TO THE MEMBERS
Your Directors have pleasure in presenting their Seventy-fifth Report and the AuditedFinancial Statements of the Company for the financial year 2018-19.
|FINANCIAL HIGHLIGHTS || || |
| || ||(र in Lakhs) |
|Particulars ||For the year ended March 31 2019 ||For the year ended March 31 2018 |
|Sale of Products ||364030.02 ||327390.01 |
|Other Operating Income ||3830.28 ||3322.16 |
|Other Income ||11328.60 ||11698.72 |
|Total Income ||379188.90 ||342410.89 |
|Profit Before Tax ||69885.41 ||62148.26 |
|Profit After Tax ||45033.18 ||40121.78 |
|Retained Earnings and || || |
|Other Comprehensive || || |
|Income (OCI) || || |
|Balance brought forward ||130517.03 ||104745.13 |
|Profit for the year ||45033.18 ||40121.78 |
|OCI arising from remeasurement of employee benefits ||(208.82) ||(107.64) |
|Dividend - FY 2017-18 ||(11687.12) ||- |
|Dividend - FY 2016-17 ||- ||(8499.72) |
|Dividend Distribution Tax ||(2402.32) ||(1730.34) |
|Transfer to Reserves ||(4503.32) ||(4012.18) |
|Balance carried forward ||156748.63 ||130517.03 |
Your Directors recommend a final dividend of र 50/- and special dividend ofर 15/- per share for the year ended March 31 2019 on 21249302 fully paid-upEquity Shares of र 10/- each. The proposed dividend if approved at the AnnualGeneral Meeting will absorb a sum of र 13812.05 Lakhs (Previous year : र11687.12 Lakhs) and Corporate Dividend Tax of र 2839.11 Lakhs (Previous year :र 2402.32 Lakhs). The Corporate Dividend Tax is provided at the rate applicable onthe day on which the accounts were approved by the Board of Directors.
DIVIDEND DISTRIBUTION POLICY
The Company has in place a Dividend Distribution Policy in terms of requirements underthe Securities and Exchange Board of India (Listing Obligations and DisclosureRequirements) Regulations 2015. The said Policy is available on the Company's website athttp://www.abbott.co.in/investor-relations/policies.html
MANAGEMENT DISCUSSION AND ANALYSIS
India has emerged as the fastest growing major economy in the world and is expected tobe one of the top three economic powers of the world over the next 10-15 years backed byits strong democracy and partnerships. The World Bank has retained its forecast of India'sgrowth rate at 7.5% for the next two fiscal years. According to the Bank's report privateconsumption and investment willbenefitfrom strengthening credit growth amid moreaccommodative monetary policy with inflation below the Reserve Bank of India's target.Additionally increased adoption of GST is expected to encourage a faster shift from theinformal to the formal sector.
INDIAN PHARMACEUTICAL MARKET (IPM)
India enjoys an important position in the global pharmaceuticals sector. While Indiaranks tenth globally in terms of value it is ranked third in volumes. The IndianPharmaceuticals sector displays unique characteristics. Branded generics comprise 70 to 80per cent of the retail market. Local players enjoy a dominant position driven byformulation development capabilities and early investments.
According to IQVIA there are over 10000 pharma companies that operate in Indiaemploying more than 500000 people and providing medication to 1.3 Billion people. Recentpricing pressures in the US have prompted increased focus on the domestic businessleading to sturdy growth. According to McKinsey & Co. five key factors driving growthof IPM are: enhanced medical infrastructure; rise in the prevalence and treatment ofchronic diseases; greater health insurance coverage; launches of patented products andmarket creation in new therapies.
India's domestic Pharmaceutical Market turnover (without exports) reached र129015 Crore in 2018 growing by 9.4 percent year-on-year. By 2020 the Indian market isexpected to be near the top in terms of volumes a close 2nd behind only the US market.
OPPORTUNITIES AND THREATS
IPM is at an interesting crossroads and there are multiple factors which impact theindustry growth revenue and profitability of companies. Industry by themes such asdomestic consumption private and public insurance increasing spending and better accessto healthcare. Factors like expansion of pricing regulations and increasing regulatoryinterventions could potentially put pressure on the growth.
Factors which impact industry and Company growth include :
Government Initiatives : The Indian Government has taken many steps to reducecosts bring down healthcare expenses and promote healthcare. The allocation to theMinistry of Health and Family Welfare has increased by 13.1 percent to र 61398Crore in Union Budget 2019-20.
The National Health Protection Scheme is the largest Government funded healthcareprogramme which is expected to benefit 100 million poor families in the country byproviding a cover of upto र 5 Lakh per family per year for secondary andtertiary care hospitalisation. This programme was announced in havingfallen Union Budget2018-19. According to McKinsey & Co approximately 650 million Indians will be insuredby 2020 out of which only approximately 240 million will have private insurance. DuringMarch 2018 the Drug Controller General of India (DCGI) announced its plans to start asingle-window facility for innovators to provide new drug approvals. This integrated andunified approach will help in unblocking huge potential of the industry. Government's'Pharma Vision 2020' is aimed at making India a global leader in end-to-end drugmanufacture. Approval time for new facilities has been reduced to boost investments. Inaddition the thrust on rural health programmes lifesaving drugs and preventive vaccinesalso augur well for the pharmaceutical companies.
