You are here » Home » Companies » Company Overview » Healthcare Global Enterprises Ltd

Healthcare Global Enterprises Ltd.

BSE: 539787 Sector: Health care
NSE: HCG ISIN Code: INE075I01017
BSE LIVE 15:40 | 23 Aug 271.30 -2.75
(-1.00%)
OPEN

272.55

HIGH

273.00

LOW

266.75

NSE 15:31 | 23 Aug 270.80 -3.85
(-1.40%)
OPEN

271.90

HIGH

275.05

LOW

269.80

OPEN 272.55
PREVIOUS CLOSE 274.05
VOLUME 2916
52-Week high 289.00
52-Week low 206.60
P/E 107.66
Mkt Cap.(Rs cr) 2,325
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00
OPEN 272.55
CLOSE 274.05
VOLUME 2916
52-Week high 289.00
52-Week low 206.60
P/E 107.66
Mkt Cap.(Rs cr) 2,325
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

Healthcare Global Enterprises Ltd. (HCG) - Director Report

Company director report

Dear members

Your Directors have pleasure in presenting the Annual Report of your Company togetherwith the Audited Standalone and Consolidated Financial Statements and the Auditors’Report thereon for the year ended March 31 2016.

The financial statements and other reports annexed to the Annual report are incompliance with the requirements of the Companies Act 2013.

1. Financial Results

The highlights of consolidated financial results of your Company and its subsidiariesand your Company as a standalone entity are as follows:

2015-16 2014-15
(Rs. in millions) (Rs. in millions)
Consolidated
Income from operations 5819.77 5193.75
Total Expenditure excluding Depreciation Interest cost tax and exceptional items 4923.29 4431.35
Profit before other income Depreciation Interest cost tax and exceptional items 896.48 762.40
Other income 34.51 48.15
Depreciation Finance Charges and exceptional items 880.97 780.41
Profit before tax 50.02 30.14
Profit after tax before share of profit of minority interest 54.33 46.97
Profit after tax 12.21 8.34
Standalone
Income from operations 4702.13 4201.50
Total Expenditure excluding Depreciation Interest cost tax and exceptional items 4027.79 3637.02
Profit before other income Depreciation Interest cost tax and exceptional items 674.34 564.48
Other income 29.95 42.91
Depreciation Finance Charges and exceptional items 761.87 683.48
Profit/(Loss) before tax (57.58) (76.09)
Profit/Loss after tax (28.45) (23.66)

2. Performance Overview

Consolidated Operations

The consolidated income from operations for FY 2015 - 16 was Rs. 5819.77 millions ascompared to Rs. 5193.75 millions in the previous fiscal year reflecting a growth of 12%.EBITDA in FY 2015- 16 was Rs. 896.48 millions as compared to Rs. 762.40 millions in FY2014-15 reflecting a year-on-year increase of 17.6%. EBITDA margin for the year was 15.4%as compared to 14.7% in FY 2014-15 reflecting an increase of 70 basis points. PAT in thefiscal year was Rs. 12.21 millions as compared to Rs. 8.34 millions in FY 2014-15reflecting a year-on-year increase of 47.6%.

The revenue growth was driven by 12% growth from HCG Centres (including themulti-specialty hospitals) while the Milann centres contributed growth of 14%. HCG Centresconstituted 92% of the consolidated revenues for the Company and the remaining 8% of theconsolidated revenue was contributed by Milann Centres.

Standalone Operations

The Company ended the year FY 2015-16 with income from operations of Rs. 4702.13millions as compared to Rs. 4201.50 millions reflecting an increase of 12% compared tothe previous fiscal year. Our EBITDA before exceptional items for FY 2015-16 was Rs.704.29 millions with EBITDA margin of 15%.

3. Business Strategy

Expand the reach of our cancer care network in India

HCG plans to expand its network in India by establishing new cancer centres acrossIndia and by expanding the capacity and service offering of the existing HCG cancercentres. We carry out a competitive assessment of the markets in which HCG plans to expandthe network based on a number of factors including the estimated incidence of cancer inthe primary and secondary catchment population the number of comprehensive cancercentres if any in the catchment; the average distance patients have to travel to availof such comprehensive cancer care; affordability of healthcare generally and cancer carein particular; and the available third party payer options whether corporate governmentor private insurance. HCG will continue to expand its network through green fieldprojects partnership arrangements and acquisitions; and afirmed that the past experienceswill aid the Management in identifying potential opportunities in the future and assistHCG in integrating new cancer centres into the existing HCG network.

Strengthen our HCG brand to reach more cancer patients

We believe that our HCG brand distinguishes us from our competitors. As we establishnew comprehensive cancer centres across India we plan to invest in building our brandenhancing our market presence brand image and visibility. We intend to strengthen ourpatient support groups comprising cancer survivors to further spread awareness of cancerscreening and to educate patients regarding cancer treatment options and their relativeoutcomes and benefits. Through these initiatives we seek to further strengthen our brandand our commitment to the community cancer patients and their families.

