The Members of
Laurus Labs Limited
Your Directors have pleasure in presenting the 12th Annual Report of the Companytogether with the Audited Financial Statements for the Financial Year ended 31st March2017.
(Rs in Million)
|Particulars ||2016-17 ||2015-16 |
|Gross Income ||19183 ||18081 |
|Earnings Before Interest Tax Depreciation and Amortization (EBITDA) ||4461 ||3740 |
|Finance Charges ||970 ||1110 |
|Depreciation/Amortization ||1030 ||858 |
|Net Profit Before Tax ||2476 ||1796 |
|Provision for Tax ||451 ||349 |
|Net Profit After Tax carried to Balance Sheet ||2026 ||1447 |
|Proposed Dividend amount ||159 ||49 |
|Proposed Dividend Tax amount ||32 ||10 |
(i) Initial Public Offer (IPO):
Your Company has successfully completed its Initial Public Offering (IPO) and Offer forSale (OFS) and the Equity Shares of the Company have been listed on the National StockExchange of India Limited (NSE) and BSE Limited (BSE) with effect from December 19 2016.Further details are provided below under the heading "Share Capital".
During the year under review your Company achieved the following:
Growth of 6.1% in income and 19.29% in Earnings Before Interest Tax Depreciation andAmortisation (EBITDA)
Expansion of R&D Centre at Hyderabad is completed
Unit 5 (dedicated manufacturing facility for Aspen) was inaugurated and operationalfrom November 2016.
Initiated ARV API supply into the European market
USFDA and WHO-Geneva Inspections completed successfully at Unit-2
Under Profit sharing arrangement with Natco for Hepatitis-C Segment Natco launchedVelpatasvir and Sofosbuvir combination in Nepal and launched in India in May 2017.
Partnering with Dr. Reddy's for development and marketing of several anti-retroviralformulations on profit-and cost sharing basis
Signed manufacturing and supply agreement for Oncology NCE for clinical phase andcommercial supplies
Unit 4 for API/Intermediate manufacturing facility is under construction
Filed 3 ANDAs with USFDA and one dossier with WHO-Geneva
Business prospects will remain positive because of the growing global demand forgenerics and opportunities provided by expiry of patents in developed markets.
Various business aspects including market conditions business opportunitieschallenges etc. have been discussed at length in the Management's Discussion and Analysis(MDA) which forms part of this Annual Report.
Your directors are pleased to recommend a dividend @ 15% (i.e. Rs 1.50/- per share offace value of Rs 10/- each) for the Financial Year ended March 31 2017. The dividend ifapproved by the Members in their forthcoming Annual General Meeting to be held on July12 2017 will be paid to the Members on or after July 18 2017 whose names appear on theRegister of Members as on Book Closure Date.
Transfer to Reserves:
Your Company does not propose to transfer any portion of profits to Reserves.
During the year under review your Company had successfully completed its InitialPublic Offering (IPO) of equity shares of the Company and the equity shares have beenlisted on National Stock Exchange of India Limited (NSE) and BSE Limited (BSE) with effectfrom December 19 2016. In the process the Company had offered 7009345 Equity Sharesfor an aggregate amount of Rs 2997.10 Million (6936775 equity shares of Rs 10/- at aprice of Rs 428 per equity share to the Public and 72570 equity shares of Rs 10/- each ata price of Rs 388 per equity share to the employees under employee reservation category).The Private Equity Investors namely Aptuit (Asia) Private Limited FIL Capital Management(Mauritius) Limited Fidelity India Principals and Bluewater Investment Ltd. havetogether offered 24107440 equity shares in the Offer For Sale (OFS) in the IPO for anaggregate amount of Rs 10308 Million. Therefore the total IPO including Offer For Salewas for 31116785 equity shares of Rs 10/- each for a total amount of Rs 13305.10Million.
Prior to IPO the Company converted all Series A Series B and Series C PreferenceShares into equity Shares in July 2016.
