useful life is NIL at the beginning of the year in terms of provisions of Companies Act 2013 ||- ||(17.00) ||- ||(17.00) |
|Add: Surplus brought forward from previous Year ||7200.74 ||9528.92 ||6615.16 ||9204.30 |
|Surplus available ||19297.18 ||18433.05 ||18461.92 ||17847.47 |
|Appropriations made to surplus: || || || || |
|Interim dividend ||928.94 ||- ||928.94 ||- |
|Proposed final dividend ||433.42 ||1021.26 ||433.42 ||1021.26 |
|Dividend distribution tax (on interim dividend and proposed final dividend) ||277.35 ||207.90 ||277.35 ||207.90 |
|Dividend of previous years (including dividend distribution tax) ||3.07 ||3.15 ||3.07 ||3.15 |
|Transfer to general reserve ||- ||10000.00 ||- ||10000.00 |
|Balance carried to Balance Sheet ||17654.40 ||7200.74 ||16819.15 ||6615.16 |
Review Of Operations:
The Companys Standalone revenues from operations were RS. 132849.38 Lakhs forthe FY 2015-16 as compared to RS. 121487.25 Lakhs for the previous year registeringgrowth of 9.35% in the current financial year. The Company has made Net Profit of RS.12096.44 Lakhs on standalone basis for the year under review as compared to H9522.64Lakhs for the previous year registering a growth of 27.03% in the current financial year.
The primary growth driver in FY 2015-16 was led by change in product mix. On astandalone basis the Active Pharmaceutical Ingredients (API) business contributed thelargest share of revenue at 37% while Pharmaceutical Finished Intermediates (PFI) andFinished Dosages contributed 29% and 34% respectively. This is compared to 40% 25% and35% for API PFI and Finished Dosages respectively in FY 2014-15. The profitabilityoutpaced revenue growth due to several reasons. Our continuous efforts on operationalexcellence process innovation yield improvement and lower raw material cost of some ofthe key starting materials resulted improved earnings.
During the year under review two of our facilities located in Vizag and Jeedimetlahave completed US FDA inspection. There were no observations for the Vizag facility andthree observations for the Jeedimetla facility. We have responded to the US FDA within thestipulated time and we believe that these issues will be resolved in the near future.During the year the US FDA had approved Ibuprofen Rx ANDA filed by us for 400 mg 600 mgand 800 mg tablets. This will further strengthen our core base business and enable us toincrease our product offering to our customers in the United States. The managementbelieves that the profitability margins from the operations are sustainable and it willcontinue to strengthen its leadership position through dedicated research and introductionof new products.
Vertical integration has always been our strength and focus area. We will continue ourfocus on our core business and strengthen it by enhancing our capacities improving ourefficiencies adding new products moving up in the value chain and most importantlyoffering better services to our customers. The Company will continue to solidify itsbusiness model and build systems that are sustainable as it continue to scale-up.
During the financial year 2015-16 the Company enhanced Paracetamol API capacity atBonthapally plant by 3000 metric tonnes per annum. The Company is further adding 3600tonnes of PFI capacity at Gagillapur facility. The Company is also enhancing Metformin andGuaifenesin API capacity at Bonthapally plant by 7000 and 2000 tons per annumrespectively.
The Board of Directors has recommended a final dividend of 20 paisa per equityshare(Face value RS. 1/- per equity share) for the FY 2015-16amounting to H433.42 Lakhs.This is in addition to the interim dividend of 45 paisa per equity share paid during theyear. The total dividend for the FY 2015-16 aggregates 65 paisa per equity share amountingto RS. 1362.36 Lakhs as compared to 50 paisa per equity share paid in the previous year.Dividend distribution tax is H277.35 Lakhs for the FY 2015-16 on interim and proposedfinal dividend.
Transfer Of Amount To Reserves:
The Board has not recommended any transfer to general reserve from the profits of theyear under review.