Expand our cancer care network to Africa

We believe that despite the growing incidence of cancer there is a shortage of cancercentres in many countries in Africa. As a result patients suffering from cancer oftentravel outside the region at a significant cost for availing quality cancer careincluding to our comprehensive cancer centres in India. In the past we have experiencedan increase in the number of patients travelling from Africa and other regions to ourcentre of excellence in Bengaluru as well as to our other comprehensive cancer centres inIndia for cancer treatment. We believe that this growing demand presents us with anopportunity to establish a network of speciality cancer centres in Africa.

Upgrade and strengthen our information technology infrastructure

We are in the process of significantly upgrading our information technologyinfrastructure in order to enhance the quality of care delivered to patients and tofurther enhance our clinical best practices and research capabilities. Our plannedinformation technology infrastructure will be based on a private cloud-computing systemand will encompass a centralised EMR system seamlessly integrated with various othercentralised systems including HIS and ERP system. We believe that the implementation ofthese information systems will maximise efficiencies through the greater integration ofour network and help us fine tune protocols through knowledge sharing and collaboration.Further we believe that these initiatives will enhance our ability to conductlongitudinal research studies (which are long-term observational research studies) andassociate clinical outcomes with mutation and other genomic findings in cancer patienttissues maintained at our biorepository. We believe that this will position us as apartner of choice for cancer researchers and academia.

Expand our Milann network of fertility centres across India and build our Milann brand

We believe that in expanding our Milann network we are well-positioned to leverageHCG’s successful track record of growing through partnerships with specialistphysicians and hospitals as well as our relationship base within the medical community.

We intend to invest in building our Milann brand through targeted media campaignsfocusing on building patient awareness of fertility treatment primarily through patienttestimonials and socially relevant messages. We also intend to undertake communityoutreach programmes strengthen our patient support groups and undertake other awarenessbuilding activities among corporate entities. In addition we intend to undertake variousdirect consumer marketing activities including advertising in print television outdoorand digital media.

4. Management’s Discussion and Analysis Report

The Management’s Discussion and Analysis Report on the company’s financialand operational performance industry trends business outlook and Initiatives and othermaterial changes with respect to the company and its subsidiaries wherever applicableare presented in separate section which forms part of the Annual Report.

5. Transfer to reserves

There are no appropriations to/from the General reserves of the company during the yearunder review.

6. Dividend

Keeping in view the growth strategy of the Company the Board of Directors of yourCompany have decided to plough back the profits and thus not recommended any dividend forthe financial year under review.

7. Consolidated financial statements

The consolidated financial statements of the company for the financial year ended March31 2016 prepared in accordance with Indian GAAP forms part of this Annual Report.

8. Subsidiaries and Associates

In accordance with Section 129(3) of the Companies Act 2013 read with Regulation 33 ofSEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 and applicableaccounting standards the consolidated financial statements of the Company prepared inaccordance with the relevant accounting standards specified under Section 133 of theCompanies Act 2013 read with the rules made there under forms part of this AnnualReport. In view of the same the financial statements and other documents of eachSubsidiaries and Associate Companies are not attached to this Report.

Further pursuant to proviso 3 and 4 of Section 136 (1) of the Companies Act 2013:

a) The Annual Report of the Company containing therein its standalone and consolidatedfinancial statements are available on the website of the Company being www. hcgel.com.

b) The audited financial statements of subsidiary companies will be made available onthe website of the Company being www.hcgel.com post approval by shareholders of theCompany.

As on March 31 2016 the Subsidiaries and Associate Companies of the Company includingproposed investments are as under of which none are material subsidiaries. All thesubsidiaries are engaged in health care activities. Pursuant to the provisions of thesection 133 of the Companies Act 2013 a statement containing the salient features of thefinancial statements of the Company’s subsidiaries and associates in Form AOC-1 isannexed herewith as "Annexure 6" and forms part of the Report.

Sl. No. Name of the entity Country of Incorporation % of ownership held by the Company as at March 31 2016
A HCG Medi-Surge Hospitals Private Limited India 74.00%
B Malnad Hospital & Institute of Oncology Private Limited India 70.25%
C HealthCare Global Senthil Multi Specialty Hospitals Private Limited India 100.00%
D MIMS HCG Oncology Private Limited India 100.00%
E BACC Healthcare Private Limited India 50.10%
F HealthCare Diwan Chand Imaging LLP India 75.00%
G HCG Pinnacle Oncology Private Limited India 50.10%
H APEX HCG Oncology Hospitals LLP India 50.10%
I HCG Regency Oncology Healthcare Private Limited India 50.10%
J DKR Healthcare Private Limited (formerly Parenthood Healthcare Private Limited) 100% subsidiary of BACC Healthcare Private Limited which is subsidiary of the company India 50.10%
K HCG NCHRI Oncology LLP India 51.00%
L HCG Oncology LLP India 74.00%
M Strand-Triesta Cancer Genomics LLP India 30.00%
N HCG EKO Oncology LLP (incorporated on May 15 2015) India 50.50%
O HCG (Mauritius) PVT. LTD. (incorporated on May 22 2015) Mauritius 100.00%
P Healthcare Global (Africa) PVT. LTD. (incorporated on May 22 2015) subsidiary of HCG (Mauritius) PVT. LTD which is subsidiary of the company Mauritius 100.00%
Q HealthCare Global (Uganda) Private Limited subsidiary of HCG (Africa) PVT. LTD which is subsidiary of the company Uganda 100.00%
R HealthCare Global (Kenya) Private Limited subsidiary of HCG (Africa) PVT. LTD which is subsidiary of the company Kenya 100.00%
S HealthCare Global (Tanzania) Private Limited subsidiary of HCG (Africa) PVT. LTD which is subsidiary of the company Tanzania 100.00%