Further the Company has also allotted three bonus equity shares of Rs 10/- each forevery one the then existing equity share of Rs 10- each held i.e. in the ratio of 3:1 inJuly 2016 by capitalizing the reserves to the extent of Rs 739713030/-. This CorporateAction of Bonus Issue was extended to the ESOP Schemes 2011 and 2016 as well. The ESOP2016 was originally approved by the Members in the 11th Annual General Meeting held onJune 9 2016. In September 2016 the Company has also allotted 118500 equity shares of
Rs 10/- each at a price of Rs 10/- each to the employees of the Company pursuant toexercise of vesting rights by the employees under ESOP Scheme 2011.
The Authorized Share Capital of the Company has been increased from Rs 914 Mn to Rs1110 Million by creation of additional 19600000 equity shares of Rs 10/- each. Furtherentire authorized preference capital of Series A Series B and Series C has been convertedinto authorized equity share capital of the Company. As a result the Authorized ShareCapital as on the date stands at 111000000 equity shares of Rs 10/- each aggregating toRs 1110000000/- (Rupees One Billion One hundred and ten million only).
The movement in Authorized Share Capital is as follows:
|Authorized Capital as on March 31 2016 ||Movement during the year 2016-17 ||Cumulative Authorized Capital post- such movement |
|24787037 equity shares of Rs 10/ each ||Nil ||24787037 equity shares of Rs 10/- each |
|-- ||Increase of 19600000 equity shares of Rs 10/- each on June 6 2016 ||44387037 equity shares of Rs 10/- each |
|2259060 0.001% CCPCPS of Rs 10/- each - Series A ||Converted into 2259060 equity shares of Rs 10/- each on July 20 2016 ||46646097 equity shares of Rs 10/- each |
|2477387 0.001% CCPCPS of Rs 243/- each - Series B ||Converted into 60200504 equity shares of Rs 10/- each on July 20 2016 ||106846601 equity shares of Rs 10/- each |
|4153399 0.001% CCPCPS of Rs 10/- each - Series C ||Converted into 4153399 equity shares of Rs 10/- each on July 20 2016 ||111000000 equity shares of Rs 10/- each (as on March 31 2017) |
The movement in paid up share capital is as follows:
|Paid Up Capital as on March 31 2016 ||Movement during the year 2016-17 ||Cumulative Paid Up Capital after such movement |
|15767255 equity shares of Rs 10/ each ||Nil ||15767255 equity shares of Rs 10/- each |
|2259060 0.001% CCPCPS of Rs 10/- each - Series A ||Allotted 2259060 equity shares of Rs 10/- each on July 15 2016 pursuant to conversion ||18026315 equity shares of Rs 10/- each |
|2477387 0.001% CCPCPS of Rs 243/- each - Series B ||Allotted 2477387 equity shares of Rs 10/- each on July 15 2016 pursuant to conversion ||20503702 equity shares of Rs 10/- each |
|4153399 0.001% CCPCPS of Rs 10/- each - Series C -- ||Allotted 4153399 equity shares of Rs 10/- each on July 15 2016 pursuant to conversion Allotment of 73971303 equity shares of Rs 10/- each as Bonus Shares on July 27 2016 in the ratio of 3:1 ||24657101 equity shares of Rs 10/- each 98628404 equity shares of Rs 10/- each |
| ||Allotment of 118500 equity shares of Rs 10/- each on September 26 2016 under ESOP Scheme 2011 ||98746904 equity shares of Rs 10/- each |
|-- ||Allotment of 7009345 equity shares of Rs 10/- on December 15 2016 in IPO ||105756249 equity shares of Rs 10/- each |
The movement in Securities Premium Account is as follows:
Rs in Millions
|Particulars ||Amount ||Cumulative Amount |
|Balance as on March 31 2016 ||4070.93 ||4070.93 |
|Add: Premium on conversion of 2477387 Series B Preference ||577.23 ||4648.16 |
|Shares @ Rs 233/- per Share || || |
|Less: Issue of 73971303 Bonus equity Shares of Rs 10/- each ||(739.71) ||3908.45 |
|Add: Transfer from Stock Options ||5.94 ||3914.39 |
|Add: Allotment of 7009345 equity Shares of Rs 10/- each at premium ||2927.01 ||6841.40 |
|Less: IPO Expenses ||(137.86) ||6703.54 |
|Balance as on March 31 2017 || ||6703.54 |
Utilization of IPO Proceeds:
The details of utilisation of IPO proceeds - Rs 2859.24 Million (net off IPO relatedexpenses including service tax - Rs 137.86 Million) are as follows:
Rs in Millions
|Particulars ||As per Prospectus ||Utilised upto March 31 2017 ||Unutilised amount as at March 31 2017 |
|Pre-payment of term loans ||2262.90 ||2262.90 ||- |
|General corporate purposes ||596.34 ||596.34 ||- |
|Total ||2859.24 ||2859.24 ||- |
Change in the nature of business if any:
There is no change in the nature of business of the Company or any of its subsidiariesor associates during the year under review.
