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Sequent Scientific Ltd.

BSE: 512529 Sector: Health care
NSE: SEQUENT ISIN Code: INE807F01027
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OPEN 118.50
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VOLUME 6768
52-Week high 150.55
52-Week low 102.00
P/E 383.39
Mkt Cap.(Rs cr) 2,897
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OPEN 118.50
CLOSE 120.15
VOLUME 6768
52-Week high 150.55
52-Week low 102.00
P/E 383.39
Mkt Cap.(Rs cr) 2,897
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

Sequent Scientific Ltd. (SEQUENT) - Director Report

Company director report

Dear Members

We hereby present the 31st Annual Report of your Company along with the AuditedFinancial Statements of the Company for the financial year ended March 31 2016.

1. FINANCIAL SUMMARY

The Financial Performance of the Company (Standalone) for the Financial Year endedMarch 31 2016 is given below:

( Rs. in mn)

Particulars 2015-16 2014-15
Revenue from Operations 3967.74 4448.16
Other Income 115.77 32.21
Total Income 4083.51 4480.37
Profit/ (Loss) before Interest Depreciation Tax & Exceptional Items 484.22 638.37
Less: Interest 164.42 474.56
: Depreciation and amortisation expenses 242.89 263.75
Profit/(Loss) Before Tax & Exceptional Items 76.91 (99.94)
Exceptional Items (5.40) 529.99
Profit/(Loss) Before Tax 71.51 430.05
Provision for - Current Tax - 16.98
- Deferred Tax 0.69 -
Profit/(Loss) after Tax 70.82 413.07

2. BUSINESS PERFORMANCE REVIEW

During the financial year 2015-16 on a standalone basis your Company’s revenuesstood at Rs. 4083.51 mn as against Rs. 4480.37 mn in 2014-15. The Company posted anEBITDA of Rs. 484.22 mn in the year as against Rs. 638.37 mn in 2014-15. The Company madea net profit of Rs. 70.82 mn.

On a consolidated basis your Company’s revenue for the year 2015-16 stood at Rs.6451.22 mn as against Rs. 4753.23 mn in 2014-15. The Company posted an EBITDA of Rs.735.17 mn for the year 2015-16 as against Rs. 304.56 mn in 2014-15. On a consolidatedlevel the Company made a loss of Rs. 197.85 mn.

A detailed analysis on the Company’s operational and financial performance for theyear is covered under ‘Management’s Discussion and Analysis Report’ whichforms part of the Annual Report.

Business Overview

Human API

Registered a growth of 69.8% during the year 2015-16 as against previous year 2014-15Received an Establishment Inspection Report from US FDA for the API facility at Mangalore

Animal Health

Strategic progression from API driven model to formulation led business

Expansion to new geographies globally and strengthened presence in existing markets

Analytical Services

Inauguration of GLP (Good Laboratory Practices) compliant Analytical Services Centre atBengaluru Successful completion of USFDA Audit at Mangalore Centre R&D

Filing of 7 USDMFs and 4 CEPs/ EDMFs Initiation of formulation development program inanimal health business Acquisition of IP in US and EU for 3 products – FelbamateMefenamic acid and Cetirizine

Corporate Actions

Human Health Business

Acquisition of controlling stake in Indo Phyto Chemicals Private Limited for forayinginto niche female healthcare segment with specific focus on steroids and hormones

Animal Health Business

Acquisition of animal health business division of Lyka an initiative to strengthen theCompany’s cattle and dairy business in India.

Fortification of Company’s positioning in Turkey’s animal health market byacquiring Topkim Ila

Premiks San. ve Tic. A.S making Alivira Turkey’s largest animal health company inTurkey.

Foray into European veterinary market through acquisition of N-Vet AB and Fendigo.These Companies have established a strong front-end presence for Alivira in the Europeanmarkets.

There was no change in the nature of the business of the Company during the year endedMarch 31 2016.

