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Ajanta Pharma Ltd.

BSE: 532331 Sector: Health care
NSE: AJANTPHARM ISIN Code: INE031B01049
BSE 12:31 | 16 Apr 1739.45 36.40
(2.14%)
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NSE 12:19 | 16 Apr 1739.85 30.25
(1.77%)
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OPEN 1705.00
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VOLUME 2283
52-Week high 1883.00
52-Week low 1283.10
P/E 24.63
Mkt Cap.(Rs cr) 15,055
Buy Price 1738.15
Buy Qty 1.00
Sell Price 1739.95
Sell Qty 1.00
OPEN 1705.00
CLOSE 1703.05
VOLUME 2283
52-Week high 1883.00
52-Week low 1283.10
P/E 24.63
Mkt Cap.(Rs cr) 15,055
Buy Price 1738.15
Buy Qty 1.00
Sell Price 1739.95
Sell Qty 1.00

Ajanta Pharma Ltd. (AJANTPHARM) - Director Report

Company director report

Dear Shareholders

Your Directors present their Forty-First Annual Report and Audited Financial Statementsfor the Year ended 31 March 2020.

1. Financial performance

(Rs. in cr. except EPS)

Particulars

Standalone

Consolidated

Year ended 31 March 2020 2019 2020 2019
Revenue from operations 2196 1773 2588 2055
Other Income 184 102 92 21
Profit before Depreciation Finance Costs and Tax expense 717 583 776 588
Profit after Tax 441 392 468 387
Total Comprehensive Income 439 390 473 384
Earning Per Share (EPS) (Rs.) (Basic) 50.55 44.51 53.60 43.97

2. Performance Review

There is no change in the nature of business of the company and it continues to operateonly in one segment i.e. Pharmaceutical. Your company achieved a growth of 26% inConsolidated Revenue from Operations over the previous year while Consolidated ProfitAfter Tax grew at 21%. Exports contributed around 70% of the business. We commencedoperations at newly set up Pithampur manufacturing facility as also oral solid section atGuwahati. Sterile Ophthalmic section at Guwahati will be operationalised in the nextfinancial year after which the major capex plans of the company will come to conclusion.Management Discussion & Analysis forming part of this report further gives the detailsof major events occurred during the year as well as state of company's affairs.

3. Dividend

The Board had during the year declared and paid interim dividend of Rs.13/- (650%) perequity share in accordance with the dividend policy. Total dividend payout was Rs.115.93cr. including dividend distribution tax. With a view to conserve the resources for thebusiness operations Board recommends interim dividend to be considered as final. TheDividend Distribution Policy is placed on the website of the company and its weblink ishttp:// www.ajantapharma.com/AdminData/PolicyCodes/ DividendPolicy.pdf

4. Subsidiaries Associates and Joint Ventures

Your company continues to have five subsidiaries overseas including one step downsubsidiary and there were no changes in the same during the year. Financials ofsubsidiaries are included in the consolidated financial statements which forms part ofthis Annual Report. There have been no material change in the nature of business ofsubsidiaries. The Company does not have any Associate company or Joint Venture.

All the subsidiaries have contributed positively in the growth and profitability of thecompany. Statement containing salient features of financials of subsidiaries pursuant toSection 129 of the Companies Act 2013 ("Act") read with Rule 5 and 8(1) of theCompanies (Accounts) Rules 2014 is annexed as "Annexure A" to thisReport in the prescribed Form AOC-1. Audited Financial Statements of Company'ssubsidiaries are available on Company's website at www.ajantapharma.com and the same areavailable for inspection at the Registered Office of the Company. The same will also bemade available to interested members upon getting request.

Web-link of the Policy for Material Subsidiaries can be accessed at http://www.ajantapharma.com/ AdminData/PolicyCodes/ PolicyonMaterialSubsidiaries2019.pdf

5. Consolidated Financial Statements

The Annual Audited Consolidated Financial Statements for the financial year ended 31March 2020 together with Report of Auditors' thereon forms part of this annual report.

