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Kilitch Drugs (India) Ltd.

BSE: 524500 Sector: Health care
NSE: KILITCH ISIN Code: INE729D01010
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VOLUME 4748
52-Week high 113.00
52-Week low 43.80
P/E 35.70
Mkt Cap.(Rs cr) 115
Buy Price 87.10
Buy Qty 50.00
Sell Price 87.50
Sell Qty 350.00
OPEN 87.50
CLOSE 90.60
VOLUME 4748
52-Week high 113.00
52-Week low 43.80
P/E 35.70
Mkt Cap.(Rs cr) 115
Buy Price 87.10
Buy Qty 50.00
Sell Price 87.50
Sell Qty 350.00

Kilitch Drugs (India) Ltd. (KILITCH) - Director Report

Company director report

To

The Members

KILITCH DRUGS (INDIA) LIMITED

Your Directors have pleasure in presenting their 25th Annual Report on the business andoperations of your Company for the year ended March 31 2017.

1. FINANCIAL RESULTS:

The summarized financial performance of the Company for the FY 2016-17 and FY 2015-16is given below:

[Amount in Rs. Lacs]

Particulars Standalone Consolidated
2016-17 2015-16 2016-17 2015-16
Gross Income 2927.69 2375.66 2979.04 2376.98
Profit Before Tax Interest & Depreciation (124.02) (87.71) (165.91) (158.13)
Finance Charges NIL NIL NIL NIL
Provision for Depreciation 131.88 161.25 975.50 1004.74
Net Profit/ (Loss) Before Tax (255.90) (248.96) (1141.40) (1162.87)
Provision for Tax 56.14 43.61 56.34 43.78
Net Profit/ (Loss) After Tax (199.76) (205.35) (1085.07) (1119.09)
Balance of Profit brought forward 5983.17 6188.52 5069.03 6178.13
Balance available for appropriation 5783.41 5983.17 3973.97 5069.03
Proposed Dividend on Equity Shares NIL NIL NIL NIL
Tax on proposed Dividend NIL NIL NIL NIL
Transfer to General Reserve NIL NIL NIL NIL
Surplus carried to Balance Sheet 5783.41 5983.17 3973.97 5069.03

2. REVIEW OF OPERATIONS: Standalone: -

During the year under review the Company has posted total Income of Rs. 2927.69 Lacsas against Rs.2375.66 Lacs for the corresponding previous year.

Further Net Loss after tax for the year under review was Rs. (199.76) Lacs as againstNet Loss of Rs. (205.35) Lacs for the corresponding previous year.

Consolidated: -

During the year under review the Company has posted total Income of Rs. 2979.04 Lacsas against Rs. 2376.98 Lacs for the corresponding previous year.

Further Net Loss after tax for the year under review was Rs. (1085.07) Lacs as againstNet Loss of Rs. (1119.09) Lacs for the corresponding previous year.

3. STATEMENT OF AFFAIRS AND FUTURE OUTLOOK:

Today’s world is driven by more and more demanding health care agenda theenvironment in which the Pharmaceutical

& Life science companies operate is increasingly becoming challenging. There is aglobal need for innovative cost effective medicines Whilst the health care providerpatients payers inclusive of regulators are demanding greater value for money moretransparency and access to information on the product.

This global competition to our company has continued to be to be taken care of whileformulating significant the growth plan & strategies. Given its strong technologicalbase wide market range of products we are getting well equipped to meet thesechallenges.

We are working tirelessly to create an environment of innovation and learning. Thisobjective enables us to help our customers across the world gain access to affordablehealthcare. We are a growing organization with products across the pharmaceutical valuechain designed to offer solutions for unmet medical needs and better access to existingmedicines. Our offerings cover branded formulations generic drugs OTC products andspecialty products.

With the back up of the seasoned professional management we shall soon successfullycomplete the project in Ethiopia where we are setting up a dedicated Cephalosporin plantwhich shall cater to the entire nation of Ethiopia and shall also cater to the nearby EastAfrican markets. We are about to complete the up-gradation of our manufacturing unit inMumbai with the state of art machineries and technologies which will give us an additionalreach to conquer the markets across the globe.

With this belief and your support we hope to achieve all time highest export sales ofour company.

4. DIVIDEND AND RESERVES:

In view of Loss incurred by the Company your Directors are unable to recommend anydividend for the financial year under review.

