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Vivimed Labs Ltd.

BSE: 532660 Sector: Industrials
NSE: VIVIMEDLAB ISIN Code: INE526G01021
BSE LIVE 15:45 | 15 Dec 110.05 0.35
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112.70

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NSE 15:51 | 15 Dec 110.85 1.15
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OPEN 112.70
PREVIOUS CLOSE 109.70
VOLUME 101071
52-Week high 153.30
52-Week low 83.75
P/E 6.59
Mkt Cap.(Rs cr) 908
Buy Price 0.00
Buy Qty 0.00
Sell Price 110.05
Sell Qty 2547.00
OPEN 112.70
CLOSE 109.70
VOLUME 101071
52-Week high 153.30
52-Week low 83.75
P/E 6.59
Mkt Cap.(Rs cr) 908
Buy Price 0.00
Buy Qty 0.00
Sell Price 110.05
Sell Qty 2547.00

Vivimed Labs Ltd. (VIVIMEDLAB) - Director Report

Company director report

Financial Results

The financial performance of your Company for the year ended 31st March 2016 issummarized below:

(Rs in million)

Particulars Standalone Consolidated
Year ended 31.03.2016 Year ended 31.03.2015 Year ended 31.03.2016 Year ended 31.03.2015
Revenue from Operations (Net) 3203.77 4315.82 13564.40 13859.65
EBITDA 861.82 1071.55 2428.92 2227.52
Less : Finance Costs 560.59 623.35 815.66 790.37
Less : Depreciation 187.92 205.6 613.93 661.78
Profit Before Exceptional Items & 113.31 242.55 999.32 775.37
Tax
Exceptional Items 0 0 0.00 0.00
Profit Before Tax 113.40 242.55 999.32 775.37
Less : Tax Expense 32.12 53.20 162.59 54.87
Profit After Tax 81.28 189.35 836.73 720.50
Less: Minority Interest Nil Nil Nil Nil
Profit attributable to shareholders of the Company 81.28 189.35 836.73 720.50
Opening balance in Statement of Profit and Loss 1932.48 1758.50 3785.01 3181.49
AMOUNT AVAILABLE FOR 2013.76 1947.49 4621.74 3901.99
APPROPRIATION
That the Directors recommends for appropriation as under:
Transfer to General Reserve - - - -
Closing Balance in Statement of Profit and Loss 2013.76 1947.49 4621.74 3785.01

OVERVIEW OF COMPANY’S FINANCIAL PERFOMANCE

On a consolidated basis your Company reported net revenue of H13564.40 million asagainst Rs 13859.65 million. This marginal decline was due to the change in product mixin the Specialty Chemicals business and eventual divestiture of certain identified productsegments. EBITDA for FY2016 was Rs 2428.92 compared to Rs 2227.52 million in theprevious year. This growth This was driven by robust performance of both the API and FDFdivisions in the healthcare vertical. Net profit after minority interest for the group forthe current year is Rs 836.73 million as against H720.50 million in the previous year.

Net revenue from operations on standalone basis increased to Rs 3203.77 million asagainst Rs 4315.82 million in the previous year. FY2016 EBITDA was Rs 861.82 compared toRs 1071.55 million in the previous year. The Profit After Tax for the current year is Rs81.28 million.

Your Company has entered into an agreement with Clariant India Limited for the transferand sale of identified products along with their associated trademarks and assets withinthe Speciality Chemicals division for H3800 million. During January 2016 the Companyclosed the first stage of the transaction and received H2584 crores as part of the saleproceeds. The remaining consideration will be received after Closure of second stage ofthe transaction. There are no material changes and commitments affecting the financialposition of your Company which have occurred between the end of the financial year FY2016and the date of this report.

SHARE CAPITAL

The Authorised Share Capital of the Company is H1110000000/- (Rupees One HundredEleven Crores only) comprising 40000000 (Four Crores) Equity Shares of H10/- (RupeesTen Only) each and 710000 (Seven Lakh Ten Thousand only) Preference Shares of theCompany with a par value of H1000/- (Rupees One Thousand only) each. The Paid Up ShareCapital of the Company is H162037830 (rupees sixteen crores twenty lakhs thirty-seventhousand eight hundred and thirty only) divided into 16203783 equity shares of H10/-each as on March 31 2016.

TRANSFER TO GENERAL RESERVE

The Company proposes not to transfer funds to general reserves for the FY2016. Thetotal Reserves & Surplus (including Capital Reserve Securities Premium ReserveCentral Subsidy General Reserve and Surplus) as on March 31 2016 is H3534.38 million.

DIVIDEND

Due to proposed investment in expansions and developments in future and to conserve theavailable resources for the same the board of directors of the Company have not recommendany dividend for the year FY2016

PUBLIC DEPOSITS

During the year under review your Company has not accepted any deposit within themeaning of Sections 73 and 74 of the Companies Act 2013 read with the Companies(Acceptance of Deposits) Rules 2014 (including any statutory modification(s) orre-enactment(s) for the time being in force).

LOANS AND INVESTMENTS

Details of loans guarantees and investments under the provisions of Section 186 of theCompanies Act 2013 read with the Companies (Meetings of Board and its Powers) Rules2014 as on 31st March 2016 are set out in the Standalone Financial Statements formingpart of this report.

CONSOLIDATED ACCOUNTS

The Consolidated Financial Statements of your Company for the financial year FY2016 areprepared in compliance with applicable provisions of the Companies Act 2013 read with theRules issued thereunder applicable Accounting Standards and the provisions of SEBI(Listing Obligations and Disclosure Requirements) Regulations 2015 (hereinafter referredto as the "Listing Regulations"). The consolidated financial statements havebeen prepared on the basis of audited financial statements of your Company itssubsidiaries and associate companies as approved by the respective Board of Directors.