Material changes and commitments affecting the financial position of the Companywhich have occurred between the end of financial year and the date of this report

The following transactions/ proposed transactions occurred between the end of financialyear i.e. March 31 2016 and the date of this report:

Acquisition of 60% stake in Karizoo Group Spain one of the leading animal healthgroups in Spain and European markets on July 1 2016. Acquisition of 70% stake inInterchange Veterinria Indstria E Comrcio S.A. Brazil on August 1 2016 which willprovide a foothold in the hugely attractive and fast growing Brazilian market.

3. DIVIDEND

The Board of Directors of the Company has not recommended any dividend for thefinancial year ended March 31 2016.

The Company is not proposing to carry any amount to reserves.

During the year 2015-16 the Company has transferred unclaimed dividend of Rs. 8827/-to Investor Education and Protection Fund as per Investor Education and Protection Fund(Awareness and Protection of Investor) Rules 2001.

4. SHARE CAPITAL

As on date the authorised share capital of the Company is Rs. 500000000/- dividedinto 250000000 equity shares of Rs. 2/- each.

The issued subscribed and paid up equity capital of the Company as on date is Rs.476472390 divided into 238236195 equity shares of Rs. 2/- each.

During the year ended March 31 2016 the Company has allotted equity shares as under:

Date of allotment No. of Shares Allottee category Remarks Issue price
April 15 2015 1200000 Promoter Group Entities On conversion of convertible warrants Rs. 222.15
May 26 2015 7476635 Qualified Institutional Buyers Qualified Institutions Placement Rs. 535.00
June 10 2015 800000 Promoter Group Entity On conversion of convertible warrants Rs. 222.15
June 10 2015 200000 Promoter Group Entity On conversion of convertible warrants Rs. 236.00
June 10 2015 1100000 Public On conversion of convertible warrants Rs. 475.00
August 13 2015 757734 Promoter Group Entity Preferential issue for consideration other than cash (Issue of equity shares against acquisition of equity shares of Alivira Animal Health Limited India) Rs. 669.10
November 16 2015 2800000 Promoter Group Entities On conversion of convertible warrants Rs. 236.00
December 1 2015 2827679 Public Preferential issue for consideration other than cash (Issue of equity shares against acquisition of equity shares of Alivira Animal Health Limited India) Rs. 669.10

The Company has not allotted equity shares after the balance sheet date i.e. March 312016.

Sub-division of equity shares of the Company

The Company sub-divided its equity shares from 1 (One) Equity share of Rs. 10 each into5 (Five) Equity shares of Rs. 2/- each on February 26 2016 with an intent to improve theliquidity of the Company’s shares in the stock market and also to encourage theparticipation of small investors in the equity shares of the Company.

Issue of Warrants on preferential basis

As on date 5500000 warrants which were issued on preferential basis to promotergroup entity are outstanding.

The Company had originally issued 1100000 convertible warrants on April 11 2015which can be converted into equivalent number of equity shares of the Company having facevalue of Rs. 10 each for a consideration of Rs. 475 each. Pursuant to sub-division of 1(One) equity share of Rs. 10 each into 5 (Five) equity shares of Rs. 2 each theoutstanding warrants have been adjusted proportionately.

The Company raised Rs. 1674.8 mn through preferential issue to promoters/Non-promotersduring the year.

Qualified Institutional Placement

The Company raised Rs. 4000 mn through Qualified Institutional Placement which wassubscribed by quality long-term investors who endorsed the vision of the Company of beinga Power House in the Global Animal Health Space.

5. LISTING OF EQUITY SHARES OF THE COMPANY ON NATIONAL STOCK EXCHANGE OF INDIALIMITED

The equity shares of the Company were listed with National Stock Exchange of IndiaLimited on March 8 2016 under the trading symbol "SEQUENT" and admitted fortrading on March 10 2016.

