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Sterling Biotech Ltd.

BSE: 512299 Sector: Industrials
NSE: STERLINBIO ISIN Code: INE324C01038
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VOLUME 73236
52-Week high 6.77
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P/E
Mkt Cap.(Rs cr) 93
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
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OPEN 3.30
CLOSE 3.28
VOLUME 73236
52-Week high 6.77
52-Week low 3.16
P/E
Mkt Cap.(Rs cr) 93
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

Sterling Biotech Ltd. (STERLINBIO) - Director Report

Company director report

Dear Shareholders

Your Directors have pleasure in presenting the 31st Annual Report of theCompany together with the Audited Financial Statements for the Financial Year ended 31stMarch 2017.

The Accounting year of the Company in previous year has been changed from January 2015-December 2015 to January 2015-March 2016 in line with the provision of the CompaniesAct 2013 which prescribe a uniform financial year. Accordingly previous year's AnnualAccounts and Report of the Company are for a period of fifteen months from January 1 2015to March 31 2016. The figures for the previous year of 15 months ended on 31 March 2016therefore are not comparable with current year of 12 months ended on March 31 2017.

FINANCIAL RESULTS FOR THE ENDED ON 31st MARCH 2017

(Rs. in Lacs)

Particulars Year ended on March 31 2017 15 Months ended on March 31 2016
Sales 40018.95 56053.13
Total Income 40416.64 56838.08
EBIDTA from Operation 1655.05 7230.56
Interest 36979.77 41478.19
Depreciation 26354.78 34514.48
Profit/(Loss) before Tax and Extraordinary item (61679.50) (68762.11)
Extraordinary items - -
Profit/(Loss) before Tax (61679.50) (68762.11)
Provision for Current Tax - -
Provision for Deferred Tax (20434.00) (23715.00)
Profit/(Loss) after Tax (41245.50) (45047.11)

Note: The Company has prepared the financial statements in accordance with theCompanies (Indian Accounting Standards) Rules 2015 prescribed under Section 133 of theCompanies Act 2013. The Company has adopted the Indian Accounting Standards (Ind AS) from1st April 2016. The comparative financial information of the Company for a period offifteen months from January 1 2015 to March 31 2016 has also been restated to complywith Ind AS.

OPERATIONS :

The total income of the Company in the current year has been Rs.40416.64 Lacs and inthe previous year it was Rs.56838.08 Lacs. The finance cost has been Rs.36979.77 Lacsand in the previous year it was '41478.19 Lacs. The Loss before Tax has been Rs.61679.50Lacs as and in the previous year it was Rs.68762.11 Lacs. The loss after tax in thecurrent year has been Rs.41245.50 Lacs and in the previous year it was Rs.45047.11 Lacs.

REASONS OF REDUCTION IN PROFITABILITY :

The major reasons for reduction in profitability are Increase in Effluent Treatmentcost due to increase in standards global economic slowdown increase in the cost of rawmaterials the selling prices have remained stable thereby the increase in cost could notbe passed on to buyer and non-availability of raw material due to restriction onslaughtering activity.

CORRECTIVE STEPS TAKEN BY MANAGEMENT:

1. Company has taken action like thorough study on the effluent discharge issuetightening of quality norms for effluent discharge from the plant evaluation ofrequirement of modification of existing effluent discharge problem and the necessary CAPEXhas also been incurred by the company.

2. The Company has put in place the cost control measures like hard negotiation withthe material suppliers improvement in and tightening up of cost control system etc.Company expects that the combined effect of all these factors would be favorable foroverall operations.

DIVIDEND & TRANSFER TO RESERVE :

In view of the loss for the year ended on March 31 2017 no amount is proposed to betransferred to the reserve(s) and your Directors have not recommended payment of anydividend for the year under review.

SHARE CAPITAL:

The paid up Equity Share Capital of the Company as on March 31 2017 was Rs.272170388divided into 272170388 Equity Shares of Rs.1/- each and Preference Share Capital as onthat date was Rs.19125850000 divided into 1912585000 number of Unlisted 8%Redeemable Cumulative Non-Participating Non-Convertible Preference Shares of Rs.10/- eachhaving no voting rights.