The Authorized Share Capital of the Company is 345000000 equity shares of RS.1/- each. The Company has allotted 11350230 equity shares of RS. 1/- each to thepromoters upon exercise of an equal number of warrants vested in them pursuant to theapproval of the members obtained during the financial year 2015-16. The Company has alsoallotted 1110000 equity shares of RS. 1/- each upon exercise of an equal number of stockoptions pursuant to the extant Stock Option Scheme of the Company.
In view of the above allotments the outstanding shares of the company increased from204251540 equity shares of RS. 1/- each to 216711770 equity shares of RS. 1/- each.
Transfer To The Investor Education & Protection Fund (IEPF):
According to Section 205C of the Companies Act 1956 read with Investor Education andProtection Fund (Awareness and Protection of Investors) Rules 2001 the unclaimeddividend amounting to H282878/- (rupees two lakh eighty two thousand eight hundred andseventy eight only) for the financial year 2007-08 was transferred to the
Investor Education and Protection Fund established by the Central Government during theyear under review.
Managements Discussion and Analysis Report:
Managements Discussion and Analysis Report for the year under review asstipulated under regulation 34(2) of the Listing Regulations is presented in a separatesection forming part of the Annual Report.
Subsidiaries Joint Ventures and Associate Companies:
No company has become/ceased to be a subsidiary or joint venture or associate duringthe financial year 2015-16.
The developments in business operations / performance of subsidiaries consolidated withthe Company are as below:
Granules USA Inc. a wholly-owned foreign Subsidiary of your company caters to therequirements of customers in the U.S market. The Share Capital of the Company as on March31 2016 is RS. 116.31 Lakhs.
During the FY 2015-16 the Company achieved a turnover of H29828.82 Lakhs against theturnover of RS. 17774.91 Lakhs of FY 2014-15 and the profit after tax is RS. 168.67 Lakhsagainst H(40.82) Lakhs of FY 2014-15.
The Company has not commenced its operations so far. However construction of greenfield API project was started during the year under review in its land located atVisakhapatnam in the state of Andhra Pradesh. As on March 31 2016 the Authorized ShareCapital of the Company is RS. 1600.00 Lakhs divided into 16000000 (one crore sixtylakhs) equity shares of RS. 10/- each and the Paid Up Share Capital of the
Company is H 1383.06 Lakhs divided into 13830600 (one crore thirty eight lakhthirty thousand and six hundered) equity shares of RS. 10 each.
The draft scheme of amalgamation of M/s. GIL Lifesciences Private Limited with theCompany was approved by the Board of Directors of the Company subject to approval of theHonble High Court of Judicature at Hyderabad for the State of Telangana and theState of Andhra Pradesh.
Renovation of facility of Granules PharmaceuticalsInc. a wholly-owned foreignsubsidiary of your company was completed during the year. During the year the companystarted Product development work in the renovated facility. The Share Capital of theCompany as on March 31 2016 is RS. 1225.00 Lakhs.
The Policy for determining material subsidiaries as approved by the Board may beaccessed on the Companys website at the link: www.granulesindia. com
Joint Venture Companies:
The developments in business operations / performance of Joint Venture Companiesconsolidated with the Company are as below:
The Share Capital of the Company as on March 31 2016 is H3638.06 Lakhs. During the FY2015-16 the
Company achieved a turnover of RS. 17008.32 Lakhs as against turnover of H22216.72Lakhs in the FY 2014-15 of which Granules India Limited reports 50% in its consolidatedrevenue. However previous year figures are not comparable as current year figures are fornine months period from April to December 2015.
The Share Capital of the Company as on March 31 2016 is H 8576.19 Lakhs. The Companyhas commenced the commercial production during the FY 2015-16 and achieved a turnover ofRS. 1425.66 Lakhs of which
Granules India Limited reports 50% in its consolidated revenue.
However as per the provisions of section 129 of the Companies Act 2013 read withCompanies (Accounts) Rules 2014 a separate statement containing the salient features ofthe financial statements of the subsidiary Companies and Joint Ventures is prepared inForm AOC-1 and it forms part of the consolidated financial statements.