8.1 Subsidiaries incorporated during the Financial Year

a) HCG (Mauritius) Pvt. Ltd. ("HCG Mauritius"): HCG Mauritius wasincorporated on May 22 2015 under the Companies Act 2001 of Mauritius as a privatelimited company. It has its registered office at St Louis Business Centre Cnr Desrochesand St Louis Streets Port Louis Mauritius. HCG Mauritius is authorised to hold companieswhich are primarily engaged in the business of treating persons with cancer carrying onresearch in the field of oncology and providing various services in the field of oncology.HCG (Mauritius) Pvt. Ltd is a Wholly Owned Subsidiary of the Company.

b) HealthCare Global (Africa) Pvt. Ltd ("HCG Africa"): HCG Africa wasincorporated on May 22 2015 under the Companies Act 2001 of Mauritius as a privatelimited company. It has its registered office at St Louis Business Centre Cnr Desrochesand St Louis Streets Port Louis Mauritius. HCG Africa is authorised to engage in thebusiness of treating persons with cancer carrying on research in the field of oncologyand providing various services in the field of oncology and hold companies which areengaged in the same business. HCG Mauritius holds 113002 ordinary shares of USD 1 eachaggregating to 100% of the issued and paid up share capital of HCG Africa.

c) HCG EKO Oncology LLP ("HCG EKO LLP"): HCG EKO LLP was incorporated on May15 2015 under the LLP Act as a limited liability partnership firm. It has its registeredoffice at HCG Tower No. 8 P Kalinga Rao Road Sampangi Rama Nagar Bengaluru 560 027Karnataka. HCG EKO LLP is authorised to primarily engage in the business of setting uphospitals at Kolkata with high end linear accelerators oncology pharmacy and mattersincidental and ancillary thereto.

8.2 Disinvestments made by the Company during the Financial Year a) Shareholding inother Subsidiaries of Africa: The Company has transferred its entire shareholding inHealthCare Global (Uganda) Private Limited ("HCG Uganda") HealthCare Global(Kenya) Private Limited ("HCG Kenya") and HealthCare Global (Tanzania) PrivateLimited ("HCG Tanzania") to HealthCare Global (Africa) Pvt. Ltd. AccordinglyHCG Uganda HCG Kenya and HCG Tanzania have become level two subsidiaries of the Company.

b) Shareholding in HCG TVH Medical Imaging Private Limited ("HCG TVH"): OurCompany has entered into a share purchase agreement dated November 23 2015 with HCG TVHour erstwhile subsidiary and Anderson Diagnostics Private Limited. Pursuant to the termsof this agreement our Company has transferred its entire shareholding in HCG TVHaggregating 51.00% of the total paid up equity share capital of HCG TVH to AndersonDiagnostics Private Limited for an aggregate consideration of Rs.510000. Accordingly HCGTVH has ceased to be the subsidiary of the Company during the Financial Year.

9. Public deposits

The company has not accepted any deposits from public in terms of Section 73 of theCompanies Act 2013 during the year under review.

10. Particulars of loans guarantees or investments under Section 186 of the CompaniesAct 2013

Loans/Advances given Investments made Guarantees provided securities extended by thecompany during the year/previous year covered under Section 186 of the Companies Act 2013are as under. The loans and advances were utilized for the furtherance of the objects ofthese companies and for the operations in the ordinary course of business.

Name of the Company/Entity 2015-16 2014-15
Nagpur Cancer Hospital and Research Institute Private Limited - 22163300
HealthCare Global Senthil Multi-Specialty Hospitals Private Limited 553615 293072
HCG TVH Medical Imaging Private Limited 135428 241602
MIMS HCG Oncology Private Limited 130832 134866
HCG Medi-surge Hospitals Private Limited 20230932 27656963
Malnad Hospital and Institute of Oncology Private Limited 195054 832852
Healthcare Global (Kenya) Private Limited 854699 1262000
Healthcare Global (Tanzania) Private Limited 1866962 709371
HCG Pinnacle Oncology Private Limited 33944855 62207
BACC Healthcare Private Limited 733181 16204
HCG Foundation - 81254
HCG (Mauritius) Private Limited 620444 -
HealthCare Global (Africa) Private Limited 620444 -
Investments made by the company during the year/previous year are as listed below:
Name of the Company/Entity 2015-16 2014-15
HealthCare Diwan Chand Imaging LLP 130594 3879174
APEX HCG Oncology Hospitals LLP 5112200 21525000
HCG Regency Oncology Healthcare Private Limited 24499993 30400000
Healthcare Global (Kenya) Private Limited 1262000 3710850
Healthcare Global (Tanzania) Private Limited - 63100
Malnad Hospital and Institute of Oncology Private Limited - 2060600
HCG (Mauritius) Private Limited 11155487 -
HCG Oncology LLP 68715301 -
Security/Guarantee provided by the company during the year/previous year are as listed below:
Name of the Company/Entity 2015-16 2014-15
HCG Medi-surge Hospitals Private Limited 292000000 -
Guarantees provided by the company during the year/previous year are as listed below:
Name of the Company/Entity 2015-16 2014-15
BACC Healthcare Private Limited 18100000 33700000
HCG Pinnacle Oncology Private Limited 10900000 -
HCG Oncology LLP 66500000 -

11. Related party transactions

All transactions entered into with the related parties as defined under the CompaniesAct 2013 during the financial year were in the ordinary course of business and on anarm’s length basis and do not attract the provisions of Section 188 of the CompaniesAct 2013.