ISSUE OF PREFERENCE SHARES:

During the year with a view to mitigate the financial crunch promoters have fundedRs.701350000 by subscribing to preference shares and the Company has issued and allotted701135000 Unlisted 8% Redeemable Cumulative Non- Participating Non-ConvertiblePreference Shares carrying no voting rights of face value of Rs.10/- each at par toentities in which promoters are interested.

FCCB CONVERSION INTO EQUITY SHARES OR GDRs :

The FCCBs are convertible into equity shares of the Company. During the year noconversion request was received and the outstanding FCCBs as on 31 March 2017 are USD201082000.

QUALITY:

Meeting the stringent quality standards required by our international clientele ourfacilities have earned certifications including:

• Hazardous Analysis and Critical Control Point Certification (HACCP)

• ISO 9001

• ISO 14001

• European Directorate For Quality of Medicine Certification (EDQM)

• Kosher Certificate

• IFANCA Halal Certificate

MEETINGS OF THE BOARD:

Ten (10) Board Meetings were held during the financial year ended 31st March 2017. Thedetails of the Board Meetings with regard to their dates and attendance of each of theDirectors thereat have been provided in the Corporate Governance Report.

COMMITTEES OF THE BOARD OF DIRECTORS :

The Board has constituted following committees of Directors to deal with matters andmonitor the activities falling within the respective terms of reference:

• Audit Committee

• Nomination and Remuneration Committee

• Stakeholders Relationship Committee

• Corporate Social Responsibility Committee

The details of the membership terms of reference and attendance at the meetings of theabove Committees of the Board are provided in the Corporate Governance Report forming apart of this Annual Report. There has been no instance where the Board has not acceptedthe recommendations of the Audit Committee.

DIRECTORS:

Pursuant to Section 152 of the Companies Act 2013 Mr. Nitin Sandesara ManagingDirector of the Company retires by rotation and being eligible offers himself forre-appointment at the ensuing Annual General Meeting. The Board recommends hisreappointment.

DECLARATION OF INDEPENDENCE BY DIRECTOR:

Pursuant to the provisions under Section 134(3)(d) of the Companies Act 2013 withrespect to statement on declaration given by Independent Directors under Section 149(6) ofthe Companies Act 2013 the Board hereby confirm that all the Independent Directors ofthe Company have given a declaration and have confirmed that they meet the criteria ofindependence as provided in the said Section 149(6) read with Regulation 16 of Securitiesand Exchange Board of India (Listing Obligations & Disclosure Requirements)Regulations 2015.

DEPOSITS:

During the year ended on March 31 2017 your Company has not accepted any fixeddeposits from the public falling under Section 73 of the Companies Act 2013 read with theCompanies (Acceptance of Deposits) Rules 2014. Thus as on March 31 2017 there were nodeposits which were unpaid or unclaimed and due for repayment.

STATUTORY AUDITORS:

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

It is proposed to appoint M/s. Mukesh & Associates Chartered Accountants asStatutory Auditors of the Company for a term of 5 (five) consecutive year. M/s. Mukesh& Associates Chartered Accountants have confirmed their eligibility andqualification required under the Act for holding the office as Statutory Auditors of theCompany.

The observations and comments given by Auditors in their report read together withnotes to Accounts are selfexplanatory and hence do not call for any further comments underSection 134 of the Act. The Auditors' Report does not contain any qualificationreservation or adverse remark.

SECRETARIAL AUDITOR:

A Secretarial Audit was conducted for the year ended on March 31 2017 by theSecretarial Auditor M/s. Ramesh Kheradia a Company Secretary in Practice. The Report ofSecretarial Audit in form of MR-3 for the year ended on March 31 2017 is attached asAnnexure 2 to the Report. Secretarial Auditor gave observation in his report.

INDUSTRIAL RELATIONS:

The industrial relations of the Company continued to remain cordial. The Directors wishto place on record their sincere appreciation for the co-operation extended and thevaluable contribution made by the employees at all levels.