Consolidated Financial Statements:
The consolidated financial statements in terms of Section 129 of the Companies Act2013 and regulation 34 of the Listing Regulations and prepared in accordance withAccounting Standard 21 as specified in the Companies (Accounting Standards) Rules 2006 asamended thereof forms a part of this annual report. As per the provisions of Section 136of the Companies Act 2013 the Company has placed separate audited accounts of itsSubsidiaries on its website www.granulesindia.com and copy of separate audited accounts ofits Subsidiaries will be provided to the members at their request.
Directors Responsibility Statement:
Pursuant to the requirement of Section 134(5) of the Companies Act 2013 and based onthe representations received from the operating management the Directors hereby confirmthat:
a) in the preparation of the annual accounts for the year ended March 31 2016 theapplicable accounting standards read with requirements set out under Schedule III to theAct have been followed and there are no material departures from the same;
b) the Directors have selected such accounting policies and applied them consistentlyand made judgments and estimates that are reasonable and prudent so as to give a true andfair view of the state of affairs of the Company as at March 31 2016 and of the profit ofthe Company for the year ended on that date;
c) the Directors 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) the Directors have prepared the annual accounts on a going concern basisfor the financial year ended March 31 2016;
e) the Directors have laid down internal financial controls to be followed by theCompany and that such internal financial controls are adequate and are operatingeffectively; and
f) the Directors have devised proper systems to ensure compliance with the provisionsof all applicable laws and that such systems are adequate and operating effectively.
The Company is committed to maintain the highest standards of Corporate Governance andadhere to the Corporate Governance requirements set out by SEBI. The report on CorporateGovernance as stipulated under the Listing Regulations forms an integral part of thisReport. The requisite certificate from the Auditors of the Company confirming compliancewith the conditions of Corporate Governance is attached to the report on CorporateGovernance.
Corporate Social Responsibility (CSR):
The Corporate Social Responsibility Committee (CSR Committee) has formulated andrecommended to the Board a Corporate Social Responsibility Policy (CSR Policy) indicatingthe activities to be undertaken by the Company which has been approved by the Board.
The Composition of the Committee is provided below.
|Name ||Category |
|Mrs. Uma Devi Chigurupati Chairperson ||Non-Independent Executive |
|Mr. Krishna Prasad Chigurupati ||Non-Independent Executive |
|Mr. A. Arun Rao ||Independent Non-Executive |
The CSR Policy may be accessed on the Companys website at the link:www.granulesindia.com
The Company is undertaking CSR initiatives in compliance with Schedule VII to the Act.During the year under review the Company has spent RS. 140.04 Lakhs on CSR activities.The annual report on CSR activities is annexed here with marked as $QQH[XUH__
Nomination and Remuneration Committee:
The Companys Nomination and Remuneration Committee consists of majority ofIndependent Directors which ensures transparency in determining the remuneration ofDirectors KMPs and other employees of the Company. The Chairman of the committee is anIndependent Director thereby resulting in independent and unbiased decisions.
During the financial year 2015-16 the composition of Nomination and RemunerationCommittee is provided below.
|Name ||Category |
|Mr. C. Parthasarathy Chairman ||Independent Non-Executive |
|Mr. L. S. Sarma ||Independent Non-Executive |
|Mr. A. Arun Rao ||Independent Non-Executive |
|Mr. K.B. Sankar Rao ||Non-Independent Non-Executive |
|Mr. Krishna Prasad Chigurupati ||Non-Independent Executive |
The Performance Evaluation and Remuneration Policy framed by the Committee and approvedby the Board is directed towards rewarding performance of Executive and Non-ExecutiveDirectors Key Managerial Personnel and Senior Management Personnel of the Company basedon review of achievements periodically.