Disclosures as required under Section 134(3) (h) read with Rule 8(2) of the Companies(Accounts) Rules 2014 are given in Form AOC 2 as specified under Companies Act 2013which is annexed herewith as "Annexure 5" and forms part of the report.

12. Initial Public Offer

The Board of Directors of the Company and the Shareholders of the Company on May 292015 and June 15

2015 respectively had approved the Initial Public Offer of upto 14000000 EquityShares of Rs. 10 each and Offer For Sale of Equity Shares by certain members of theCompany upto 23000000 Equity Shares subject to approval of all regulatory authoritiesconcerned in this regard.

During the year the company has completed its Initial Public Offering of 29800000equity shares of Rs. 10 each comprising of Fresh Issue of 11600000 equity shares andOffer For Sale of 18200000 equity shares at a premium of Rs. 208 per equity share. Thetotal issue size was Rs. 6496.4 million. The shares got listed the National Stock Exchangeof India Limited and BSE Limited on March 30 2016.

The proceeds of the initial public offer are proposed to be utilized for the followingpurposes:

1. Purchase of medical equipment

2. Investment IT software services and hardware

3. Pre-payment of debt; and

4. General Corporate Purposes

During the year under review the company has not deviated in utilizing the proceeds ofissue.

13. Share capital

a) Authorized Capital: There is no change in the authorized share capital of theCompany during the year. As on the date of this report the authorized share capital ofthe Company is Rs. 1270000000 consisting of 127000000 equity shares of Rs. 10 each.

b) The Issued Subscribed and Paid up Capital has increased from Rs. 699838080consisting of 69983808 equity shares of Rs. 10 each to Rs. 850759860 consisting of85075986 equity shares of Rs. 10 each during the year.

The increase in the Issued Subscribed and Paid up Capital was on account of thePreferential allotment of shares made by the Company upon conversion of Series C andSeries D share warrants which were issued by the Company to Dr. B.S. Ajai Kumar Promoter;allotment of shares to Dr. M. Gopichand (Pursuant to the Scheme of merger entered into byand between HealthCare Global Enterprises Limited and its subsidiary HealthCare GlobalVijay Oncology Private Limited duly approved by the Hon’ble High Court of Karnataka)allotment of shares to employees pursuant to ESOP Scheme 2010 and 2014 apart from theFresh Issue of shares to the public through IPO.

14. ERP Implementation

Your company is in the advanced stages of the SAP implementation project at all thehospitals/centres across the country. The implementation of ERP will standardize andimprove the operational processes facilitate control mechanisms through sophisticatedchecks and balances minimize duplication and reduce costs.

15. Number of meetings of the Board

The meetings of the Board are scheduled at a regular intervals to decide and discuss onthe business performance policies strategies and other matters of significance. Theschedule of the meetings is circulated to ensure proper planning and effectiveparticipation in meetings. In certain exigencies decisions of the Board are also accordedthrough circulation.

The Board met twelve times in financial year 2015-16 viz. on April 9 2015 April 102015 May 29 2015 June 26 2015 July 13 2015 July 24 2015 September 30 2015November 6 2015 February 11 2016 March 4 2016 March 12 2016 and March 28 2016. Themaximum interval between any two meetings did not exceed 120 days.

Detailed information regarding the meetings of the Board and meetings of the committeesof Board is included in the report on Corporate Governance which forms a part ofDirectors’ Report.

16. Declaration by Independent Directors

The company has received and taken on record the necessary declaration from each ofthe independent directors under Section 149 of the Companies Act 2013 that they meet withthe criteria of their independence.

17. Extract of Annual Return

The extract of the Annual Return of your Company as on March 31 2016 as provided undersub-section (3) of Section 92 in the Form MGT 9 is annexed herewith as "Annexure1".

18. Director’s Responsibility Statement

The financial statements are prepared in accordance with the Generally AcceptedAccounting Principles (GAAP) under the historical cost convention on accrual basis. GAAPcomprises mandatory accounting standards as prescribed under Section 133 of the CompaniesAct 2013 (‘the Act’) read with Rule 7 of the Companies (Accounts) Rules 2014the provisions of the Act (to the extent notified).

Pursuant to Section 134 (3) (C) and 134 (5) of the Companies Act 2013 the Board ofDirectors of the Company hereby state and 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) the Directors had 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 at the end of the financial year and ofthe profit and loss of the Company for that period;

c) the Directors had taken proper and sufficient care for the maintenance of adequateaccounting records in accordance with the provisions of this Act for safeguarding theassets of the Company and for preventing and detecting fraud and other irregularities;

d) the Directors had prepared the annual accounts on a going concern basis;

e) the Directors had laid down internal financial controls to be followed by thecompany and that such internal financial controls are adequate and were operatingeffectively.

f) The Directors had devised proper systems to ensure compliance with the provisions ofall applicable laws and such systems are adequate and operating effectively.

