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Makers Laboratories Ltd.

BSE: 506919 Sector: Health care
NSE: N.A. ISIN Code: INE987A01010
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VOLUME 650
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52-Week low 72.00
P/E 16.78
Mkt Cap.(Rs cr) 47
Buy Price 95.65
Buy Qty 100.00
Sell Price 96.50
Sell Qty 40.00
OPEN 95.20
CLOSE 97.00
VOLUME 650
52-Week high 144.00
52-Week low 72.00
P/E 16.78
Mkt Cap.(Rs cr) 47
Buy Price 95.65
Buy Qty 100.00
Sell Price 96.50
Sell Qty 40.00

Makers Laboratories Ltd. (MAKERSLABS) - Director Report

Company director report

TO THE MEMBERS

Your Directors have pleasure in presenting the 32nd Annual Report andFinancial Statements for the year ended 31st March 2017.

FINANCIAL RESULTS
For the year ended 31.3.2017 For the year ended 31.3.2016
(Rs. Lacs) (Rs. Lacs)
Total Income 5861.53 6202.84
Profit before finance cost depreciation and taxation 650.33 507.37
Less : Finance Cost 27.77 32.01
Depreciation & Amortisation 108.44 125.02
Profit before tax 514.12 350.34
Provision for taxation
Current 132.00 140.00
Deferred 30.06 (15.43)
Tax provision for earlier years - (4.84)
Net Profit after Tax 352.06 230.61

TRANSFER TO RESERVES

The Company proposes to transfer Rs. 100 lacs to the general reserve.

MANAGEMENT DISCUSSION AND ANALYSIS (a) Financial Performance and Operations Review

Sales and other income for the financial year under report amounted to Rs. 5861.53 lacsas compared with Rs. 6202.84 lacs for the previous year degrowth of 6%. The decrease inthe income is mainly on account of lower price realisation in few generic formulationsmarketed due to competitive nature of the market and also due to reduction in the sellingprices of many formulations due to price reductions made under the drug pricing regime inthe country.

During the financial year under report the Company sold its bulk drugs manufacturingunit situated at MIDC Dombivili (East) District – Thane. The profit made on sale ofthis manufacturing unit amounted to Rs. 79.09 lacs (before tax). During the financial yearunder report the operations of the Company have resulted in a net profit of Rs.352.06 lacs as compared to a net profit of Rs. 230.61 lacs in the previous financial year.The increase in the net profit is mainly on account of profit made on sale of Company'sbulk drugs manufacturing unit situated at MIDC Dombivili (East) District – Thaneand also due to rationalization of operating costs.

(b) Opportunities Threats Risk and Concerns

The Indian generic formulations market is currently in the growth phase. It is expectedthat use of generic formulations will gradually increase in India. However cut throatcompetition quality issues of generics manufactured in the country and non existence oforganised generic formulations distribution and retailing system are a cause of concernand is hampering the growth of generic formulations market. During the year under reportthere was no change in the nature of Company's business.

(c) Internal Control Systems

The Company has an adequate internal control system including suitable monitoringprocedures commensurate with its size and the nature of the business. The internal controlsystems provide for all documented policies guidelines authorisation and approvalprocedures. The statutory auditors while conducting the statutory audit review andevaluate the internal controls and their observations are discussed with the AuditCommittee of the Board.

(d) Human Resources

Your Company continued to have cordial and harmonious relations with its employees atall levels. Your Company has adopted quality culture across the organisation in all lineand staff functions at all the locations. The quality culture has helped your Company inachieving productivity improvement cost reduction and waste elimination through employeeinvolvement at all levels.

Your Company had 95 permanent employees as at 31st March 2017.

(e) Cautionary Statement

Certain statements in the Management Discussion and Analysis may be forward lookingwithin the meaning of applicable securities law and regulations and actual results maydiffer materially from those expressed or implied. Factors that would make differences toCompany's operations include competition price realisation changes in governmentpolicies and regulations tax regimes and economic development within India.

MATERIAL CHANGES AND COMMITMENTS AFTER THE END OF THE FINANCIAL YEAR

No material changes or commitments affecting the financial position of the Company haveoccurred between the end of the financial year to which financial statements in thisreport relate and the date of this report.