5. SHARE CAPITAL:

The Paid-up Equity Share Capital of the Company as on 31st March 2017 is Rs. 1323.18Lacs comprising of 13231828 Equity Shares of Rs. 10/- each. During the year under reviewthe Company has not issued any Equity Shares.

The Board of Directors at their meeting held on 25th July 2017 proposed thepreferential issue of equity shares subject to the approval of the Members of theCompany.

In this regard it was proposed to conduct Postal Ballot to seek approval of theMembers of the Company for such Postal Ballot.

6. EMPLOYEE STOCK OPTION SCHEME:

As per Employee stock option Scheme (Kilitch ESOS 2007) each option is convertibleinto one equity shares of Rs.10/- each at exercise price of Rs.47.50 per share. Yourcompany has instituted Stock Option Plans to enable its employees to participate in yourCompanies growth and financial success. Your Company provides its employees a platform forparticipating in important decision making and instilling long term commitment towardsgrowth of the Company by way of rewarding them through Stock Options. In terms of the

Compensation and Benefit Policy of the Company employees are granted options as partof Annual Performance Review process based on their performance as well as to ensure theirretention and to hire the best talent for its senior management and key positions. TheEmployee Stock Option Plans are administered by the Nomination & RemunerationCommittee of the Board of the Company.

During the year all new grants have been made in w.e.f. February 13 2017. The Schemesare in compliance with the SEBI (Share Based Employee Benefits) Regulations 2014.

Source of shares are primary in nature since your Company has been issuing new equityshares upon exercise of options.

Options granted for a term of 3 years (inclusive of the vesting period) and are settledwith equity shares being allotted to the beneficiary upon exercise.

No stock options were issued to the Directors of your Company Further at the meetingheld on 23rd Aug 2017 Directors of the Company proposed to re-price the options at suchdiscount to the market price as they may deem fit. However the price shall not be lessthan face value of the shares. The proposed re-pricing is in conformity with SEBIguidelines.

Also The Directors propose to increase the limit of the maximum number of shares thatmay be issued under KDIL ESOS 2007 to an individual eligible participants from 5000shares to 100000 shares.

7. DIRECTORS AND KEY MANAGERIAL PERSONNEL

At the 24th Annual General Meeting held on September 30 2016 Mr. Deepu KesavanPanankattil was re-appointed as the Director of the Company liable to retire by rotation.

Also Mr. Mukund Mehta was re-appointed as the Managing Director of the Company w.e.f.30th September 2016 for a period of 5 years.

Further Mr. Deepu Kesavan Panankattil resigned as Director of the Company w.e.f. 30thNovember 2016.

Also Mr. Shailesh Mirgal appointed as the Chief Financial Officer of the Companyw.e.f. 24.08.2016

Further Mr. Dharmendra Makwana was appointed as the Company Secretary in Whole time inemployment w.e.f. 30th May 2017 and Ms. Keerti Acharya tendered her resignation as theCompany Secretary with effect from 1st May 2017.

In accordance with section 152(6) of the Companies Act 2013 and in terms of Articlesof Association of the Company Mrs. Mira Mehta (DIN: 01902831) Whole-Time Director of theCompany retires by rotation and being eligible; offers herself for re-appointment at theforthcoming 25th Annual General Meeting. The Board recommends the said reappointment forshareholders’ approval.

8. DIRECTORS’ RESPONSIBILITY STATEMENT

Pursuant to Section 134(3)(c) & 134(5) of the Companies Act 2103 the Board ofDirectors of the Company hereby confirm that:

(a) in the preparation of the annual accounts the applicable accounting standards havebeen followed along with proper explanation relating to material departures;

(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 at the end of the financial year and ofthe profit and loss of the company for that period;

(c) the directors have taken proper and sufficient care for themaintenanceofadequateaccountingrecordsinaccordance with the provisions of this Act forsafeguarding the assets of the company and for preventing and detecting fraud and otherirregularities;

(d) the directors have prepared the annual accounts on a going concern basis; and

(e) the directors have laid down internal financial controls to be followed by thecompany and that such internal financial effectively.

(f) the directors have devised proper systems to ensure compliance with the provisionsof all applicable laws and that such systems were adequate and operating effectively.

9. PARTICULARS OF EMPLOYEES AN RELATED DISCLOSURE

The information required pursuant to Section 197 read with Rule 5(1) of the Companies(Appointment and Remuneration of Managerial Personnel) Amendment Rules 2016 in respect ofemployees of the Company is enclosed as Annexure I and forms part of this Report.