Technology and Digitalisation : IPM is seeing a large impact from technology. WhileHealthcare Professionals are likely to remain the single largest influencer of treatmentand medicine choice alternative means of engaging physicians could gradually become thenorm. Technology-based remote healthcare will continue to expand significantly increasingthe reach and influence of doctors. As patients want to be more involved and empoweredhealthcare choices. their preferences will continue to influence This shift is visibleacross the country with the trend being much stronger in metro cities. Digital engagementof both doctors and patients by pharmaceutical companies is likely to become a keydifferentiator.
Price Controls and increased Regulations : Proposed Government interventions havean impact across the value chain from development manufacturing and supply chain topricing and customer engagement. As the Government continues to play a more proactive rolein shaping broader healthcare reforms the likely to be driven industry can see someuncertainty in the near term. continued process of bringing products under the NationalList of Essential Medicines (NLEM) banning Fixed Dose Combinations interpretations ofintellectual property protection that favor generics and biosimilars will continue toimpact the industry in an adverse way. Another NLEM price revision is expected to happenin 2020.
Uniform Code of Pharmaceuticals Marketing Practices (UCPMP) : UCPMP currentlyvoluntary could become mandatory shortly. A mandatory code would require ethicalmarketing practices to be followed by all companies. Given that the Company has a strongcompliance process in place it would be well positioned under a strict enforcement ofUCPMP.
REVIEW OF OPERATIONS
Financial Performance Total Revenue
Total Revenue for the year ended March 31 2019 is र 379188.90 Lakhs vis-a-visर 342410.89 Lakhs last year recording a robust growth of 10.7% over the previousfinancial year.
Net Sales for the financial year 2018-19 grew by 11.2% over the previous year toर 364030.02 Lakhs an increase of र 36640.01 Lakhs driven by both price andvolumes.
The Other Income stood at र 11328.60 Lakhs. It includes income of र978.36 Lakhs generated on account of sale of an office premise during the year.
Other Income mainly comprises Interest income from Bank Fixed Deposits. The Companycontinues to invest in fixed deposits with Banks having high credit ratings with a viewto safeguarding the principal and maintaining liquidity. Income from Bank Deposits grew by35%.
Investment strategy is reviewed periodically by the Finance Committee. The Company hasan investment portfolio of र 157207.60 Lakhs as at March 31 2019.
The Material Cost increased on account of inflation compensated against improved salesprice realisation resulting in marginal decrease in material cost as a percentage of Salesfrom 58.2% in financial year 2017-18 to 57.4% in the current year.
The Company increased its employee strength by 4.9% to 3485; however the EmployeeCost as a percentage to Sales has remained unchanged at 12.0% in the current year comparedwith the financial year 2017-18.
The increase in Employee Cost by 10.6% over the last year is mainly due to meritincrease and increased sales incentives to field force.
Other Expenses including the Depreciation and Finance Cost increased by 12.8% over thelast year. The percentage to Sales marginally increased to 15.6% compared to 15.4% for thefinancial year 2017-18 mainly on account of inflation increased marketing spend tosupport volume growth new product launches and Pill plus Services provided by theCompany.
Profit Before Tax
Profit Before Tax for the year ended March 31 2019 at र 69885.41 Lakhs grew to19.2% of Sales as compared to 19.0% in the previous year.
The Company operates in a single reportable business segment i.e."Pharmaceuticals".
The Company provides products and solutions across various therapeutic areas such asWomen's Health Gastroenterology Central Nervous System Metabolics Multi-SpecialtyVaccines Consumer Health etc.
Performance for the year under review in respect of the Company's various therapeuticsegments are highlighted below :
i) Women's Health
The Company offers a mix of global and India-specificbrands across pregnancy and otherwomen's health related products. Some of the key brands are Duphaston (Miscarriage andInfertility) Letrolife (Ovulation) Cystofert (Polycystic Ovary Syndrome) Pro 9 (PretermBirth) Solfe (Iron Deficiency) Arachitol O (Calcium & Vitamin D3 Deficiency). TheCompany posted a strong growth of 28.5% in this therapeutic area during the year mainlyled by Duphaston which grew by 29.1%.
During the year 4 new products i.e. Estrabet Gel (Menopause) Fertifoid (MaleInfertility) Doxstem (Nausea and Vomiting in Pregnancy) and Combinorm Wash (VaginalHygiene) were launched in this therapeutic area.
The Company offers several key products under this therapeutic area. Some of them areUdiliv (Liver disease) Duphalac (Constipation) Cremaffin and Cremaffin Plus(Constipation) Ganaton (Dismotility) Creon (Pancreatic Exocorine Insufficiency (PEI))Rowasa (Inflammatory Bowel Disease) and Heptral (Liver disease). The Company grew by 12.4% in this area during the year mainly driven by Udiliv and Duphalac.
During the year 5 new products i.e. Cremagel H (Anal Fissures) Dezoflav Syndrome)Lolept Injection (Hepatic encephalopathy) and Lolept Sachet (Hepatic encephalopathy) werelaunched.
The growth of this therapeutic area during the year is 9.1%; mainly driven by Thyronormwhich retains flagshipposition* in its segment.