SUBSIDIARIES

A separate statement containing the salient features of financial statements of allsubsidiaries of your Company forms part of consolidated financial statements in compliancewith Section 129 and other applicable provisions if any of the Companies Act 2013. Thefinancial statements of the subsidiary companies and related information are available forinspection by the members at the Registered Office of your Company during business hourson all days except Saturdays Sundays and public holidays upto the date of the AnnualGeneral Meeting (‘AGM’) as required under Section 136 of the Companies Act2013. Any member desirous of obtaining a copy of the said financial statements may writeto the Company Secretary at the Corporate Office of your Company. The financial statementsincluding the consolidated financial statements financial statements of subsidiaries andall other documents required to be attached to this report have been uploaded on thewebsite of your Company (www. Vivimedlabs.com).

The financial performance of each of the subsidiaries and joint venture companiesincluded in the consolidated financial statements of your Company is set out in theAnnexure -1 to this Report. Additional details of the performance and operations of thesubsidiaries along with details of the investments made by your Company are set out in theManagement Discussion and Analysis which also forms part of this report

MANAGEMENT DISCUSSION AND ANALYSIS

The Management Discussion and Analysis forms an integral part of this report and givesdetails of the overall industry structure economic developments performance and state ofaffairs of your Company’s various businesses viz. the pharmaceuticals Specialtychemicals API’s business internal controls and their adequacy risk managementsystems and other material developments during the financial year FY2016..

CORPORATE GOVERNANCE REPORT

In compliance with Regulation 34 of the Listing Regulations a separate report onCorporate Governance along with a certificate from the Auditors on its compliance formsan integral part of this report.

INDUSTRIAL RELATIONS

Your Company has always considered its workforce as its valuable asset and continues toinvest in their excellence and development programs. Your Company has taken severalinitiatives for enhancing employee engagement and satisfaction.

The industrial relations in respect of all manufacturing facilities and divisions ofyour Company are normal.

DIRECTORS AND KEY MANAGERIAL PERSONNEL

Retirement by rotation and subsequent re-appointment:

Shri Manohar rao Varalwar and Shri.Subhash Varalwar Directors are liable to retire byrotation at the ensuing AGM pursuant to the provisions of Section 152 of the CompaniesAct 2013 read with the Companies (Appointment and Qualification of Directors) Rules 2014and the Articles of Association of your Company and being eligible have offered themselvesfor re- appointment. Appropriate resolutions for their re-appointment are being placed foryour approval at the ensuing AGM. The brief resume of the Directors and other relatedinformation has been detailed in the Notice convening the 28th AGM of your Company. YourDirectors recommend their re-appointment as Directors of your Company.

The Independent Directors of your Company are not liable to retire by rotation.

Shri Santosh Varalwar (Managing Director) Shri.Pavan Kumar M (CEO) Shri. RameshChalla (CFO) and Shri.K.Yugandhar Company Secretary are the Key Managerial Personnel ofyour Company in accordance with the provisions of Sections 2(51) 203 of the CompaniesAct 2013 read with Companies (Appointment and Remuneration of Managerial Personnel)Rules 2014 (including any statutory modification(s) or re-enactment(s) for the time beingin force).

# Shri.Srinivas Chidambaram (Nominee Director) (Resigned with effect from 17.12.2015)Shri Amarjit Singh Bhatia CFO (Resigned with effect from 23/04/2016) # Shri.Pavan Kumar M(CEO)and Shri. Ramesh Challa (CFO) has been appointed on 23.04.2016.

Disclosure Relating to Remuneration of Directors Key Managerial Personnel andparticulars of Employees:

The remuneration paid to the Directors is in accordance with the Nomination andRemuneration Policy formulated in accordance with Section 178 of the Companies Act 2013and Regulation 19 of the Listing Regulations (including any statutory modification(s) orre-enactment(s) for the time being in force). The salient aspects covered in theNomination and Remuneration Policy have been outlined in the Corporate Governance Reportwhich forms part of this report.

The Managing Director & CEO of your Company does not receive remuneration from anyof the subsidiaries of your Company.

The information required under Section 197 of the Companies Act 2013 read withCompanies (Appointment and Remuneration of Managerial Personnel) Rules 2014 in respect ofDirectors/ employees of your Company is set out in Annexure-2 to this report and is alsoavailable on the website of your Company (www.vivimedlabs.com).

Declaration of Independence:

Your Company has received declarations from all the Independent Directors confirmingthat they meet the criteria of independence as prescribed under the provisions of theCompanies Act 2013 read with the Schedules and Rules issued thereunder as well asRegulation 16(1) (b) of Listing Regulations (including any statutory modification(s) orre-enactment(s) for the time being in force).

Evaluation of Board’s Performance:

Pursuant to the provisions of the Companies Act 2013 read with the Rules issuedthereunder and the Listing Regulations (including any statutory modification(s) orre-enactment(s) for the time being in force) the process for evaluation of the annualperformance of the Directors/ Board/ Committees was carried out. The criteria applied inthe evaluation process are detailed in the Corporate Governance Report which forms part ofthis report.

NUMBER OF MEETINGS OF THE BOARD AND ITS COMMITTEES

The details of the meetings of the Board of Directors and its Committees convenedduring FY2016 are given in the Corporate Governance Report which forms a part of thisreport.

AUDITORS AND AUDITORS’ REPORT

Statutory Auditors:

At the Annual General Meeting held on 30th September 2015 M/s. P.Mulari & Co.Chartered Accountants were appointed as statutory auditors of the Company to hold officetill the conclusion of the Annual General Meeting to be held in the calendar year 2017 Interms of the first proviso to Section 139 of the Companies Act. 2013 the appointment ofthe auditors shall be placed for ratification at every Annual General Meeting.Accordingly the appointment of M/s. P. Mulari & Co. Chartered Accountants asstatutory auditors of the Company is placed for ratification by the shareholders.

