TO THE MEMBERS
Your Directors have pleasure in presenting their Seventy-fourth Annual Report and theAudited Financial Statements of the Company for the financial year 2017-18.
| || ||(Rs. in Lakhs) |
|Particulars || |
For the year ended March 31 2017
|Net Sales ||327390.01 ||290237.67 |
|Other Operating Income ||3322.16 ||3631.45 |
|Other Income ||11698.72 ||5764.28 |
|Total Income ||342410.89 ||299633.40 |
|Profit Before Tax ||62148.26 ||43649.17 |
|Profit After Tax ||40121.78 ||27664.88 |
|Retained Earnings and Other Comprehensive Income (OCI) || || |
|Balance brought forward ||104743.13 ||88985.66 |
|Profit After Tax ||40121.78 ||27664.88 |
|OCI arising from re-measurement of employee benefits ||(107.64) ||(187.61) |
|Dividend - FY 2016-17 ||(8499.72) ||- |
|Dividend - FY 2015-16 ||- ||(7437.26) |
|Corporate Dividend Tax ||(1730.34) ||(1514.05) |
|Transfer to Reserves ||(4012.18) ||(2766.49) |
|Balance carried forward ||130317.03 ||104745.13 |
INDIAN ACCOUNTING STANDARDS (IND AS)
Effective April 1 2016 the Company has adopted all the Ind AS Standards and theadoption was carried out in accordance with Ind AS 101 First-time adoption of IndianAccounting Standards' with April 12015 as the transition date. The transition wascarried out from Indian Accounting Principles generally accepted in India as prescribedunder Section 133 of the Act read with Rule 7 of the Companies (Accounts) Rules 2014(IGAAP) which was the previous GAAP.
Your Directors recommend a final dividend of Rs. 50/- and special dividend of Rs. 5/-per Equity Share for the year ended March 31 2018 on 21249302 fully paid-up EquityShares of Rs. 10/- each. The proposed dividend if approved at the Annual General Meetingwill absorb a sum of Rs. 11687.12 Lakhs (Previous year : Rs. 8499.72 Lakhs) andCorporate Dividend Tax ofRs. 2402.32 Lakhs (Previous year : Rs. 1730.34 Lakhs). TheCorporate Dividend Tax is provided at the rate applicable on the day on which the accountswere approved by the Board of Directors.
DIVIDEND DISTRIBUTION POLICY
The Company has formulated 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 ECONOMIC OVERVIEW
In the International Monetary Fund's (IMF) April 2018 World Economic Outlook India'sgrowth rate is projected to be 7.4% in 2018 and 7.8% in 2019. The latest estimate seesIndia re-emerge as the fastest growing economy outperforming other emerging markets suchas China Russia and Brazil.
India's growth has recovered from the temporary dip post the implementation of theGoods and Services Tax (GST) last July - a change that is expected to lead to ease indoing business and broadening of the tax base through conversion of India into one commonmarket.
The IMS Health Market Prognosis Report highlighted that rising private consumptionforecasted to grow at 8% will be the greatest contribution to growth. Moreover as the2019 election approaches Government spending is expected to increase.
India's population growth rate is expected to slow although the numbers will stillgrow by almost 77 million by 2021 to reach 1.40 billion.
INDIAN HEALTHCARE ENVIORNMENT
In India although healthcare is provided by a mix of both public and privatefacilities it is the private sector that accounts for 75-80% of outpatient care and55-60% of in-patient care. The federal Ministry of Health and Family Welfare (MOHFW) isresponsible for framing and coordinating healthcare policy while state and districtauthorities oversee the administration and delivery of services to their patientpopulations. Department of Pharmaceuticals Ministry of Chemicals and Fertilizers framesand implements regulations for Indian Pharmaceuticals Industry.
A new National Health Policy published in March 2017 calls for an increase ingovernment spending on public health expenditure to 2.5% of the GDP in a time boundmanner. It also aims at ensuring improved access and affordability of quality secondaryand tertiary care services. The Policy's ultimate long-term goal is achieving universalhealth coverage and is viewed as the world's largest healthcare initiative by the sheernumber of potential beneficiaries.
The National List of Essential Medicines (NLEM) which was revised in December 2015 byadding more drugs is expected to see more frequent revisions and additions.
INDUSTRY STRUCTURE AND DEVELOPMENT
The Indian Pharmaceutical Market (IPM) was estimated to be Rs. 1240.3 billion in 2017with a growth of 5.2%. By 2020 India is likely to be among the top three pharmaceuticalmarkets by incremental growth and the 6th largest market globally in absolute size.
Increase in the number of middle class households coupled with improvement in medicalinfrastructure rising awareness and increase in penetration of health insurance in thecountry will also influence the growth of pharmaceuticals sector.
The market is highly fragmented with the top 10 companies constituting 43% share of theIPM and the top 150 companies accounting for 97% of the IPM. The IPM is primarily made upof Indian companies with a share of 79% of the market while acute therapies continue todominate the market constituting 64% of the IPM.
OPPORTUNITIES AND THREATS
The following factors are likely to impact the IPM in the next
few years :
Draft Pharmaceutical Policy 2017 - The August 2017 release of the draftpolicy prepared by the Department of Pharmaceuticals sets out key objectives such asincreasing access at affordable prices for essential drugs mandatory Bio-Availability andBio-Equivalence (BA/BE) tests for all drug manufacturing permissions by central or stateregulators and ensuring that all manufacturing units adopt WHO GMP and GLP standards.
Price Controls - Prices will remain under pressure as the scope of pricecontrols increased under the Drug Price Control (Amendment) Order (DPCO) following theupdate of the National List of Essential Medicines (NLEM). Currently 29 therapeuticclasses are covered by the list. It is expected that future revisions of NLEM will ensureprice controls are not diluted. The Department of Pharmaceuticals is also amending theDPCO. It is likely that some of the amendments will pose further challenges to theindustry.
National Health Protection Scheme - Ayushman Bharat is National HealthProtection Scheme which is ambitiously aiming to extend health insurance coverage of up toRs. 5 Lakh per family per annum to over 10 Crore families from the vulnerable andunder-privileged sections of society equating to around 50 Crore beneficiariesequivalent to 40% of the population.
Uniform Code of Pharmaceuticals Marketing Practices (UCPMP) - UCPMPcurrently voluntary is expected to become mandatory shortly. A mandatory Code isexpected to provide a level playing field and ethical marketing practices would befollowed by all companies.
Increasing Digital Penetration - The exponential growth in the adoption ofmobile and digital media will continue to be an important tool for patient engagement anda medium to raise disease awareness. We expect this trend to continue and gain importance.
Regulation of OTC Drugs - The OTC market is growing strongly at 10.2% andwith greater willingness to self-medicate the regulatory authorities are looking atcreating a properly defined OTC sector. The creation of a well-defined and regulated OTCmarket coupled with stricter enforcement of prescribing and dispensing regulations willdrive growth of the OTC market.
REVIEW OF OPERATIONS
Financial Performance Total Revenue
Total Revenue for the year ended March 31 2018 is Rs. 342410.89 Lakhs vis-a-vis Rs.299633.40 Lakhs last year recording a robust growth of 14.3% over the previous financialyear.
Net Sales for the financial year 2017-18 grew by 12.8% over the previous year to Rs.327390.01 Lakhs an increase of Rs. 37152.34 Lakhs driven mainly by volumes.
The significant increase in Other Income is mainly on account of income generated fromassignment of trade marks amounting to Rs. 4530.26 Lakhs.
Interest on inter-company loan to Alere Medical Private Limited India amounting toRs. 520.55 Lakhs is also included in Other Income.
The Company continued to invest in fixed deposits with Banks having high creditratings with a view to safeguarding the principal and maintaining liquidity. Income fromBank Deposits grew by 12.8%. Investment strategy is reviewed periodically by the FinanceCommittee. The Company has an investment portfolio of Rs. 98735.00 Lakhs as at March 312018.
