The Board of Directors hereby present the 24th Annual Report of your Company (theCompany) along with the Audited Financial Statements and the Auditors' Report for thefinancial year ended March 31 2017.
The financial statements have been prepared in accordance with Indian AccountingStandards (Ind AS) as per the Companies (Indian Accounting Standards)Rules2015notified2013 (the Act') and other relevant under Section 133 of Companies Act provisionsof the Act.
| || ||Rs. In Million |
|Particulars ||March 31 2017 ||March 31 2016 |
|Total revenue ||12716 ||11133 |
|Total expenditure ||7933 ||7266 |
|Profit before interest depreciation and tax ||4783 ||3867 |
|Depreciation & Interest ||1318 ||1057 |
|Profit before tax ||3465 ||2810 |
|Provision for tax ||592 ||402 |
|Profit after tax ||2873 ||2408 |
|Total Profit available for Appropriation ||9980 ||7107 |
The highlights of the Company's financial performance during FY 2016-17 are as under:
Revenue increased by 14% (from Rs. 11133 million to Rs. 12716 million)
Earnings before interest tax depreciation and amortisation (EBITDA) increased by 24%(from Rs. 3867 million to Rs. 4783 million)
Profit after tax (PAT) increased by 19% (from Rs. 2408 million to Rs. 2873 million) Adetailed financial performance analysis is provided in the Management Discussion &Analysis Report which is part of this annual report.
In order to build its capabilities in the niche but highly promising area ofbioinformatics Syngene acquired the systems biology and pharma services practice ofStrand Life Sciences Private Limited along with a team of highly experienced scientistsand data analysts. We also established an integrated multi-disciplinary drug discoveryand development center for Amgen Inc. and a Nutrition Research and Development Lab forHerbalife Nutrition. With this the company now has five dedicated centers i.e. forBristol-Myers Squibb Abbott Nutrition Baxter Inc. Amgen Inc. and Herbalife Nutrition.We have also commissioned Phase I of our new Formulation facility that is capable ofmanufacturing clinical supplies as well as commercial supplies of small volume nichetechnology products and complies with regulatory requirements of the USFDA EMA and otherregulatory authorities.
During December 2016 there was a fire incident at one of the company's researchfacilities at Biocon Park in Bengaluru. This facility including office and lab spacemakes up approximately 20% of our total revenues and 12% of our net block. There was noinjury or loss of life due to this incident and the company immediately implemented itsBusiness Continuity Plan (BCP) to minimize impact on operations. Further Industrial AllRisk Insurance Policy has helped the Company to minimize the financial impact on accountof damage to assets and loss profits. The said facility has since been non-operational. Weare in the process of obtaining necessary statutory approvals to commence the refurbishingactivities.
Paid Up Capital
During the financial year the equity shares paid up capital stood at Rs. 2000 million.
Employees are the cornerstone of our business. The Company has a co-operative workculture. We have an experienced and qualified team of scientists disciplines. As on March31 2017 we have 3492 full time employees including 3053 scientists. With our strongintellectual strength and deep knowledge base we intend to continue to drive significantgrowth in the
During the financial year the Board of Directors (the Board) has adoptedthe Dividend Distribution Policy as mandated under Regulation 43A of Securities andExchange Board of India (Listing Obligations and Disclosure Requirement) Regulations 2015(SEBI Listing Regulations 2015). The objective of this policy is to help the Board toappropriately reward the shareholders by striking a balance between dividend pay-outs andlong term capital appreciation. The Dividend Distribution Policy of theCompany is available at http://www.syngeneintl.com/investor-relations/corporate-governanceand is annexed to this report as Annexure 1. The Board has recommended a final dividend ofRs. 1.00 (i.e. 10%) per equity share for the financial year ended March 31 2017entailing a dividend pay-out of Rs. 24 crores (including dividend distribution tax)subject to shareholders' approval at the ensuing Annual General Meeting.
The record date for reckoning the eligible shareholders for the purpose of dividendpay-out will be Friday July 21 2017 and dividend will be paid on August 3 2017.
Transfer of unpaid and unclaimed amount to Investor Education and Protection Fund
Pursuant to the provisions of Section 124(5) of the Companies Act 2013 dividend whichremains unpaid or unclaimed for a period of seven years from the date of its transfer tothe Unpaid Dividend Account is required to be transferred by the Company to the InvestorEducation and Protection Fund (IEPF) established by the Central of Government under theprovisions of Section 125 of the Companies Act 2013. During the financial year there wasno amount due for transfer to IEPF.