The Auditors’ Report for FY2016 does not contain any qualification reservation oradverse remark. The Auditors’ Report is enclosed with the financial statements inthis Annual Report.

Cost Auditor:

The Board of Directors of your Company on the recommendations made by the AuditCommittee at its meeting held on August 13 2016 has approved the appointment of M/s. A.S.Rao & Co Cost Accountants (Firm Registration No. 000326) as the Cost Auditor of yourCompany to conduct the audit of cost records for the financial year FY2017. Theremuneration proposed to be paid to the Cost Auditor subject to your ratification at theensuing 28th AGM would not exceed H1.1 lacs (Rupees One lac Ten thousand only) excludingtaxes and out of pocket expenses if any.

Your Company has received consent from M/s. A.S. Rao & Co Cost Accountants to actas the Cost Auditor for conducting audit of the cost records for the financial year FY2017along with a certificate confirming their independence and arm’s length relationship.

Secretarial Auditor:

In terms of Section 204 of the Companies Act 2013 the Board of Directors of yourCompany at its meeting held on August 13 2016 has appointed Mr.N.V.S.S.S. Rao PracticingCompany Secretary (Certificate of Practice No.2886) as the Secretarial Auditor to conductan audit of the secretarial records for the financial year FY2017.

Your Company has received consent from Mr.N.V.S.S.S. Rao to act as the auditor forconducting audit of the Secretarial records for the financial year ending 31st March2017.

The Secretarial Audit Report for the financial year ended 31st March 2016 is annexedherewith as Annexure -3 to this report. The Secretarial Audit Report does not contain anyqualification reservation or adverse remark.

EXTRACT OF ANNUAL RETURN

The details forming part of the extract of the Annual Return as on 31st March 2016 inForm MGT - 9 in accordance with Section 92(3) of the Companies Act 2013 read withCompanies (Management and Administration) Rules 2014 are set out herewith as Annexure -4to this report.

RELATED PARTY TRANSACTIONS

During the financial year FY2016 your Company has entered into transactions withrelated parties as defined under Section 2(76) of the Companies Act 2013 read withCompanies (Specification of Definitions Details) Rules 2014 all of which were in theordinary course of business and on arm’s length basis and in accordance with theprovisions of the Companies Act 2013 read with the Rules issued thereunder and theListing Regulations. All transactions with related parties were reviewed and approved bythe Audit Committee. Prior omnibus approvals are granted by the Audit Committee forrelated party transactions which are of repetitive nature entered in the ordinary courseof business and are on arm’s length basis in accordance with the provisions ofCompanies Act 2013 read with the Rules issued thereunder and the Listing Regulations. Thedetails of the related party transactions as per Accounting Standard 18 are set out in theStandalone Financial Statements forming part of this report.

The Form AOC - 2 pursuant to Section 134(3)(h) of the Companies Act 2013 read withRule 8(2) of the Companies (Accounts) Rules 2014 is set out as Annexure -5

VIGIL MECHANISM

Your Company is committed to highest standards of ethical moral and legal businessconduct. Accordingly the Board of Directors have formulated a Whistle Blower Policy whichis in compliance with the provisions of Section 177(10) of the Companies Act 2013 andRegulation 22 of the Listing Regulations. employees can raise concerns regarding anydiscrimination harassment victimization any other unfair practice being adopted againstthem or any instances of fraud by or against your Company.

Any incidents that are reported are investigated and suitable action taken in line withthe whistle blower policy. The Whistle Blower Policy is also available on yourCompany’s website (www.vivimedlabs.com).

CORPORATE SOCIAL RESPONSIBILITY (CSR)

The CSR expenditure incurred by your Company during the financial year FY2016 was H36lakhs.

The CSR initiatives of your Company were under the thrust areas of water management.Your Company’s CSR Policy statement and annual report on the CSR activitiesundertaken during the financial year ended 31st March 2016 in accordance with Section135 of the Companies Act 2013 and Companies (Corporate Social Responsibility Policy)Rules 2014 is annexed to this report as Annexure -6.

CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO

The information on conservation of energy technology absorption and foreign exchangeearnings and outgo as stipulated under Section 134 of the Companies Act 2013 read withthe Companies (Accounts) Rules 2014 is set out herewith as Annexure -7 to this report.

DETAILS ON INTERNAL FINANCIAL CONTROLS RELATED TO FINANCIAL STATEMENTS

Your Company has put in place adequate internal financial controls with reference tothe financial statements some of which are outlined below.

Your Company has adopted accounting policies which are in line with the AccountingStandards prescribed in the Companies (Accounting Standards) Rules 2006 that continue toapply under Section 133 and other applicable provisions if any of the Companies Act2013 read with Rule 7 of the Companies (Accounts) Rules 2014 and relevant provisions ofthe Companies Act 1956 to the extent applicable. These are in accordance with generallyaccepted accounting principles in India. Changes in policies if any are approved by theAudit Committee in consultation with the Statutory Auditors.

The policies to ensure uniform accounting treatment are prescribed to the subsidiariesof your Company. The accounts of the subsidiary companies are audited and certified bytheir respective Statutory Auditors for consolidation.

Your Company operates in SAP an ERP system and has many of its accounting recordsstored in an electronic form and backed up periodically. The ERP system is configured toensure that all transactions are integrated seamlessly with the underlying books ofaccount. Your Company has automated processes to ensure accurate and timely updation ofvarious master data in the underlying ERP system.

Your Company has a robust financial closure self-certification mechanism wherein theline managers certify adherence to various accounting policies accounting hygiene andaccuracy of provisions and other estimates.

Your Company operates a shared service center which handles all payments made by yourCompany. This center ensures adherence to all policies laid down by the management.