19. Appointment of Directors

The Board of Directors of the Company have appointed Mr. Suresh C. Senapaty Dr.S.T.Ramesh and Mrs. Bhushani Kumar as Independent Directors with effect from May 29 2015for a term of 5 years eligible for re-appointment for an another term of 5 years.Subsequently the shareholders have approved the appointment of Mr. Shanker Annaswamy andMr. Sudhakar Rao Mr. Suresh C. Senapaty and Dr. S.T.Ramesh as Independent Directors atthe Extraordinary General Meeting held on June 15 2015 and the appointment of Mrs.Bhushani Kumar at the Extraordinary General Meeting held on July 13 2015. All theIndependent Directors of the Company have provided necessary declaration that they meetthe independence criteria as laid down under Section 149 of the Companies Act 2013.

20. Resignation of Directors

Dr. Amit Varma Non-Executive Director nominee ofMilestonePrivateEquityFundhasresignedfromDirectorship with effect from May 29 2015. TheBoard hereby places on record its appreciation for the contribution made by Dr. Amit Varmaduring his tenure as Director of the Company.

As per the provisions of the Companies Act 2013 Mr. Prakash Parthasarathy and Mr.Gangadhara Ganapati Directors of the Company retire at the forthcoming annual generalmeeting. Mr. Prakash Parthasarathy Non-Executive Director Nominee of PI OpportunitiesFund 1 has not offered himself for re-appointment.

21. Key Management personnel

During the year under report there is no change in Key Managerial Personnel (KMP) interms of Section 2(51)

& Section 203 and other applicable provisions if any of the Companies Act 2013read with the Companies (Appointment & Remuneration of Managerial Personnel) Rules2014 (including any statutory modification(s) or re-enactment thereof for the time beingin force).

22. Committees of the Board and their constitution

As required under the Companies Act 2013 and SEBI (Listing Obligations and DisclosureRequirements) Regulations 2015 the Board has formed four Committees viz. Audit and RiskManagement Committee Nomination and Remuneration Committee Stakeholders’Relationship Committee and Corporate Social Responsibility Committee.

Keeping in view the requirements of the Companies Act 2013 and SEBI (ListingObligations and Disclosure Requirements) Regulations 2015 the Board decides the terms ofreference of these Committees and the assignment of members to various committees. Therecommendations if any of these Committees are submitted to the Board for approval.

(a) Audit and Risk Management Committee

Pursuant to the requirements of Section 177 of the Companies Act 2013 and Rule 6 ofthe Companies (Meetings of Board and its Powers) Rules 2014 the company has an Audit andRisk Management Committee and the composition of the committee is as under: 1. Mr. SureshChandra Senapaty Chairman 2. Mr. Sudhakar Rao 3. Mr. Shanker Annaswamy 4. Mr. RajeshSinghal 5. Dr. B.S. Ajai Kumar 6. Ms. Sunu Manuel - Secretary of the Committee.

The Audit committee was last reconstituted and renamed as the "Audit and RiskManagement Committee" by a meeting of the Board of Directors held on May 29 2015.

(b) Nomination and Remuneration Committee

Pursuant to the requirements of Section 178 of the Companies Act 2013 and Rule 6 ofthe Companies (Meeting of Board and its Powers) Rules 2014 the Board of Directors havereconstituted the Nomination and Remuneration Committee on May 29 2015. The members ofthe Nomination and Remuneration Committee are: 1. Mr. Shanker Annaswamy Chairman 2. Dr.Sampath Thattai Ramesh 3. Mr. Prakash Parthasarathy 4. Dr. Jennifer Gek Choo Lee 5. Ms.Sunu Manuel - Secretary of the Committee.

The terms of reference of the committee are in compliance with the Companies Act 2013.The committee shall be responsible for setting policies regarding director’sappointment and remuneration including criteria for determining qualifications positiveattributes independence of a director evaluation of board setting up a succession planand other matters provided under sub-section (3) of section 178 of the Companies Act2013.

(c) Stakeholders’ Relationship Committee

The Stakeholders’ Relationship Committee was constituted by our Board of Directorsat their meeting held on May 29 2015. The scope and function of the Stakeholders’Relationship Committee is in accordance with Section 178 of the Companies Act 2013.

The members of the Stakeholders’ Relationship Committee are: 1. Mr. GangadharaGanapati Chairman 2. Dr. Jennifer Gek Choo Lee 3. Mr. Rajesh Singhal 4. Dr. B.S. AjaiKumar 5. Ms. Sunu Manuel - Secretary of the Committee.

(d) Corporate Social Responsibility Committee

The Corporate Social Responsibility Committee was constituted by our Board of Directorsat their meeting held on May 29 2015. The terms of reference of the Corporate SocialResponsibility Committee of our Company are as per Section 135 of the Companies Act 2013and the applicable rules thereunder.

The members of the Corporate Social Responsibility Committee are: 1. Mr. Sudhakar RaoChairman 2. Dr. Sampath Thattai Ramesh 3. Ms. Bhushani Kumar 4. Dr. B.S. Ajai Kumar 5. Ms.Sunu Manuel - Secretary of the Committee.