Further no employee of the Company is earning more than the limits as prescribedpursuant to Section 197 read with Rule 5(2) of the Companies (Appointment and Remunerationof Managerial Personnel) Amendment Rules 2016 in respect of employees of the Company.

Further the names of top ten employees in terms of remuneration drawn are disclosed inAnnexure II and forms part of this Report.

10. NUMBER OF BOARD MEETINGS

A calendar of meetings is prepared and circulated in advance to the Directors. Duringthe year 4 (Four) Board Meetings were convened and held the details of which are givenin the Corporate Governance Report. The intervening gap between the meetings was withinthe period prescribed under the Companies Act 2013 and the SEBI (LODR) Regulations 2015.

11. BOARD EVALUATION

Pursuant to the provisions of the Companies Act 2013 and the SEBI (LODR) Regulations2015 the Board has carried out an annual performance evaluation of its own performancethe directors individually as well as the evaluation of the working of its Committees. TheDirectors expressed satisfaction with the evaluation process. The manner in which theevaluation has been carried out has been explained in the Corporate Governance Report.

12. INDEPENDENT DIRECTORS

The Independent Director(s) have submitted their disclosure to the Board that theyfulfill all the requirements as to qualify for their appointment as Independent Directorunder the provisions of section 149 of the Companies Act 2013 as well as Regulation 17 ofthe Securities and Exchange Board of India (Listing Obligations and DisclosureRequirements) Regulations 2015.

13. NOMINATION AND REMUNERATION POLICY

The Board of Directors has framed a policy which lays down a framework in relation toremuneration of Directors. This policy also lays down criteria for selection andappointment of Board Members. The details of this policy are provided as Annexure- VIIto this Report and also available on the website of the Company www.kilitch.com.

14. EXTRACT OF ANNUAL RETURN:

The details forming part of the Extract of the Annual Return in Form MGT-9 as requiredunder Section 92 of the Companies Act 2013 is included in this Report as Annexure III andforms part of this Report.

15. DETAILS OF SUBSIDIARY/JOINT VENTURES/ ASSOCIATE COMPANIES

The Statement AOC-1 pursuant to the provisions of Section 129 (3) of theCompanies Act 2013 read with Rule 5 of the Companies (Accounts) Rules 2014 regardingSubsidiary Company is enclosed as Annexure IV to this Report.

16. STATUTORY AUDIT

As per the provisions of the Act the period of office of M/s A. M. Ghelani & Co.Chartered Accountants Statutory Auditors of the Company expires at the conclusion of theensuing Annual General Meeting.

It is proposed to appoint M/s A. M. Ghelani & Co. Chartered Accountants foranother term of 3 (Three) consecutive years. M/s A. M. Ghelani & Co. CharteredAccountants have confirmed their eligibility and qualification required under the Act forholding the office as Statutory Auditors of the Company.

The Notes on financial statement referred to in the Auditors’ Report areself-explanatory and do not call for any further comments. The Auditors’ Report doesnot contain any qualification reservation adverse remark or

17. SECRETARIAL AUDIT

In terms of Section 204 of the Act and Rules made there under M/s. Deep ShuklaPracticing Company Secretary have been appointed Secretarial Auditors of the Company. TheSecretarial Audit Report is enclosed as Annexure VI to this report.

EXPLANATION(S)/ COMMENT(S) PURSUANT TO SECTION 134(3)(f)(ii) OF THE COMPANIES ACT2013:

1. The Company is in the process to file form MGT-14 with respect to the appointment ofsecretarial auditor internal auditor and investment made by the Company.

2. The Company is in process to file Form MGT-10 for change in shareholding

18. COST AUDIT

As per the Cost Audit Orders and in terms of the provisions of Section 148 and allother applicable provisions of the Companies Act 2013 read with the Companies (Audit andAuditors) Rules 2014 Cost Audit is not applicable to our Company.

19. INTERNAL AUDIT & CONTROLS

The Company has in place adequate internal financial controls with reference to thefinancial statement. The Audit Committee of the Board periodically reviews the internalcontrol systems with the management StatutoryAuditors.Significantinternal audit findingsare discussed and follow-ups are taken thereon.

Further Milind Mehta & Co. Chartered Accountants having Membership No. 47739were appointed as Internal Auditors of the Company.

20. COMPOSITION OF AUDIT COMMITTEE

Your Company has formed an Audit Committee as per the Companies Act 2013 and the SEBI(LODR) Regulations 2015. All members of the Audit Committee possess strong knowledge ofaccounting and financial management.