Your Company in preparing its financial statements makes judgments and estimates basedon sound policies and uses external agencies to verify/ validate them as and whenappropriate. The basis of such judgments and estimates are also approved by the StatutoryAuditors and Audit Committee.

The Management periodically reviews the financial performance of your Company againstthe approved plans across various parameters and takes necessary action wherevernecessary.

Your Company has a code of conduct applicable to all its employees along with a WhistleBlower Policy which requires employees to update accounting information accurately and ina timely manner. Any non-compliance noticed is to be reported and actioned upon in linewith the Whistle Blower Policy.

Your Company gets its Standalone accounts limited review every quarter by its StatutoryAuditors.

SIGNIFICANT/MATERIAL ORDERS PASSED BY THE REGULATORS

There are no significant material orders passed by the Regulators or Courts orTribunals impacting the going concern status of your Company and its operations in future.

GENERAL

a) Your Company has not issued equity shares with differential rights as to dividendvoting or otherwise; and

b) Your Company have ESOP scheme for its employees/Directors.

DIRECTORS RESPONSIBILITY STATEMENT:

Pursuant to Section 134(3)(c) of the Companies Act 2013 (including any statutorymodification(s) or re-enactment(s) for the time being in force) the Directors of yourCompany confirm that:

(a) in the preparation of the annual accounts for the financial year ended 31st March2016 the applicable Accounting Standards and Schedule III of the Companies Act 2013(including any statutory modification(s) or re-enactment(s) for the time being in force)have been followed and there are no material departures from the same;

(b) the Directors have 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 your Company as at 31st March 2016 and of the profitand loss of the Company for the financial year ended 31st March 2016;

(c) proper and sufficient care has been taken for the maintenance of adequateaccounting records in accordance with the provisions of the Companies Act 2013 (includingany statutory modification(s) or re-enactment(s) for the time being in force) forsafeguarding the assets of the company and for preventing and detecting fraud and otherirregularities;

(d) the annual accounts have been prepared on a ‘going concern’ basis; (e)proper internal financial controls laid down by the Directors were followed by yourCompany and that such internal financial controls are adequate and operating effectively;and proper systems to ensure compliance with the provisions of all applicable laws were inplace and that such systems were adequate and operating effectively.

Cautionary statement

The management of Vivimed Labs has prepared and is responsible for the financialstatements that appear in this report. These are in conformity with accounting principlesgenerally accepted in India and therefore may include amounts based on informedjudgements and estimates. The management also accepts responsibility for the preparationof other financial information that is included in this report. Statements in thisManagement Discussion and Analysis describing the Company’s objectives projectionsestimates and expectations may be ‘forward looking statements’ within themeaning of applicable laws and regulations. Management has based these forward lookingstatements on its current expectations and projections about future events. Suchstatements involve known and unknown risks significant changes in political and economicenvironment in India or key markets abroad tax laws litigation labour relationsexchange rate fluctuations interest and other costs may cause actual results to differmaterially.

Policy on Sexual Harassment

The Company has adopted policy on Prevention of Sexual Harassment of women at Workplacein accordance with The Sexual Harassment of women at Workplace (Prevention Prohibitionand Redressal) Act 2013. During the year under review the Company has not received anycomplaints pertaining to Sexual Harassment.

APPRECIATION

Your Directors wish to convey their gratitude and place on record their appreciationfor all the employees at all levels for their hard work solidarity cooperation anddedication during the year.

Your Directors sincerely convey their appreciation to customers shareholders vendorsbankers business associates regulatory and government authorities for their continuedsupport.

For and on behalf of the Board
Sd/- Sd/-
Place: Hyderabad Manohar Rao V Santosh Varalwar
Date: August 13 2016 Wholetime Director Managing Director

ANNEXURE-1 TO BOARD’S REPORT

The financial performance of each of the subsidiaries and joint venture companiesincluded in the consolidated financial statements are detailed below:

Name of the Subsidiary/ Turnover Profit/(Loss) Before Tax Profit/(Loss) After Tax
Associates company Current Period Previous Period Current Period Previous Period Current Period Previous Period
A) Foreign Subsidiaries
1 Vivimed Holdings Limited Nil Nil Nil (15.07) Nil (15.07)
2 Vivimed Labs Europe Limited 1123 1153.92 160.04 182.34 128.00 146.05
3 Vivimed Labs USA Inc 455 484.06 6.23 6.41 2.76 6.92
4 Vivimed Labs Mauritius Limited Nil Nil (7.20) 3.84 (7.20) 3.84
5 Vivimed Labs UK Limited Nil Nil 30.09 (21.56) 29.09 (21.58)
6 Vivimed Labs Spain S.L Nil Nil (82.36) (106.15) (29.94) (37.21)
7 Union Quimico Farmaceutica S.A.U 5556.66 5240.73 485.16 345.11 431.64 319.10
8 Holiday International Limited Nil Nil 28.98 12.17 26.00 9.70
9 Uquifa Mexico S.A DE C.V 1744.81 1806.97 227.97 88.36 192.18 75.96
B) Indian Subsidiaries
1 Creative HealthCare Private Limited 989.54 861.11 80.94 71.41 55.80 64.48
2 Klarsehen Private Limited 373.37 313.68 52.83 55.37 36.19 38.15
3 Octtantis Nobel Labs Private Limited Nil Nil (12.08) (4.14) (12.08) (4.14)
4 Vivimed Labs (Alathur) Private Limited 323.19 281.31 (83.21) (85.42) (95.51) (55.30)
5 Finoso Pharma Private Limited 68.83 63.43 (1.47) 0.19 (1.47) 0.24

Notes:

1. Vivimed Specialty Chemicals Private Limited was incorporated on 20th July 2015.

2. Indian rupees equivalent of the foreign currency translated at the exchange rate asat 31st March 2016 for current period and 31st March 2015 for previous period.