The improved sales mix and marginal growth in sales price realisation resulted indecrease in Material Cost as a percentage of Sales from 59.0% in financial year 2016-17 to58.2% in the current year.
While the Company increased its employee strength by 7.8% to 3322 the Employee Costas a percentage to Sales has marginally increased from 11.9% in financial year 2016-17 to12.0% in the current year.
The increase in Employee Cost by 14.0% over the last year is mainly due to meritincreases and impact of change in monetary ceiling for Gratuity.
Other Expenses including excise duty on Sales Depreciation and Finance Cost increasedby 0.3% over the last year. The increase on account of office lease rentals for One Abbottoffice is partially offset by decrease in excise duty on Sales post implementation of GST.Other Expenses as a percentage to Sales reduced to 15.4% this year compared to 17.3% forthe financial year 2016-17 owing to higher Sales in the current year.
Profit Before Tax
Profit Before Tax for the year' ended March 31 2018 at Rs. 62148.26 Lakhs grew to19.0% of Sales as compared to 15.0% in the previous year'.
Goods and Services Tax (GST)
GST the biggest indirect tax reform of India was rolled-out effective July 1 2017.This transformational reform significantly impacted all areas of businesses across varioussectors including the pharmaceutical industry. The applicable rate of GST on drugs ingeneral is 12% and for life saving drugs is 5%. Early analysis of potential GST impact onbusiness proactive preparedness in the IT system enhancements and Supply Chain operationshelped the Company to be GST compliant right from the GST roll-out date. The Company usedthis mega reform as an opportunity to upgrade the systems and also launched manyinitiatives such as providing trainings to trade partners and other stakeholders thusengaging with them to secure an effective GST compliant environment. The Company has takena lead in making several representations to the Government authorities on the key concernareas/ challenges faced by the pharmaceutical industry and made certain recommendations toease compliance.
The Company operates in a single reportable business segment i.e."Pharmaceuticals".
The Company's business operations are divided into four divisions i.e. (i) Women'sHealth & Gastrointestine Gastroenterology GI Prospera and GI Advance (ii) SpecialtyCare (iii) GenNext and Vaccines and (iv) Consumer Care.
The key performance highlights of each Business Division for the financial year 2017-18are as follows :
(i) Women's Health & Gastrointestine Gastroenterology GI Prospera and GI AdvanceDivision
This Division offers a mix of our global and India-specific brands across pregnancyconstipation and liver diseases segments. Several of the Company's largest brands such asDuphaston (Women's Health Hormone) Duphalac (Laxative) Udiliv (Hepatic Protective)Cremaffin (Laxative) Cremaffin Plus (Laxative) Creon (Digestive Enzymes) Heptral(Alcoholic liver disease) and Rowasa (Inflammatory Bowel Syndrome) form part of thisdivision.
- Women's Health & Gastrointestine
This Business Unit posted a strong growth of 19.1% during the year. Duphaston Udilivand Duphalac have contributed significantly to overall growth.
During the year 2 new products - Cystofert (Polycystic Ovary Syndrome) and Letrolife(Ovulation) were launched.
This Business Unit posted a strong growth of 10.5% during the year mainly driven bybrands Cremaffin Cremaffin Plus and Librax.
During the year 4 new products - Duphalac Bulk (Gut Health) Duphapro (Constipation)Udiliv 450 (NAFLD) and Duphalac Lemon Flavor (Laxative) were launched.
- GI Prospera
This Business Unit grew by 3.9% during the year. The growth was majorly driven bybrands Creon Heptral and Rowasa.
During the year 3 new products - Velpaclear (Hepatitis C) Antoxipan (Pain Managementin chronic pancreatitis) and Heptral T (ALD/NAFLD) were launched.
- GI Advance
This Business Unit was formed in January 2018 to build new products on a buildoperate transfer model. As of March 2018 4 new products - Confinex (Constipation)Cremapeg (Irritable Bowel Syndrome) Dirifa (Diarrhoea/Hepatic Encephalopathy) and GX600(ALD/NALD) were launched.
(ii) Specialty Care Division
This Division consists of a comprehensive range of products for treatment of metabolicdisorders and central nervous system illnesses and covers therapy areas likehypothyroidism vertigo depression and migraine. The key brands in this division areThyronorm (thyroid preparations) Vertin (antivertigo) Prothiaden (antidepressant) andInderal (migraine prophylaxis). Some of these enjoy market leadership positions* in theirrespective therapeutic areas.
This Business Unit grew by 15.3% during the year. The growth was mainly driven byThyronorm which retains flagship position* in its segment.
During the year 1 new product - Combinorm (Probiotic - Bacterial Vaginosis) waslaunched.
- Central Nervous System
This Business Unit grew by 8.8% during the year. Vertin and Prothiaden continues as themarket leader* and has shown double-digit growth.
During the year 2 new products - Inderal 20 (Migrane) and Cerebion (Stroke/BrainInjury) were launched.
(iii) GenNext and Vaccines Division
This Division includes the therapy areas of Pain Management and Vitamins. It comprisesmulti-specialty drugs and applications and is primarily aimed at general physicians. Thekey brands include Brufen (pain killer) Duvadilan (peripheral vasodilator) Zolfresh(sleep management) Arachitol Nano (Vitamin D preparations) and Digecaine (antacidanaesthetic).
The Company has a licensing arrangement with Bharat Biotech India Limited to marketvaccines in immunology segment. The key brands in vaccine portfolio are Influvac(influenza vaccine) Enteroshield (typhoid vaccine) and Rotasure (rotavirus diarrheavaccine).
This Buisness Unit has shown a negative growth of 2.6%; however Arachitol Nano andDuvadilan have shown positive growth. Zolfresh retains number 1* position in itsparticipated market.
This Business Unit showed growth of 59.7% and contributed 3.4% of Sales for the year.The double digit growth was driven by all key brands in this unit. Influvac achieved No.1* position in its participated market this year.
(iv) Consumer Care Division
This Division is present in the Over The Counter (OTC) antacid segment and mainlypromotes all variants of Digene (antacid - antiflatulent) - tablets liquids and powders.
The Division focuses on connecting with patients through positioning of its productsmainly through mass media social media and point of sale promotion. New advertisement andmarketing strategies will help sustaining the growth of this portfolio. The Divisionshowed growth of 10.6% over the previous year.
During the year 5 new products - Rashfree Natural Cream (Diaper Rash Cream) DigenePaan Flavour (Antacid) Digene Pudina Pearls (Digestive) Cremaffin Fresh (Laxative) andBrufen Active (Pain Relief Ointment) were launched.
MEDICAL RESEARCH AND KNOWLEDGE SHARING INITIATIVES
The Company significantly supports Real World Evidence [RWE] Generation Studies andRegistration Studies for innovative products developed by Innovation and Development(I&D) teams which help in attaining its commitment for portfolio expansion. Inaddition training imparted to Healthcare professionals (HCPs) during clinical studies viaGood Clinical Practice (GCP) drives the Company's standing as a scientific company.
During the year the Company executed 23 new studies published 14 publications inmajor indexed journals and made 7 international congress presentations. The healthauthority of India approved 3 studies submitted and presented by the Company. The Companyreceived approvals to conduct phase 3 studies in adults/elderly and pediatrics in parallelfor its Influvac Quadrivalent Vaccine (QIV) Program. The Company also conducted 6 GCPworkshops to raise awareness on clinical trials.
Some of the notable studies are in therapy segments of Migraine Metabolic SyndromeConstipation Insomnia and Preterm which were presented/published at differentnational/international congresses during the year under review.