6. SUBSIDIARIES

As at March 31 2016 the Company has 17 subsidiaries out of which 9 Companies arewholly owned Subsidiaries and the Company does not have any Joint Ventures/ AssociateCompanies.

Changes in subsidiaries during the financial year ended March 31 2016:

Buyout of entire minority interest in Alivira Animal Health Limited India("Alivira")

Pursuant to the approval of Board of Directors of the Company on June 30 2015 theCompany acquired the entire shareholding by buying out the minority shareholding (i.e.9997941 equity shares) in Alivira held by Unit Trust of India Investment AdvisoryServices Limited A/c Ascent India Fund III ("Ascent") and Devicam Capital LLP("Devicam") together. The consideration towards such acquisition was paid by wayof issue of 2827679 equity shares of Rs. 10/- each to Ascent and 757734 equity sharesof

Rs. 10/- each to Devicam at a price of Rs. 669.10 per equity share through preferentialissue in compliance with relevant provisions of the Companies Act 2013 and Chapter VII ofthe Securities & Exchange Board of India (Issue of Capital and DisclosureRequirements) Regulations 2009 ("SEBI (ICDR) Regulations"). Post theacquisition of equity shares held by Devicam (on August 12 2015) and Ascent (on December1 2015) Alivira has become a wholly owned subsidiary of the Company with effect fromDecember 1 2015.

Acquisition of 60% stake in Topkim Ila Premiks San. ve Tic. A.S Turkey("Topkim")

Alivira Animal Health Limited India a wholly owned subsidiary of the Company acquired60% stake in Topkim on December 11 2015 through its subsidiary Provet Veterinerrnleri San. ve Tic. A. S. Turkey ("Provet"). Topkim is one of the oldestand reputable manufacturer of Turkey has close to 50 years of business presence with over67 registered products mainly comprising of Ectoparasiticides Endectocides andInjectable Antibiotics. It has wide distribution capabilities with presence in almostevery sales point at Turkey.

Acquisition of 85% stake in N-Vet AB Fendigo SA and Fendigo BV

Alivira Animal Health Limited India Wholly owned subsidiary of the Company hasforayed into the European Veterinary Pharmaceutical markets through acquisition of 85%stake in three companies – N-Vet AB Sweden Fendigo SA Belgium and Fendigo BVNetherland on December 3 2015.

Acquisition of 51% stake in Indo Phyto Chemicals Private Limited India("IPC")

The Company acquired 51% stake in IPC on January 27 2016. IPC is a fully integratedcompany with a portfolio of steroids and hormonal APIs and having its manufacturing basein Uttarakhand. The Company has capabilities in both fermentation and chemical synthesisgiving it a unique ability to produce APIs from the basic starting materials that areextracted from plants.

Incorporation of other subsidiaries

Alivira Animal Health Australia Pty Limited Australia was incorporated as a whollyowned subsidiary of Alivira Animal Health Limited Ireland a wholly owned subsidiary ofthe Company.

Sequent Scientific Pte. Limited Singapore was incorporated as a wholly ownedsubsidiary of the Company.

Change in shareholding of below mentioned subsidiaries during the financial year endedMarch 31 2016:

1. Alivira Animal Health Limited Ireland became a wholly owned subsidiary of theCompany pursuant to acquisition of entire shareholding in Alivira Animal Health LimitedIndia

2. Shareholding in Provet has increased from 55.15% to 60% of total equity capitalpursuant to acquisition of entire shareholding in Alivira Animal Health Limited India

Accounts of Subsidiaries

In accordance with Section 129(3) of the Companies Act 2013 the Company has prepareda consolidated financial statement of the Company and all its subsidiary companies whichis forming part of the Annual Report. Statement containing salient features of thefinancial statements of Company’s subsidiaries joint ventures and associatecompanies as required in Form AOC-1 is enclosed as Annexure 1 to this Report.