Employee Stock Option Plan
Syngene Employee Stock Option Plan (the Plan) is administered by theSyngene Employee Welfare Trust under the instructions and superintendence of Nominationand Remuneration Committee of the Board. During the financial year ended March 31 2017 atotal of 166000 options were granted to eligible employees and 1405694 equity shareswere transferred to eligible employees on exercise across multiple of stock options by theSyngene Employee Welfare Trust. Further the Company has obtained a certificate from thestatutory auditors of the Company that the scheme has been implemented in accordance withthese regulations and in to come. accordance with the resolution passed by theshareholders.
As required under Regulation 14 of Securities and Exchange Board of India (Share BasedEmployee Benefits) Regulation 2014 the applicable disclosure as on March 31 2017 isannexed to this report as Annexure 2. The details of the Plan form part of the notes toaccounts of the financial statements in this Annual Report.
There is no material change in the Plan and the Plan is in compliance with Securitiesand Exchange Board of India (Share Based Employee Benefits) Regulation 2014.
Material Changes and Commitments
No material changes and commitments have occurred subsequent to the end of thefinancial year till the date of this report which affects the financial position of theCompany.
Change in Nature of Business
There has been no change in the nature of business of the company. Your Companycontinues to be one of the leading contract research organisation (CRO) in the country.
Loans Guarantees or Investments
Loans guarantees and investments covered under Section
186 of the Companies Act 2013 forms part of the notes to the financial statements.
During the financial year the company did not accept any deposits covered underchapter V of the Companies Act 2013.
CRISIL has maintained it's CRISIL AA/Stable' rating on the banking facilitiesavailed by Syngene from various banks/ financial institutions. The rating on theshort-term facilities was reaffirmed at CRISIL A1+'.
During the financial year the Board has appointed Jonathan Hunt as Chief ExecutiveOfficer (CEO) of the Company effective from April 1 2016. The Board of your Company atits meeting held on April 27 2017 has appointed Jonathan Hunt Chief Executive Officeras a Whole-time Director of the Company for a period of five years commencing from May 12017 not liable to retire by rotation subject to shareholder's approval in the ensuingAnnual General Meeting.
The Board has also appointed Dr. Vijay Kuchroo as an Additional Independent Director onthe Board of the Company effective from March 1 2017 who shall hold office up to thedate of ensuing Annual General Meeting. Thereafter subject to shareholder's approval hewill be appointed as an Independent Director for a term of three years commencing from thedate of Board's appointment till the conclusion of Annual General Meeting proposed to beheld in 2020 and not liable to retire by rotation.
The shareholders at its Annual General Meeting held on July 23 2014 had appointedRussell Walls as an Independent Director for a tenure of three years i.e. till theconclusion of Annual General Meeting proposed to be held in the year 2017. Now RussellWalls tenure will come to an end at this Annual General Meeting.
The Board at its meeting held on April 27 2017 had reappointed Russell Walls as anIndependent Director for another term of three years commencing from the conclusion of theensuing Annual General Meeting till the conclusion of the Annual General Meeting proposedto be held in 2020 and not liable to retire by rotation.
The brief resumes of the Directors seeking appointment/ re-appointment at the ensuingAnnual General Meeting in pursuance of Regulation 36(3) of SEBI Listing Regulation 2015are annexed to the Annual General Meeting Notice.
Prof. Catherine Rosenberg shall retire by rotation at the ensuing Annual GeneralMeeting and is eligible for reappointment. The Board recommends her re-appointment and thesame forms part of Annual General Meeting Notice.
Peter Bains Non-Executive Director and former CEO of your Company has stepped downfrom the Board with effect from the conclusion of the Board meeting held on April 272017. Peter has been associated with the Company since 2010 and was instrumental indriving its growth and a successful Initial Public Offer (IPO).
Key Managerial Personnel (KMP)
Pursuant to Section 203 of the Companies Act 2013 the Key Managerial Personnel of theCompany are Kiran Mazumdar Shaw Managing Director Jonathan Hunt Chief ExecutiveOfficer M B Chinappa Chief Financial Officer and Mayank Verma Company Secretary. Duringthe financial year Jonathan Hunt has been appointed as Chief Executive Officer of theCompany with effect from April 1 2016.
Declaration by Independent Directors
The Company has received necessary declaration from the Independent Directors inaccordance with the requirements of Section 149(7) of the Companies Act 2013 that theymeet the criteria of independence as laid out in sub-section (6) of Section 149 of theCompanies Act 2013 and the SEBI Listing Regulation 2015.