SHARE CAPITAL

The paid-up equity share capital of the Company as at 31st March 2017 isRs. 491.70 lacs. The Company currently has no outstanding shares issued with differentialrights sweat equity or ESOS.

SUBSIDIARY JOINT VENTURE AND ASSOCIATE COMPANIES

The Company has no subsidiary or joint venture companies. During the financial yearunder report no company has become / ceased to be subsidiary or joint venture company.

RESEARCH & DEVELOPMENT

During the year under report the Company has started Research & Development(R&D) activities at Company's manufacturing unit situated at GIDC Industrial EstateNaroda Ahmedabad 382 330 (Gujarat). The Company is currently focussing on development ofophthalmic range of formulations at its new R&D Centre. During the year under reportthe Company has spent an amount of Rs. 37.81 lacs as R&D expenditure (Rs. 35.60 lacstowards installation of R&D equipments and Rs. 2.21 lacs towards R&D revenueexpenses).

DIVIDEND

Your directors are pleased to recommend a equity dividend of Rs. 1.00 per share (10%)for the financial year under report. The dividend will be tax free in the hands of theshareholders.

The dividend amounting to Rs. 49.17 lacs and dividend tax amounting to Rs. 10.01 lacsif approved at the ensuing Annual General Meeting will be appropriated out of the profitsfor the year.

DIRECTORS

Mr. Saahil Parikh retires as director by rotation at the ensuing Annual General Meetingand being eligible offers himself for re-appointment.

Mr. Saahil Parikh is also being re-appointed as the Wholetime Director of the Companyfor a further period of 3 years with effect from 11th August 2017 and thenecessary resolution in this regard is being proposed at the ensuing Annual GeneralMeeting for the approval of the members.

Pursuant to the provisions of Section 149 of the Companies Act 2013 Mr. K. C. JainMr. S. V. Loyalka and Dr. Rajeshwar Singh have been appointed as Independent Directors fora period of five years till 31st March 2019 at the annual general meeting heldon 28th July 2014. Mr. K. C. Jain Mr. S. V. Loyalka and Dr. Rajeshwar Singhwho are independent directors have submitted a declaration that each of them meets thecriteria of independence as provided in Section 149(6) of the Companies Act 2013 andthere has been no change in the circumstances which may affect their status as independentdirectors during the year. In the opinion of the Board the independent directors possessappropriate balance of skills experience and knowledge as required.

A brief note on Director retiring by rotation and eligible for re-appointment isfurnished in the Report on Corporate Governance.

KEY MANAGERIAL PERSONNEL

During the financial year under report the Company has appointed following persons asKey Managerial Personnel:

Mrs. Purnima Jain Wholetime Director/CEO
Mr. Saahil Parikh Wholetime Director / CFO
Ms. Khyati Danani Company Secretary

During the year Ms. Khushbu Thakkar Company Secretary resigned from the services ofthe Company w.e.f. 15th June 2016 and in her place Ms. Khyati Danani wasappointed as the Company Secretary w.e.f 9th August 2016.

POLICY ON DIRECTORS' APPOINTMENT AND REMUNERATION AND OTHER DETAILS

The Nomination and Remuneration Committee has laid down the criteria for Directors'appointment and remuneration including criteria for determining qualifications positiveattributes and independence of a Director. The following attributes/criteria for selectionhave been laid by the Board on the recommendation of the Committee: the candidate shouldposses the positive attributes such as Leadership Entrepreneurship Business Advisor orsuch other attributes which in the opinion of the Committee the candidate possess and arein the interest of the Company; the candidate should be free from any disqualifications asprovided under Sections 164 and 167 of the Companies Act 2013; the candidate should meetthe conditions of being independent as stipulated under the Companies Act 2013 andListing Agreement entered into with Stock Exchanges in case of appointment as anindependent director; and the candidate should posses appropriate educationalqualification skills experience and knowledge in one or more fields of finance lawmanagement sales marketing administration research corporate governance technicaloperations infrastructure medical social service professional teaching or such otherareas or disciplines which are relevant for the Company's business.