23. Board Evaluation

Pursuant to the provisions of the Companies Act 2013 SEBI (LODR) Regulations 2015and in line with the Company’s Board Evaluation Policy peer evaluation of all Boardmembers including the Chairman of the Board annual performance evaluation of its ownperformance as well as the evaluation of the working of the Committees of the Board hasbeen carried out. This evaluation was led by the Chairman of the Nomination andRemuneration Committee with specific focus on the performance and effective functioning ofthe Board. The evaluation process also considers the time spent by each of the Boardmembers core competencies personal characteristics accomplishment of specificresponsibilities and expertise.

24. Risk Management

Like any other company functioning in the complex set up of healthcare serviceindustry your Company is exposed to various risks like competition risks marketfluctuation risks interest rate risks exchange rate fluctuation risks technologyobsolescence risks compliance risks people risks etc. These risks are assessed from timeto time by the Audit and Risk Management committee and steps are taken to mitigate theserisks.

At HCG management has the overall responsibility to design implement and monitor aneffective process and control environment that is aligned to the inherent risk profile ofthe organization. Management is responsible for the identification evaluation andmanagement of significant risks. The Company is in the process of adopting a framework tofocus on key risks that might impact achievement of business objectives. The frameworkentails a structured process to identify assess and monitor the risks and initiatesuitable mitigation strategies for effective risk management. The Board monitors exposureto these risks with the assistance of various committees and senior management.

The internal control framework is designed to manage and mitigate the risks faced bythe Company. The Company has designed and implemented an entity level control frameworksetting the control philosophy and principles which guide the organization policy andoperating process framework. The organizational role responsibility and accountabilitystructures with appropriate performance oversight processes are defined and aligned toprovide an enabling environment to the business units and functions to operate as per thedesign control environment. Review and oversight procedures are designed to monitoreffective adherence as per design.

25. Corporate Social Responsibility

The provisions of Corporate Social Responsibility ("CSR") under the CompaniesAct 2013 were not applicable to the Company for the financial year 2015-16.

However your Company has been over the years pursuing as a part of its corporatephilosophy an unwritten CSR policy voluntarily which goes much beyond mere philanthropicgestures and integrates interest welfare and aspirations of the community with those ofthe company itself and create an environment of partnership for inclusive development.

Over the years HCG has also been involved in a number of social initiatives to supportthe community and bring about a positive change in preventive healthcare througheducation and awareness building activities. Its CSR programmes are delivered through HCGFoundation which is committed to providing health services and subsidized medical care tothe socially and economically marginalized sections of society.

Free cancer detection and screening camps Continuous Medical Education (CMEs) are nowa regular feature in HCG’s community outreach program. We believe that organizationalgrowth is impossible without the sharing and pooling of our knowledge and resources. Bestpractices are disseminated across our facilities through coordinated CMEs ContinuousNursing Education (CNEs) and seminars. HCG organizes such continuous education programmesevery year.

The CSR Committee formed and constituted as reported under the head Board Committeesshall: a) formulate and recommend to the Board a Corporate Social Responsibility Policywhich shall indicate the activities to be undertaken by the company as specified inSchedule VII of the Companies Act 2013; b) recommend the amount of expenditure to beincurred on the activities referred to in clause (a) as applicable; and; c) monitor theCorporate Social Responsibility Policy of the company from time to time.

26. Internal Control system and their adequacy

The internal control system is commensurate with the nature of business size andcomplexity of operations and has been designed to provide reasonable assurance on theachievement of objectives in effectiveness and efficiency of operations reliability offinancial reporting and compliance with applicable laws and regulations.

As part of the Corporate Governance Report CEO/ CFO certification is provided forassurance on the existence of effective internal control systems and procedures in theCompany.

The internal control framework is supplemented with an internal audit program thatprovides an independent view of the efficacy and effectiveness of the process and controlenvironment and supports a continuous improvement program. The internal audit program ismanaged by an Internal Audit function and the Audit & Risk Management Committee of theBoard.

The scope and authority of the Internal Audit Function is derived from the AuditCharter approved by the Audit & Risk Management Committee of the Board. The InternalAudit function develops an internal audit plan to assess control design and operatingeffectiveness as per the risk assessment methodology.

The Internal Audit function provides assurance to the Board and management that asystem of internal control is designed and deployed to manage key business risks and isoperating effectively.

Management provides action plans to address the observations noted from the internalaudit reviews and action plans are monitored towards resolution under the supervision andguidance of the Audit and Risk Management Committee.

27. Vigil Mechanism for Directors and employees

Section 177(9) of the Companies Act 2013 mandates every listed company or such classof companies as may be prescribed to establish a Vigil mechanism for its directors andemployees which shall function as a channel for receiving and redressing ofemployees’ complaints and shall be operated by the Audit and Risk managementcommittee. The Vigil Mechanism provides for (a) adequate safeguards against victimizationof persons who use the Vigil Mechanism; and (b) direct access to the Chairperson of theAudit Committee of the Board of Directors of the Company in appropriate or exceptionalcases.