Material Changes and commitments affecting the financial position of the Company:
There are no material changes and commitments affecting the financial position of theCompany that have occurred between the end of the financial year of the Company to whichthe financial statements relate and the date of the Report i.e. between March 31 2017 toMay 18 2017.
The Company did not accept any fixed deposits.
Subsidiaries Associates and Joint Ventures:
The Company had two Wholly Owned Subsidiaries namely (i) Viziphar Biosciences PrivateLimited and (ii) Laurus Synthesis Inc. USA. During the year the Company has disinvestedits 100% stake in Viziphar Biosciences Private Limited vide Agreement dated April 18 2016and the effective date of Agreement was April 1 2016 and therefore Viziphar BiosciencesPrivate Limited ceased to be the Subsidiary of the Company w.e.f. April 1 2016. Furtherduring the year your Company has acquired balance 73% of equity shareholding of itsAssociate Company namely Sriam Labs Private Limited with effect from November 1 2016thereby Sriam Labs Private Limited became 2nd 100% wholly Owned Subsidiary of the Company.Therefore as on March 31 2017 the Company has two subsidiaries namely (i) LaurusSynthesis Inc. USA; and (ii) Sriam Labs Private Limited India.
As per Sec. 129(3) of the Companies Act 2013 the consolidated financial statement ofthe Company and all its Subsidiaries and Associates prepared in accordance with theapplicable accounting standards forms part of this Annual Report. Further a statementcontaining salient features of the financial statements of our subsidiaries and associatesin the prescribed form in AOC-1 is attached as Annexure-1 to the Directors' Report.
Consolidated financial Statements:
Consolidated Financial Statements have been prepared by the Company in accordance withthe requirements of applicable Accounting Standards and the provisions of Companies Act2013. As per the provisions of Section 136 of the Companies Act 2013 the Company hasplaced separately the audited financial statements of its subsidiaries on its websitewww.lauruslabs.com and copies of audited financial statements of the subsidiaries will beprovided to the Members at their request.
Particulars of Loans Guarantees and Investments:
During the year your Company has provided a Corporate Guarantee to Citi Bank Indiaand in turn Standby Letter of Credit issued by Citi Bank India to Citi Bank Inc. USA onbehalf of the Subsidiary Company namely Laurus Synthesis Inc. USA for US Dollars 2Million to meet the objectives of the said Subsidiary Company.
Further the Company has also issued a Corporate Guarantee to the Bankers of Sriam LabsPrivate Limited for an amount of Rs 690.60 Million both of which are well within thelimits prescribed under Sec.186 of the Companies Act 2013.
Board of Directors and Key Management Personnel:
As per the provisions of the Companies Act 2013 Mr.Rajesh Kumar Dugar (DIN:00307729)and Mr. Narendra Ostawal (DIN:06530414) will retire at the ensuing annual general meetingand being eligible seek reappointment. The Board of Directors recommends theirre-appointment.
During the year Mr. Amal Ganguli Mrs. Aruna Bhinge Mr. Rajesh Chandy and Mr. RameshSubrahmanian were appointed as Independent Directors of the Company for a period of 5years from the dates of their respective appointments. Mr. Chandrakanth Chereddi wasappointed as Whole-time Director for a period of 5 years from August 9 2016.