During the year 4 new products Methimercazole (Hyperthyroidism) Thyronorm 37.5(Hypothyroidism) Tenefron (Type 2 Diabetes) and Tenefron M/M Forte (Type 2 Diabetes) werelaunched.
iv) Central Nervous System
This therapeutic area showed a negative growth of 1.4%. Vertin (Vertigo) and Prothiaden(Depression) continue as the market leaders* in their participated market.
During the year Inderal F (Migraine Prophylaxis) was launched.
Under Multi-Specialty the Company offers products for Pain Management Nutritionalsupplements Vitamins and Insomnia.
The key brands include Brufen (Pain killer) Duvadilan (Preterm birth) Zolfresh(Insomnia management) Arachitol Nano (Vitamin D3 deficiency) antacid).
This therapatic area has shown a growth of 14.4% during the year. The double-digitgrowth was mainly driven by Zolfresh Arachitol Nano and Brufen. Zolfresh retains number1 position* in its participated market.
During the year 2 new products Nefosar tablets (Analgesic) and Nefosar Injection(Analgesic) were launched.
The Company has a licensing arrangement with Bharat Biotech India Limited to marketvaccines in immunology segment. The key brands in vaccines portfolio are (Influenza)Enteroshield (Typhoid) and Rotasure (Rotavirus Diarrhea).
The Vaccines showed strong double-digit growth of 20.4% and contributed 3.6% of Salesfor the year. The growth was mainly driven by Influvac a number 1* product in itsparticipated market.
vii) Consumer Health
The Company offers a few Consumer directed products.
It promotes all variants of Digene (antacid antiflatulent) - (Hemorrhoids) PepIBS(Irritable Bowel tables liquids and powders.
During the year this business showed degrowth of 17.2%. However the Company focuseson connecting with patients through positioning of its products mainly through mass mediasocial media and point of sale promotion including new advertisement and marketingstrategies to achieve the growth of this portfolio.
MEDICAL RESEARCH AND KNOWLEDGE SHARING INITIATIVES
Evidence-based medicine is becoming increasingly important in empowering HealthcareProfessionals (HCP) to better patient care. Research studies undertaken by the Companyranging from real-world evidence (observational epidemiological registry studies) toregistration studies have been instrumental in defining and driving organizationalstrategies and creating high-quality scientific evidence thus aiding in During the yearthe Company executed 25 new studies published 45 articles in major indexed journals with6 international presentations. Apart from this registration study wasconducted for approval of Influvac Quadrivalent vaccine which is expected to reach themarket in the second half of 2019. This new vaccine will enhance the protection againstinfluenza by targeting an additional strain. All the studies were conducted in compliancewith Good Clinical Practice (GCP) and regulatory requirements.
Capability building of the HCPs has remained a high strategic priority for the Company.During the year more than 2000 medical education programs were conducted towardsachieving this objective. The Company also partnered with medical associations to drivecapability building in various therapy areas. Furthermore as a continued commitmenttowards knowledge dissemination 12 GCP workshops were conducted training approximately1200 medical/paramedical staff across major institutes in India.
We see multiple opportunities in front of us as the landscape continues to shift. Giventhe transformation of the industry we see the following areas which could be opportunitiesfor us to improve our business model and relationships with our customers.
- Doctor support : One of our key focus areas is identifying innovations inthe doctor engagement model by focusing on multiple touch points with doctors across theentire customer journey. We are in the process of setting up a partnership ledecosystem to engage Healthcare Professionals through leveraging digital channels. Themodel could alter how we organize our sales force and can help us focus on more scientificdiscussions with doctors. The Company plans to continue shaping therapies like influenzaacidity hypothyroid through our doctor engagement initiatives.
- Providing patient support beyond the pill : As patients become moreinvolved in healthcare choices we need to also engage with them using digital as asystematic channel to help them in their healthcare journey. Engaging with patientsdirectly for education counselling or compliance support will play a significant role in
Targeted partnerships can also be explored with other players in the industry which isalso seeing a wave of activity by tech led startups. The Company has led manyindustry-first support systems for patients across gastroenterology (Gutfit) andhypothyroid which are planned to be expanded to additional therapies.
- Internal talent development : Managing talent and attrition among thesales force is likely to become a key differentiator in the market. The Company has a verylow healthcare. attrition rate in comparison with the industry. The Company conductsdifferentiated programs for its field force for their development.
- Pharmacy engagement : Pharmacists today are most influential when it comesto Strengthening channel management capabilities and resources to ensure connect with thepatients can be a key differentiator for us. India is rapidly moving towards a uniformquality standard and building capabilities for pharmacists is critical to enable them toplay a greater role in the market. The Company's dedicated OTC area will enable us toexpand its coverage.
RISKS AND CONCERNS
The Pharmaceutical Industry in India is under the lens from the Government consumersand health insurers. A ban on fixed dose combinations stringent guidelines for clinicaltrials and a uniform code for marketing practices are all signs of increased Governmentoversight. The Government may also enforce regulations on prescribing generics. Thenumerous changes in the regulatory regime in the recent past has created a sense ofuncertainty which could negatively impact the industry.
Additionally the National Pharmaceutical Pricing Authority (NPPA) continues to expandthe list of essential medicines under the National List of Essential Medicines 2015 andrevision of the said list is expected in 2020. Government policies around capping of trademargins could also negatively impact the industry.