Under this policy we encourage our employees to report their genuine concern of anyconduct that results in violation of the ethical behaviour or to report any act if notconducted in a fair transparent manner thereby compromising professionalism honesty andintegrity (on an anonymous basis if employees so desire).

Likewise under this policy we have prohibited discrimination retaliation orharassment of any kind against any employees who based on the employee’s reasonablebelief that such conduct or practice have occurred or are occurring reports thatinformation or participates in the said investigation. No individual in the Company hasbeen denied access to the Audit and Risk Management Committee or its Chairman.

This meets the requirement under Section 177(9) and (10) of the Companies Act 2013 andRegulation 22 of SEBI (LODR) Regulations.

28. Company’s Policy on Appointment and Remuneration of Directors

As on March 31 2016 the Board consists of 10 members of which 5 Directors areIndependent Directors and 4 are Non-Executive Directors. Dr. B.S. Ajai Kumar Chairman& CEO is the only Executive Director on the Board.

An appropriate mix of Executive and Independent Directors ensures greater independenceof Board. The Company has been following well laid down policy on appointment andremuneration of Directors Key Managerial Personnel (KMPs) and Senior ManagementPersonnel.

The remuneration of executive directors comprises of fixed remuneration and variablepay based on performance and adheres to the applicable provisions of the Companies Act2013 read with relevant rules as detailed in Corporate Governance Report which forms apart of this report.

The remuneration of Independent Directors comprises of sitting fees which is paid forattending the meetings of the Board and the Committees of the Board in accordance with theprovisions of Companies Act 2013.

The Policy of the Company on the Director’s appointment and remunerationincluding criteria for determining qualifications positive attributes independence of adirector and other matters as required under sub-section (3) of section 178 of theCompanies Act 2013 is available on our website www.hcgel.com. We afirm that theremuneration paid to directors is as per the terms laid out in the nomination andremuneration policy of the Company.

29. Particulars of employees

The disclosure in terms of Section 197 (12) of the Companies Act 2013 read with Rule5 (1) of the Companies (Appointment and Remuneration of Managerial personnel) Rules 2014in respect of employees of the company for the year ended March 31 2016 is provided asAnnexure 4 to this Report.

30. Significant and Material orders

During the period under report there have been no material or significant orderspassed by the Regulators/Courts which would have an impact on the going concern status andoperations of the company in future.

31. Statutory Auditors

M/s. Deloitte Haskins & Sells Chartered Accountants Bangalore (Registration No.008072S) the Statutory Auditors of the Company have been appointed as the Auditors ofthe Company at the Annual General Meeting held on 30th September 2014 to hold office for aterm of 3 years i.e. till the conclusion of the Annual General Meeting (AGM) of theCompany to be held in the year 2017.

The provisions of the Companies Act 2013 require their appointment to be ratified bymembers each year at the AGM. Accordingly requisite resolution forms part of the noticeconvening the AGM.

The company has also received a declaration from M/s. Deloitte Haskins & SellsChartered Accountants Bangalore to the effect that the ratification if made would bewithin the limits as mentioned in the provision of Section 141 of the Companies Act 2013and are eligible to be appointed.

32. Auditors’ Report

There are no qualifications reservations or adverse remarks made by M/s DeloitteHaskins & Sells Statutory Auditors in their report for the financial year ended March31 2016; and hence do not call for any further comments under Section 134 of theCompanies Act 2013.

33. Material changes and commitments if any affecting the financial position of thecompany occurred between the end of the financial year to which these financial statementsrelate and the date of the report:

There are no other material changes affecting the financial position of the companybetween the end of the financial year to which this financial statements relate and thedate of the report.

34. Secretarial Audit

Pursuant to the provisions of Section 204 of the Companies Act 2013 and The Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 your Company hasappointed Mr. V Sreedharan Partner M/s V Sreedharan & Associates a firm of CompanySecretaries in Practice to undertake the Secretarial Audit of the company for thefinancial year ended March 31 2016. The said Report of the Secretarial Audit in Form MR3 is annexed herewith as "Annexure 2" and forms part of the report.

There are no qualification reservations or adverse remarks made by the SecretarialAuditor of the Company in their Secretarial Audit Report.

35. Cost Auditor

Pursuant to Section 148 of the Companies Act 2013 read with The Companies (CostRecords and Audit) Amendment Rules 2014 the cost records maintained by the Company inrespect of its hospital activity is required to be audited. Your Directors had on therecommendation of the Audit and Risk Management Committee appointed M/s. M.Thimmarayaswamy & Co. Cost Accountants to audit the cost records of the Company forthe Financial Year 2016-17 at a remuneration of Rs. 100000 and out of pocket expensesto be reimbursed at actuals. As required under the Companies Act 2013 the remunerationpayable to the cost auditors is required to be placed before the Members in a generalmeeting for ratification. Accordingly a resolution seeking ratification by the Membersfor the remuneration payable to M/s. M. Thimmarayaswamy & Co. Cost Auditors isincluded in the notice convening the ensuing Annual General Meeting.

36. Particulars regarding Conservation of energy Technology absorption and Foreignexchange earnings and outgo as per Section 134(3)(m) of the Companies Act 2013.

Conservation of energy: The operations of your company are not energy-intensive.However significant measures are being taken to reduce energy consumption by using energyefficient equipment. The Company has taken initiatives to conserve energy and consume lessenergy.