Further the Audit Committee is functional as per the provision of Section 177 ofCompanies Act 2013 and Rules made thereunder and as per Regulation 18 of Securities andExchange Board of India (Listing Obligations and Disclosure Requirements) Regulations2015.

The other details of the Audit Committee are given in the Corporate Governance Reportappearing as a separate section in this Annual Report.

21. VIGIL MECHANISM

In pursuant to the provisions of section 177(9) & (10) of the Companies Act 2013a Vigil Mechanism for directorsas issued and employees to report genuine concerns has beenestablished. The Vigil Mechanism Policy has been uploaded on the website of the Company atwww.kilitch.com. The employees of the Company are made aware of the said policy at thetime of joining the Company.

22. RISK MANAGEMENT POLICY

The Company has laid down the procedure to inform the Board about the risk assessmentand minimization procedures. These procedures are reviewed by the Board annually to ensurethat there is timely identification and assessment of risks measures to mitigate themand mechanisms for their proper and timely monitoring and reporting.

23. DEPOSITS

The Company has neither accepted nor renewed any fixed deposits during the year underreview under Section 76 of the Companies Act 2013. There are no unclaimed depositsunclaimed / unpaid interest refunds due to the deposit holders or to be deposited to theInvestor Education and Protection Fund as on March 31 2017.

24. LOANS & GUARANTEES

During the year under review the Company has not provided any loan guaranteesecurity or made any investment covered under the provisions of Section 186 of theCompanies Act 2013 to any person or other body corporate.

25. INSURANCE

The properties/assets of the Company are adequately insured.

26. RELATED PARTY TRANSACTIONS

During Financial Year 2016-17 the Company entered into certain Related PartyTransactions which are in the ordinary course of business and at arm’s length basiswith approval of the Audit Committee. The Audit Committee grants omnibus approval for thetransactions which are of foreseen and repetitive nature. A detailed summary of RelatedParty Transactions is placed before the Audit Committee and the Board of Directors fortheir review every quarter.

There are nomateriallysignificantRelated Party Transactions executed between theCompany and its Promoters Directors key Managerial Personnel or other designatedpersons that may have a potential conflict with the interest of the Company at large.

Since all Related Party Transactions entered into by the Company were in ordinarycourse of business and were on an arm’s length basis Form AOC-2 is applicable to theCompany and is enclosed a Annexure V to this report.

27. CORPORATE GOVERNANCE CERTIFICATE

In compliance with Regulation 34(3) read with Schedule V(C) of the SEBI (LODR)Regulations 2015 a Report on Corporate Governance forms part of this Annual Report. byPracticing Company Secretary The Certificate certifying compliance with the conditions ofcorporate governance as prescribed under Schedule V(E) of the SEBI (LODR) Regulations2015 is annexed to the Corporate Governance Report.

28. CORPORATE SOCIAL RESPONSIBILITY

The Company does not meet the criteria of Section 135 of Companies Act 2013 read withthe Companies (Corporate Social Responsibility Policy) Rules 2014 so there is norequirement to constitute Corporate Social Responsibility Committee and frame a policythereof.

29. MANAGEMENT DISCUSSION AND ANALYSIS

The Management Discussion and Analysis Report which gives a detailed state of affairsof the Company’s operations forms part of this Annual Report.

30. CONSERVATION OF ENERGY RESEARCH AND DEVELOPMENT TECHNOLOGY ABSORPTION ANDFOREIGN EXCHANGE

(A) Conservation of Energy:

i. steps taken or impact on conservation of energy; The use of energy is beingoptimized through improved operational methods. Continuous efforts are being made tooptimize and conserve energy by improvement in production process. Even though itsoperations are not energy-intensive significant measures are taken to reduce energyconsumption by using energy-efficient equipment. The Company regularly reviews powerconsumption patterns in its all locations and implements requisite improvements/changes inthe process in order to optimize energy/ power consumption and thereby achieve costsavings.

ii. steps taken for utilizing alternate sources of energy; The steps taken by theCompany for utilizing alternate sources of energy: The Company is using electricity as themain source of energy and is currently not exploring any alternate source of energy.

iii. capital investment on energy conservation equipments;

Our Company firmly believes that our planet is in dire need of energy re-sources andconservation is the best policy.

(B) Absorption of Technology:

i. The efforts made towards technology absorption: The Company values innovation andapplies it to every facet of its business. This drives development of distinctive newproducts ever improving quality standards and more efficient processes.