BOARD EVALUATION

The Nomination and Remuneration Committee lays down the criteria for performanceevaluation of independent directors Board of Directors and Committees of the Board. Thecriteria for performance evaluation is based on the various parameters like attendance andparticipation at meetings of the Board and Committees thereof contribution to strategicdecision making review of risk assessment and risk mitigation review of financialstatements business performance and contribution to the enhancement of brand image of theCompany.

The Board has carried out evaluation of its own performance as well as that of theCommittees of the Board and all the Directors.

REMUNERATION POLICY

The objective and broad framework of the Company's Remuneration Policy is to considerand determine the remuneration based on the fundamental principles of payment forperformance for potential and for growth. The Remuneration Policy reflects on certainguiding principles of the Company such as aligning remuneration with the longer terminterests of the Company and its shareholders promoting a culture of meritocracy andcreating a linkage to corporate and individual performance and emphasising on lineexpertise and market competitiveness so as to attract the talent. The Nomination andRemuneration Committee recommends the remuneration of Directors and Key ManagerialPersonnel which is approved by the Board of Directors subject to the approval ofshareholders where necessary. The level and composition of remuneration shall bereasonable and sufficient to attract retain and motivate the directors key managerialpersonnel and other employees of the quality required to run the Company successfully. Therelationship of remuneration to performance should be clear and meet appropriateperformance benchmarks. The remuneration to directors key managerial personnel and seniormanagement personnel should also involve a balance between fixed and incentive payreflecting short and long term performance objectives appropriate to the working of theCompany and its goals.

FAMILIARISATION PROGRAM FOR INDEPENDENT DIRECTORS

Details of the familiarisation program of independent directors are disclosed on thewebsite of the Company www.makerslabs.com.

MEETINGS OF THE BOARD AND COMMITTEES THEREOF

This information has been furnished under Report on Corporate Governance which isannexed.

DIRECTORS' RESPONSIBILITY STATEMENT

Your Directors confirm: i) that in the preparation of the annual accounts theapplicable accounting standards have been followed alongwith proper explanation relatingto material departures; ii) that your Directors have selected such accounting policies andapplied them consistently and made judgments and estimates that are reasonable and prudentso as to give a true and fair view of the state of affairs of the Company at the end ofthe financial year March 31 2017 and of the profit of the Company for the financial year;iii) that your Directors have taken proper and sufficient care for the maintenance ofadequate accounting records in accordance with the provisions of the Act for safeguardingthe assets of the Company and for preventing and detecting fraud and other irregularities;iv) that your Directors have prepared the annual accounts on a going concern basis; v)that your Directors have laid down internal financial controls to be followed by theCompany and that such internal financial controls are adequate and were operatingeffectively; and vi) that your Directors have devised proper systems to ensure compliancewith the provisions of all applicable laws and that such systems were adequate andoperating effectively.

CORPORATE GOVERNANCE

As per the requirements of SEBI (Listing Obligations and Disclosure Requirements)Regulations 2015 the Company has complied with the requirements of Corporate Governancein all material aspects. A report on Corporate Governance (Annexure 1) together with acertificate of its compliance from the Statutory Auditors forms part of this report.

FIXED DEPOSITS

Your Company has not accepted any deposits from the public during the year under reviewand as such no amount of principal or interest on deposits from public was outstanding ason the date of the balance sheet.

AUDIT COMMITTEE

Details of the Audit Committee along with its constitution and other details areprovided in the Report on Corporate Governance.

AUDITORS AUDIT REPORT AND AUDITED ACCOUNTS

M/s. Agarwal & Mangal. Chartered Accountants (Firm Registration No. 100061W)retire as auditors of the Company under the provisions of Section 139 of the CompaniesAct 2013. They are not eligible for re-appointment as the auditors of the Company underthe provisions of Section 139 (2) of the Companies Act 2013. The Board places on recordits appreciation for the services rendered by M/s. Agarwal & Mangal CharteredAccountants as the Statutory Auditors of the Company for all these years.