INTERNAL CONTROL SYSTEM AND ITS ADEQUACY
The Company has put in place an internal control mechanism commensurate with its sizeand nature of business. These systems provide a reasonable assurance on achievement of itsoperational compliance and reporting objectives including safeguarding of assets of theCompany prevention and detection of frauds accuracy and completeness of accountingrecords and ensuring compliance with corporate policies.
This mechanism is sound in design and the framework is continuously evaluated foreffectiveness and adequacy. The mechanism operates through well-documented standardoperating procedures policies and process guidelines. adoptionandadherence.
The Internal Audit plan is finalised based on current perception of internal controlrisk and compliance requirement in consultation with operating divisions. The InternalAuditors as a part of their audits review the design of key processes from an adequacyof controls point of view.
Additionally significant internal management actions thereon are reported to the AuditCommittee on a quarterly basis. An independent and empowered Audit Committee reviews theobservations and assesses the adequacy of the actions proposed as well as monitorstheir implementation. The Internal Auditors conduct a quarterly follow up forimplementation/remediation of all audit recommendations and the status report is presentedto the Audit Committee regularly.
The Company has implemented both preventative and detection controls and appropriatecorrective actions taken to reduce the risks including :
Abbott Code of Business Conduct requires annual certification by all employees;
Compliance Committee is formed with representatives from all the operatinggroups;
Senior Management has oversight of the compliance programs;
Business Compliance Cell is assigned with the responsibility of trainingmonitoring and ensuring compliance of the Company's Policies and Procedures by employees;
The Company has a Whistle Blower mechanism in place;
Business Divisions have a quarterly meetings with Director - Office of Ethicsand Compliance to monitor and discuss compliance with various business processes.
The Company Management has assessed the effectiveness of internal controls overfinancial reporting for the year ended March 31 2019 and based on the assessment believethat the same are adequate and working effectively.
The Statutory Auditors have issued unmodifiedaudit report on the adequacy of theinternal controls over financial reporting and its operating effectiveness.
The Company has 3485 employees.
The Company firmly believes that human capital continues to be the driving force ofbusiness. It provides holistic capabilities to its employees to boost organizationalperformance. Their skill dedication zeal and agility is helping the business understandand respond to changing healthcare needs so that the Company can live up to its promise tohelp people live fuller healthier lives.
The Company's Human Resource (HR) team has developed and deployed integrated talentmanagement practices which encompass the entire employee lifecycle- recruitmentinduction development career progression rewards and recognitions.
Talent Strategy audit observations and
The Company's India Talent Strategy (ITS) aims to attract and retain the right qualityand number of talent that supports its vision of being the employer of choice in theIndian Healthcare Industry. The five pillars of ITS include :
1. Leadership Engine
2. No.1 Field Force
3. Managerial effectiveness
4. Best-in-class' support functions
5. Stronger EVP
The five pillars rest securely on the strong foundations of performance culture soundgovernance and digital innovation. Our Talent Management strategy aims to :
Build the industry's best talent pipeline;
Ensure our businesses have the talent they need to compete successfully now andin the future;
Improve our talent visibility globally;
Drive manager accountability;
Enhance differentiation of talent.
Our Talent Management process is well embedded in our system and supports leadershipsales marketing and support functions. Through our uniform assessments for Second LineManagers we create a common talent pool. Additionally we have launched certificationprograms and career paths for field employees. HR Leadership and the Talent Strategy teamsmeet separately every month to closely monitor progress on the various aspects of ourtalent strategy and take necessary action.
Capability Building Programs
The Company believes in motivating and engaging employees through shared goalscapability building initiatives career growth opportunities and provide an environment oftransparency accountability and positive reinforcement.
Several leadership development programs such as In-stride Global Citizen DevelopmentProgram Emerging Leaders Program New Leaders Program etc. were conducted duringthe year. We firmly believe that the biggest source of our competitive advantage is ourpeople. From talent acquisition to on-boarding nurturing and development our efforts aregeared to lending greater power to our Employee Value Proposition Grow with theLeader'.
Prevention of Sexual Harassment at Workplace
The Company has an Internal Complaints Committee (ICC) in place as required under theSexual Harassment of Women at Workplace (Prevention Prohibition and Redressal) Act 2013.
Appropriate training is imparted to employees regularly through online portal. Thistraining also forms a part of New Employee Orientation Program. During the year 2complaints were received by the Company/ICC under the aforesaid Act and the same wereappropriately disposed off.
DIRECTORS' RESPONSIBILITY STATEMENT
Pursuant to Section 134(5) of the Companies Act 2013 your Directors state that : a)in the preparation of the Annual Accounts for the year ended March 31 2019 theapplicable accounting standards have been followed and there are no material departuresfrom the same; b) they have selected such accounting policies and applied themconsistently and made judgments and estimates that are reasonable and prudent so as togive a true and fair view of the state of affairs of the Company as at March 31 2019 andof the profits of the Company for that year; c) they have taken proper and sufficientcarefor the maintenance of adequate accounting records in accordance with the provisions ofthe Companies Act 2013 for safeguarding the assets of the Company and for preventing anddetecting fraud and other irregularities; d) they have prepared the Annual Accounts of theCompany on a going concern basis; e) they have laid down adequate Internal FinancialControls to be followed by the Company and that such Internal Financial Controls areadequate and are operating effectively; f) they have devised proper systems to ensurecompliance with the provisions of all applicable laws and that such systems are adequateand operating effectively.