Policy on Directors' Appointment and Remuneration
The policy of the Company on Director's appointment and remuneration includingcriteria for determining qualifications independence and other matters as provided underSection 178(3) of the Companies Act 2013 is annexed to this report as Annexure 3.
Meetings of the Board
A calendar of board meetings is prepared and circulated in advance to the Directors.During the financial year the Board met five times details of which are given in theCorporate Governance Report that forms part of this Annual Report.
The intervening gap between the two Board meetings were within the period as prescribedunder the Companies Act 2013 and the SEBI Listing Regulations 2015.
The Audit Committee of the Company comprises entirely of Independent Directors. Themembers of the Committee are Russell Walls Chairman Paul Blackburn and Suresh Talwar.The Board has accepted all the recommendations made by the Audit Committee during thefinancial The composition and other relevant details of other Board level committees i.e.Audit and Risk Committee Nomination and Remuneration Committee Stakeholders RelationshipCommittee and Corporate Social Responsibility Committee are disclosed separately in theCorporate Governance Report which forms part of this annual report.
A diverse Board enables efficient functioning through differences in perspectives andskills and also fosters differentiated thought processes on the back of varied industrialand management expertise gender knowledge and geographical background. The Boardrecognises the importance of a diverse composition and has adopted a Board DiversityPolicy which sets out the approach to diversity. The Board Diversity Policy ofthe Company is available at http://www.syngeneintl.com/investor-relations/corporate-governance.
As per the provisions of the Companies Act 2013 and SEBI Listing Regulations 2015the annual evaluation was carried out as per the criteria laid down by the Nomination andRemuneration Committee to review performance of the Board its Committees Chairperson andIndividual Directors. The details of said evaluation has been enumerated in the CorporateGovernance Report that forms part of this annual report. The outcome of the Boardevaluation for the financial year 2016-17 was discussed by the Nomination and RemunerationCommittee and the Board at their meeting held on January 24 2017.
Director's Responsibility Statement
Based on the framework of internal financial established and maintained by the Companywork performed by the internal statutory and secretarial auditors reviews performed bythe management and the relevant Board Committees the Board in concurrence with the Auditand Risk Committee is of the opinion that the Company's internal financial controls wereadequate and effective as on 31 March 2017.
In Compliance with section 134(5) of the Companies Act 2013 the Board to the best oftheir knowledge hereby confirms the following:
(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 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) 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 operating effectively;
(f) The Directors have devised proper systems to ensure compliance with the provisionsof all applicable laws and that such systems are adequate and operating effectively.
M/s. B S R & Co. LLP Chartered Accountants (ICAI Registration No.101248W/W-100022) were appointed as Statutory Auditors of the Company at the AnnualGeneral Meeting held on June 30 2016 to hold office from the conclusion of 23rd AnnualGeneral Meeting till the conclusion of 28th Annual General Meeting proposed to be held in2021 subject to annual ratification of their appointment by the shareholders.
As required under the provisions of section 139(1) of the Companies Act 2013 theCompany has received a written consent from B S R & Co. LLP Chartered Accountants totheir appointment and a eligibility certificate to the effect that their appointment ifmade would be in accordance with the Companies Act 2013 and the Rules framed thereunderand that they satisfy the criteria provided in section 141 of the Companies Act 2013.
Accordingly the appointment of M/s. B S R & Co. LLP Chartered Accountants asStatutory Auditors of the Company is placed for ratification of the forms part of theAnnual General Meeting Notice.
The tenure of M/s. Price Waterhouse Coppers & Co. (PwC) LLP Chartered Accountantsas Internal Auditors of the Company had come to an end in October 2016. Based on therecommendation of Audit and Risk Committee the Board at its meeting held on October 202016 has appointed M/s. Ernst & Young LLP as new Internal Auditors of the Company fora period of three years.
Pursuant to section 204 of the Companies Act 2013 read with rules made thereunderinter-alia requires every listed company to annex with its Board's report a SecretarialAudit Report given by a Company Secretary in Practice in the Form MR-3.
The Board appointed M/s. V. Sreedharan & Associates Practicing CompanySecretaries as Secretarial Auditors to conduct the Secretarial Audit of the Company forthe Financial Year 2016-17. The report does not contain any qualification reservation oradverse remarks. The Board at its meeting held on April 27 2017 has appointed M/s. V.Sreedharan & Associates Practicing Company Secretaries as Secretarial Auditors toconduct Secretarial Audit of the Company for the Financial Year 2017-18. The SecretarialAudit Report of the Company for the financial is annexed to this report as Annexure 4.