For and on behalf of the Board
Sd/- Sd/-
Place: Hyderabad Manohar Rao V Santosh Varalwar
Date: August 13 2016 Wholetime Director Managing Director

ANNEXURE-2 TO BOARD’S REPORT

Information required under Section 197 of the Companies Act 2013 read with Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014

A. Ratio of remuneration of each Director to the median remuneration of all theemployees of your company for the Financial year 2015-16 is as follows:

Name of Director(s) Total Remuneration Ratio of remuneration of director to the Median remuneration
SANTOSH VARALWAR 6000004 23
SUBHASH VARALWAR 6000004 23
MANOHAR RAO VARALWAR 6000004 23
SANDEEP VARALWAR 6000004 23
SRIRAMBATLA RAGHUNANDAN 5000004 19.17
PROF M BHAGVANTH RAO 305000 1.17
NIXON PATEL 25000 0.10
PEESAPATI VENKATESWARULU 115000 0.44
PAALURI VENKATARATHNAM 555000 2.13
UMANATH VARAHABHOTLA 90000 0.35

Notes:

1. The information provided above is on standalone basis.

2. The remuneration of Non-Executive Directors is sitting fees paid to them for thefinancial year 2015-16 and commission of H3 lakh payable to Mr. P.V. Rathnam.

3. Median remuneration of the Company for all its employees is H260835/- -for thefinancial year 2015-16.

B. Details of percentage increase in the remuneration of each Director and CFO &Company Secretary in the financial year 2015-16 are as follows:

Name(s) Designation Remuneration (in Rs) Increase (in %)
2015-16 2014-15
SANTOSH VARALWAR Managing director 6000004 6000004 0
SUBHASH VARALWAR Whole-time director 6000004 6000004 0
MANOHAR RAO VARALWAR Whole-time director 6000004 6000004 0
SANDEEP VARALWAR Whole-time director 6000004 6000004 0
SRIRAMBATLA RAGHUNANDAN Whole-time director 5000004 5000004 0
PROF M BHAGVANTH RAO Director 305000 135000 125.93
NIXON PATEL Director 25000 15000 66.67
PEESAPATI VENKATESWARULU Director 115000 75000 53.33
PAALURI VENKATARATHNAM Director 555000 935415 -40.67
UMANATH VARAHABHOTLA Director 90000 Nil #
AMARJIT SINGH BHATIA Chief Financial Officer 4376277 Nil #
N M VAIDYANATHAN Chief Financial Officer Nil 5304187 #
YUGANDHAR KOPPARTHI Company Secretary 1836004 1771500 3.6

Notes:

1. # Appointed / worked during the referred financial year (Percentage increase inremuneration not reported as they were holding Directorship / CFO positions for the partof the financial years 2015-2016 or 2014-15 and remuneration is proportionately adjusted).

2. The remuneration to Non-Executive Directors is sitting fees paid to them for thefinancial year 2015-16 and commission payable to Mr. P.V. Rathnam.

3. The remuneration to Directors is within the overall limits approved by theshareholders of your Company.

C. Percentage increase in the median remuneration of all employees in the financialyear 2015-16: (Amount in H)

2015-16 2014-15 Increase (in %)
Median remuneration of all employees per annum 260835 208668 25

D. Number of permanent employees on the rolls of your Company as on 31st March 2016:

Executive/Manager cadre 298
Staff 279
Operators/Workmen 78
Total 655

E. Explanation on the relationship between average increase in remuneration and CompanyPerformance:

The increase in average remuneration of all employees in the financial year 2015-16 ascompared to the financial year 2014-15 was 25%.

The key indices of Company’s performance are:

2015-16 2014-15 Growth (%)
Net Revenue from operations 3193.94 4301.48 -25.75
Profit Before Tax and Exceptional Items 113.40 242.59 -53.25
Profit After Tax 81.28 189.39 -57.08

Your Company is committed in ensuring fair pay and a healthy work environment for allits employees. Your Company offers competitive compensation to its employees. The pay alsoincorporates external factors like cost of living to maintain concurrence with theenvironment. Your Company maintains a simple compensation structure which allows theemployees to have flexibility in the way in which they realize their salaries. Internalequity is ensured by appropriate fitment at the time of the employee joining a particularcadre and grade. The fixed pay for an employee depends on his/her performance against theobjectives set for the year. The variable pay is paid out to the employee on the basis ofthe performance of your Company and the corresponding business unit or function he/ sheforms a part of.

Thus there will be a positive correlation in the increase in remuneration of employeesand your Company’s performance; however a perfect correlation will not be visiblegiven the dependency on the other factors stated above.

F. Comparison of the remuneration of the Key Managerial Personnel against theperformance of your Company:

The Profit Before Tax and Exceptional Items Decreased by 53.25% in 2015-16 compared to2014-15. The details of remuneration of Key Managerial Personnel are given in point‘H’ below.

G. Details of Share price and market capitalization:

The details of variation in the market capitalization and price earnings ratio as atthe closing date of the current and previous financial years are as follows:

As on 31st March 2016 As on 31st March 2015 Increase/ (decrease) (%)
Price Earnings Ratio 82.97 31.18 166.10
Market Capitalization (Rs In millions) 6748.88 5907.09 14.25

Comparison of share price at the time of first public offer and market price of theshare of 31st March 2016:

Market Price as on 31st March 2016 416.50
Price at the time of initial public offer in 2005 (converted to price of each share for face value of H10/- each) H10/- each) 70.00
% increase of market price over the price at the time of initial public offer 495

Note:

1. Closing share price on the National Stock Exchange of India Limited (NSE) has beenused for the above tables.

H. Comparison of average percentage increase in salary of employees other than keymanagerial personnel and the percentage increase in the key managerial remuneration: H( inmillions)

2015-16 (Rs) 2014-15 (Rs) Increase (%)
Avarage salary of all employees (other than Key Managerial Personnel) 382086 295200 29.43%
Key Managerial Personnel
- Salary of MD & CEO 6000004 6000004 0
- Salary of CFO 4376277 5304187 (17.49)#
- Salary of CS 1836004 1771500 3.6

# There is a change in CFO position during the respective financial years (Worked forpart of the financial year).

I. Key parameters for the remuneration paid to the Directors:

The key parameters for the remuneration paid to the Directors are decided by theNomination and Remuneration Committee in accordance with the principles laid down in theNomination and Remuneration Policy.