RELATED PARTY TRANSACTIONS:

All contract(s)/arrangement(s)/transaction(s) entered into by your Company with itsrelated parties during the year under review were:

• in "ordinary course of business" of the Company;

• on "an arm's length basis"; and

• not "material"

As per the provisions of Section 188(1) of the Act read with Companies (Meetings ofBoard and its Powers) Rules 2014. Accordingly Form AOC-2 prescribed under theprovisions of Section 134(3)(h) of the Act and Rule 8 of the Companies (Accounts) Rules2014 for disclosure of details of Related Party Transactions which are "not atarm's length basis" and also which are "material & at arm's lengthbasis" is not provided as an annexure of the Directors' Report.

However details of the Related Party Transactions entered into during the year underreview and as on March 31 2017 are disclosed as part of the financial statements of yourCompany for the year under review as Note 26. Further pursuant to the provisions of theAct and the SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015Board has approved and adopted a Policy on Related Party Transactions. The said policy isavailable on your Company's website viz. www.sterlingbiotech.in

TRANSFER OF UNCLAIMED DIVIDEND TO INVESTOR EDUCATION AND PROTECTION FUND:

Pursuant to provisions of Section 205A of the Companies Act 1956 and Section 124 ofthe Companies Act 2013 and [pursuant to rule 3 of the Investor Education and ProtectionFund (Awareness and Protection of Investors) Rules 2001] the unpaid/unclaimed dividendpertaining to the year ended on December 31 2008 amounting to Rs. 4013431/- which waslying in the Company's separate unpaid dividend account and remaining unclaimed for aperiod of seven years was transferred to the Investor Education and Protection Fund(IEPF).

PARTICULARS OF LOANS GUARANTEES AND INVESTMENTS:

Loans and investments covered under Section 186 of the Companies Act 2013 form partof the Notes to the financial statements provided in this Annual Report.

The Company has not provided any guarantee as prescribed under section 186 of theCompanies Act 2013.

SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS OR TRIBUNALSIMPACTING THE GOING CONCERN STATUS AND COMPANY'S OPERATIONS IN FUTURE:

During the year ended on March 31 2017 there were no such orders passed by theregulators or courts or tribunals impacting the going concern status and company'soperations in future.

ADEQUACY OF INTERNAL FINANCIAL CONTROLS WITH REFERENCE TO THE FINANCIAL STATEMENTS:

The Company has adequate internal control procedures commensurate with its size andnature of business. The business control procedures ensure efficient use and protection ofCompany's resources and compliance with policies procedures and statutory requirements.

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

There have been no material changes and commitments affecting the financial positionof the Company which occurred between the end on March 31 2017 to which the financialstatements relate and the date of this report.

NOMINATION AND REMUNERATION POLICY :

The Company follows a policy on nomination and remuneration of Directors and SeniorManagement Employees. The Policy is approved by the Nomination and Remuneration Committee.The policy on the above is attached as Annexure 3.

CORPORATE SOCIAL RESPONSIBILITY :

CSR is a company's sense of responsibility towards the community and environment inwhich it operates. It is the continuing commitment by business to behave ethically andcontribute to economic development of the society at large and building capacity forsustainable livelihoods. The Company believes in conducting its business responsiblyfairly and in a most transparent manner. It continually seeks ways to bring about anoverall positive impact on the society and environment where it operates and as a part ofits social objectives.

This policy has been formally formulated and adopted in terms of Section 135 of theCompanies Act 2013 and Rules framed there under to undertake CSR activities.

The responsibilities of the CSR Committee include:

1. Formulating and recommending to the Board of Directors the CSR Policy and indicatingactivities to be undertaken.

2. Recommending the amount of expenditure for the CSR activities.

3. Monitoring CSR activities from time to time.

In view of the losses for the year under review your Company was not required to spendany amount towards the CSR activities as per the applicable provisions of Section 135 ofthe Companies Act 2013. Accordingly the details of the CSR activities during the yearunder review are not provided in this Report.