6. Share capital

During the year 7500 shares were issued against the options exercised and 500 newoptions were granted under Ajanta Pharma Share Based Incentive Plan 2019. Disclosures withregard to Employees' Stock Options Scheme are put up on the Company's website and can beaccessed at http://www.ajantapharma. com/Annual Reports. aspx

7. New projects & CAPEX

Company places emphasis on building infrastructure to be future ready and to keep tabwith the growing needs. During the year third phase of Guwahati plant new manufacturingfacility in Pithampur Madhya Pradesh and new R & D building in Kandivli Mumbai werecompleted and became fully functional. Expansion of facility at Dahej has been commencedand the same is expected to be over by December 2020. During the year an amount ofRs.245cr. was incurred on capex.

8. Directors and Key Managerial Personnel

During the year Dr. Anil Kumar resigned on 3 April 2019. There were no changes in KeyManagerial Personnel during the year.

8.1. Independent Directors

All the Independent Directors have given declarations that they continue to meet thecriteria of independence as laid down under Section 149(6) of the Act and Rules madethereunder and under the Securities and Exchange Board of India (Listing Obligations andDisclosure Requirements) Regulations 2015 ("Listing Regulations"). They havealso affirmed compliance to the Code of Conduct for Independent Directors as prescribed inSchedule IV of the Act. Based on disclosures provided by them none of them aredisqualified from being appointed as Director under Section 164 of the Act and areindependent from the management.

8.2. Re-appointment of Whole time Director

Based on recommendation of the Nomination & Remuneration Committee Board ofDirectors have subject to approval of Members re-appointed Mr. Madhusudan B.Agrawal (DIN: 00073872) as Vice-Chairman for a period of 5 years with effect from 1April 2020. Resolution seeking approval of members for his re-appointment forms part ofthe notice of the Annual General Meeting forming part of this report.

8.3.Retirement by rotation

Mr. Mannalal B. Agrawal retires by rotation at the ensuing Annual General Meeting andbeing eligible offers himself for re-appointment. The Board recommends hisre-appointment.

8.4.Policies on appointment and remuneration of Directors

Policy for determining qualifications of directors and Policy for remuneration ofDirectors approved by the Nomination and Remuneration Committee of the Board of Directorsare available at (http:// www.ajantapharma.com/AdminData/PolicyCodes/ Policy fordetermining qualifications of Directors. pdf) and (http://www.ajantapharma.com/AdminData/PolicyCodes/Policyforremuneration2018.pdf) The same are briefly mentioned in CorporateGovernance Report which forms integral part of this report.

8.5. Key Managerial Personnel

Mr. Yogesh M. Agrawal Managing Director (DIN: 00073673) Mr. Rajesh M. Agrawal JointManaging Director (DIN: 00302467) Mr. Arvind Agrawal Chief Financial Officer (DIN:00648589) and Mr. Gaurang Shah Company Secretary (FCS No.: 6696) are the Key ManagerialPersonnel of the Company as on the date of this report.

8.6. Independent Director's familiarisation programme

Company continued to familiarise Independent Directors with business operationscritcal functions and other important aspects to enable them to contribute onfully-informed basis and discharge their functions and responsibilities effectively.

During the year the Independent Directors were familiarised with following:

i. Annual Budget and capex plan for FY 2020;

ii. Overview of US operations;

iii. Commercial aspects of sourcing of APIs/other materials;

iv. Corporate Governance @ APL and corporate law amendments.

Details of familiarisation programme imparted is placed on the company's website andits weblink is: http://www.ajantapharma.com/AdminData/ Director FamiliarizationProgram/Directors familiarization programme.pdf

8.7. Board and Directors' evaluation

Performance evaluation of the Board as whole individual directors and of the BoardCommittees was carried out by Board of Directors as suggested by the Nomination andRemuneration Committee. The evaluation was done in accordance with the framework andcriteria laid down by the Committee. Further at a separate meeting the IndependentDirectors evaluated performance of Non-Independent Directors Board as a whole and of theChairman of the Board. Manner of evaluation of Board of Directors performance and mattersincidental thereto are detailed in the Corporate Governance Report which forms part ofthis report. Board of Directors were satisfied with the evaluation process and expressedsatisfaction over performance of individual directors Board as a whole and of the BoardCommittees as revealed by the evaluation reports.

9. Board meetings

During the year four Board meetings were held details of which are given in theCorporate Governance Report.