Board's Response on the remarks made by Secretarial Auditors and Statutory Auditors
There were no qualifications reservations or adverse remarks made by the StatutoryAuditors in their report and by the Company Secretary in practice in their SecretarialAudit Report.
Corporate Governance Report
The Company's philosophy on Corporate Governance is to consistently follow soundCorporate Governance practices based on fairness integrity transparencyprofessionalism honesty and accountability in all its business practices and dealings.The Company's corporate governance framework focuses on adequate & timely disclosurestransparent & robust accounting policies and a strong & Independent Board in orderto maximise shareholders benefit. The Company's report on Corporate Governance for thefinancial year ended March 31 2017 as per regulation 34(3) read with Schedule V of theSEBI Listing Regulation 2015 and forms part of this annual report.
Auditors' Certificate on Corporate Governance
As required under Schedule V(E) of SEBI Listing Regulation 2015 the auditors'certificate on compliance with the requirement of corporate governance is enclosed asAnnexure 5 to this report. The auditors' certificate for financial year 2016-17 does notcontain any qualification reservation or adverse remarks.
Management Discussion and Analysis Report
As required under Regulation 34 of SEBI Listing Regulation 2015 the ManagementDiscussion and Analysis Report forms part of this annual report.
Business Responsibility Report
Regulation 34(2)(f) of the SEBI Listing Regulation 2015 mandates inclusion of theBusiness Responsibility Report as part of the Annual Report for top 500 listed entitiesbased on market capitalization. The Business Responsibility Report contains a detailedreport describing the initiatives taken by the Company on business responsibilitiesvis-a-vis the nine principles of the National Voluntary Guidelines on socialenvironmental and economic responsibilities of business framed by the Ministry ofCorporate Affairs. In year2016-17 compliance with the regulation the Company's first BusinessResponsibility Report forms part of this annual report.
Corporate Social Responsibility
As per Section 135 of the Companies Act 2013 the Company constituted a CorporateSocial Responsibility Committee which comprises of Dr. Bala S Manian Chairman SureshTalwar Dr. Vijay Kuchroo and Prof. Catherine Rosenberg. The Committee monitors andoversees various CSR initiative activities of the Company. The Company's CSR initiativesare based on the principle of making enduring impact through programs that promote socialand economic inclusion. The Company is committed to innovation affordability and accessto healthcare. In line with this commitment and as a socially responsible organizationthe Company invested in CSR programs aimed at making a difference to the lives ofmarginalized communities. The Company's CSR activities are executed through BioconFoundation. Biocon Foundation develops and implements programs in the area of healthcareeducation infrastructure rural development promotion of art and culture genderequality and development of vulnerable sections of the society. The CSR policy of theCompany is available on the Company's website athttp://www.syngeneintl.com/investor-relations/corporate-governance. A detailed report onCSR activities is annexed to this report as Annexure 6.
Adequacy of Internal Financial Control
The Company had laid down certain guidelines policies processes and structures toenable implementation of appropriate internal financial controls across the organisation.These control processes enable and ensure the orderly and efficient conduct of thecompany's business including safeguarding of assets prevention and detection of fraudsand errors the accuracy and completeness of the accounting records and timely preparationof reliable financial information. There are control processes both on manual and ITapplications including ERP applications wherein the transactions were approved andrecorded. Review and control mechanisms are built in to ensure that such control systemsare adequate and operating effectively. Because of the inherent limitation of internalfinancial controls including the possibility of collusion or improper management overrideof controls material misstatements in financial reporting due to error or fraud may occurand not be detected. Also evaluation of the internal financial controls are subject tothe risk that the internal financial control may become inadequate because of changes inconditions or that the compliance with the policies or procedure may deteriorate.
Risk Management Policy
The Company has put in place an enterprise wide risk management framework. Thisholistic approach provides the assurance that to the best of its capabilities theCompany identifies assesses and mitigates risks that could materially impact itsperformance in achieving the stated objectives. The Audit and Risk Committee on aquarterly basis reviews critical risks along with its mitigation plans. The Committeealso ensures that the Company is taking appropriate measures to achieve prudent balancebetween risk and reward in both ongoing and new business activities. The Committee onregular basis reviews the Company's portfolio of risks and considers it against theCompany's Risk Appetite. The Committee also recommends changes to the risk managementtechnique associated frameworks processes and practices of the Company.
Whistle Blower Policy/Vigil Mechanism
The Company's Whistle Blower Policy allows employees directors and other stakeholdersto report matters such as genuine grievances corruption fraud & misconductmisappropriation of assets and non-compliance of Code of Conduct of the Company or anyother unethical practices. The policy safeguards the whistle blowers to report concerns orgrievances and also provides a direct access to the Chairman of the Audit Committee.During the financial year none of the personnel has been denied access to the Chairman ofthe Audit Committee. The Whistle Blower Policy is available on the Company's website athttp://www.syngeneintl.com/investor-relations/ corporate-governance.