In their place it is proposed by the Company to appoint M/s. Natvarlal Vepari &Co. Chartered Accountants (Firm Registration No. 106971W) as the Statutory Auditors ofthe Company for a period of 5 years till the conclusion of the Company's 37thAnnual General Meeting and the necessary resolution in this regard is proposed to bepassed by the members of the Company at the ensuing Annual General Meeting. The Auditors'Report read with the notes to the accounts referred to therein are self-explanatory andtherefore do not call for any further comments. There are no qualifications reservationsor adverse remarks made by the Auditors.

COST AUDIT

Pursuant to the provisions of Section 148 of the Companies Act 2013 M/s. Kale &Associates Cost Accountants (Firm Registration. No. 101144) were appointed as the CostAuditors to conduct audit of cost records of the Company for the financial year 2016-17.

The Cost Audit Report for the financial year 2015-16 which was due to be filed withthe Ministry of Corporate Affairs by 26th October 2016 was filed on 25thOctober 2016.

SECRETARIAL AUDIT

Pursuant to the provisions of Section 204 and other applicable provisions if any ofthe Companies Act 2013 M/s. Parikh & Associates Practising Company Secretaries wereappointed as the Secretarial Auditors for auditing the secretarial records of the Companyfor the financial year 2016-17.

The Secretarial Auditors' Report is annexed hereto. There are no qualificationsreservations or adverse remarks made by the Secretarial Auditors.

CORPORATE SOCIAL RESPONSIBILITY (CSR)

The provisions of Section 135 of the Companies Act 2013 pertaining to Corporate SocialResponsibility (CSR) is not applicable to the Company.

SAFETY ENVIRONMENT AND HEALTH

The Company considers safety environment and health as the management responsibility.Regular employee training programmes are carried out in the manufacturing facility onsafety and environment.

PARTICULARS OF LOANS GUARANTEES AND INVESTMENTS

The Company has not given any loans or guarantees or made investments in contraventionof the provisions of the Section 186 of the Companies Act 2013. The details of the loansand guarantees given and investments made by the Company are provided in the notes to thefinancial statements.

RELATED PARTY TRANSACTIONS

All related party transactions that were entered into during the financial year were onarm's length basis and were in the ordinary course of Company's business. The Board hasapproved a policy for related party transactions which has been uploaded on the website ofthe Company http://www.makerslabs.com/pdf/Corporate Policy /Related PartyTransactions.pdf.

All the related party transactions are placed before the Audit Committee as well as theBoard for approval on a quarterly basis. Omnibus approval was also obtained from the AuditCommittee and the Board on an annual basis for repetitive transactions. Resolution of theshareholders is also obtained wherever necessary in this regard. Related partytransactions are disclosed in the notes to the financial statements. Prescribed Form No.AOC-2 pursuant to clause (h) of sub-section (3) of Section 134 of the Act and Rule 8(2) ofthe Companies (Accounts) Rules 2014 is furnished as Annexure 2 to this report.

PARTICULARS OF EMPLOYEES

The information required pursuant to Section 197 read with Rule 5 of the Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 a statement showingthe names and other particulars of the employees drawing remuneration and other details asset out in the said rules are provided as an Annexure 3 in this annual report. The Companyhad no employee drawing remuneration in excess of the amount as mentioned under Rule 5 ofthe Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014. Thenecessary information in respect of top 10 employees of the Company in terms ofremuneration drawn is furnished in Annexure 3. However having regard to the provisions ofthe first proviso to Section 136(1) of the Act and as advised the Annual Report excludingthe aforesaid information is being sent to the members of the Company. The saidinformation is available for inspection at the registered office of the Company duringworking hours excluding Saturdays and any member interested in obtaining such informationmay write to the Company Secretary and the same will be furnished on request. The fullAnnual Report including the aforesaid information is available on the Company's websitewww.makerslabs.com.

CODE OF CONDUCT

The Board has laid down a code of conduct for Board members and senior managementpersonnel of the Company. The code incorporates the duties of independent directors aslaid down in the Companies Act 2013. The said code of conduct is posted on Company'swebsite www.makerslabs.com. The Board members and senior management personnel haveaffirmed compliance with the said code of conduct. A declaration signed by the WholetimeDirector / CEO is given at the end of this Report.