10.Board Committees

Details of composition of various Board Committees and matters incidental thereto areprovided in the Corporate Governance Report.

11. Related Party Transactions and Policy

All the Related Party transactions (RPTs) entered into during the financial year wereon an arm's length basis and in the ordinary course of business and in accordance with theCompany's Policy on Related Party Transactions. Pursuant to Regulation 23(3) of theListing Regulations and Rule 6A of the Companies (Meetings of Board and its Powers) Rules2014 the Audit Committee granted omnibus approvals to the transactions likely to beentered into by the Company with related parties during the year. The Audit Committee alsoreviewed all RPTs on quarterly basis.

All the RPTs affected during the year are disclosed in the notes to FinancialStatements. Company's Policy on Related Party Transactions is uploaded on the website andits weblink is http:// www.ajantapharma.com/AdminData/PolicyCodes/PolicyonRelatedPartyTransactions2019.pdf There were no material related party transactionsthat required disclosures under Section 134(3)(h) of the Act.

12. Corporate Social Responsibility (CSR)

Company considers its economic environmental and social responsibility to fostersustainable local development as well as add value to the local economy in which itoperates.

During the year Company continued several initiatives under the CSR program directlyas well as through agencies permitted under the Act for the benefit of thousands ofunderprivileged in rural & tribal areas. These included conducting cataract surgerycamps skin camps family welfare camps providing subsidised food for patients &relatives and various educational initiatives at schools & colleges. Company alsodonated to PM Cares Fund Government of Maharashtra and Brihanmumbai Municipal Corporationfor supporting their fight against COVID-19 as also provided ventilators thermalthermometers sanitisers and protective gears such as latex gloves gamex gloves N-95masks PPE kits etc. for the same. The CSR Committee reviews and monitors the CSRprojects and expenditure undertaken by the Company on a regular basis.

CSR policy and CSR activities undertaken during the year in accordance with Section 134& 135 of the Act read with Rule 8 of the Companies (Corporate Social ResponsibilityPolicy) Rules 2014 and Rule 9 of the Companies (Accounts) Rules 2014 are annexed tothis report as "Annexure B".

13. Management Discussion and Analysis

A detailed review of the operations performance and future outlook is given in theManagement Discussion and Analysis which forms part of this report.

14. Report on Corporate Governance

Company is committed to maintain the highest standards of Corporate Governance andadhere to the Corporate Governance requirements set out by the Securities and ExchangeBoard of India ("SEBI"). Report on Corporate Governance together withcertificate from the Practicing Company Secretary regarding compliance of conditions ofReport on Corporate Governance is annexed and forms an integral part of this report.

15. Business Responsibility Report

Business Responsibility Report (BRR) for FY 2020 forms part of the Annual Report andas a green initiative the same has been hosted on the Company's website which can beaccessed at http:// www.ajantapharma.com/AnnualReports.aspx Any Member interested inobtaining a copy of BRR may write to the Company Secretary.

16. Credit Rating

The Company's bank facilities are rated by Credit Analysis and Research Limited (CARE).They have assigned rating Care A1+ for working capital facilities and Care AA for longterm borrowings which indicates very strong/high degree of safety regarding timelypayment of financial obligations.

17. Annual Return

As per Rule 12(1) of the Companies (Management & Administration) Rules 2014 anextract of Annual Return in Form MGT. 9 forms part of this report and is annexed as "AnnexureC". Annual Return as per Section 92(3) of the Act is available at http://www.ajantapharma.com /AnnualReports.aspx

18. Auditors

18.1. Statutory Auditors

At the 38th Annual General Meeting held on 5 July 2017 the shareholders hadapproved appointment of B S R & Co. LLP. Chartered Accountants (ICAI Firm'sRegistration No. 101248W/W-100022) as the Statutory Auditors for a period of 5 yearscommencing from the conclusion of the 38th Annual General Meeting until theconclusion of 43rd Annual General Meeting. Auditors have confirmed that theyhold a valid certificate issued by the Peer Review Board of the ICAI in pursuance of theListing Regulations.

Auditor's Report for the year under review forms part of this annual report. It doesnot contain any qualifications reservations or adverse remarks.