IMS Health has forecasted the Indian Pharmaceutical Market to grow at a compoundedannual growth rate of 9.7% between 2017 and 2022 reaching approximately Rs. 2000 billionby 2022.
For the near future after an in-depth overview of our strength and our market leadingposition we identified specific opportunities to leverage for growth. Some of these are :
Shape therapies to accelerate existing key brands :
Accelerate growth of existing brands through focused brand building innovativemarketing campaigns and partnerships to help patients and physicians. This will ensure wecontinue growing faster than the market and drive our therapy leadership.
Provide services that go beyond just the pill:
We have targeted interventions at each stage along the continuum of care' forpatients. For example we have developed a holistic end-to-end solution in the gut spacecalled Gutfit' which involves solutions such as counselling and nutrition advice forpatients.
Increase portfolio depth through the launch of new products in our existing therapyareas :
During the year we have launched 21 new products and have a robust plan for futurelaunches.
Focus on internal talent development engagement retention and capability building:
We run successful management trainee programs conduct uniform assessments for firstline and second line manager roles and have the industry's only 3-tier certificationprogram for our field force. This year we launched the Women Leaders of Abbott (WLA)initiative to help female employees at Abbott India maximize their potential.
Digital differentiation and use of technology:
It complement our products to drive engagement with Key Opinion Leaders and patientsfor example in-clinic engagement through augmented and virtual reality interfaces such asthe VertiGo App. Through the roll out of iPads to field force of three of our BusinessUnits we have more engaging and differentiated content to showcase to doctors.
RISKS AND CONCERNS
The implication of risk has steadily intensified given the volume and complexity ofchange the pharmaceutical industry continues to face both in India and the world.Regulatory challenges are compounded by evolving regulations and new legislations. Whileregulators are committed to create an environment conducive for pharmaceutical companiesto do business sync between policy and operations will be an area to watch.
The National Pharmaceutical Pricing Authority (NPPA) will continue to play an activerole of regulator for drug prices and further changes are expected to be introduced to thepricing system. More frequent revisions to the National List of Essential Medicines (NLEM)are expected.
Although no concrete proposals to introduce direct controls on patented product priceshad been made public as of early 2018 it is possible that a patented drug price policycould be introduced.
Numerous professional organisations and government bodies have repeatedly called fordoctors to prescribe low cost generic medicines to patients. This is one among a series ofmeasures planned by the health ministry to regulate the cost of medical care and makehealthcare more affordable in India. The introduction of generic prescribing regulationsis on the government's agenda.
INTERNAL CONTROL SYSTEM AND ITS ADEQUACY
The Company has put in place an internal control mechanism that is commensurate withits size and nature of business. These systems provide a reasonable assurance onachievement of its operational compliance and reporting objectives including safeguardingof assets of the Company prevention and detection of frauds accuracy and completeness ofaccounting records and ensuring compliance with the 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.
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 audit observations and management actions thereonare reported to the Audit Committee on a quarterly basis. An independent and empoweredAudit Committee reviews the observations and assesses the adequacy of the actions proposedas well as monitors their implementation. While the Internal Auditors conduct a quarterlyfollow up for implementation/remediation of all audit recommendations and the statusreport is presented to the Audit Committee regularly.
The Company has implemented both preventative and detection controls and appropriatecorrective actions to reduce the risks including:
Abbott Code of Business Conduct (COBC) requires annual certification by allemployees;
Compliance Committee is formed with representatives from all the operatinggroups;
Senior Management have oversight of the compliance programs;
Business Compliance Cell is assigned with responsibility of training monitoringand ensuring compliance of the Company's Policies and Procedures by field employees;
The Company has a Whistle Blower mechanism in place;
Business Divisions have a quarterly meeting with Director - Office of Ethics andCompliance to monitor and discuss the compliance with various business processes.
The Company Management has assessed the effectiveness of internal controls overfinancial reporting for the year ended March 31 2018 and based on the assessmentbelieve that the same are adequate and working effectively.
The Statutory Auditors have issued an audit report on the adequacy and effectiveness ofthe internal financial control systems over financial reporting.
The Company firmly believes that human capital continues to be the driving force of ourbusiness. We endeavor to attract retain develop and deploy the best available talentacross the functions and hierarchy of the Company. Providing an empowering workenvironment that is built upon openness and transparency fosters collaborativeparticipation of over 3300 committed people towards addressing the unmet healthcare needsof its customer universe.
Our Human Resource team has developed and deployed an integrated talent managementmechanism which encompasses the entire employee lifecycle - recruitment careerprogression rewards and recognitions.
India Talent Strategy
Pursuing an integrated approach to talent management helps us to attract the besttalent and also develop future leaders from within the organisation. We leveragedifferentiated talent hiring using multiple channels including premier business schoolsin India and abroad. In its fourth year of execution our India Talent Strategy aims :
to be the employer of choice in the Indian Healthcare Industry in terms ofattracting and retaining the right quantity and quality talent;
to achieve our aspiration to continue to grow faster than the markets we operatein and deliver predictable performance.
The Company believes in motivating and engaging employees through shared goalscapability building initiatives career growth opportunities and an environment oftransparency accountability and positive reinforcement.
Women Leaders of Abbott
Helping women at Abbott maximize their potential and realise greater achievement andadvancement throughout their careers is the mission of Women Leaders of Abbott (WLA).Through various programs initiatives and speaker series WLA connects women employees andoffers tools and topics to help them maximize their careers at Abbott.
The objective of this initiative is to create a platform for attracting retaining andadvancing female talent in the organisation and thereby becoming the Employer of Choicefor female employees and contributing positively to business success.
Several leadership programs such as In-stride Global Citizen Development ProgramEmerging Leaders Program etc. were conducted during the year.
Some of the other notable initiatives include :
Feeder Pool Development Program aimed at accelerating progress of our key talenttowards leadership roles at mid-management level;
Differential Hiring Strategy aimed at infusing differential talent and diversity;
Sales Management Trainee Program aimed at building a diverse and superior talentpool for first line managers;
Sales Leadership Development Program an internal career development programdesigned to source talent internally and establish a career path for key functions/ roles;
Uniform Assessments for First Line and Second Line Manager roles aimed at creatingsuccession pipeline for First Line and Second Line high performing field managers;
Executive Program in Sales & Marketing an Executive Program in Sales andMarketing from IIM Calcutta for high potential Second Line Managers.
The Company constantly focuses on propagating a coaching culture across saleshierarchy. On-job-coaching is one of the important levers of building individualcapabilities and drive employee motivation and engagement. "Coaching Olympiad"is a very innovative initiative aimed at identifying and recognising "BestCoaches" in the sales teams. A total of 22 best coaches were recognised during thebiggest annual sales conference - a first-in- industry initiative.
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. This training also forms a part of NewEmployee Orientation Program. There were no complaints received by the Company/ICC duringthe year under the aforesaid Act.
Total number of employees as on March 31 2018 is 3322.
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 2018 theapplicable accounting standards have been followed and there are no material departuresfrom the same;
b) they have selected such accounting policies and applied them consistently and madejudgments and estimates that are reasonable and prudent so as to give a true and fair viewof the state of affairs of the Company as at March 312018 and of the profits of theCompany for that year;
c) they have taken proper and sufficient care for the maintenance of adequateaccounting records in accordance with the provisions of the Companies Act 2013 forsafeguarding the assets of the Company and for preventing and detecting fraud and otherirregularities;
d) they have prepared the Annual Accounts of the Company on a going concern basis;
e) they have laid down adequate Internal Financial Controls to be followed by theCompany and that such Internal Financial Controls are adequate and are operatingeffectively;
f) they have devised proper systems to ensure compliance with the provisions of allapplicable laws and that such systems are adequate and operating effectively.