Disclosure under Section 22 of the Sexual Harassment of Women at Workplace (PreventionProhibition and Redressal) Act 2013
Your company is committed to providing a workplace that is free from discriminationharassment and victimization regardless of gender race creed religion. The Company hasa policy in place on Prevention Prohibition and Redressal of Sexual Harassment atWorkplace in compliance with the requirements of The Sexual Harassment of Women atWorkplace (Prevention Prohibition and Redressal) Act 2013.
The object of this policy is to ensure prevention of sexual harassment and provide asafe working environment. The Policy is applicable to all employees including contractualemployees of the Company. The Internal Complaints Committee (ICC) has beenconstituted to consider and redress all complaints of sexual harassment at workplace. Thepolicy has set guidelines on the redressal and enquiry process that is to be followed bycomplainants and the ICC while dealing with issues related to sexual harassment atworkplace against any employee. During the financial year two cases were reported underprevention of sexual harassment policy and both of them were satisfactorily addressed andresolved.
Significant and Material orders by the Regulators or Courts or Tribunals
During the financial year there have been no significant and material orders passed bythe regulators or courts or tribunals impacting the going concern status and Company'soperations in the future.
Related Party Contracts or Arrangements
There were no materially significant related party transactions entered between theCompany directors management or their relatives except for those disclosed in thefinancial statements.
All the contracts/arrangements/transactions entered into by the Company with therelated parties during the financial year 2016-17 were in the ordinary course of businessand on an arm's length basis.
Accordingly particulars of contracts or arrangements with related parties referred toin Section 188(1) along with the justification for entering into such contract orarrangement in Form AOC-2 does not form a part of the report. The company formulated thepolicy on Materiality of Related Party Transactions and Dealing with Related PartyTransactions'' and the same is available http://www.syngeneintl.com/investor-relations/corporate-governance. The details of related partydisclosures forms part of note to the financial statements provided in the annual report.
Conservation of Energy Technology Absorption Foreign Exchange Earnings and
The particulars as prescribed under section 134 (3) (m) of the Companies Act 2013read with Rule 8(3) of the Companies (Accounts) Rules 2014 are annexed to this report asAnnexure 7.
Particulars of Employees
Disclosures pertaining to remuneration and other details as required under Section197(12) of the Companies Act 2013 read with Rule 5(1) of the Companies (Appointment andRemuneration of Managerial Personnel) Rules 2014 are annexed to this report as Annexure8.
Particulars of employees remuneration as required under section 197(12) of theCompanies Act 2013 read with Rule 5(2) and 5(3) of the Companies (Appointment andRemuneration of Managerial Personnel) Rules 2014 forms part of this report. Consideringfirst proviso to Section 136(1) of the Companies Act 2013 the Annual Report excludingthe said information was sent to the shareholders of the Company and others entitledthereto. The said information is available for inspection at the registered office of theCompany during working hours up to the date of ensuing Annual General Meeting. Anyshareholder interested in obtaining such information may write to the Company Secretary inthis regard. The said information is also available on the website of the company atwww.syngeneintl. com.
Extract of Annual Return
In compliance with Section 92 and Section 134(3)(a) of the Companies Act 2013 read withapplicable Rules made thereunder an extract of the annual return in Form MGT-9 is annexedto this report as Annexure 9.
None of the Directors of your Company are disqualified as per provisions of Section164(2) of the Companies Act 2013. Your Directors have made necessary disclosures asrequired under various provisions of the Act and SEBI Listing Regulations 2015.
We place on record our gratitude to our employees at all levels who have contributed tothe growth and sustained success of the Company through their dedication hard workcooperation and support. We would like to thank all our clients vendors bankersinvestors media and other business associates for their continued support andencouragement during the year.
We also thank the Government of India the Government of Karnataka the Ministry ofInformation Technology and Biotechnology the Ministry of Commerce and Industry theMinistry of Finance and Corporate Affairs the Department of Scientific and IndustrialResearch the Customs and Excise Departments the Reserve Bank of India the Income TaxDepartment SEZs (Special Economic Zones) LTU Bengaluru and all Other Government Agenciesfor their support during the year and look forward to their continued support in thefuture.
| ||For and on behalf of the Board |
|Date: April 27 2017 ||Kiran Mazumdar Shaw |
|Place: Bengaluru ||Managing Director |