18.2. Internal Auditors

M/s. Ernst & Young LLP conducted internal audit of important centralised functions.For other locations viz. factories C&F agents and warehouses local Charteredaccounting firms having requisite expertise and resources are appointed as internalauditors. Internal audit findings are discussed at the meetings of Audit Committee andappropriate actions are taken by concerned functions/locations.

18.3. Secretarial Auditors

Pursuant to provisions of Section 204 of the Act and the Companies (Appointment andRemuneration of ManagerialPersonnel)Rules2014andRegulation24A of the Listing RegulationsBoard had appointed M/s. Alwyn D'Souza & Co. Practicing Company Secretary toundertake the Secretarial Audit of the Company. Secretarial Audit Report in prescribedForm No. MR-3 is annexed to this report as "Annexure D". There are noqualifications or reservations or adverse remarks in the Secretarial Audit Report.

18.4. Cost Auditors

The company maintains cost records as per the provisions of Section 148(1) of the Actand the same are audited by the Cost Auditors. Cost Audit Report for the financial year2018 - 19 has been filed with the Ministry of Corporate Affairs on 26 August 2019. Boardhas appointed M/s. Sevekari Khare & Associates Practicing Cost Accountants to auditthe cost records of the Company for the financial year 2020-21. Their remuneration issubject to ratification by shareholders at the ensuing Annual General Meeting.Accordingly resolution seeking members' ratification of their remuneration forms part ofthe Notice convening the 41st Annual General Meeting. Board recommends the samefor approval of members. During the year under review the statutory auditors internalauditors secretarial auditors and cost auditors have not reported any instances of fraudcommitted in the Company by its officers or employees.

19. Annual Secretarial Compliance Report

M/s. Alwyn D'Souza & Co. Practicing Company Secretary have issued SecretarialCompliance Report for the year ended 31 March 2020 which confirms that the Company hasmaintained proper records as stipulated under various Acts Rules and Regulations and thatno action has been taken against the Company or its material subsidiaries or promoters/directors by the SEBI/Stock Exchanges.

20. Internal Control System Risk Management and Compliance Framework

The Company has a well-established internal control framework which is designed tocontinuously assess the adequacy effectiveness and efficiency of financial andoperational controls. It also has Risk Management framework in place which defines rolesand responsibilities at various levels of the risk management process. Board has set upRisk Management Committee (RMC) as per details set out in the Corporate Governance report.Audit Committee and RMC reviews key risk elements of the company's business financeoperations & compliance and its mitigation strategies. RMC reviews key strategicbusiness compliance and operational risks; whereas issues around ethics and fraudinternal control over financial reporting process risks and their mitigation arereviewed by the Audit Committee. Risk Management system followed by the Company isdetailed in the Management Discussion and Analysis report.

21. Vigil Mechanism/Whistle Blower policy

Company has been observing zero tolerance for any form of unethical behaviour. Inaccordance with Section 177(9) of the Act Rule 7 of the Companies (Meetings of Board andits Powers) Rules 2014 and Regulation 22 of the Listing Regulations Company has set upvigil mechanism viz. Whistle Blower Policy to enable the employees and Directors toreport to the Audit Committee Chairman genuine concerns unethical behavior andirregularities if any noticed by them in the Company which could adversely affectcompany's operations.

It is posted on the intranet and website of the Company and the same is available athttp:// www.ajantapharma.com/AdminData/PolicyCodes/ WhistleBlowerPolicy2019.pdf The sameis reviewed by the Audit Committee from time to time. No concerns or irregularities havebeen reported by employees/directors till date.

22. Managerial Remuneration and particulars of employees

There were 7167 permanent employees of the Company as of 31 March 2020. Theinformation pursuant to Rule 5(1) of the Companies (Appointment and Remuneration ofManagerial Personnel) Rules 2014 is annexed to this report as "Annexure E".Information pursuant to Rule 5(2) & 5(3) of the Companies (Appointment andRemuneration of Managerial Personnel) Rules 2014 also forms part of this report. Howeverthis information is not sent along with this report pursuant to proviso to Section 136(1)of the Act. Any shareholder interested in obtaining a copy of the same may write to theCompany Secretary at the registered office address of the Company.

23. Loans Guarantees or Investments

Details of Loans Guarantees and Investments pursuant to provisions of Section 186 ofthe Act are given in Notes to Financial Statements.