BOARD EVALUATION:

The Board of Directors have carried out an annual evaluation of its own performanceboard committees and individual Directors pursuant to the provisions of the Act and thecorporate governance requirements as prescribed by Securities and Exchange Board of India(Listing Obligations and Disclosure Requirements) Regulations 2015 ("SEBI ListingRegulations").

The performance of the committees was evaluated by the board after seeking inputs fromthe committee members on the basis of the criteria such as the composition of committeeseffectiveness of committee meetings etc.

The board and the nomination and remuneration committee reviewed the performance of theindividual directors on the basis of the criteria such as the contribution of theindividual director to the board and committee meetings like preparedness on the issues tobe discussed meaningful and constructive contribution and inputs in meetings etc. Inaddition the chairman was also evaluated on the key aspects of his role.

In a separate meeting of independent directors performance of non-independentdirectors performance of the board as a whole and performance of the chairman wasevaluated taking into account the views of executive directors and non-executivedirectors. The same was discussed in the board meeting that followed the meeting of theindependent directors at which the performance of the board its committees andindividual directors was also discussed. Performance evaluation of independent directorswas done by the entire board excluding the independent director being evaluated.

CORPORATE GOVERNANCE:

Corporate governance requirements under the Companies Act 2013 and as stipulatedunder the Securities and Exchange Board of India (Listing Obligations and DisclosureRequirements) Regulations 2015. A separate section on corporate governance under the SEBI(Listing Obligations and Disclosure Requirements) Regulations 2015 along with thecertificate from the Statutory Auditor confirming the compliance is annexed and formspart of this Annual Report in Annexure-4.

MANAGEMENT DISCUSSION & ANALYSIS:

Management Discussion and Analysis for the year under review as stipulated underSecurities and Exchange Board of India (Listing Obligations and Disclosure Requirements)Regulations 2015 Regulation 34(3) read with Schedule V of the Listing Regulations ispresented in a separate section forming part of the Annual Report in Annexure-1.

EXTRACT OF ANNUAL RETURN:

The details forming part of the extract of the Annual Return in form MGT-9 is annexedherewith as Annexure- 5.

PARTICULARS OF EMPLOYEES:

There are no employees drawing remuneration of more than One crore and two lacs rupeeslimit as specified under provisions of Section 197(12) of the Act and Rule 5(2) & 5(3)of Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014.

VIGIL MECHANISM:

Your Company has a well-defined 'Whistle Blower Policy' and established Vigil Mechanismto provide for adequate safeguard against victimisation of Directors and employees whofollow such mechanism and also make provisions for direct access to the chairperson ofAudit Committee in appropriate cases. Details of the Vigil Mechanism policy are madeavailable on the Company's website at www.sterlingbiotech.in/investors.html.

FAMILIARISATION PROGRAMME FOR INDEPENDENT DIRECTORS:

All new Independent Directors (IDs) inducted into the Board are given an orientation.Presentations are made by Executive Directors (EDs) and Senior Management giving anoverview of the Company's operations to familiarize the new IDs with the Company'sbusiness operations. The new IDs are given an orientation on our products group structureand subsidiary Company Board constitution and procedures matters reserved for the Boardand the Company's major risks and risk management strategy. The Policy on the Company'sFamiliarisation Programme for IDs can be accessed atwww.sterlingbiotech.in/investors.html.

INTERNAL CONTROL AND ITS ADEQUACY:

The Company has adequate internal controls and processes in place with respect to itsfinancial statements which provide reasonable assurance regarding the reliability offinancial reporting and the preparation of financial statements. These controls andprocesses are driven through various policies procedures and certifications. Theprocesses and controls are reviewed periodically. The Company has a mechanism of testingthe controls at regular intervals for their design and operating effectiveness toascertain the reliability and authenticity of financial information.

DISCLOSURE UNDER THE SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION PROHIBITIONAND REDRESSAL) ACT 2013 :

The Company has in place a Policy against Sexual Harassment at work place in line withthe requirement of Sexual Harassment of Women at Workplace (Prevention Prohibition andRedressal) Act 2013. All employees (permanent contractual temporary and trainees) arecovered under this Policy. No complaint received by the Committee during the year.

CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION FOREIGN EXCHANGE EARNINGS AND OUTGO:

The information required under Section 134(3)(m) of the Companies Act 2013 read withRule 8(3) of the Companies (Accounts) Rules 2014 is annexed herewith as Annexure-6.

DIRECTORS' RESPONSIBILITY STATEMENT:

Pursuance to the requirement under Section 134(3)(c) of the Companies Act 2013 yourDirectors hereby states that :

a) In the preparation of the annual accounts the applicable accounting standards havebeen followed and there are no material departures from the same;

b) The accounting policies have been selected and these have been applied consistentlyand judgments and estimates made thereon are reasonable and prudent so as to give a trueand fair view of the state of affairs of the Company for the period ended on March 312017 and of the loss of the Company for the aforesaid period;

c) Proper and sufficient care has been taken for the maintenance of adequate accountingrecords in accordance with the provisions of the Companies Act 2013 for safeguarding theassets of the Company and for preventing and detecting fraud and other irregularities;

d) Annual accounts of the Company have been prepared on a 'going concern' basis;

e) Internal financial controls have been laid down and being followed by the Companyand that such internal financial controls are adequate and were operating effectively; and

f) Proper systems to ensure compliance with the provisions of all applicable laws havebeen devised.

ACKNOWLEDGEMENT:

Your Directors would like to express their sincere appreciation for the cooperation andassistance received from shareholders bankers financial institutions regulatory bodiesand other business constituents during the year under review. Your Directors also wish toplace on record their deep sense of appreciation for the commitment displayed by allexecutives officers and staff of the Company during the financial year.

Place : Mumbai

For and on behalf of the Board of Directors

Date : May 30 2017 Nitin Sandesara Chetan Sandesara
Managing Director Jt. Managing Director
(DIN:00255496) (DIN:00255671)

(Annexure- 6 to the Director's Report )

CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION FOREIGN EXCHANGE EARNING AND OUTGO

Pursuant to Section 134 (3)(m) of the Companies Act 2013 read with Rule 8(3) of theCompanies (Accounts) Rules 2014

A. CONSERVATION OF ENERGY

Energy Conservation Measures taken: The Company has undertaken various measures forconservation and saving of energy in critical areas including

1. Power factor improvement

2. Quicker heat transfer

3. Monitoring of combustion efficiency of boilers

4. Reuse of Steam condensate as boiler feed water

5. Optimum use of utility depending upon process requirement.

As in earlier years your Company continued to envisage and implement energyconservation measures in various manufacturing operations leading to saving ofquantitative consumption of power fuel and oil etc. The Company is also carrying oncontinuous education and awa reness program for its employees for Energy conservation andoptimum use.

B. TECHNOLOGY ABSORPTION

Research & Development (R & D)

1. Specific areas in which R & D carried out by the Company:

• Improvement of product quality

• Process improvements

• Cost effectiveness

• El imination of waste in the systems

2. Benefits derived as a result of the above R & D:

Improvement in yield and product quality cost effectiveness and reduction inconsumption of raw material and utilities.

3. Future plan of action:

The Company's effort will continue in the areas of product quality process improvementtechnology with the aim of offering better products to meet consumer needs.

TECHNOLOGY ABSORPTION ADAPTATION AND INNOVATION

1. Efforts in brief made towards technology absorption adaptation and innovation:

After full absorption of technology imparted by foreign collaborations innovations inprocess control cost reduction and quality improvements are being made on a continuousbasis.

2. Benefits derived as a result of the above efforts:

Improvements in productivity cost of manufacturing quality waste elimination andflexibility in manufacturing.

3. Information regarding technology imported during last 5 years : Nil.

C. FOREIGN EXCHANGE EARNED AND USED

(Rs. in Lacs)

a. Earned: Rs.4507.02 million

b. Used: Rs.1711.9 million

For and on behalf of the Board of Directors

Place : Mumbai Nitin Sandesara Chetan Sandesara
Date : May 30 2017 Managing Director Jt. Managing Director
(DIN:00255496) (DIN:00255671)