WHISTLE BLOWER POLICY / VIGIL MECHANISM

There is a Whistle Blower Policy in the Company and no personnel has been denied accessto the Chairman of the Audit Committee. The policy provides for adequate safeguardsagainst victimization of persons who use vigil mechanism. The Whistle Blowing Policy isposted on the website of the Company www.makerslabs.com.

PREVENTION OF INSIDER TRADING

The Board at its meeting held on 29th May 2015 has adopted a revised Codeof Prevention of Insider Trading based on the SEBI (Prohibition of Insider Trading)Regulations 2015. The same has been placed on the website of the Companywww.makerslabs.com.

All the Directors senior management employees and other employees who have access tothe unpublished price sensitive information of the Company are governed by this code.During the year under Report there has been due compliance with the said code of conductfor prevention of insider trading.

BUSINESS RISK MANAGEMENT

Pursuant to the provisions of Section 134 of the Companies Act 2013 the Company hasconstituted a Risk Management Committee. The details of the Committee and its terms ofreference are provided in the Report on Corporate Governance which is annexed.

SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS

There are no significant or material orders passed by any regulator tribunal or courtthat would impact the going concern status of the Company and its future operations.

CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO

In accordance with the requirements of Section 134 of the Companies Act 2013statement showing particulars with respect to conservation of energy technologyabsorption and foreign exchange earnings and outgo is furnished as Annexure 4 to thisreport.

EXTRACT OF ANNUAL RETURN

In accordance with the requirements of Section 92 (3) of the Companies Act 2013 andRule 12 (1) of the Companies (Management and Administration) Rules 2014 an abstract ofAnnual Return in Form MGT-9 is furnished as Annexure 5 to this report.

ACKNOWLEDGEMENTS

Your Directors place on record their appreciation for the co-operation and supportextended to the Company by its bankers. Your Directors also place on record theirappreciation of the continued hard work put in by employees at all levels.

For and on behalf of the Board
Mumbai Purnima Jain Saahil Parikh
11th May 2017 Wholetime Director Wholetime Director

ANNEXURE 2

Form No. AOC-2

(Pursuant to clause (h) of sub-section (3) of Section 134 of the Act and Rule 8(2) ofthe Companies (Accounts) Rules 2014)

Form for disclosure of particulars of contracts/arrangements entered into by thecompany with related parties referred to in sub-section (1) of Section 188 of theCompanies Act 2013 including certain arms length transactions under third proviso thereto

1. Details of contracts or arrangements or transactions not at arm's length basis: (a)Name(s) of the related party and nature of relationship: Not Applicable (b) Nature ofcontracts/arrangements/transactions: Not Applicable (c) Duration of the contracts /arrangements/transactions: Not Applicable

(d) Salient terms of the contracts or arrangements or transactions including the valueif any: Not Applicable (e) Justification for entering into such contracts or arrangementsor transactions: Not Applicable (f) Date(s) of approval by the Board: Not Applicable (g)Amount paid as advances if any: Not Applicable (h) Date on which the special resolutionwas passed in general meeting as required under first proviso to Section 188: NotApplicable

2. Details of material contracts or arrangement or transactions at arm's length basis:

(a) Name(s) of the related party and nature of relationship: M/s. Ipca LaboratoriesLtd. Company promoted by same promoters.

(b) Nature of contracts/arrangements/transactions: i. Purchase/ sale of materialscapital goods plant & machineries packing materials etc. at a market determinedprice that would be generally agreed by the trade / industry for similar nature oftransaction. ii. Availing of/rendering of services/manufacturing on loan licensebasis/premises on rental etc. at a price that would be generally charged in the trade /industry for that particular type of service/arrangement. iii. Provision of commonservices at proportionate cost. (c) Duration of the contracts / arrangements/transactions:Continuous transactions on an ongoing basis. (d) Salient terms of the contracts orarrangements or transactions including the value if any: Purchase/sale ofmaterials capital goods plant & machineries packing materials manufacturing onloan license basis etc. on arm's length basis.