Dr. Satyanarayana Chava Dr. Raju Srihari Kalidindi and Mr. VV Ravi Kumar all of whohave been appointed as Whole Time Directors for a period of 5 years with effect from April
1 2015 and whose appointments have been approved by the Members in their 10th AnnualGeneral Meeting held on July 31 2015 continue to function as Whole Time Directors of theCompany. The Board has appointed Dr. Satyanarayana Chava as Chief Executive Offcer of theCompany and Mr. VV Ravi Kumar as Chief Financial Offcer of the Company.
Mr. Niten Malhan Mr. Robert Weisskoff Mr. Conner Town Mulvi Mr. Frank Wright all of them being Non-Executive and Nominee Directors have resigned as Directors duringthe year under review. Mr. Amal Ganguli has passed away on May 8 2017 and your Boardregret the information of Mr. Amal Ganguli's demise and pay homage and extend itsheart-felt condolences to the bereaved family.
Your directors have appreciated the immense contributions made by the above directorsfor the growth of the Company.
The Board of Directors in their Meeting held on May 18 2017 have appointed Dr. M.Venu Gopala Rao (DIN.00012704) and Dr. Ravindranath Kancherla (DIN:00117940) subject toapproval of the Members as Non-Executive and Independent Directors for a period of 5years with effect from May 18 2017.
The Board and Committee meetings are pre-scheduled and a tentative calendar of themeetings shall be finalized in consultation with the Directors to facilitate them to plantheir schedule. However in case of urgent business needs approval is taken by passingresolutions through circulation. During the year under review 20 (twenty) board meetingswere held. The details of the meetings including composition of various committees areprovided in the Corporate Governance Report.
Declaration from Independent Directors:
The independent directors have submitted the declaration of independence stating thatthey meet the criteria of independence as provided in sub-section (6) of Section 149 ofthe Companies Act 2013.
Policy on Directors' Appointment and Remuneration:
The policy of the Company on directors' appointment and remuneration includingcriteria for determining qualifications positive attributes independence of a directorand other matters are adopted as per the provisions of the Companies Act 2013. Theremuneration paid to the Directors is as per the terms laid out in the nomination andremuneration policy of the Company. The nomination and remuneration policy is adopted bythe Board is placed on the Company's website
Your Company had formulated a risk management policy for dealing with different kindsof risks which it faces in day-to-day operations of the Company. Risk Management Policy ofthe company outlines different kinds of risks and risk mitigating measures to be adoptedby the Board. The Company has adequate internal financial control systems and proceduresto mitigate the risk. The risk management procedure is reviewed by the Audit Committee andBoard of Directors on regular basis at the time of review of quarterly financial resultsof the Company. Further your Company had constituted a Risk Management Committee whichlays down various risk mitigating practices that your Company is required to implement inthe Company.
Adequacy of Internal Financial Controls:
The internal financial controls with reference to the Financial Statements apart fromstatutory audit internal audit and cost compliance are adequate to the size andoperations of the Company.
Directors' Responsibility Statement:
In terms of Section 134(3)(c) of the Companies Act 2013 the Board of Directors of theCompany states 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 suffcient care for the maintenance of adequateaccounting records in accordance with the provisions of Companies 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 operativeeffectively; and
(f) the directors had devised proper systems to ensure compliance with the provisionsof all applicable laws and that such systems were adequate and operative effectively.
Related Party Transactions:
In accordance with Sec 134(h) of the Companies Act 2013 and Rule 8(2) of Companies(Accounts) Rules 2014 the particulars of contracts or arrangements entered into by theCompany with the Related Parties referred to in Sec.188(1) of the Act have been providedin Form AOC-2 and attached the same as Annexure-2
The details of related party disclosures as stated in the notes to the financialstatements forms part of this annual report.
The Company established whistle blower policy in order to assure that the business isconducted with integrity and that the Company's financial information is accurate.