Following are major principles for determining remuneration to the Directors:

(i) Commission to the Non-Executive Directors: The Nomination and RemunerationCommittee recommends the Commission (variable component) payable to the Non- ExecutiveDirectors after considering their contribution to the decision making process at meetingsof the Board / Committees participation and time spent as well as providing strategicinputs and supporting the highest level of Corporate Governance and Board effectiveness.The Committee also reviews the commission and remuneration paid to Non-Executive Directorsincluding Independent Directors of other similar sized companies. It is within the overalllimits fixed by the shareholders of your Company.

(ii) Commission to the Managing Director and other whole time

Directors: The Nomination and Remuneration Committee evaluates the performance of theManaging Director and other whole time Directors by setting their Key PerformanceObjectives or Key Performance Parameters at the beginning of each financial year. TheCommittee approves the compensation package of them and ensures that the compensationpackage is in accordance with applicable laws in line with the Company’s objectivesshareholders’ interests industry standards and have an adequate balance betweenfixed and variable components.

J. There are no employees of the Company who receive remuneration in excess of thehighest paid Director of your Company.

K. Affirmation that the remuneration is as per the Nomination and Remuneration Policyof your Company:

It is affirmed that the remuneration paid to the Directors Key Managerial Personneland senior management is as per the Nomination and Remuneration Policy of your Company.

Statement containing the particulars of employees in accordance with Rule 5 (2) of theCompanies (Appointment and Remuneration of Managerial Personnel) Rules 2014:

L. List of employees of your Company employed throughout the financial year 2015-16 andwere paid remuneration not less than H60 lakhs per annum

Name Designation Remuneration ( Rs ) Qualification Experience (years) Joining Date Age (years) Last employment
SANTOSH VARALWAR Managing director & CEO 6000004 Management Graduate 30 09/11/1989 54 Shiping Corporation of India
SUBHASH VARALWAR Whole-time director 6000004 Post Graduate in Chemical Engineering and a Management Graduate 42 09/11/1989 68 Fertilizer Corporation of India
MANOHAR RAO VARALWAR Whole-time director 6000004 post-graduation in Veterinary Sciences 55 10/11/1994 79 Department of Animal Husbandry Government of Andhra Pradesh
SANDEEP VARALWAR Whole-time director 6000004 Graduation in B. Pharmacy 24 23/01/2008 47 V V S Pharmaceuticals & Chemicals Pvt Ltd.

Notes:

1. Shri Santosh Varalwar Shri. Manohar Rao Varalwar Shri. Subhash Varalwar and Shri.Sandeep Varalwar (Directors) are relatives to each other.

2. @ The contractual terms of Shri Santosh Varalwar Shri. Manohar Rao Varalwar Shri.Subhash Varalwar and Shri. Sandeep Varalwar (Directors) are governed by the resolutionspassed by the shareholders in the 27th AGM of your Company held on 30th September 2015.3. The above mentioned Directors are part of the promoter group and holding(Along withother promoters and persons acting in concert with them) 5965945 shares of H10/- each(36.82% to the total paid up capital) of your Company.

4. Remuneration includes salary bonus commission various allowances performanceincentive contribution to provident fund and superannuation fund and taxable value ofperquisites but excludes provision for gratuity and leave encashment.

M. Employees employed for the part of the year and were paid remuneration during thefinancial year 2015-16 at a rate which in aggregate was not less than H 5 lakhs per month:

Name Designation Remuneration (Rs ) Qualification Experience (years) Joining Date Age (years) Last employment
Mr.Amarjit Singh Bhatia Chief Financial Officer 4376277 Chartered Accountant 20 14/08/2015 53 Polygenta Technologies Ltd

Notes:

1. The above mentioned employee is not related to any of the Directors of the Companywithin the meaning of Companies (Appointment and Remuneration of Managerial Personnel)Rules 2014.

2. The above mentioned employee is not holding any shares of your Company along withtheir spouse and dependent children. 3. All appointments are contractual and terminable bynotice on either side.

4. Remuneration includes salary bonus commission various allowances performanceincentive contribution to provident fund and superannuation fund and taxable value ofperquisites but excludes provision for gratuity and leave encashment.

For and on behalf of the Board
Sd/- Sd/-
Place: Hyderabad Manohar Rao V Santosh Varalwar
Date: August 13 2016 Wholetime Director Managing Director

ANNEXURE-3 TO BOARD’S REPORT

FORM NO.MR.3.

SECRETARIAL AUDIT REPORT

FOR THE FINANCIAL YEAR ENDED 31ST MARCH 2016

[Pursuant to section 204(1) of the Companies Act 2013 and Rule 9 of the Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014]

To

The Members Vivimed Labs Limited

78/A Kolhar Industrial Area Bidar – 585403 Karnataka

I have conducted the Secretarial Audit of the compliance of applicable statutoryprovisions and the adherence to good corporate practices by Vivimed Labs Limited(hereinafter referred to as "the Company") Secretarial Audit was conducted in amanner that provided me a reasonable basis for evaluating the corporate conducts/statutorycompliances and expressing my opinion thereon.