Further financial statements together with related reports and information of each ofthe subsidiary companies of the Company have been placed on the website of the Companywww.sequent.in.

7. EXTRACT OF ANNUAL RETURN

Extract of Annual Return in terms of Section 92(3) of the Companies Act 2013 in FormMGT- 9 is enclosed as Annexure 2 to the Directors’ Report.

8. PUBLIC DEPOSIT

During the financial year 2015-16 the Company has not accepted or renewed any publicdeposits in terms of Sections 73 and 74 of the Companies Act 2013 and rules framedthereunder.

9. BOARD OF DIRECTORS & KEY MANAGERIAL PERSONNEL

Board Composition

As on August 12 2016 the Board comprises of 7 Directors consisting of 2 ExecutiveDirectors 2 Non-executive Directors and 3 Independent Directors. Chairman of the Board isan Independent Director.

Mr. Narendra Mairpady (DIN: 00536905) was appointed as an Additional and IndependentDirector on the Board of Directors of the Company w.e.f August 1 2015 and members haveapproved his appointment as a Director and Independent Director at their Annual GeneralMeeting held on September 24 2015.

Mr. Kannan Ramanujam (DIN: 00190637) resigned from the directorship of the Company witheffect from the closing of business hours of February 11 2016. The Directors place onrecord their sincere appreciation and recognition of the valuable contribution andservices rendered by Mr. Kannan Ramanujam during his tenure as a Director of the Company.

Dr. S Devendra Kumar (DIN: 00050440) and Mr. K E C Rajakumar (DIN: 00044539) wereappointed as Additional Directors with effect from October 29 2015 and February 11 2016respectively.

As per Section 161 of the Companies Act 2013 ("the Act") an AdditionalDirector shall hold office up to the date of next Annual General Meeting or the last dateon which the Annual General Meeting should have been held whichever is earlier and his/her appointment as a Director of the Company has to be approved by the members of theCompany. In this regard a proposal will be placed before the members at the ensuing AnnualGeneral Meeting for the appointment of Dr. S Devendra Kumar and Mr. K E C Rajakumar asDirectors of the Company.

Mr. Manish Gupta Managing Director (DIN: 06805265) retires by rotation at the ensuingAnnual General Meeting and being eligible offers himself for re-appointment.

Brief profiles of Mr. Manish Gupta Dr. S Devendra Kumar and Mr. K E C Rajakumar aregiven in the corporate governance report which forms part of this report.

Your directors recommend their appointment/ reappointment to the members of theCompany.

As on date the Company has the following Key Managerial Personnel: Mr. Manish Gupta– Managing Director (DIN: 06805265) Dr. Gautam Kumar Das – Joint ManagingDirector (DIN: 02920990) Mr. Kannan P R – Chief Financial Officer Mr. Preetham Hebbar– Company Secretary

There is no change in Key Managerial Personnel of the Company during the year 2015-16.

The Company has received necessary declarations from each Independent Director thatthey meet the criteria of independence laid down in Section 149 (6) of the Companies Act2013.

10. MEETINGS OF THE BOARD

During the year ended March 31 2016 11 (Eleven) Board Meetings were held. Thesemeetings were held on April 15 2015 April 24 2015 June 10 2015 June 30 2015 July8 2015 July 30 2015 August 13 2015 October 29 2015 December 7 2015 January 112016 and February 11 2016.

11. POLICY ON DIRECTORS APPOINTMENT AND REMUNERATION

The Directors of the Company are appointed by members at the General Meetings of theCompany.

As regards the appointment and tenure of Independent Directors the Company has adoptedthe provisions of the Companies Act 2013 read with Securities and Exchange Board of India(Listing Obligations and Disclosure Requirements) 2015.