RELATED PARTY TRANSACTIONS
Policy on dealing with Related Party Transactions and Materiality
The Company has formulated a Policy on dealing with Related Party Transactions andMateriality in terms of requirements of the Companies Act 2013 and the SecuritiesandExchangeBoard 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 the AuditCommittee and Board as and when required. The details of such transactions are alsoreviewed by the Audit Committee on a quarterly/annual basis. Material Transactions(transaction 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 2017-18 ("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.
Details of the said Transactions are provided in Note 42 to the Financial Statements.
CORPORATE SOCIAL RESPONSIBILITY
Corporate Social Responsibility (CSR) Policy
The CSR Policy is available on the Company's website athttp://www.abbott.co.in/investor-relations/policies.html
CSR initiatives undertaken during the financial year 2017-18
The Company incurred an amount of Rs. 912.22 Lakhs on various CSR activities duringthe financial year 2017-18.
The Annual Report of CSR activities undertaken by the Company during the financial year2017-18 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 enablemanagement 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 toidentify and select among alternative risk responses - risk avoidance reduction sharingand acceptance.
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 Company facesa variety of risks affecting different parts of the organisation and risk managementfacilitates effective response to the interrelated impacts and integrated responses tomultiple 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 targets and guard against loss of resources. It is alsodirected to help ensure effective reporting and compliance with laws and regulationsavoid damage to the entity's reputation and associated consequences.
The Company operations and its Business Divisions are included in the scope of the RiskManagement Framework.
During the year Risk Management Core Team comprising of representatives of variousfunctions and businesses carried out risk assessment exercise to identify varioussignificant risks associated with the business operations and mitigation plans to addresssuch risks. 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 Board and Audit Committee.
We report with profound grief the sad and untimely demise of Mr Ranjan Kapur whopassed away on January 27 2018. The Board places on record its sincere appreciation forthe invaluable contributions and guidance received from Mr Kapur towards the progress ofthe Company.
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.
1. Mr Rajiv Sonalker (DIN : 07900178) has been appointed as Additional and Whole-timeDirector of the Company for a period of 2 (two) years effective August 8 2017 subject tothe approval of the Members at the ensuing Annual General Meeting;
2. Ms Anisha Motwani (DIN : 06943493) has been appointed as Additional and IndependentDirector for a period of 3 (three) years effective April 25 2018 subject to the approvalof the Members at the ensuing Annual General Meeting.
In compliance with Section 152 of the Companies Act 2013 Mr Munir Shaikh (DIN :00096273) and Mr Kaiyomarz Marfatia (DIN : 03449627) retire by rotation at the ensuingAnnual General Meeting and being eligible offer themselves for re-appointment.
In accordance with the provisions of the Securities and Exchange Board of India(Listing Obligations and Disclosure Requirements) (Amendment) Regulations 2018 (effectiveApril 1 2019) approval of Members is sought through Special Resolution forre-appointment of Mr Munir Shaikh who has attained the age of Seventy-five years.
Based on recommendation of the Nomination and Remuneration Committee your Directorsrecommend appointment/ re-appointment of Mr Rajiv Sonalker Ms Anisha Motwani Mr MunirShaikh and Mr Kaiyomarz Marfatia.
Declaration of Independence
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 Meetings of the Board
Seven Board Meetings were held during the year on May 19 2017; July 18 2017; August8 2017; November 13 2017; December 19 2017; February 14 2018 and March 27 2018.
Policy on Nomination and Appointment of Directors/ Criteria for appointment of SeniorManagement and Remuneration Policy
Policy on Nomination and Appointment of Directors/Criteria for appointment of SeniorManagement and Remuneration Policy as formulated under Section 178(3) of the CompaniesAct 2013 is annexed as "Annexure II" and forms part of this Report.
Performance Evaluation of the Board Board Committees and Directors
Pursuant to the requirements of the Companies Act 2013 read with Rules framedthereunder and the Securities and Exchange Board of India (Listing Obligations andDisclosure Requirements) Regulations 2015 the Company has formulated PerformanceEvaluation Framework and Policy which sets a mechanism for the evaluation of the BoardBoard Committees and Directors. The said Policy is available athttp://www.abbott.co.in/investor- relations/policies.html
Under the aforementioned Framework and Policy the performance evaluation of the BoardCommittees and individual Directors is conducted through self-assessment and groupdiscussion. The Board may refer to a suggested set of questions/parameters to guide theirdiscussions. The Chairman of the Board/Nomination and Remuneration Committee meet theindividual Directors to provide feedback if any.
During the year the Board/the Nomination and Remuneration Committee conductedperformance evaluation of each individual director and the Board conducted performanceevaluation of the Board and Committees through self- assessment and group discussions.Evaluation was done based on the parameters stated under the aforesaid Framework.Independent Directors at their separate meeting evaluated performance of Non-IndependentDirectors the Board as a whole and the Chairman. Appropriate feedback was provided to theChairman and Managing Director.
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 Mr R A Shah (Chairman) Mr Krishna Mohan Sahni Mr MunirShaikh and Ms Anisha Motwani. Role of the Committee is provided in detail in the CorporateGovernance Report forming part of this Report. All the recommendations made by the AuditCommittee during the year were accepted by the Board.
VIGIL MECHANISM/WHISTLE BLOWER POLICY
The Vigil Mechanism/Whistle Blower Policy called "Abbott India Limited - Procedurefor Internal Investigations" lays down a mechanism for reporting and investigation ofall unethicalbehavior alleged violations or potential violations of laws regulations orAbbott Code of Business Conduct policies procedures or other standards.
The said Policy is available on the website of the Company athttp://www.abbott.co.in/investor-relations/policies.html
Employees have numerous ways to voice concerns and are encouraged to report the sameinternally for resolution. The said Policy provides for adequate safeguards againstretaliation and access to the Chairman 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 (IC AI 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 term of 5 years i.e. fromfinancial year 2014-15 to the financial year 2018-19 to hold office till the conclusionof the Seventy-fifth Annual General Meeting of the Company subject to ratification at eachAnnual General Meeting.
In terms of Section 40 of the Companies (Amendment) Act 2017 notified on May 7 2018the requirement for ratification of appointment of Statutory Auditors by Members at everyAnnual General Meeting has been omitted and accordingly Members' approval is not requiredfor ratification of their appointment annually.
The Auditors' Report for the financial year 2017-18 does not contain any adverseremarks qualifications or reservations or disclaimers which require explanation/commentsby the Board.
M/s Kishore Bhatia & Associates Cost Accountants (Registration No. 00294) areappointed as the Cost Auditors of the Company for the financial year 2018-19 at aremuneration of Rs. 6.65 Lakhs plus taxes as applicable and reimbursement of out-of-pocketexpenses.
The said remuneration to the Cost Auditors shall be subject to ratification by theMembers at the ensuing Annual General Meeting.
Cost Audit Report along with the Compliance Report for the financial year 2016-17issued by M/s N I Mehta and Associates then Cost auditors was filed on August 22 2017(due date of filing was September 27 2017).
M/s KPMG Chartered Accountants (ICAI Firm Registration No. BA62445) are the InternalAuditors of the Company. Internal Audit Report their significant findings and follow upactions taken by the Management is reviewed by the Audit Committee on a quarterly basis.
SECRETARIAL AUDIT REPORT
The Secretarial Audit Report issued by Ms Neena Bhatia Practising Company Secretary(Membership No.: FCS 9492 and Certificate of Practice No. 2661) for the financial yearended March 312018 does not contain any adverse remark qualifications or reservations ordeclaimer which requires any explanation/ comments by the Board. The said Report isannexed as "Annexure III" and forms part of this Report.
HEALTH SAFETY AND ENVIRONMENT
Health and Safety:
Providing a safe workplace and keeping the employees healthy is the Company's toppriority. We are committed to keeping all those who work for the Company safe bypreventing dangerous incidents in and around the workplace. Our EHS strategy aims todevelop a standardised approach to foster continuous improvement and ensure a safe andefficient working environment that minimises any adverse environmental impact. Ineducating our employees we also empower them to promote safer and healthier lives intheir wider communities. We strive to maintain the highest standards of EnvironmentHealth and Safety (EHS) practices.