Based on my verification of the Company’s books papers minute books forms andreturns filed and other records maintained by the Company and also the informationprovided by the Company its officers agents and authorized representatives during theconduct of secretarial audit I hereby report that in my opinion the Company has duringthe audit period covering the financial year ended on 31st March 2016 (‘AuditPeriod’) complied with the statutory provisions listed hereunder and also that theCompany has proper Board-processes and compliance-mechanism in place to the extent in themanner and subject to the reporting made hereinafter:

I have examined the books papers minute books forms and returns filed and otherrecords maintained by the Company for the financial year ended on 31st March 2016according to the provisions of:

(i) The Companies Act 2013 (the Act) and the rules made thereunder;

(ii) The Securities Contracts (Regulation) Act 1956 (‘SCRA’) and the rulesmade thereunder;

(iii) The Depositories Act 1996 and the Regulations and Bye- laws framed thereunder;

(iv) Foreign Exchange Management Act 1999 and the rules and regulations madethereunder;

(v) The following Regulations and Guidelines prescribed under the Securities andExchange Board of India Act 1992 (‘SEBI Act’): -

(a) The Securities and Exchange Board of India (Substantial Acquisition of Shares andTakeovers) Regulations 2011;

(b) The Securities and Exchange Board of India (Prohibition of Insider Trading)Regulations 1992;

(c) The Securities and Exchange Board of India (Issue of Capital and DisclosureRequirements) Regulations 2009 (Not applicable to the Company during the Audit Period);

(d) The Securities and Exchange Board of India (Employee Stock Option Scheme andEmployee Stock Purchase Scheme) Guidelines 1999 and The Securities and Exchange Board ofIndia (Share Based Employee Benefits) Regulations 2014;

(e) The Securities and Exchange Board of India (Issue and Listing of Debt Securities)Regulations 2008 (Not applicable to the Company during the Audit Period);

(f) The Securities and Exchange Board of India (Registrars to an Issue and ShareTransfer Agents) Regulations 1993 regarding the Companies Act and dealing with client;

(g) The Securities and Exchange Board of India (Delisting of Equity Shares)Regulations 2009 (Not applicable to the Company during the Audit Period); and

(h) The Securities and Exchange Board of India (Buyback of Securities) Regulations1998 (Not applicable to the Company during the Audit Period).

I have also examined compliance with the applicable clauses of the following:

(i) Secretarial Standards issued by The Institute of Company Secretaries of India;

(ii) The Listing Agreement entered into by the Company with Stock Exchanges;

(iii) Securities and Exchange Board of India (Listing Obligations and DisclosureRequirements) Regulations 2015 (with effect from 1st December 2015).

During the period under review the Company has complied with the provisions of the ActRules Regulations Guidelines Standards etc. mentioned above.

I further report that having regard to the compliance system prevailing in the Companyand on examination of the relevant documents and records in pursuance thereof on test– check basis the Company has complied with the following laws applicablespecifically to the Company:

a. The Environment (Protection) Act 1986 and The Manufacture Storage and Import ofHazardous Chemicals Rules 1989;

b. Air (Prevention and Control of Pollution) Act 1981 and Rules issued by the StatePollution Control Boards; and

c. Water (Prevention and Control of Pollution) Act 1974 and Rules issued by the StatePollution Control Boards.

I further report that -

The Board of Directors of the Company is duly constituted with proper balance ofExecutive Directors Non-Executive Directors and Independent Directors. The changes in thecomposition of the Board of Directors that took place during the period under review werecarried out in compliance with the provisions of the Act.

Adequate notice is given to all directors to schedule the Board Meetings agenda anddetailed notes on agenda were generally sent at least seven days in advance and a systemexists for seeking and obtaining further information and clarifications on the agendaitems before the meeting and for meaningful participation at the meeting.

All decisions at Board Meetings and Committee Meetings are carried out unanimously/withrequisite majority as recorded in the minutes of the meetings of the Board of Directors orCommittees of the Board as the case may be.

I further report that there are adequate systems and processes in the Companycommensurate with the size and operations of the Company to monitor and ensure compliancewith applicable laws rules regulations and guidelines.

We further report that during the audit period there was no specific event / actionhaving a major bearing on the Company’s affairs in pursuance to the laws rulesregulations guidelines etc. referred to above.

N V S S S Rao
Company Secretary in practice
Place: Hyderabad ACS No.5868
Date: 13th August 2016 CP NO.2886

ANNEXURE -5 TO BOARD’S REPORT

Disclosure of Particulars of Contracts/Arrangements entered into by the Company

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)

Disclosure of particulars of contracts/arrangements entered into by the company withrelated parties referred to in sub-section (1) of section 188 of the Companies Act 2013including certain arms length transactions under third proviso thereto.

1. There are no contracts/arrangements entered into by the company with related partiesreferred to in sub-section (1) of section188 of the Companies Act 2013 which are not atarms length basis

2. Contracts/arrangements entered into by the company with related parties referred toin sub-section (1) of section 188 of the Companies Act 2013 which are at arms lengthbasis:

Name (s) of the related party & nature of relationship Nature of contracts / arrangements/ transaction Duration of the contracts/ arrangements/ transaction Salient terms of the contracts or arrangements or transaction including the value if any Date of approval by the Board Amount paid as advances if any Justification for entering into such contracts or arrangements or transactions’
Sales & Dossier
Creative Health Care Private Limited India Sale of goods FY 2015-16 Not exceeding H15 crore per annum 12.11.2014 30.87 The transaction is at arm’s length price
Klar Sehen Private Limited India Sale of goods FY 2015-16 Not exceeding H10 crore per annum 12.11.2014 8.98 The transaction is at arm’s length price
Vivimed Labs Europe Limited UK Sale of goods FY 2015-16 Not exceeding H150 crore per annum 12.11.2014 177.94 The transaction is at arm’s length price
Vivimed Lab USA Inc. USA Sale of goods FY 2015-16 Not exceeding H70 crore per annum 12.11.2014 665.07 The transaction is at arm’s length price
Union Quimico Farmaceutica SAU Spain Sale of goods FY 2015-16 Not exceeding H20 crore per annum 12.11.2014 64.16 The transaction is at arm’s length price
Uquifa Mexico S A de C.V Sale of goods FY 2015-16 Not exceeding H10 crore per annum 12.11.2014 0.23 The transaction is at arm’s length price
Purchases from
Creative Health Care Private Limited India Purchases of goods FY 2015-16 Not exceeding H15 crore per annum 12.11.2014 109.97 The transaction is at arm’s length price
Klar Sehen Private Limited India Purchases of goods FY 2015-16 Not exceeding H15 crore per annum 12.11.2014 6.46 The transaction is at arm’s length price
Vivimed Labs Europe Limited UK Purchases of goods FY 2015-16 Not exceeding H10 crore per annum 12.11.2014 19.11 The transaction is at arm’s length price
Vivimed Lab USA Inc. USA Purchases of goods FY 2015-16 Not exceeding H5 crore per annum 12.11.2014 2.61 The transaction is at arm’s length price