Risk Management Committee:
Risk Management Committee has been entrusted with the responsibility to assist theBoard in (a) overseeing and approving the Companys enterprise wide risk managementframework; and (b) overseeing that all the risks that the organization faces such asstrategic financial credit market liquidity security property IT legalregulatory reputational and other risks have been identified and assessed and there is anadequate risk management infrastructure in place capable of addressing those risks. YourCompany has proper process for Risk Management.
Internal Audit & Controls:
Your Company continues to engage M/s Dhanunjaya & Haranath Chartered Accountantsas its Internal Auditors. During the year your Company continued to implement theirsuggestions and recommendations to improve the internal controls. Their scope of workincludes review of operational efficiency effectiveness of systems & processescompliances and assessing the internal control strengths in all areas. Internal Auditorsfindings are discussed and suitable corrective actions are taken as per the directions ofAudit Committee on an on-going basis to improve efficiency in operations.
The Companys internal control systems are well established and commensurate withthe nature of its business and the size and complexity of its operations. The AuditCommittee reviewsadequacyandeffectivenessoftheCompanysinternal control environmentand monitors the implementation of audit recommendations. The recommendations/suggestionsof the internal auditors are discussed in the Audit Committee meetings.
Directors and Key Managerial Personnel:
Mr. Harsha Chigurupati ceased to be Executive Director during the year under review dueto his resignation on October 31 2015. However Mr. Harsha is continuing as member of theBoard and he is Non-Executive Director of the Company.
In accordance with the provisions of Section 152 of the Companies Act 2013 and theArticles of Association of the Company Mr. Harsha Chigurupati Non-IndependentNon-Executive Director of the Company retires by rotation at the ensuing Annual GeneralMeeting and being eligible offers himself for re-appointment.
The Company has received declarations from all the Independent Directors of the Companyconfirming that they meet with the criteria of independence as prescribed both under theCompanies Act and the Listing Regulations.
The Company has devised a Policy for performance evaluation of Independent DirectorsBoard Committees and other individual Directors which include criteria for performanceevaluation of the Non-Executive Directors and Executive Directors.
The Board of Directors have complete access to the information within the Company.Independent Directors have the freedom to interact with the Companys management.Interactions happen during Board / Committee meetings when CXOs are asked to makepresentations about performance of the Company. Apart from this they also haveindependent interactions with the Statutory Auditors the Internal Auditors and externaladvisors appointed from time to time. Further they meet without the presence of anymanagement personnel and their meetings are conducted informally to enable the IndependentDirectors to discuss matters pertaining to the Companys affairs and put forth theircombined views to the Board of Directors of the Company.
Mr. Krishna Prasad Chigurupati Chairman and Managing Director Mrs. Uma DeviChigurupati Executive Director Mr. VVS Murthy Chief Financial Officer and Mrs.Chaitanya Tummala Company Secretary are key managerial personnel of the Company.
Employee Stock Option Plan (ESOP):
The Nomination and Remuneration Committee of the Board of Directors of the Companyinter alia administers and monitors the Employee Stock Option Plan of the Company inaccordance with the applicable SEBI Guidelines.
The applicable disclosures as stipulated under the SEBI Guidelines as on March 31 2016(cumulative position) with regard to the Employees Stock Option Scheme are hereinunder provided. The issue of equity shares pursuant to exercise of options does not affectthe Statement of Profit and Loss of the Company as the exercise is made at the marketprice prevailing as on the date of the grant plus taxes as applicable.
Pursuant to clause 14 of the SEBI (Employee Stock Option Scheme and Employee StockPurchase Scheme) Guidelines 1999 certificate from M/s. Kumar & Giri StatutoryAuditors is given as Annexure II to this report. Voting rights on the shares issued toemployees under the ESOP are either exercised by them directly or through their appointedproxy.