The Employee Health and Safety (EHS) Policy has been implemented through our Global EHSStandards supported by a well-defined EHS organisational structure EHS StandardOperating Procedures and EHS specific programs all ensuring we meet all the localregulatory requirements.
Suggestions from the Safety Committee comprising representatives from the workforceand management are implemented promptly to resolve issues impacting Plant safety andemployee health. Routine self-audits and third party safety audits are conducted to verifycompliance with the regulatory and internal safety requirements.
During the year pumps within the existing fire hydrant system were upgraded to coveradditional expansion area to mitigate the risk of fire at the Goa Plant. The site isgeared to handle any type of fire situation.
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 and so on. A cross-functionalteams for emergency response and firefighting is in place. Mock drills for fire-fightingand rescue operations are conducted in association with local fire brigade to keep thestaff in a state of preparedness for any emergencies. The Company has a detailed BusinessContinuity Plan in place. We are continuously improving on the Behavior Based Safety (BBS)program and visible improvement in safety culture is observed. Stop for Safety initiativewas initiated this year to support the BBS program. The Plant had no reportable or losstime incident during last 5 years.
The Plant has a well-appointed first-aid room with a full time nurse and OccupationalHealth Physician catering to employee needs. The Plant is also armed with an on-sitefully-equipped ambulance van. It is mandatory for all plant employees to undergo regularmedical check-up as prescribed under the Company's Policies.
Introduction of closed loop system for Chloroform handling was a major initiativeundertaken at the Plant this year. This will reduce employee exposure and accidentalinhalation. Additionally we have invested in several employee engagement programs likecelebration of National Safety week World Environment day and Abbott EHS month that willhelp 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 projects to save water. Examples include improved condensate recovery fromboilers installation of fluid bed dryer filter bag washing and drying machine to save 50liters of water per washing cycle and intermediate product container cleaning machineinstalled to save 40 liters of water per container. The treated water from our waste watertreatment plant is recycled for horticulture within the site.
The Company has a state-of-the-art effluent treatment plant at Goa with parameters oftreated effluents well below the limit set by the local State Pollution Control Board. OurGoa plant is a "ZERO" discharge plant.
Over the period of last 5 years the site has achieved more than 25% absolute waterreduction in usage and 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 yield improvement. Along with increasing productivitythis initiative has helped save the discharge of raw materials and solvents into theenvironment.
Goa plant has received the "Best Environmental Practices Award" from GoaState Pollution Control Board to recognise the efforts for recycling the used water fromliquid bottle cleaning machines in cooling water towers in utility section.
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 the
purview of waste disposal. In 2017 36% of the waste was sent for recycling 62 % forincineration/co-processing and 2% for composting. One of our significant achievements hasbeen the changing fate of hazardous waste through our initiatives that changed fromIncineration to Co-processing. With this change we have ensured that the energy from thewaste is recovered thus contributing to the reduction of C02 emission and global warming.56% of site waste was incinerated 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 IV" and forms part of this Report.
EXTRACT OF ANNUAL RETURN
Extract of Annual Return as provided under sub-section (3) of Section 92 of theCompanies Act 2013 and Rules framed thereunder is annexed as "Annexure V" andforms 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 Section 197(12) of theCompanies Act 2013 read with Rule 5(1) of the Companies (Appointment and Remuneration ofManagerial Personnel) Rules 2014 is annexed as "Annexure VI" and forms part ofthis 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
Corporate Governance Report along with a Certificate from the Statutory Auditors of theCompany with regard to compliance of the conditions of Corporate Governance pursuant tothe requirements of the Securities and Exchange Board of India (Listing Obligations andDisclosure Requirements) Regulations 2015 forms part of this Report.
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
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 the Company granted a loan ofRs. 20000.00 Lakhs to Alere MedicalPrivate Limited India (a Related Party as per the provisions of the Securities andExchange Board of India (Listing Obligations and Disclosure Requirements) Regulations2015) for a period of six months on December 26 2017 at an interest rate of 10% perannum pursuant to the provisions of Section 186 of the Companies Act 2013 and Rulesframed thereunder to pay off its existing inter-company trade liability. The said loan isguaranteed by Abbott Laboratories USA i.e. the ultimate holding company.
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 won several prestigious awards and recognitions including"Best Companies to Work For" by Business Today; Best Marketing Campaign for"Constipation Conversations" by Healthcare Leadership Awards; Best use ofTechnology for Training and Excellence in the Production of Learning Content by 4th WorldTraining Development Congress; Silver for Digital Marketing Excellence for Abbott IndiaRadio by DIGIX X.
Your Board recognises the extensive contribution made by all employees towards thegrowth of the Company year-after-year and places on record its sincere appreciation forthe same.
Your Board is sincerely thankful to all business partners institutions banks and inparticular the Members for their on-going support and trust in the Company.
|For and on behalf of the Board || |
|Munir Shaikh ||R A Shah |
|Chairman ||Director |
|DIN : 00096273 ||DIN : 00009851 |
Policy on Nomination and Appointment of Directors/Criteria for Appointment of SeniorManagement
[In compliance with the provisions of Section 178(3) of the Companies Act 2013 andRegulation 19(4) read with Schedule II Part D (A)(1) of the Securities and Exchange Boardof India (Listing Obligations and Disclosure Requirements) Regulations 2015.]
1.1 In terms of the provisions of Section 178 of the Companies Act 2013 Rules madethereunder and the Securities and Exchange Board of India (Listing Obligations andDisclosure Requirements) Regulations 2015 the Nomination and Remuneration Committee isinter alia required to determine the appropriate size and composition of the Boardformulate criteria for identifying suitable candidates for the position of Directors andSenior Management and criteria for determining the qualifications positive attributes andindependence of director devise succession plan and recommend to the Board appointmentand removal of Board members and Senior Management personnel.
1.2 This Policy shall act as a guideline for determining qualifications positiveattributes and independence of a Director and matters related to the appointment andremoval of Directors and Senior Management.
2.1 This Policy would lay down criteria and terms and conditions with regard toidentifying persons who are qualified to become Directors (Executive Non-executive andIndependent) and Senior Management including their qualifications positive attributesand independence.
3. Criteria for appointment of Directors :
3.1 The following characteristics shall be taken into consideration when selectingnominees for the Board of Directors. Individual nominees do not need to satisfy all thequalifications listed below and there is no requirement that all qualifications berepresented on the board.
3.2 In addition to the specific characteristics set forth below board members shouldat a minimum have backgrounds that when combined provide a portfolio of experience andknowledge that will serve Abbott's governance and strategic needs. Board candidates willbe considered on the basis of a range of criteria including broad-based business knowledgeand relationships prominence and excellent reputations in their primary fields ofendeavor as well as a broad business perspective and commitment to good corporatecitizenship. Directors should have demonstrated experience and ability that is relevant tothe Board of Directors' oversight role with respect to Abbott's business and affairs.
3.3 Strong management experience ideally with major public companies with successfulmultinational operations including but not limited to :
3.3.1 Active or recently retired Chairman and Chief Executive Officers.
3.3.2 Presidents and Chief Operating Officers.
3.3.3 Executive or Group Vice Presidents with short term potential for movement to item3.3.1 or 3.3.2 above.
3.4 Other areas of experience which are desirable for representation on the Abbottboard include but are not limited to :
3.4.3 Medical and Scientific Research and Development
3.4.5 International Business
3.5 Other qualifications that would be helpful in addition to the above include butare not limited to :
3.5.1 Senior level government experience
3.5.2 Academic administration
3.6 The Board shall include a range of ages and a diversity of ethnicity gender andgeography.
3.7 Primary characteristics required in new board candidates:
3.7.1 They must be first and foremost able and willing to represent the shareholders'short-term and long-term economic interests.