(i) Statutory Auditors:
S. R. Batliboi & Associates LLP Chartered Accountants the auditors of the Companyhave completed their term of 10 years under Sec.139(2) of the Companies Act 2013 andtherefore the Board of Directors of your Company on the recommendation of the AuditCommittee have recommended to the members for appointment of Deloitte Haskins & SellsLLP Firm Registration No.117366W/W-100018 as Statutory Auditors of the Company for aperiod five years from the conclusion of 12th Annual General Meeting till the conclusionof 17th Annual General Meeting of the Company.
(ii) Cost Auditors:
In accordance with Section 148 of the Companies Act 2013 read with Companies (Audit& Auditors') Rules
2014 and the Companies (Cost Records and Audit) Amendments Rules 2014 the Companymaintains the cost records in respect of its business.
Your Board has appointed M/s. Bharathula & Associates Cost Accountants as theCost Auditors of the Company for the Financial Year 2017-18. As required by the Act theremuneration of the Cost Auditors have to be ratified by the Members and accordingly theresolution relating to the Cost Auditors is being placed before the Members for theirratification.
(iii) Secretarial Auditors & Secretarial Audit Report:
Pursuant to the provisions of Section 204 of the Companies Act 2013 and Rule 9 of theCompanies (Appointment and Remuneration of Managerial Personnel) Rules 2014 the Companyhas appointed Y. Ravi Prasada Reddy Practising Company Secretary (CP No5360) proprietorof RPR & Associates to undertake the Secretarial Audit of the Company for thefinancial year 2016-17. The Secretarial Audit Report issued in Form MR-3 is in Annexure-3to this Report. There are no qualifications reservations or adverse remarks in theSecretarial Audit Report.
Auditors' Qualifications/reservations/adverse remarks/Frauds reported:
There are no Auditors' Qualifications or reservations or adverse remarks on thefinancial statements of the Company. The Auditors have not reported any frauds to theAudit Committee as prescribed under Sec. 143 (12) of the Companies Act 2013.
Significant and material orders passed by the Courts/Regulators:
There are no significant and material orders passed by the Courts or Regulators againstthe Company.
CARE has affrmed its rating as A+ i.e. Positive Outlook on the long term bankfacilities of the Company and upgraded its rating from A1 to A1+ on the short term bankfacilities of the Company.
All properties and insurable interests of the Company including buildings plant andmachinery and stocks have been fully insured.
Corporate Social Responsibility initiatives:
Pursuant to the provisions of Section 135 and Schedule VII of the Companies Act 2013CSR Committee of the Board of Directors had framed the policy on Corporate SocialResponsibility and the Projects and Programs undertaken by the Company during the yearunder review have been provided in Annexure-4 and forms part of this Report.
Extract of Annual Return:
As required pursuant to section 92(3) of the Companies Act 2013 and rule 12(1) of theCompanies (Management and Administration) Rules 2014 an extract of annual return in MGT9 is given in the Annexure-5 and forms part of this Report.
Statement of Particulars of Appointment and Remuneration of Managerial Personnel/employees:
In accordance with the provisions of Section 134 and Rule 5 of Companies (Appointmentand Remuneration of Managerial Personnel) Rules 2014 the statement of particulars ofappointment and remuneration of managerial personnel and employees is attached inAnnexure-6 to this Report.
The management believes that the competent and committed human resources are vitallyimportant to attain success in the organization. In line with this philosophy utmost careis being exercised to attract quality resources and suitable training is imparted onvarious skill-sets and behavior. Annual sports and games were conducted across theorganization to enhance the competitive spirit and encourage bonding teamwork among theemployees.
Employee Stock Options:
During the year the Company has allotted 118500 (One hundred Eighteen thousand andfive hundred only) equity shares of Rs 10/- at a price of Rs 10/- per share to variouseligible employees of the Company under Employee Stock Option Scheme-2011 upon exercise oftheir vesting rights.
Further the Shareholders have approved a new Employees Stock Option Scheme 2016wherein 300000 stock options have been reserved to the employees at an exercise price of25% less than the Fair Market Value of the Share of the Company on the date of grant ofoptions. During the year the Company had granted 178438 options as Grant-1 under thisScheme to the employees of the Company.