The Nomination and Remuneration Committee at its meeting held on July 30 2015 hasadopted a policy namely Sequent Policy on Nomination and Remuneration ("thePolicy") in adherence to Section 178(3) of the Companies Act 2013 and Clause 49 (IV)(B) (4) of the Listing Agreement as entered with stock exchange (till November 30 2015)/provisions of Securities and Exchange Board of India (Listing Obligations and DisclosureRequirements)

Regulations 2015 (w.e.f. December 1 2015). The policy shall act as a guideline onmatters relating to the remuneration appointment removal and evaluation of performanceof the Directors Key Managerial Personnel and other employees of the Company. The policyis given as Annexure 3 in this report.

12. EVALUATION OF BOARD OF DIRECTORS

Pursuant to provisions of Schedule IV of the Companies Act 2013 and Clause 49 of theListing Agreement as entered with stock exchange (till November 30 2015)/ provisions ofSecurities and Exchange Board of India (Listing Obligations and Disclosure Requirements)Regulations 2015 (w.e.f. December 1 2015) the Company has formulated a policy called asSequent Board Performance Evaluation Policy ("the Policy"). Based on this theCompany has prepared a questionnaire to carry out the evaluation of performance of everyDirector including the Independent Directors at regular intervals and at least on anannual basis. The questionnaire is structured to embed various parameters based on whichthe performance of a Board can be evaluated. Customised questionnaires are formulated forevaluating Independent Directors Non-Executive Directors Whole-time DirectorsChairperson of the Board and the Board as a whole.

Based on the policy the evaluation was conducted by the Company.

Detailed data on composition of Board of Directors Committees of Board of DirectorsMeeting details charter for each committee and attendance details forms part of theCorporate Governance Report.

13. AUDIT COMMITTEE

The Composition of Audit Committee of the Company as on August 12 2016 is given below:Dr. Gopakumar G Nair – Chairman Dr. Kausalya Santhanam – Member Mr. NarendraMairpady– Member

Board of the Company has accepted all recommendations given by the Audit Committee.

14. SECRETARIAL AUDIT REPORT

Pursuant to the provisions of Section 204 (1) of the Companies Act 2013 and theCompanies (Appointment and Remuneration of Managerial Personnel) Rules 2014 the Companyhas appointed M/s. BG & Associates Practicing Company Secretaries

(Certificate of Practice No: 4221) to carry out the Secretarial Audit for the financialyear 2015-16. The Secretarial Audit Report is annexed as Annexure 4 to the Directors’Report. There are no qualifications observations or adverse remarks in the SecretarialAudit Report.

15. AUDITORS

Statutory Auditors

At the Annual General Meeting held on September 29 2014 M/s. Deloitte Haskins &Sells Chartered Accountants (Firm’s Registration Number: 008072S) were appointed asStatutory Auditors of the Company for a period of 5 years from 29th Annual General Meetingtill the conclusion of 34th Annual General Meeting. In terms of the first proviso toSection 139 of the Companies Act 2013 the appointment of auditors shall be placed forratification at every Annual General Meeting. Accordingly the appointment of M/s.Deloitte Haskins & Sells Chartered Accountants as Statutory Auditors of the Companyis placed for ratification by the members in the ensuing Annual General Meeting of theCompany.

Cost Auditor

Pursuant to Section 148(3) and Companies (Cost records and audit) Rules 2014 Mr.Girish Kambadaraya Cost Accountant was appointed as the Cost Auditor for the financialyear 2015-16. The due date for filing the Cost Audit Reports in XBRL mode for thefinancial year ended March 31 2015 was September 30 2015 and the Cost Audit reports werefiled by the Cost Auditor on September 29 2015.

The due date for filing the Cost Audit Reports for the financial year ended March 312016 is September 30 2016.

The Board at its meeting held on August 12 2016 on recommendation of Audit Committeehas appointed M/s. Kirit Mehta & Associates Cost Accountants as the Cost Auditor forthe financial year 2016-17 in terms of Section 148(3) and Companies (Cost records andaudit) Rules 2014 as amended. As per the requirement of Companies Act 2013 theremuneration payable to Cost Auditors shall be placed for ratification of at the ensuingAnnual General Meeting of the Company.