3.7.2 They must be able to contribute to the evaluation of the existing management ofthe Company.
3.7.3 They must also be cognizant of the responsibilities of the Company to :
Its employees Its customers Social issues Regulatory authorities
3.7.4 They must be willing to take the necessary time to properly prepare for board andcommittee meetings at a minimum based on a thorough review of the material supplied beforeeach board meeting.
3.8 Primary characteristics required for renomination of incumbent directors :
3.8.1 Incumbent directors should continue to meet the general qualifications outlinedabove and in addition should abide by the following criteria:
22.214.171.124 Adequate preparation for board and committee meetings including a thoroughreview of and familiarity with the written materials supplied before each meeting
126.96.36.199 Participation in and contributions to board and committee discussions throughuseful and pertinent suggestions questions and comments
188.8.131.52 Providing on-going advice and counsel to management on the director's owninitiative and when requested by management
184.108.40.206 Regular attendance at board and committee meetings
220.127.116.11 Maintaining an independent familiarity with the external environments in whichthe Corporation operates and especially in the director's own particular fields ofexpertise
4. Other Positive Attributes for Directors :
4.1 It is desirable that candidates proposed for Directorship possess the followingpositive attributes :
4.1.1 Any post-graduation qualifications from reputed business schools/universities inIndia or abroad;
4.1.2 Experience and expertise in dealing with strategic issues and long-termperspectives;
4.1.3 Strong leadership experience a superior knowledge of business principles andcapacity for independent thought and exercising independent judgment;
4.1.4 Ability to participate constructively in deliberations at board meetings;
4.1.5 Willingness to exercise authority in a collective manner;
4.1.6 Inquisitive and objective perspective practical wisdom and mature judgment;
4.1.7 Self-confidence to contribute to board deliberations and stature such that otherboard members will respect his or her view;
4.1.8 Capable of devoting sufficient time and attention to his/her professionalobligations for informed and balanced decision making;
4.1.9 Focused towards the Company and generous/ open minded towards the team;
4.1.10 Fit and proper person of impeccable integrity reputation and character; absenceof convictions and restraint orders; and competence including financial solvency and networth.
5.1 In case of appointment of Independent Director the candidate shall meet thecriteria of Independence as set out in Annexure I.
6. Criteria for Appointment of Senior Management:
6.1 Individuals of high integrity who have a solid record of accomplishment in theirchosen fields and who possess the qualifications qualities and skills to effectivelyrepresent the best interests of all stakeholders. Candidates will be selected for theirability to exercise good judgment and to provide practical insights and diverseperspectives.
7. Appointment Mechanism:
7.1 The Nomination and Remuneration Committee shall play a consultative role for anyappointment requiring Board approval as stipulated by law or regulation for DirectorsKey Managerial Personnel and Senior Management officials. It shall provide its advice andrecommendations to the Board.
7.2 The Managing Director/Executive Directors/Non- Executive Directors/Key ManagerialPersonnel are appointedbytheBoardofDirectors uponrecommendation from the Nomination andRemuneration Committee.
7.3 Senior Management Personnel shall be appointed by the Company as per Companypolicies.
8.1 Managing Director/Executive Directors :
8.1.1 Managing Director/Executive Directors shall retire as per the applicableprovisions of the Companies Act 2013 or Rules made thereunder or the prevailing AbbottIndia Limited guidelines on retirement of Directors whichever is earlier.
8.1.2 The Board will have the discretion to retain the retiring Director in the sameposition even after attaining the retirement age for the benefit of the Company.
8.1.3 Special resolution needs to be passed for appointment /re-appointment of Directorin the position of Managing Director/Executive Directors who have attained age of 70years.
9. Independent Director:
9.1 An Independent Director shall hold office for a term of up to five consecutiveyears on the Board of the Company and will be eligible for re-appointment for another termof up to 5 consecutive years on passing of a special resolution by the Company anddisclosure of such appointment in the Board's Report.
9.2 No Independent Director shall hold office for more than two consecutive terms butsuch Independent Director shall be eligible for appointment after expiry of three years ofceasing to become an Independent Director. Provided that an Independent Director shallnot during the said period of three years be appointed in or be associated with theCompany in any other capacity either directly or indirectly.
10. Non- Executive Director (other than Independent
10.1 Other non-executive Directors shall retire by rotation as per the applicableprovisions of the Companies Act 2013 or Rules made thereunder as amended from time totime.
11. Key Managerial Personnel and Senior Management:
11.1 Key Managerial Personnel and Senior Management shall retire as per the Companypolicy or their employment terms.
12.1 The Committee may recommend to the Board with reasons recorded in writing removalof an Independent Director and Key Managerial Personnel subject to the provisions andcompliance of the Companies Act 2013 Rules made thereunder and other applicableregulations and applicable policies of the Company.
12.2 The Senior Management Personnel shall be removed by the Company as per Companypolicies.
13. Succession Planning:
13.1 Succession planning for Abbott's senior management positions is critical toAbbott's long-term success. The Nomination and Remuneration Committee shall annuallyreview and confer with the Managing Director and the HR Director regarding Abbott'ssuccession plans and report and make recommendations on them to the Board of Directors.
14. Review of the Policy:
14.1 This Policy shall be subject to review by the Committee at such intervals as maybe deemed necessary. Changes (if any) recommended by the Committee shall be placed beforethe Board for its approval.
1. Criteria for Independence :
1.1 A Director is considered Independent if the Board makes an affirmativedetermination after a review of all relevant information. In order for a Director to beconsidered Independent the Director:
1.1.1 Shall not be Managing Director or a Whole-time Director or a Nominee Director.
1.1.2 Shall be a person of integrity and shall possess relevant expertise andexperience.
1.1.3 Shall not be a promoter of the Company or its holding subsidiary or associateCompany.
1.1.4 Shall not be related to promoters or Directors in the Company its holdingsubsidiary or associate Company.
1.1.5 Apart from receiving Director's remuneration shall not have any pecuniaryrelationships with the Company its holding its subsidiary its associate companies itspromoters or Directors during the current financial year or immediately preceding twofinancial years.
1.1.6 Relatives should not have or had pecuniary relationships or transactions with theCompany its holding subsidiary or associate Company or their promoters or Directorsamounting to 2% or more of its gross turnover or total income or INR 50 Lakhs or suchamount as the Company may prescribe whichever is lower during the two immediatelypreceding financial years or during the current financial year.
1.1.7 Neither himself/herself nor any of his/her relatives shall hold or has held theposition of a Key Managerial Personnel or is or has been employee of the Company or itsholding subsidiary or associate company in any of the three financial years immediatelypreceding the financial year in which he is proposed to be appointed.
1.1.8 Neither himself/herself nor any of his/her relatives is or has been an employeeor proprietor or a partner in any of the 3 financial years immediately preceding thefinancial year of:
18.104.22.168 A firm of auditors (Internal/Statutory) or company secretaries in practice orcost auditors of the Company or its holding subsidiary or associate company;
22.214.171.124 Any legal or a consulting firm that has or had any transaction with theCompany its holding subsidiary or associate Company amounting to 10% or more of thegross turnover of such firm;
126.96.36.199 Holds together with his relatives 2% or more of the total voting power of theCompany;
188.8.131.52 a Chief Executive or Director by whatever name called of any non-profitorganization that receives 25% or more of its receipts from the Company any of itspromoters Directors or its holding subsidiary or associate Company or that holds 2% ormore of the total voting power of the Company.