The details of the stock options granted / vested / exercised under the Granules IndiaEquity Stock Option Plan 2009 approved by the members in 18th Annual GeneralMeeting are given below:
|Description ||Details |
|(a) Options granted till date under the scheme ||8000000 options |
|(b) Pricing formula ||Closing market price as on the date prior to the grant date on National Stock Exchange (where there was highest trading volume). |
|(c) Options vested during the year ||690000 |
|(d) Options exercised during the year ||1110000 |
|(e) Total number of shares arising as a result of exercise of options ||1110000 |
|(f) Options lapsed during the year ||20000 |
|(g) Options lapsed till date under the scheme ||2250000 |
|(h) Variation in terms of options ||Nil |
|(i) Money realized by exercise of options during the year ||RS. 19432000/- |
|(j) Total number of options in force ||2350000 |
|(k) Employee wise details of options granted during the year to: ||Nil |
|(i) Senior managerial personnel ||Not Applicable |
|(ii) Any other employee who receives a grant in any one year of options amounting to 5% or more of options granted during the year. ||Not Applicable |
|(iii) Identified employees who were granted option during any one year equal to or exceeding 1% of the issued capital (excluding outstanding warrants and conversions) of the company at the time of grant. ||Not Applicable |
|(l) Diluted Earnings per share (EPS) pursuant to issue of shares on exercise of options calculated in accordance with Accounting Standard (AS) 20 Earning per share. ||H5.74 per share |
|(m) Where the company has calculated the employee compensation cost using the intrinsic value of the stock options the difference between the employee compensation cost that shall have been recognized if it had used the fair value of the options. ||Not Applicable |
|(n) Weighted-average exercise price whose exercise price either equals or exceeds or is less than the market price of the stock ||RS. 17.51/- per share |
|(o) Description of the method and significant assumptions used during the year to estimate the fair values of options. ||Not Applicable |
Auditors & Their Report:
Pursuant to the provisions of Sections 139 141 & 142 and other applicableprovisions if any of the Companies Act 2013 and rules made thereon M/s. Kumar &Giri Chartered Accountants Hyderabad was re-appointed for three years in the 23rdAnnual General meeting subject to ratification at every Annual General meeting. TheCompany has received a certificate from the auditors to the effect that their ratificationfor re-appointment if made would be in accordance with the conditions as specified underSection 141 of the Companies Act 2013 read with Companies (Audit and Auditors) Rules2014. The Directors recommend for ratification of re-appointment of M/s. Kumar & GiriChartered Accountants as Statutory Auditors for the financial year 2016-17. A resolutionproposing ratification of re-appointment of M/s. Kumar & Giri Chartered Accountantsas the Statutory Auditors of the Company for the financial year 2016-17 pursuant tosection 139 of the Companies Act 2013 forms part of the Notice.
Comments of the Auditors in their report and the notes forming part of the accounts areself-explanatory and need no comments. However the Auditors have not made any adversequalifications in their report on the accounts of the Company for the year under review.
The Board has appointed M/s. Saurabh Poddar & Associates Company Secretaries toconduct Secretarial Audit for the financial year 2015-16. The Secretarial Audit Report forthe financial year ended March 31 2016 is annexed here with marked as Annexure III tothis Report. The Secretarial Audit Report does not contain any qualification reservationor adverse remark.
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 an armslength basis. During the year except with the wholly owned subsidiary the Companyhad not entered into any contract / arrangement / transaction with related parties whichcould be considered material in accordance with the policy of the Company on materialityof related party transactions.
The Policy on materiality of related party transactions and dealing with related partytransactions as approved by the Board may be accessed on the Companys website at thelink: www.granulesindia.com.
The particulars of contracts or arrangements with related parties referred to insection 188(1) are prepared in Form No. AOC-2 pursuant to clause (h) of sub-section (3) ofsection 134 of the Act and Rule 8(2) of the Companies (Accounts) Rules 2014 and the sameis enclosed as Annexure IV to this Report
The Audit Committee comprises majority Independent Directors namely Mr. C.Parthasarathy (Chairman) Mr. L.S. Sarma Mr. A.P. Kurian Mr. A. Arun Rao and Mr. KrishnaPrasad Chigurupati as other members. During the period under review Mr. L.S. Sarmaresigned as Chairman of the Audit Committee and Mr. C. Parthasarathy IndependentDirector was elected as Chairman of the Committee by Committee members. All therecommendations made by the Audit Committee were accepted by the Board.