A proposal will be placed before the members for the ratification of remunerationpayable to M/s. Kirit Mehta & Associates Cost Accountants as a Cost Auditor of theCompany for the financial year 2016-17.

16. AUDIT REPORT

There are no qualifications observations or adverse remarks in the Audit Report issuedby the Statutory Auditors of the Company for financial year ended March 31 2016.

17. PARTICULARS OF EMPLOYEES

The statement containing particulars of employees as required under Section 197(12) ofthe Companies Act 2013 read with Rule 5 (1) of the Companies (Appointment andRemuneration of Managerial Personnel) Rules 2014 is provided as an Annexure 5 formingpart of this report except the report as per Rule 5 (2) of the Companies (Appointment andRemuneration of Managerial Personnel) Rules 2014. In terms of Section 136 of theCompanies Act 2013 the said report is open for inspection at the Registered Office ofthe Company during working hours and any member interested in obtaining a copy of the samemay write to the Company Secretary at the registered office of the Company.

18. VIGIL MECHANISM / WHISTLE BLOWER POLICY

The Board of Directors of the Company at its meeting held on May 28 2014 has approvedthe implementation of Whistle Blower Policy namely "Sequent Whistle BlowerPolicy" throughout the Company in order to curb the unethical or improper behavior/practices or alleged wrongful conduct or violation of Code of Conduct of the Company orapplicable laws frauds bribery corruption employee misconduct illegality healthsafety & environmental issues or misappropriation of Company funds or assets withinthe Company or by the Company. This policy helps in providing a mechanism for personnel toreport to the Authority concerns about unethical behavior actual or suspected fraud orviolation of the company’s code of conduct or ethics policy.

The Policy ensures that strict confidentiality is maintained whilst dealing withconcerns and also that no discrimination will be meted out to any person for a genuinelyraised concern.

19. PARTICULARS OF LOANS GUARANTEES OR INVESTMENTS BY THE COMPANY

Particulars of investments made loans given and guarantees provided is as per detailsgiven below:

Name of the entity Relationship Investment Loan Guarantee
(Amount in Rs. ) (Amount in Rs. ) (Amount in Rs. )
Alivira Animal Health Limited India Wholly Owned Subsidiary 3348999758 589589872 -
Indo Phyto Chemicals Private Limited India Subsidiary 68500000 - -
Strides Shasun Limited India (Investment made in Shasun Pharmaceuticals Limited prior to merger with Strides Shasun Limited formerly known as Strides Arcolab Limited) - 781000000 - -

20. PARTICULARS OF CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES

All the transactions entered with related parties are in the ordinary course ofbusiness and on arm’s length basis.

Further there are no materially significant related party transactions with itspromoters the directors or the management their subsidiaries or relatives etc. that mayhave potential conflict with the interests of the Company at large.

The particulars of material contracts or arrangements with related parties referred toin Section 188(1) as prescribed in Form AOC-2 of the rule 8(2) of Companies (Accounts)Rules 2014 is given as an Annexure 6.

All transactions with the related parties are disclosed in Note 28.2 to the financialstatements in the Annual Report.

21. CORPORATE SOCIAL RESPONSIBILITY

As per section 135(1) the Company has constituted a Corporate Social ResponsibilityCommittee comprising of Mr. Manish Gupta Dr. Gopakumar G Nair and Dr. Kausalya Santhanamas its members. The Company adopted a policy on Corporate Social Responsibility on May 142016.

The disclosure as required under Companies (Corporate Social Responsibility Policy)Rules 2014 is set out in Annexure 7 of this report.

22. RISK MANAGEMENT

The Company has a risk management framework for identifying and managing risks.Additional details are provided in the ‘Management Discussion and Analysis’report forming part of this Report.

23. SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS OR TRIBUNALS

There are no significant and material orders passed by the Regulators Courts orTribunals that would impact the going concern status of the Company and its futureoperations.

24. DIRECTORS’ RESPONSIBILITY STATEMENT

In accordance with Section 134(5) of the Companies Act 2013 the Directors of yourCompany to the best of their knowledge and ability 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) they have selected such accounting policies and applied them consistently and madejudgments and estimates that are reasonable and prudent so as to give a true and fair viewof the state of affairs of the company at the end of the financial year and of the profitand loss of the company for that period;

(c) they have 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) they have prepared the annual accounts of the Company have been prepared on a goingconcern basis;

(e) they have laid down internal financial controls to be followed by the company andthat such internal financial controls are adequate and were operating effectively.

(f) they have devised proper systems to ensure compliance with the provisions of allapplicable laws and that such systems were adequate and operating effectively.

25. CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION FOREIGN EXCHANGE EARNINGS/ OUTGO ANDRESEARCH & DEVELOPMENT

The particulars as prescribed under Section 134(3)(m) of the Companies Act 2013 readwith rule 8(3) of the Companies (Accounts) Rules 2014 is enclosed as an Annexure 8 to theDirectors’ Report.

Detailed write-up on Research and Development activity forms part of the annexure tothe Directors’ Report.

26. CORPORATE GOVERNANCE

The Company has complied with all the mandatory requirements of Corporate Governancespecified by the Securities and Exchange Board of India ("SEBI") through andClause 49 of the Listing Agreement as entered with stock exchange (till November 302015)/ provisions of Securities and Exchange Board of India (Listing Obligations andDisclosure Requirements) Regulations 2015 (w.e.f. December 1 2015)("Regulations"). As per Regulation 34(3) and Schedule V of the Regulations aseparate Report on Corporate Governance forms part of the Annual Report of the Company. Acertificate from the Statutory Auditors of the Company regarding compliance with CorporateGovernance requirements as stipulated in the regulations and listing agreement enteredwith Stock Exchange also forms part of the Annual Report.

27. MANAGEMENT DISCUSSION AND ANALYSIS

Pursuant to Regulation 34 (3) and Schedule V of Securities and Exchange Board of India(Listing Obligations and Disclosure Requirements) Regulations 2015 Management Discussionand Analysis Report forms part of this Report.

28. EMPLOYEE STOCK OPTION SCHEME

The Company has formulated an employee stock option plan titled "SSL ESOP Scheme2010" (the "ESOP 2010") in accordance with the provisions of Securities andExchange Board of India (Share Based Employee Benefits) Regulations 2014 (the "SEBIESOP Guidelines") and the scheme is administered through a trust. As on date3500000 shares have been issued to the trust. During the year the Nomination andRemuneration Committee has granted 500000 options to identified employees and 225000options lapsed due to resignation of employees. As at March 31 2016 3545000 Stockoptions are outstanding.

The ESOP scheme of the Company is in Compliance with the Securities and Exchange Boardof India (Share Based Employee Benefits) Regulations 2014.

Further disclosure under Section 62 of the Companies Act 2013 read with Rule 12 ofCompanies (Share Capital and Debentures) Rules 2014 and SEBI (Share Based EmployeeBenefits) Regulations 2014 given as an Annexure 9 to this Report.

29. APPRECIATION

Your Directors would like to express their grateful appreciation for the excellentsupport and cooperation received from the Members Customers Financial InstitutionsBanks Government Authorities Reserve Bank of India Securities and Exchange Board ofIndia Stock Exchanges Manufacturers and Suppliers to the Company.

We would like to place on record our sincere appreciation for the total commitmentdedication untiring efforts and hard work put in by the employee members at all levels ofthe Company in realisation of the corporate goals in the years ahead.

For and on behalf of the Board of Directors
Place: Bengaluru Dr. Gopakumar G Nair
Date: August 12 2016 Chairman