1.1.9 Has not held office for more than 2 consecutive terms on the Board of theCompany.
1.1.10 Should not be a material supplier service provider or customer or a lessor orlessee of the Company.
1.1.11 Shall not be less than 21 years of age.
2. Definition for the said purpose :
2.1 "Nominee Director" implies a Director nominated by any financialinstitution in pursuance of the provisions of any law for the time being in force or ofany agreement or appointed by any government or any other person to represent itsinterests.
2.2 "Associate Company" implies a Company which is an "associate"as defined in Ind AS 28 "Investments in Associates and Joint Ventures'' issued bythe Institute of Chartered Accountants of India.
2.3 "Relative" implies anyone who is related to another if they are membersof HUF; if they are husband and wife; or if one person is related to the other in suchmanner as may be prescribed. A person shall be deemed to be the relative of another if heor she is related to another in the following manner namely - Father (includesstep-father) Mother (includes step-mother) Son (includes step-son) Son's wifeDaughter Daughter's husband Brother (includes step-brother) Sister (includesstep-sister).
1.1 Section 178(3) of the Companies Act 2013 and Securities and Exchange Board ofIndia (Listing Obligations and Disclosure Requirements) Regulations 2015 requires everyNomination and Remuneration Committee (N&RC) to devise a Policy on remuneration ofDirectors Key Managerial Personnel (KMP) and other employees.
1.2 The N&RC is responsible for recommending to the Board a Policy relating to theremuneration of Directors Key Managerial Personnel and other employees.
2.1 N&RC has laid down this Policy to ensure compliance with Section 178 (4) of theCompanies Act 2013 which states that:
2.1.1 the level and composition of remuneration is reasonable and sufficient toattract retain and motivate Directors of the quality required to run the companysuccessfully;
2.1.2 relationship of remuneration to performance is clear and meets appropriateperformance benchmarks; and
2.1.3 Remuneration to Whole-time Directors KMP and Senior Management Personnelinvolves a balance between fixed and incentive pay reflecting short and long termperformance objectives appropriate to the working of the Company and its goals.
3. Company Philosophy:
3.1 The Company's compensation philosophy is based on three primary factors:
3.1.1 Being competitive with peer-group companies both within and outside of healthcarewith financial performance similar to the Company;
3.1.2 Making individual performance the primary driver of total pay;
3.1.3 Linking pay to achievement of the Company's business goals.
3.2 Simply stated the Company's compensation is intended to compare favorably with thepay programs of other leading healthcare companies as well as other high- performingcompanies outside of the healthcare arena that have a similar size scope and financialperformance to the Company and operate in markets where we compete for talent.
3.3 While employees are paid based on their skills and levels of performance employeepay at the Company is on average targeted to be competitive at the median pay of otherleading companies.
3.4 The Company is dedicated to providing a solid foundation of employee benefits thatwill allow employees to meet their personal and family needs. We recognize the importanceof financial security for things that matter most to the employee and their family. Ourbenefits philosophy is based on three primary core values :
3.4.1 The Company cares and is concerned for the health welfare and financialwell-being of its employees worldwide
3.4.2 The Company has established competitive benefits as part of the Total Rewardsoffered to its employees
3.4.3 The Company has developed standards for effective management of employee benefitprograms.
3.5 The Company is committed to offering comprehensive and competitive benefit packagesdesigned to meet the changing needs of our employees and our diverse businesses.
4.1 "Act" means the Companies Act 2013 and Rules framed thereunder asamended from time to time.
4.2 "Key Managerial Personnel" means
Chief Executive Officer or the Managing Director or the Manager;
Chief Financial Officer; and
Such other officer as may be prescribed under the Act.
4.3 "Senior Management" means personnel of the company who are members of itscore management team excluding the Board of Directors comprising all members ofmanagement one level below the Executive Directors including the functional heads.
4.4 "Other Employees" means all other employees of Abbott India Limited butdo not include employees who have signed collective or union agreements or on contractualbasis.
5. Remuneration for Non-Executive Directors (Independent
& Non- Independent Directors) :
5.1 Sitting Fees
5.1.1 Non-Executive Directors (NEDs) (other than those employed with any Abbott groupcompany) will be paid sitting fees for attending each meeting of the Board and itsCommittees as determined by the Board from time to time in accordance with the provisionsof the Act. The sitting fees payable to the NEDs for attending the meetings of the Boardand various Committees is given in the Annexure attached at the end of this Policy.Quantum of sitting fees maybe subject to review on a periodic basis as and when requiredsubject to the applicable statutory provisions of the Act as amended from time to time.
5.2 Reimbursement of reasonable expenses
5.2.1 The Company may pay or reimburse to the NEDs such expenditure as may have beenincurred by them for attending the Board/ Committee meetings. This may includereimbursement of expenditure incurred by them for accommodation travel and any out ofpocket expenses for attending Board/Committee meetings General meetings Court convenedmeetings Meetings with shareholders /creditors /management site visits/induction andtraining (organized by the Company for Directors)
5.2.2 In the case of Independent Directors the Company may pay/reimburse any expensesincurred (subject to reasonable limits) by the independent Director for professionaladvice from Independent advisors in the furtherance of their duties as IndependentDirectors.
5.3 Stock Options
5.3.1 Independent Directors shall not be entitled to any stock options of the Company.
5.4 Insurance policy for Non- Executive Directors
5.4.1 Where any insurance is taken by the Company on behalf of its NEDs forindemnifying them against any statutory liability the premium paid on such insurancewould not constitute part of their remuneration.
6. Remuneration for Managing Director ("MD") Executive
6.1 The remuneration to MD/ED and any change thereof shall be approved by the Board onthe recommendation of the N&RC subject to approval by the shareholders of the Companywithin the limits prescribed under the Act and Central Government approval whereverrequired.
6.2 Fixed remuneration is payable by the way of salary perquisites and allowances. TheN&RC shall recommend to the Board annual increments in salary effective 1st Aprileach year.
6.3 Apart from the fixed remuneration there is a variable component of a performancelinked incentive/ commission which is payable on an annual basis. The amount ofperformance bonus/commission shall be determined by the Board based on the recommendationof the N&RC and in alignment with Company policy. There canbe components of one-timeincentive or special incentives basis his agreed compensation structure with the hostcountries in case of expatriates. The same will be as recommended by the N&RC andapproved by the Board of Directors.
6.4 The Company shall provide retirement benefits as per statutory requirements.Additionally there may be certain other retirement benefits that may be provided to MD/ EDsuch as pension gratuity superannuation etc.
6.5 MD/ED are also eligible for Long Term Incentives granted by the Parent CompanyAbbott Laboratories USA in the form of Stock Options and/or Restricted Stock Units.
7. Minimum Remuneration:
7.1 If in any financial year the Company has no profits or its profits are inadequatethe Company shall pay remuneration to its MD & EDs in accordance with the provisionsof Schedule V of the Act.
8. Provisions for excess Remuneration:
8.1 If MD/ED draws or receives directly or indirectly by way of remuneration any suchsums in excess of the limits prescribed under the Act or without the prior sanction of theCentral Government where required he/she shall refund such sums to the Company and untilsuch sum is refunded hold it in trust for the Company. The Company shall not waiverecovery of such sum refundable to it unless permitted by the Central Government.
9. Key Managerial Personnel ("KMP") Senior Management
and Other Employees:
9.1 Base Salary
9.1.1 Salaries to KMP Senior Management and other employees are decided basis thelevel of responsibility and individual performance. Base pay structure would depend upon:
Periodic surveys of appropriate comparison companies;
Salary ranges which reflect job worth based on competitive comparisons.
9.2 Bonus Perquisites Allowances and Benefits
9.2.1 In addition to the fixed salary certain perquisites allowances and benefits areprovided to the KMPs Senior Management and other employees.
9.2.2 The Company currently provides all employees with social security in terms ofinsurance towards hospitalization (Mediclaim insurance) accidental death anddismemberment (personal accident insurance).