RELATED PARTY TRANSACTIONS
Policy on dealing with Related Party Transactions and Materiality
The Company has in place the Policy on dealing with Related Party Transactionsand Materiality in terms of requirements of the Companies Act 2013 and the Securities andExchange Board of India (Listing Obligations and Disclosure Requirements) Regulations2015. The said Policy is available on the Company's website athttp://www.abbott.co.in/investor-relations/policies.html
As per the said Policy all Related Party Transactions are pre-approved by theAudit Committee and Board as and when required. The details of such transactions are alsoreviewed by the Audit Committee on a quarterly/annual basis. Material transactions(transactions exceeding 10% of the annual turnover as per the last audited financialstatements) if any with any Related Parties are pre-approved by the Shareholders.
Details of Related Party Transactions
All the Related Party Transactions including the material transactions entered into bythe Company during the year 2018-19 ("said Transactions") were in the ordinarycourse of business and on arm's length basis. The said Transactions were pre-approved bythe Audit Committee Board and Shareholders wherever necessary. The details of the sameare provided in Note 41 to the Financial Statements.
CORPORATE SOCIAL RESPONSIBILITY
Corporate Social Responsibility (CSR) Policy
The CSR Policy is available on the Company's website at http://www.abbott.co.in/investor-relations/policies.html
CSR initiatives undertaken during the financial year 2018-19
The Company incurred an amount of र 1128.46 Lakhs on various CSR activitiesduring the financial year 2018-19.
The Annual Report of CSR activities undertaken by the Company during the financial year2018-19 is annexed as "Annexure I" and forms part of this Report.
RISK MANAGEMENT FRAMEWORK
The Company recognises Risk Management as an integrated forward-looking andprocess-oriented approach. It has developed a Risk Framework which is directed to enablethe Management to effectively deal with uncertainty and associated risk and opportunityenhancing the capacity to build value. It enables to avoid pitfalls and surprises alongthe way. Broadly the Framework encompasses :
Aligning risk appetite and strategy The Company considers its risk appetite inevaluating strategic alternatives setting related objectives and developing mechanisms tomanage related risks.
Enhancing risk response decisions Risk Management provides the rigor to identifyand select among alternative risk responses risk avoidance reduction sharing andacceptance.
Reducing operational surprises and losses The Company strives to gain enhancedcapability to identify potential events and establish responses reducing surprises andassociated costs or losses.
Identifying and managing multiple and cross-enterprise risks The Companyfaces a variety of risks affecting different parts of the organization and riskmanagement facilitates effective response to the interrelated impacts and integratedresponses to multiple risks.
Seizing opportunities By considering a full range of potential events theCompany is positioned to identify and proactively realise opportunities.
Improving deployment of capital Obtaining robust risk information allowsmanagement to effectively assess overall capital needs and enhance capital allocation.
These capabilities inherent in this Framework enable the Company achieving theperformance and profitability guard against loss of resources. It is also directed to helpensure effective reporting and compliance with laws and regulations avoid damage to theentity's reputation and associated consequences. The Company operations and its BusinessDivisions are included in the scope of the Risk Management Framework.
During the year Risk Management Core Team comprising of representatives of variousfunctions and businesses carried out risk assessment exercise to identify varioussignificant associated with the business operations and mitigation plans to address suchrisks. Material risks identified are evaluated on a continuing basis.
Material risks and mitigation plans were reviewed by the Risk Management Committee andthen presented to the Audit Committee and the Board.
During the year Mr R A Shah (DIN : 00009851) Independent Director retiredupon completion of his term effective close of business hours on March 31 2019. Mr Shahwas associated with the Company for over 36 years and your Company has benefited immenselyunder his tenure. The Board places on record its sincere appreciation for the guidance andsupport received from Mr Shah over these years.
The Board based on the recommendation of the Nomination and Remuneration Committeeappointed the following Directors on the Board of the Company upto the date of thisReport. Their appointment/re-appointments shall be subject to the approval of theshareholders at the ensuing Annual General Meeting of the Company.
- Mr Sudarshan Jain (DIN : 00927487) has been appointed as Additional and IndependentDirector of the Company for a period of 3 (three) years effective April 1 2019;
- Mr Mark Murphy II (DIN : 08385393) has been appointed as Additional Directoreffective April 1 2019;
- Mr Rajiv Sonalker (DIN : 07900178) has been re-appointed as Whole-time Director ofthe Company for a period effective August 8 2019 upto June 30 2021.
In compliance with Section 152 of the Companies Act 2013 Mr Jawed Zia (DIN :00191276) and Mr Kaiyomarz Marfatia (DIN : 03449627) retire by rotation at theensuing Annual General Meeting and being eligible offer themselves for re-appointment.
Based on recommendation of the Nomination and Remuneration Committee your Directorsrecommend appointment/ re-appointment of Mr Sudarshan Jain Mr Mark Murphy II MrRajiv Sonalker Mr Jawed Zia and Mr Kaiyomarz Marfatia.