The Company has aug`mented its revenues and per unit price realization by deployinginnovative marketing strategies and offering exciting new products. The depth of designingcapabilities was the core to our success over the years.

The Company uses the service of in-house designers as well as those of free-lancers indeveloping product designs as per the emerging market trends. The Company uses innovationin design as well as in technology to develop new products.

ii. Benefits derived as a result of the above efforts: As a result of the above thefollowing benefits have been achieved:

a. Better efficiency in operations

b. Reduced dependence on external sources for technology for developing new productsand upgrading existing products

c. Expansion of product range and cost reduction

d. Greater precision

e. Retention of existing customers and expansion of customer base

f. Lower inventory stocks resulting in low carrying costs.

iii. The Company has not imported any technology during the year under review;

iv. The Company has not expended any expenditure towards Research and Developmentduring the year under review.

(C) FOREIGN EXCHANGE EARNING AND OUTGO:

(I) Earnings in Foreign Currency

(Rs. in Lacs)

Particulars 2016-17 2015-16
Export Sales 1723.39 1460.81

(II) Expenditure in foreign currency

(Rs. in Lacs)

Particulars 2016-17 2015-16
Business Promotion & Travelling 56.87 30.70
Export Registration 42.63 147.09
Export Expenses 1.62 0.06

31. TRANSFER OF AMOUNTS TO INVESTOR EDUCATION AND PROTECTION FUND

As per the provision of Section 125 of the Companies Act 2013 read with rule 4 ofCompanies (Declaration and Payment of Dividend) Rules 2014 Dividend which remainunclaimed for the period of seven years are required to be transferred to the InvestorEducation Protection Fund administered by the Central Government.

Dates of declaration of dividends since 2008-09 and the corresponding dates whenunclaimed dividends are due to be transferred to the Central Government are given in thebelow table.

Financial Year Ended Date of declaration of Dividend Amount Remaining unclaimed/ Unpaid as on 31.03.2017 (Rs.) Last date for claiming unpaid dividend amount (before) Last date for transfer to IEPF
2009- 2010 20/10/2010 381280 31.07.2018 30.09.2018
2010- 2011 10/09/2011 475219 31.07.2019 30.09.2019
2011- 2012 29/09/2012 8676450 31.07.2020 30.09.2020

Members are requested to note that after completion of seven years no claims shall lieagainst the said fund or company for the amounts of dividend so transferred nor shall anypayment be made in respect of such claims.

32. GENERAL

During the year ended 31st March 2017 there were no cases filed /reported pursuant tothe Sexual Harassment of women at workplace (Prevention Prohibition and Redressal) Act2013.

The Company confirms that it has paid the Annual Listing Fees for the year 2017-18 toBSE and NSE where the Company’s Shares are listed.

During the year under significantand material review no orders were passed by theregulators or courts or tribunals impacting the going concern status and Company’soperations.

During the year under review there have been no material changes and commitmentsaffecting the financial position of the Company which have occurred between the end of thefinancial year of the company to which the financial statements relate and the date of thereport.

33. HUMAN RESOURCES

Your Company treats its "human resources" as one of its most importantassets.

Your Company continuously invests in attraction retention and development of talent onan ongoing basis. A number of programs that provide focused people attention are currentlyunderway. Your Company thrust is on the promotion of talent internally through jobrotation and job enlargement.

34. SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS OR TRIBUNALS:and material orders There are no significant passed by theRegulators / Courts /Tribunals which would impact the going concern status of the Company and its futureoperations.

35. MATERIAL CHANGES AND COMMITMENTS AFFECTING THE FINANCIAL POSITION OF THE COMPANY:

The Board of Directors at their meeting held on 25th July 2017 proposed thepreferential issue of equity shares subject to the approval of the Members of theCompany.

In this regard it was proposed to conduct Postal Ballot to seek approval of theMembers of the Company for such Postal Ballot.

36. ACKNOWLEDGEMENT

The Directors would like to thank all shareholders customers bankers medicalprofessionals business associates suppliers distributors and everybody else with whosehelp cooperation and hard work the Company is able to achieve the results. The Directorswould also like to place on record their appreciation of the dedicated efforts put in bythe employees of the Company.

For & on behalf of the Board of Directors of
Kilitch Drugs (India) Limited
Mukund Mehta Bhavin Mehta
[DIN: 00147876] [DIN: 00147895]
Managing Whole-Time Director
Director
Place: Mumbai
Date: 14th August 2017