Your company constantly evaluates and invests in new technology to make theinfrastructure more energy efficient. As the cost of energy consumed by the company formsa very small portion of the total costs the financial implications of these measures arenot material.

Technology absorption: Over the years your company has brought into the country thebest and the world class equipments for the treatment of cancer. The company has adedicated team of technically competent personnel who relentlessly work on technologyupgradation and development related fields. Your company also deploys its resources fromtime to time and imparts necessary training to keep abreast of the continuously changingtechnology.

HCG as part of its continuous endeavour to provide better healthcare services hasintroduced two major latest technologies at some of the centres during the period underreport.

Robotic Surgery: Da Vinci - Robotic Surgery is an advanced form of minimallyinvasive or laparoscopic (small incision) surgery where surgeons use acomputer-controlled robot to assist them in certain surgical procedures. In recent yearsrobotic surgery has become a new standard of treatment for many cancers includingprostate gynaecological and abdominal surgery. This facility is installed at Bangaloreand Ahmedabad centres.

Tomotherapy Treatment System: The TomoTherapy treatment system uses a patentedmulti-leaf collimator (MLC) that divides the radiation beam into beamlets all aimed atthe tumor. More beam directions give physicians more control in how they plantreatments—and more assurance that dose will be confined to the tumor reducing therisk of short- and long-term side effects. This facility is installed at Kalinga Rao Roadcentre Bangalore.

Both the Robotic Surgery and Tomotherapy treatment facilities are imported and arefully operational.

Research and Development: R&D of new services designs frameworks processes andmethodologies continue to be of importance at the company. This allows your company toincrease quality and customer satisfaction through continuous innovation.

Foreign exchange earnings and outgo: The details of Foreign Exchange Earnings and Outgoduring the year ended March 31 2016 vis a vis during the year ended March 31 2015 is asunder:

Particulars

For the year ended (Rs.)

March 31 2016 March 31 2015
Expenditure in Foreign Exchange Interest 5014116 6977248
Travel expenses 20859873 6625416
Repairs and maintenance :Machinery 19153402 11788000
Professional charges 21676217 3562075
Business promotion expenses 1681885 7518659
Total 68385493 36471398
Imports
Capital Goods 435057602 259240194
Consumables 17753402 9970579
Earnings in foreign exchange Medical service income 356380654 310044092

37. Prevention of Sexual Harassment Policy

The Company has in place a Prevention of Sexual Harassment policy in line with therequirements of the Sexual Harassment of Women at the Workplace (Prevention Prohibitionand Redressal) Act 2013. An Internal Complaints Committee has been set up to redresscomplaints received regarding sexual harassment. All employees (permanent contractualtemporary trainees) are covered under this policy.

During the year 2015-2016 two complaints were received by the Company relating tosexual harassment; and the Internal Complaints Committee after due consideration disposedoff the cases by taking appropriate actions. There were no complaints pending as on March31 2016.

38. Green initiative

As a green initiative in corporate governance Ministry of Corporate affairs havepermitted companies to send electronic copies of Annual Report notices etc. to thee-mail IDs of shareholders. We are accordingly arranging to send soft copies of thesedocuments to the e-mail IDs of shareholders available with us.

In case any of the shareholders would like to receive physical copies of thesedocuments the same shall be forwarded on written request to the company.

We are also in the process of starting a sustainability initiative with the aim ofbeing carbon neutral and minimize our impact on the environment. Sustainability practiceswill be implemented and tracked diligently to ensure that we comply with the goals we setfor ourselves.

39. Employee stock option schemes

The company has two Employee stock option schemes namely "HCG ESOS 2010"adopted on June 16 2010 and Employees Stock Option Scheme 2014 (ESOS 2014) adopted in2014-15. For further details on the scheme refer Annexure 3 of the Director’s report.

40. Corporate Governance

Your Company continues to place greater emphasis on managing its affairs withdiligence transparency responsibility and accountability and is committed to adoptingand adhering to best Corporate Governance practices.

Your company is in compliance with the requirements of SEBI (LODR) Regulations 2015.The Report on Corporate Governance in terms of Regulation 34 of the said Regulations formspart of the report.

Certificate from the Statutory Auditors of the company confirming the compliance withthe conditions of Corporate Governance as stipulated by Regulation 34 (3) of SEBI (LODR)Regulations 2015 is attached to this report.

41. Management Discussion & Analysis

Report on Management Discussion and Analysis in terms of Regulation 34 of SEBI (LODR)Regulations 2015 forms part of the report.

42. Acknowledgement

We stay committed to partnering for value creation and take this opportunity to thankone and all who have participated in our journey this far. Your Directors desires to placeon record its sincere appreciation to all employees at all levels who with sustaineddedicated effort and hard work enabled the company to deliver a good all-roundperformance. Your Directors also wish to place on record their appreciation andacknowledge with gratitude the support and co-operation extended by the variousconsultants bankers shareholders and investors at large and look forward to theircontinued support. We also take this opportunity to express sincere thanks to the medicalfraternity and patients for their continued co-operation patronage and trust reposed inthe company and its health services.

For and on behalf of the Board of Directors
Date: May 26 2016 Dr. BS Ajaikumar
Place: Bangalore Chairman