Declaration of Independence targetsand
The Company has received declarations from all the Independent Directors confirmingthat they meet with the criteria of independence prescribed under sub-section (6) ofSection 149 of the Companies Act 2013 and the Securities and Exchange Board of India(Listing Obligations and Disclosure Requirements) Regulations 2015 as amended from timeto time.
Number of Board Meetings risks
Six Board Meetings were held during the year on May 14 2018; July 18 2018; August 132018; November 13 2018; February 8 2019 and March 30 2019.
Policy on Nomination and Appointment of Directors/Criteria for appointment of SeniorManagement and Remuneration Policy
The Company has adopted the Policy on Nomination and Appointment of Directors/Criteriafor appointment of Senior Management and Remuneration Policy as per the provisions ofSection 178(3) of the Companies Act 2013 and the Rules framed thereunder. The saidPolicies are available on the Company's website athttp://www.abbott.co.in/investor-relations/policies.html Nomination Policy acts as aguideline for determining qualifications positive attributes and independence ofDirectors and matters related to the appointment and removal of Directors and SeniorManagement. The Policy lays down -i) criteria and terms and conditions with regard toidentifying suitable candidates who are qualified to become Directors and SeniorManagement; ii) appointment mechanism for Managing Director/Executive and Non-ExecutiveDirectors/Independent Directors/Key Managerial Personnel and Senior Management; iii)tenure of Managing Director/Executive Directors/ Independent Directors; iv) their removalprocess and succession planning.
Remuneration Policy lays down the Company's philosophy and criteria as well as mannerof determining the remuneration of Managing Directors Executive/Non- Executive DirectorsIndependent Directors Senior Management Key Managerial Personnel and other employees.
Performance Evaluation of the Board Board Committees and Directors
The Company has adopted the Board Evaluation Framework and Policy which sets amechanism and criteria for the evaluation of the Board Board Committees and Directorsincluding Independent Directors. The same is availableathttps://www.abbott.co.in/investor-relations/policies.html During the year 2018-19 theBoard and Nomination and Remuneration Committee carried out performance evaluation of eachindividual director (excluding the director being evaluated) and also evaluated if theIndependent Directors continue to fulfill the criteria of independence prescribed underthe Companies Act 2013 Rules framed thereunder and the Securities and Exchange Board ofIndia (Listing Obligations and Disclosure Requirements) Regulations 2015 as amended fromtime to time. The Board evaluated performance of entire Board and each of the Committees.Independent Directors at their separate meeting reviewed the performance ofNon-Independent Directors Board and the Chairman considering the views of the otherExecutive and Non-Executive Directors.
Performance Evaluation as stated above was conducted through self-assessment andgroup discussions basis the suggested set of questions/parameters provided in theaforesaid Framework.
KEY MANAGERIAL PERSONNEL
Mr Ambati Venu Managing Director Mr Rajiv Sonalker Chief Financial Officer and MsKrupa Anandpara Company Secretary are the Key Managerial Personnel of the Company.
The Audit Committee comprises Ms Anisha Motwani (Chairperson) Mr Krishna Mohan SahniMr Sudarshan Jain and Mr Munir Shaikh. Role of the Committee is provided in detail in theCorporate Governance Report forming part of this Report. All the recommendations made bythe Audit Committee during the year were accepted by the Board.
VIGIL MECHANISM/WHISTLE BLOWER POLICY
The Company has in place Vigil Mechanism/Whistle Blower Policy called "AbbottIndia Limited Procedure for Internal Investigations". It lays down a mechanism forreporting and investigation of all unethical behavior alleged or potential violations oflaws regulations or Abbott Code of Business Conduct policies procedures or otherstandards.
The said Policy is available on the website of the Company athttp://www.abbott.co.in/investor-relations/policies.html Employees have numerous ways tovoice their concerns and are encouraged to report the same internally for resolution. Thesaid Policy provides for adequate safeguards against retaliation and access to theChairman of the Audit Committee.
Any concerns/grievance can be communicated through various sources as provided underthe said Policy or via toll free number 0008001001058 or online athttp://speakup.abbott.com
S R B C & CO LLP Chartered Accountants (ICAI Firm Registration No.:324982E/E300003) were appointed as the Statutory Auditors at the Seventieth AnnualGeneral Meeting of the Company held on August 1 2014 for a period of five yearsi.e. from financial year 2014-15 to the financial year 2018-19 to hold office till theconclusion of the Seventy-fifth Annual General Meeting of the Company. The term of S R B C& CO LLP will end at the ensuing Annual General Meeting.
As per the provisions of Sections 139 141 and all other applicable provisions if anyof the Companies Act 2013 and Rules framed thereunder S R B C & CO LLP is eligiblefor re-appointment as Statutory Auditors of the Company for another term of five years.The Board based on recommendation of the Audit Committee has recommended there-appointment of S R B C & CO LLP as the Statutory Auditors for a term of five yearsi.e. from financial year 2019-20 to financial year 2023-24 to hold office till theconclusion of the Eightieth Annual General Meeting of the Company.
The Auditors' Report for the financial contain any adverse remarks qualifications orreservations or disclaimers which require explanations/comments by the Board.