9.2.3 The Company provides retirement benefits as per statutory requirements.
9.2.4 The Company provides a performance linked cash bonus to all employees based onperformance of the Company in general and the individual's performance for the relevantfinancial year measured against specific Key Result Areas which are aligned to theCompany's objectives and policies.
9.2.5 KMP/Senior Management Personnel/other employees as per their grade are alsoeligible for Long Term Incentives granted by the Parent Company Abbott LaboratoriesU.S.A in the form of Stock Options and/or Restricted Stock Units.
10. Merit Pay:
10.1 The common effective date for merit pay increase is on 1st April of the calendaryear. Merit pay is intended to focus solely on individual performance against goals andexpectations determined for an individual during the Performance Excellence reviewprocess.
11. Policy Implementation:
11.1 The N&RC is responsible for recommending this Remuneration Policy to theBoard.
11.2 The Board is responsible for approving and overseeing implementation of thisPolicy (with the support of the N&RC).
12. Review of this Policy:
12.1 This Policy shall be subject to review by the N&RC at such intervals as may bedeemed necessary. Changes (if any) recommended by the N&RC shall be placed before theBoard for its approval.
ANNEXURE TO THE POLICY
|Sr. No. ||Board/Committee Meeting ||Amount per Meeting per Director (Rs.) |
|1 ||Board of Directors (including Meetings of Independent Directors) ||100000 |
|2 ||Audit Committee ||100000 |
|3 ||Nomination & Remuneration Committee ||50000 |
|4 ||Stakeholders Relationship Committee ||50000 |
|5 ||Corporate Social Responsibility Committee ||50000 |
|6 ||Risk Management Committee ||50000 |
Conservation of Energy Technology Absorption and Foreign Exchange Earnings and Outgo
[In compliance with the provisions of Section 134(3)(m) of the Companies Act 2013 readwith Rule 8 of the Companies (Accounts) Rules 2014]
A. Conservation of Energy
i. The Energy conservation measures taken
Existing Fluorescent Tube Light high power (FTL) consuming lights replaced with energysaving Light EmittingDiode (LED) lights in Quality Control areas. New condensate recoverypump installed to improve the condensate recovery from 55% to 80%.
Following measures have been taken at the Goa plant during the year 2017-18 forconservation of water -
Effluent Treatment Plant treated water used for toilet flushing in change rooms.
Fluidbed dryerfilterbagwashingand dryingmachine installed to save 50 liters of waterper washing cycle. Intermediate product container cleaning machine installed to save 40liters of water per container.
ii. The steps taken by the Company for utilizing alternate sources of energy
iii. The Capital Investment on Energy Conservation Equipment
Rs. 1.71 Lakhs
B. Technology Absorption
i. The efforts made towards Technology Absorption
High speed hammer mill installed to improve the efficiency of sugar millingprocess to reduce ergonomic risk while manual handling of sugar and to reduce the laborhours per batch.
Bucket type self-cleaning filter installed in liquid manufacturing area toreduce open handing of liquid materials during batch manufacturing.
Pneumatic pumps installed for paste charging in liquid manufacturing area toreduce ergonomic risk while manual loading of pastes inside the tanks through hopper.
Closed loop system installed for chloroform transfer from one tank to anothertank to reduce the risk of manual handling and inhalation of chloroform.
Track & trace system for tertiary packing installed to comply with currentregulations.
On line inspection system installed on blister packing machines to reject nonfilled blisters online.
Installation of dynamic & static pass box for proper material flow.
ii. The benefits derived like product improvement cost reduction product developmentor import substitution
New Videojet printers installed on liquid and tablet secondary packing lines inorder to reduce the packing line stoppages on account of old printer breakdowns resultingin increased efficiency of packing lines and reduction in the wastage of packingmaterials.
New volumetric liquid filling line increased the yields of Cremaffin andDuphalac by 0.3% and improved overall equipment efficiency by 6%.
Zebra printers installed for printing of shipper labels in tablet and liquidsecondary packing area to replace manual overprinting of shipper labels along with twomanpower savings per shift.
Cremaffin batch size increased from 5.5 KL to 10 KL to cope up with increasingmarket demand. This initiative resulted in approximately 50 % reduction in line clearancestime 50 % reduction in batch testing and 5% increase in liquid filling line efficiency.
Launch of new SKUs Cremaffin 225 ml Udiliv 15's new pack & Duphalac Lemonflavor.
iii. In case of imported technology (imported during the
last three years reckoned from the beginning of the
a. the details of technology imported : Nil
b. the year of import: Nil
c. whether the technology been fully absorbed : NA
d. if not fully adsorbed areas where adsorption has not taken place and the reasonsthereof: NA
iv. Expenditure on Research & Development
|Sr. No. ||Particulars ||Rs. in Lakhs |
|(a) ||Capital ||1.71 |
|(b) ||Recurring ||68.71 |
|(c) ||Total ||70.42 |
|(d) ||Total R&D expenditure as a Percentage of Total Turnover ||0.02% |
C. Foreign Exchange Earnings and Outgo
|Particulars ||Rs. in Lakhs |
|A. Total Foreign Exchange used || |
|a. On import of raw materials finished goods consumable stores and capital goods ||36342.35 |
|b. On professional charges sales promotion expenses commission on export sales registration fees business travel software etc. ||1012.70 |
|c. On purchase of Trademarks ||710.79 |
|d. For dividend remittance ||6373.62 |
|B. Total Foreign Exchange earned || |
|a. Exports of goods ||2394.75 |
|b. Service income ||526.33 |
|c. Recoveiy of expenses ||200.25 |
|d. Other earnings ||564.20 |
Disclosure under Section 197(12) of the Companies Act 2013 and other disclosures asper Rule 5 of the Companies (Appointment and Remuneration of Key Managerial Personnel)Rules 2014 :
i. (a) The percentage increase in remuneration of each Director Chief FinancialOfficer and Company Secretary of the Company and (b) ratio of the remuneration of eachdirector to the median remuneration of the employees of the Company for the financial year2017-18 :
|Name of the Director ||% Increase in the remuneration (a) ||Ratio of remuneration of each Director / to median remuneration of employees (b) |
|Mr Munir Shaikh ** (Non-Executive Chairman) ||- ||2.0 |
|Mr RA Shah** (Independent Director) ||- ||2.5 |
|Mr Ranjan Kapur ** (Independent Director) ||- ||1.5 |
|Mr Krishna Mohan Sahni** (Independent Director) ||- ||2.2 |
|Mr Ambati Venu (Managing Director) || ||85.7 |
|Mr Rajiv Sonalker1 (Chief Financial Officer and Whole-time Director) ||16.8 ||23.6 |
|Ms Krupa Anandpara (Company Secretary) ||18.6 ||NA |
1. Appointed as Additional and Whole-time Director effective August 8 2017.
* Mr Ambati Venu joined effective September 29 2016 and therefore increase in hisremuneration cannot be calculated.
** Entitled for Sitting fees ofRs. 100000 for attending each Board Audit Committeeand Independent Directors Meetings and Rs. 50000 for attending each of the otherCommittee Meetings.
ii. The percentage increase in the median remuneration of employees in the financialyear :
iii. Number of permanent employees on the rolls of the Company:
iv. Average percentile increase made in the salaries of employees other than managerialpersonnel in the last financial year and its comparison with the percentile increase inthe managerial remuneration and justification thereof:
Average percentage increase made in the salaries of employees other than the managerialpersonnel in the year 2017-18 was 10.5%. Managerial remuneration is not comparable withprevious year since Mr. Ambati Venu joined effective from September 292016 and Mr. RehanKhan resigned effective April 30 2016.
v. It is affirmed that the remuneration paid to Directors Key Managerial Personnel andother Employees is as per the Remuneration Policy of the Company.