Both ESOP Scheme 2011 and ESOP Scheme 2016 have been adjusted to the Bonus Issueas approved by the members during the year in the ratio of 3:1. Accordingly the totaloptions outstanding as on March 31 2017 under ESOP Scheme 2011 were 935000 and underESOP Scheme 2016 were 1200000.
The details of stock options are as mentioned in Annexure 7 and forms part of thisReport. Further the details of the stock options stated in the notes to accounts of thefinancial statements also forms part of this Annual Report.
Conservation of energy technology absorption and foreign exchange earnings/outgo:
The information required under Section 134 (3) (m) of the Companies Act 2013 readwith Rule 8(3) of Companies (Accounts) Rules 2014 is appended hereto as Annexure 8 andforms part of this Report.
Policy on Prevention of Sexual Harassment:
The Company has formulated and implemented a policy for Prevention of Sexual Harassmentof Women at workplace. During the year under review the Company has not received anycomplaints under the policy.
The Company has many systems processes and policies to ensure professional ethics andharmonious working environment. We follow Zero Tolerance towards Corruption and unethicalconduct. These are ensured through Whistle Blower Policy Anti-Corruption Policy GiftPolicy Sexual Harassment Policy and Redressal Guidelines.
The Equity Shares of your Company have been inducted in S&P BSE 500 indices witheffect from March 31 2017.
The Companies Act 2013 states that a formal annual evaluation needs to be made by theBoard of its own performance and that of its committees and individual directors. ScheduleIV of the Companies Act 2013 states that the performance evaluation of independentdirectors shall be carried out by the entire Board of Directors excluding the directorbeing evaluated. SEBI (LODR) Regulations 2015 also mandates that the Board shall monitorand review the Board evaluation framework. The evaluation of all the Directors and theBoard as a whole was conducted based on the criteria and framework adopted by theNomination and Remuneration Committee including performance and working of its committees.
A separate section on Corporate Governance practices followed by your Company asstipulated under Schedule V(C) of the SEBI (LODR) Regulations 2015 is enclosed formingpart of this report.
The certificate of the Practising Company Secretary Mr.Y.Ravi Prasada Reddy with regardto compliance of conditions of corporate governance as stipulated under Schedule V (E) ofthe SEBI (LODR) Regulations 2015 is annexed to the Report on Corporate Governance.
Disclosure with respect to unclaimed suspense account:
The following are the details that are required to be provided under Schedule V (F) ofthe SEBI (LODR) Regulations 2015:
|No. of Shareholders and outstanding shares in the suspense account in the beginning of the year (19th Dec.2016) i.e. date of listing of shares of the Co. ||No. of Shareholders approached for transfer of shares during the year ||No. of Shareholders to whom shares were transferred and no. of shares transferred ||No. of shareholders and the no. of outstanding shares in the suspense account at the end of the year (31st March 2017). |
|6 Shareholders and 210 Equity Shares ||3 Shareholders ||3 Shareholders and 105 Shares ||3 Shareholders and 105 Shares |
Business Responsibility Report (BRR)
The Listing Regulations mandate the inclusion of the BRR as part of the Annual Reportfor top 500 listed entities based on market capitalization. In accordance with the ListingRegulations we have integrated BRR disclosures into our Annual Report.
Your Directors would like to place on record their sincere appreciation to customersbusiness associates bankers vendors government agencies and shareholders for theircontinued support.
Your Directors are also happy to place on record their sincere appreciation to theco-operation commitment and contribution extended by all the employees of the Laurusfamily and look forward to enjoying their continued support and cooperation.
| ||For and on behalf of the Board || |
| ||Dr. Satyanarayana Chava ||Ravi Kumar V. V. |
| ||Executive Director & ||Executive Director & |
|Hyderabad ||Chief Executive Offcer ||Chief Financial Offcer |
|18th May 2017 ||DIN:00211921 ||DIN:01424180 |