 

For and on behalf of the Board
Sd/- Sd/-
Place: Hyderabad Manohar Rao V Santosh Varalwar
Date: August 13 2016 Wholetime Director Managing Director

ANNEXURE-7 TO BOARD’S REPORT

CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO

Section 134 of the Companies Act 2013 read with Companies (Accounts) Rules 2014

PARTICULARS OF CONSERVATION OF ENERGY

All the manufacturing units continued their efforts to reduce the specific energyconsumption. Specific and total energy consumption is tracked on a daily basis atindividual factory/ block level and also at consolidated manufacturing level. Energyconservation initiatives are being planned and implemented across manufacturing locations.

Energy audits are conducted at all the manufacturing units at regular intervals and thefindings of the audits are implemented. Apart from regular practices and measures forenergy conservation many new initiatives were driven across the units by Processoptimization and automation Optimisation of Electrical Equipment Lighting Other keyinitiatives for Energy conservation:

Power and Fuel Consumption
Particulars FY 2015-16 FY 2014-15
1. Electricity
Unit (KWH)(in Mn) 44.79 11.55
Total amount ( H in Mn) 36.40 77.79
Average rate/Unit (H) 8.12 6.74
2. Own generation from Diesel generator set
Unit (KWH)(in Mn) 1.05 1.33
Total amount (H in Mn) 19.02 23.65
Average rate/Unit (H) 18.07 17.78
3. Coal
Quantity (MT) 3747.62 9846
Total cost ( H in Mn) 27.04 56.63
Average rate/MT (H) 7215 5752

Consumption per unit of production

Particulars Standards Current year Previous year
Products (with details) unit Electricity Furnace oil Coal Since the Company manufactures a wide range of specialty chemicals API’s and different combinations of finished dosages it is not practicable to give consumption per unit of production.

TECHNOLOGY ABSORPTION

PARTICULARS OF ABSORPTION

1. Technology absorption adaptation and innovation

The Research and Development (R&D) discipline aims to work on products thatstrengthen the competitive position in the Market primarily on differentiated portfolio.Formulation R&D efforts at Vivimed are directed towards exploring the options ofvertical integration. To meet customer demands our teams focus on innovate techniques inproduct development. The Company is continuously striving to strengthen its R&D teamsand infrastructure.

2. Benefits derived as a result of the above efforts

• Efficient processes.

• Robust Product development engine.

• Super value proposition to our customers and key stake holders.

• Competitive advantage in the specialty chemicals /pharmaceutical space

3. Imported technology:

Research and Development (R&D)

The Vivimed R&D is focused on revitalizing our growth engine to balance short midand long-term goals. The company is committed to offer superior and affordable solutionsfor products with intrinsic challenges at the chemistry engineering and formulationtechnology areas.

Our R&D primarily caters to our in-house product development requirements forspecialty chemicals API PFI and Finished Dosage products. Our development philosophyaims to collaborate and offer a business model of delivering end-to-end solutions acrossOver the Counter (OTC) monograph OTC Abbreviated New Drug Application (ANDA) andprescription drugs.

The Company provides comprehensive drug development resources and solutions forpre-formulation formulation development analytical development CGMP scale- upstability and also co-ordinate for conducting bioavailability and bioequivalence studiesfor regulated and emerging markets. The Company possesses capabilities to develop severalIR and MR solid dosage products and filing dossier and ANDA for regulated marketsincluding the U.S. Canada Europe Australia and other countries.

R&D currently focuses on developing and filing generic products for regulatedmarkets and also on large volume OTC drugs and the products with intrinsic challenges Inaddition R&D is working to build a healthy products portfolio for enhanced andsustainable growth on extending our product reach line extensions for existing productsand also adding value through applications such as extended release.

• Benefits derived as a result of the above R & D

Vivimed could achieve a long term sustainability to offer superior value to itscustomers which would enable the Company to achieve Global leadership position. TheCompany has developed four sunscreen products during the year.

• Future plan of action

The Company intends to focus on different classes of projects in line with ourBusiness strategy; some which can generate revenue in the short-term and some more inthe future. The pipeline is being designed to cater products of variable complexities inthe areas of chemistry IP regulatory engineering and manufacturing.

The Company will offer wider basket of Products to the regulated Markets including CIScountries North America and Europe.

Expenditure incurred on Research and Development

Particulars FY 2015-16 FY 2014-15
Capital
Revenue 1100.79 1106.02
Total 1100.79 1106.02

FOREIGN EXCHANGE EARNINGS AND OUTGO

Particulars FY 2015-16 FY 2014-15
Foreign Exchange Earnings 1157.68 3675.35
Foreign Exchange Outgo 1357.78 2508.44

 

Manohara Rao Varalwar Santosh Varalwar
Whole-time Director Managing Director
Place: Hyderabad
Date: August 13 2016