The Company has a Vigil mechanism and Whistle blower policy in terms of the ListingRegulations under which the employees are free to report violations of applicable lawsand regulations and the Code of Conduct. Protected disclosures can be made by a whistleblower through a dedicated e-mail or a letter to the Chairman of the Audit Committee.
The Policy on vigil mechanism and whistle blower policy may be accessed on theCompanys website at the link:www.granulesindia.com
Eight (8)meetings of the Board of Directors were held during the year under review. Thedetails of the Board Meetings with regard to their dates and attendance of each of theDirectors thereat have been provided in the Corporate Governance Report.
Code of Conduct
A declaration regarding compliance with the code of conduct signed by theCompanys Chairman and Managing Director is published in the Corporate GovernanceReport which forms part of the annual report.
Particulars of loans given investments made guarantees given and securities providedare provided in the standalone financial statement (Please refer to Note No.2.12 2.13 and2.35 to the standalone financial statement).
Conservation of energy technology absorption and foreign exchange earnings and outgo:
The particulars relating to conservation of energy technology absorption foreignexchange earnings and outgo as required to be disclosed under the Act are provided inAnnexure V to this Report.
Extract of Annual Return
Extract of Annual Return of the Company is annexed herewith as Annexure VI to thisReport.
Particulars of Employees and related disclosures
In terms of the provisions of Section 197(12) of the Act read with Rules 5(2) and 5(3)of the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014 astatement showing the names and other particulars of the employees drawing remuneration inexcess of the limits set out in the said rules forms part of this Report.
Disclosures pertaining to remuneration and other details as required under Section197(12) of the Act read with Rule5(1) of the Companies (Appointment and Remuneration ofManagerial Personnel) Rules 2014 are also forms part of this Report.
However having regard to the provisions of the first proviso to Section 136(1) of theAct the Annual Report excluding the aforesaid information is being sent to the members ofthe Company. The said information is available for inspection at the registered office ofthe Company during working hours for a period of 21 days before the date of ensuing AnnualGeneral Meeting and any member interested in obtaining such information may write to theCompany Secretary and the same will be furnished on request. This information is availableon the Companys website link: www.granulesindia.com
Your Directors further state that the remuneration paid to the Key managerialPersonnel and others is as per the Remuneration Policy of the Company.
Policy on Sexual Harassment
The Company has a Policy on "Prevention of Sexual Harassment of Women atWorkplace" for the matters connected there with or incidental thereto covering allthe aspects as contained under the "The Sexual Harassment of Women at Work place(Prohibition Prevention and Redressal)Act 2013".
During the year under review the Company has not received any complaints pertaining toSexual Harassment.
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 or otherwise.
3. Issue of shares (including sweat equity shares) to employees of the Company underany scheme save and except ESOP referred to in this Report.
4. Cost Audit is not applicable for the financial year 2015-16.
5. Neither the Chairman and Managing Director nor the Whole-time Directors of theCompany receive any remuneration or commission from any of its subsidiaries.
6. No significant or material orders were passed by the Regulators or Courts orTribunals which impact the going concern status and Companys operations in future.
Appreciations And Acknowledgements:
Your Directors would like to express their sincere appreciation for the assistance andco-operation received from the financial institutions banks Government authoritiescustomers vendors and members during the year under review. Your Directors wish hereby toplace on record their appreciation of the services rendered by the employees withoutwhose whole-hearted efforts the over all satisfactory performance would not have beenpossible.
Your Directors look forward to the long term future with confidence.
On behalf of the Board of Directors
Krishna Prasad Chigurupati
Chairman and Managing Director
April 28 2016