(e) Date(s) of approval by the Board if any: 27th May 2016 (f) Date ofapproval of shareholders: 9th August 2016 (g) Amount paid as advances if any:Not Applicable

Note: All related party transactions that were entered into during the financial yearwere on arm's length basis and were in the ordinary course of Company's business.

For and on behalf of the Board
Mumbai Purnima Jain Saahil Parikh
11th May 2017 Wholetime Director Wholetime Director

ANNEXURE 3

DETAILS OF REMUNERATION AS REQUIRED UNDER SECTION 197(12) OF THE COMPANIES ACT 2013READ WITH RULE 5 (1) OF THE COMPANIES (APPOINTMENT AND REMUNERATION OF MANAGERIALPERSONNEL) RULES 2014

i. The percentage increase in remuneration of each Director Chief Financial Officerand Company Secretary during the financial year 2016-17 ratio of the remuneration of eachDirector to the median remuneration of the employees of the Company for the financial year2016-17 is as under:

Sr. No. Name of the Director/ Key Managerial Personnel and Designation Remuneration of Director / KMP for the financial year 2016-17 (Rs.) % increase/ (decrease) in remuneration in the financial year 2016-17 Ratio of remuneration of each Director /to median remuneration of employees
1 Mrs. Purnima Jain (Wholetime Director/CEO) 3865467 10.58% 20.51
2 Mr. Saahil Parikh (Wholetime Director/CFO) 3290787 16.47% 17.46
3 Mr. K. C. Jain (Director) 120000 (14.29%) 0.64
4 Mr. S. V. Loyalka (Director) 90000 (18.18%) 0.48
5 Dr Rajeshwar Singh (Director) 120000 (4.00%) 0.64
6 Ms. Khyati Danani (Company Secretary - appointed w.e.f 09.08.2016) 662638 - 3.52
7 Ms. Khushbu Thakkar (Company Secretary - resigned w.e.f 15.06.2016) 181685 - 0.96

ii. The median remuneration of the employees of the Company during the financial yearwas Rs. 188448. iii. In the financial year there was a decrease of 2.79% in the medianremuneration of employees. iv. There were 95 permanent employees on the rolls of Companyas on March 31 2017.

v. Average percentage increase made in the salaries of employees other than themanagerial personnel in the last financial year i.e. 2016-17 was 10.32% whereas theincrease in the managerial remuneration for the same financial year was 11.80%.

vi. It is hereby affirmed that the remuneration paid is as per the Remuneration Policyfor Directors Key Managerial Personnel and other Employees.

For and on behalf of the Board
Mumbai Purnima Jain Saahil Parikh
11th May 2017 Wholetime Director Wholetime Director

ANNEXURE 4

1. CONSERVATION OF ENERGY

i. The steps taken or impact on conservation of energy :

During the year under review all possible efforts were made to ensure optimumconservation of electricity and fuel at the manufacturing plants of the Company.

ii. The steps taken by the Company for utilizing alternate sources of energy :

Presently none.

iii. The capital investment on energy conservation equipments :

The Company has not spent any material capital investment on energy conservationequipments except some investment on energy conservation consumables.

2. TECHNOLOGY ABSORPTION

Research & Development

(A) Specific areas in which R&D work was carried out by the Company:

The Company has started R&D activities during the financial year at its Ahmedabadmanufacturing unit. The Company is currently in the process of developing ophthalmic rangeof formulations. (B) Benefits derived as a result of the above R&D: The Company hasjust started its R&D activities benefits of which will come in future years. (C)Future Plan of Action : Development of more range of formulations initially for thedomestic market. (D) Expenditure incurred on R&D:

2016-17 2015-16
(Rs. lacs) (Rs. lacs)
a) Capital 35.60 -
b) Revenue 2.21 -
c) Total 37.81 -
d) R & D expenditure as a percentage of turnover 0.74% -

(E) Imported technology (imported during last 5 years):

The Company has not imported any technology during the last 5 years.

3. FOREIGN EXCHANGE EARNINGS AND OUTGO

Foreign Exchange Earnings – Nil.

Foreign Exchange Expenditure - Rs. 3920635

For and on behalf of the Board
Mumbai Purnima Jain Saahil Parikh
11th May 2017 Wholetime Director Wholetime Director