24. Deposits

Your Company has not accepted any deposits from the public falling within the purviewof Section 73 of the Act read with the Companies (Acceptance of Deposits) Rules 2014.

25. Directors' Responsibility Statement

To the best of their knowledge and belief and according to the information andexplanations obtained by them your Directors confirm: a. that in the preparation of theannual accounts for the year ended 31 March 2020 the applicable Accounting Standards havebeen followed along with proper explanation relating to material departures if any;

b. that the directors had selected accounting policies and applied them consistentlyand made judgments and estimates that are reasonable and prudent so as to give a true andfair view of the state of affairs of the company at the end of the financial year ended 31March 2020 and of the profit of the company for the period;

c. that proper and sufficient care has been taken for the maintenance of adequateaccounting records in accordance with the provisions of the Act for safeguarding theassets of the company and for preventing and detecting fraud and other irregularities;

d. that the annual accounts/financial statements have been prepared on a going concernbasis;

e. that proper internal financial controls were in place and that the financialcontrols were adequate and were operating effectively;

f. that the Directors had devised proper systems to ensure compliance with theprovisions of all applicable laws were in place and were adequate and operatingeffectively.

26. Conservation of energy technology absorption foreign exchange earnings and outgo

Pursuant to Section 134 of the Act read with Companies (Accounts) Rules 2014particulars of conservation of energy technology absorption foreign exchange earningsand outgo are given in "Annexure F" to this report.

27.Unclaimed Dividend/Shares

In pursuance of Regulation 39 read with Schedule VI of the Listing Regulations thedetails of shares lying in unclaimed suspense account and unclaimed shares/dividendtransferred to IEPF are provided in the Corporate Governance Report.

28. Compliance with Secretarial Standards

During Financial Year 2020 the Company has complied with all applicable mandatorySecretarial Standards issued by the Institute of The Company Secretaries of India.

29. Material changes & commitment affecting the financial position of the company

There are no material changes and commitments affecting the financial position of thecompany which have occurred between the end of the financial year and the date of thisreport. There has been no change in nature of business of the Company.

30. Significant & material orders passed by the Regulators or Courts or Tribunals

No significant or material orders have been passed against the Company by theRegulators Courts or Tribunals which impacts the going concern status and company'soperations in future.

31. Human Resource Health & Safety

Human resources are invaluable assets of the Company. It believes that its employeesare pivotal to all the initiatives that drive to realise its plans. Company takes pride inits human capital which comprises people from diverse backgrounds and cultures. Theorganisation's achievements are an outcome of efforts dedication and convictiondemonstrated by its people. Company maintains highest standards of health and safety inall the plants.

Various training and grooming programs sports events and fun events like crickettournament karaoke competition hobby classes like clay Ganapati making kettle paintingetc. were conducted during the year as part of employee engagement and motivationinitiatives.

32. Policy on sexual harassment of women at work place

The Company has put in place and has complied with the provisions of Policy onprevention prohibition and redressal of sexual harassment of women at workplaces inaccordance with The Sexual Harassment of Women at Workplace (Prevention Prohibition andRedressal) Act 2013. The policy has set guidelines on the redressal and enquiry processthat is to be followed by complainants and the Internal Complaints Committees (ICC)whilst dealing with issues related to sexual harassment at the work place. All womenemployees (permanent temporary contractual and trainees) are covered under this policy.Company has set up ICC at all the locations where there are more than 10 women employeesto address the complaints regarding sexual harassment. The company has not received anycomplaints during the year. Policy is available on intranet of the company. The Company iscommitted to providing safe and conducive work environment to all of its employees andassociates.

33. Gratitude & Acknowledgements

Your Directors convey a sense of high appreciation to all employees of the Company fortheir commitment hard work significant contributions and continued dedication. TheDirectors also wish to express their gratitude to investors for the faith that theycontinue to repose in the Company. They also acknowledge the whole-hearted supportencouragement and cooperation received by it from various departments of the Governments& other statutory bodies financial institutions banks distributors suppliersbusiness associates analysts medical professionals and customers.

For and on Behalf of the Board of Directors

Mannalal B. Agrawal

Chairman

Mumbai 20 May 2020

.