M/s Kishore Bhatia & Associates Cost Accountants (Registration No. 00294) areappointed as the Cost Auditors of the Company for the financialyear 2019-20 at aremuneration of र 6.65 Lakhs plus taxes as applicable and reimbursement ofout-of-pocket expenses. The said remuneration to the Cost Auditors shall be subject toratification by the Members at the Meeting.
COST AUDIT REPORT
Cost Audit Report along with the Compliance Report for the financial year 2017-18issued by M/s Kishore Bhatia & Associates Cost auditors was filed with the Ministryof Corporate Affairs on July 25 2018 (due date of filing was September 27 2018).
M/s KPMG Chartered Accountants (ICAI Firm Registration No. BA62445) are the InternalAuditors of the Company. Internal Audit Report their significant findingsand taken by theManagement is reviewed by the Audit Committee on a quarterly basis.
Ms Neena Bhatia Practising Company Secretary (Membership No. FCS 9492 andCertificate of Practice No. 2661) is the Secretarial Auditor of the Company for thefinancial year 2018-19.
SECRETARIAL AUDIT REPORT
The Secretarial Audit Report issued by Ms Neena Bhatia Practising CompanySecretary (Membership No. FCS 9492 and Certificate of Practice No. 2661) March 31 2019does not contain any adverse remark qualifications reservations or declaimer whichrequires any explanation/ comments by the Board except for the observation that the nameof the Company appears in the breach list displayed on the website of the Depositories andBombay Stock Exchange for having foreign investments in excess of sectoral cap. In theopinion of the Board there is no breach of the sectoral cap and inclusion of theCompany's name in the breach list is incorrect. The Company is in the process ofwriting to the Government highlighting the issues involved and seeking necessaryresolution of the same. The said Report is annexed as "Annexure II" and formspart of this Report.
HEALTH SAFETY AND ENVIRONMENT
Health and Safety :
Providing a safe workplace and keeping the employees healthy is the Company's toppriority. The Company has clear consistent policies and standards to manage employeehealth safety and productivity while also protecting the environment.
We are committed to keeping employees safe by preventing dangerous incidents in andaround the workplace. In educating our employees we also empower them to promote saferand healthier lives in their wider communities. We strive to maintain the higheststandards of Environment Health and Safety (EHS) practices. The EHS Policy has beenimplemented through our Global EHS standards based on ISO 14001 and OHSAS 45001 supportedstructure EHS Standard by a well-defined Operating Procedures and EHS specific programsensure that we meet all the local regulatory requirements.
Suggestions from the Safety Committee comprising representatives from the workforceand Management are implemented promptly to resolve issues impacting Plant safety andemployee health. Regular self-audits and third-party safety follow up actions audits areconducted to verify compliance with the regulatory and internal safety requirements. ThePlant has a record of completion of seven years without lost time injury During the yearthe site has upgraded the fire pumps and fire hydrant system making provision forsprinklers to provide site with advanced fire protection. The sprinkler system will befully operational in 2019.
Training programs are conducted at the Plant on health and safety issues to buildtechnical capabilities. Employees are also encouraged to attend external training programson various topics such as regulatory requirements ergonomics machine guarding hot worksafety road safety industrial hygiene industrial safety the financial year ended and soon. A cross-functional teams for emergency response and firefighting is in place. Mockdrills for fire-fighting and rescue operations are conducted in association with localfire brigade to keep the staff in a state of preparedness for any emergencies. TheCompany has a detailed Business Continuity Plan in place. We are continuouslyimproving on the Behavior Based Safety (BBS) program and visible improvement in safetyculture is observed. Stop for Safety initiative is being practiced to support the BBSprogram.
Special focus is maintained on critical safe work initiatives like contractorsafety hand safety and working on heights. Additionally we have invested in severalemployee engagement programs like celebration of National Safety week World Environmentday and Abbott EHS month that help build a sustainable EHS culture.
A responsibility towards the environment is part of Abbott's mandate. We continuouslyendeavor to minimize the use of renewable resources and cut down on carbon emission. Inall our initiatives we adopt a holistic approach and make efforts to curtail the adverseenvironmental impact if there is any during product-manufacturing and its disposaleither by us our vendors or customers. The site continued to implement multiple waterconservation and emission reduction projects. Examples include Effluent treatment plantupgradation for efficiency improvement sludge reduction through skimming HVAC condensatereuse for utilities optimization of water chiller operation to reduce electricity and LEDlighting throughout the site. The treated water from our waste water treatment plant isrecycled for toilet flush and horticulture within the site.
The Company has a state-of-the-art effluent treatment parameters of treated effluentswell below the limit set by the local State Pollution Control Board. Our Goa Plant is a"ZERO" discharge plant.
Over the period of last five years the site has achieved more than 20% absolute waterreduction in usage. The rain water harvesting project was effectively continued at thePlant this year which resulted in 600 KL of water storage during the monsoon season.
Major focus during the year was process optimization and yield improvement. Along withincreasing productivity this initiative has helped save the discharge of raw materialsand solvents into the environment.
Furthermore gas emissions from the boiler and generator stacks as well as the ambientair quality are monitored regularly by us and they are well below the limits set by theState Pollution Control Board. There is also a vermi-composting unit in place to convertcanteen waste into organic manure which is used in the lawns and on the plantation insidethe factory premises. The site retains its Zero Waste to landfill certification in thewaste disposal. In 2018 62% of the waste was sent for recycling 36% for co-processingand 2% for composting. The site continued sending hazardous waste for Co-processing. Withthis change we have ensured that the energy from the waste is recovered thuscontributing to the reduction of CO2 emission and global warming. 36% of site waste wasincinerated with energy recovery.
CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO
The particulars as required under the provisions of Section 134(3) (m) of the CompaniesAct 2013 read with Rule 8 of the Companies (Accounts) Rules 2014 in respect ofConservation of Energy Technology Absorption Foreign Exchange Earnings and Outgo etc.are annexed as "Annexure III" and forms part of this Report.
The Annual Return of the Company has been placed on the website of the Companyat https://www.abbott.co.in/investor-relations/financials.html Extract of Annual Return asprovided under sub-section (3) of Section 92 of the Companies Act 2013 and Rules framedthereunder is annexed as "Annexure IV" and forms part of this Report.
DISCLOSURE UNDER SECTION 197(12) OF THE COMPANIES ACT 2013 AND OTHER DISCLOSURES ASPER RULE 5 OF THE COMPANIES (APPOINTMENT AND REMUNERATION OF MANAGERIAL PERSONNEL) RULES2014
Disclosures required in accordance with the provisions of plant with Section 197(12) ofthe Companies Act 2013 read with Rule 5(1) of the Companies (Appointment andRemuneration of Managerial Personnel) Rules 2014 is annexed as "Annexure V" andforms part of this Report.
Statement containing Particulars of Employees pursuant to Section 197(12) of theCompanies Act 2013 read with Rule 5(2) of the Companies (Appointment and Remuneration ofManagerial Personnel) Rules 2014 forms part of this Report. However as per theprovisions of Sections 134 and 136 of the Companies Act 2013 the Report and FinancialStatements are being sent to the Members and others entitled thereto excluding theStatement containing Particulars of Employees which is available for inspection by theMembers at the Registered Office of the Company during business hours on all working days(except Saturdays) up to the date of ensuing Annual General Meeting. Any Memberinterested in obtaining a copy of such Statement may write to the Company Secretary at theRegistered Office of the Company.
CORPORATE GOVERNANCE REPORT
Auditors of the Company with regard to compliance of the conditions of CorporateGovernance pursuant to the requirements of the Securities and Exchange Board of India(Listing Obligations and Disclosure Requirements) Regulations 2015 form part of thisReport.
BUSINESS RESPONSIBILITY REPORT
Business Responsibility Report as required under Regulation 34 of the Securities andExchange Board of India (Listing Obligations and Disclosure Requirements) Regulations2015 forms part of this Report.
COMPLIANCEWITH SECRETARIAL STANDARDS
The Board of Directors affirms that the Company has complied with the applicableSecretarial Standards issued by the Institute of Company Secretaries of India (SS1 andSS2) respectively relating to Meetings of Board and its Committees and General Meetings.
DISCLOSURES OF ORDERS PASSED BY REGULATORS OR COURTS OR TRIBUNAL
No orders have been passed by any Regulator or Court or Tribunal which can have impacton the going concern status and the Company's operations in future.
No fixed deposits were accepted during the year.
PARTICULARS OF LOANS INVESTMENTS AND GUARANTEES
During the year ended March 31 2019 the loan of र 20000.00 Lakhs which wasgranted to Alere Medical Private Limited India ("Alere") [a Related Party asper the provisions of the Companies Act 2013 and the Securities and Exchange Board ofIndia (Listing Obligations and Disclosure Requirements)
Regulations 2015] for a period of six months on December 26 2017 was rolled over fora further period of six months effective June 27 2018 at an interest rate of 10% perannum in accordance with the provisions of Section 186 of the Companies Act 2013 andRules made thereunder. The said loan was availed by Alere for the purpose of workingcapital funding requirement and was guaranteed by Abbott Laboratories USA i.e. theultimate holding company. The said loan was repaid by Alere on November 15 2018 withoutstanding interest up to that date.
No disclosure or reporting is required in respect of the following items as there wereno transactions relating to these items during the year under review :
1. Issue of equity shares with differential rights as to dividend voting or otherwise;
2. Issue of shares (including sweat equity shares) to employees of the Company underany scheme;
3. The Company does not have any joint venture or subsidiaries.
AWARDS AND RECOGNITIONS
During the year The Company was awarded as the "Company of the Year" byAWACS. The Company also received several other prestigious awards and recognitionsincluding the National Awards for Training and Development by World HRD Congress forExcellence in Content Development for e-detailing training Rajni ka iPad; DMA Asia ECHOAward by Direct Marketing Association India (DMAi) for Best Marketing Campaign -#MomvsFlu; Golden Globe Tiger Award for Thyronorm; AIOCD - Brand of the Year Award forThyronorm by AWACS and Outstanding Patient Support Award for Gutfit by CMO Asia andLeveraging Technology for Better Patient Management (for Gutfit) at the Connected HealthIndia Summit & Awards 2018.
Your Board expresses gratitude towards all our employees business partnersinstitutions banks and in particular the Members for their steadfast trust and supportto the Company.
|For and on behalf of the Board || |
|Munir Shaikh ||Ambati Venu |
|Chairman ||Managing Director |
|DIN : 00096273 ||DIN : 07614849 |