Aurobindo Pharma Ltd.
|BSE: 524804||Sector: Health care|
|NSE: AUROPHARMA||ISIN Code: INE406A01037|
|BSE 00:00 | 08 Aug||568.20||
|NSE 00:00 | 08 Aug||567.85||
|Mkt Cap.(Rs cr)||33,291|
|Mkt Cap.(Rs cr)||33290.84|
Aurobindo Pharma Ltd. (AUROPHARMA) - Director Report
Company director report
Your Directors are pleased to present the 35th Annual Reportof your Company together with the audited accounts for the financial year ended March 312022.
Your Company has paid first interim dividend of 150% i.e. '1.50 perequity share of '1 second interim dividend of 150% i.e. '1.50 per equity share of '1third interim dividend of 150% i.e. '1.50 per equity share of '1 and fourth interimdividend of 450% i.e. '4.50 per equity share of '1. The total dividend for the financialyear 2021-22 comes to 900% i.e. '9.00 per equity share of '1 against 400% i.e. '4.00 perequity share of '1 paid in the previous year.
Pursuant to Regulation 43A of the SEBI (Listing Obligations andDisclosure Requirements) Regulations 2015 top 1000 listed entities based on marketcapitalisation are required to formulate a Dividend Distribution Policy. The Board hasapproved and adopted the Dividend Distribution Policy and the same is available on yourCompany's website: https://www.aurobindo.com/wp-content/uploads/2018/10/Dividend-Distribution-Policy. pdf
Your Company is the leading generic pharma company globally and nowranks as seventh largest generic company by sales and second largest listed Indianpharmaceutical company by revenues. Your Company has become the largest supplier in theUSA by volume in last quarter of the financial year. Your Company maintained its growthmomentum in revenue and profitability despite headwinds caused by the pandemic.
On a standalone basis your Company's revenue stood at '112871.4million in the financial year 2021-22 as against '158236.8 million in the correspondingprevious period.
The Formulations business stood at '66942.9 million due to transfer offormulation units (Unit IV Unit XVI) to wholly-owned subsidiaries of Aurobindo PharmaLimited. The API business witnessed a growth of 28.5% to '44022.6 million. EBITDA for theyear decreased by 64.2% to '14734.0 million vs. '41198.3 million in the correspondingprevious period. Gross Profit margin decreased by 6% to 48.2% of revenue (vs. 54.2%revenue in FY21) which led EBITDA margin for the year to decrease by 13% to 13.1% ofrevenue (vs. 26% of revenue in FY21). Profit before Tax for the year is at '16374.8million. Your Company's net profit (before Other Comprehensive Income) is at'14547.1 million as against '31129.1 million in FY21. The diluted Earnings Per Sharestood at '24.83 compared to '53.13 in FY21.
On a consolidated basis the revenues stood at ' 234554.9 million. TheFormulations business stood at '199393.2 million vs '216859.7 million in thecorresponding previous period.
The Active Pharmaceutical Ingredients (APIs) business posted a growthof 13.9% to '35155.7 million vs. '30859.0 million in FY21. The growth in API segment ledby strong growth of 20.4% in Beta Lactam segment to '20825.0 million. EBITDA margindecreased by 2.8% to 18.7% vis-a-vis 21.5% in FY21.
R&D expenditure for the year was '15813.5 million or 6.7% ofrevenue increased from '15095.7 million or 6.1% of revenue in FY21. EBITDA before forexand other income stood at '43867.9 million. Your Company reported a Net Profit of'26471.0 million vs. '53338.4 million (including one off gains from the sale of Natrolbusiness in FY21) in corresponding previous period. The Diluted Earnings Per Share(reported) stood at '45.19 compared to '91.05 in FY21. During the year Company receivednet loss (net of the tax) of '1216.8 on exceptional items including Gain on sale oftangible assets Impairment of intangible assets & goodwill and Impairment of capitalwork in progress.
The US is the largest market for your Company and accounted for 47.4%of the total revenue. US revenue stood at '111221.1 million. Your Company has launched 22products in FY22. Your Company has maintained its dominant position in the US market andis ranked as the largest volume player as per IQVIA QTR March 2022 data.
Your Company continues to strengthen its pipeline for the globalmarkets including the US market. As on March 31 2022 your Company filed 727 AbbreviatedNew Drug Applications (ANDAs) on a cumulative basis. Of the total count 505 have receivedfinal approvals and 33 received tentative approvals including 8 ANDAs which aretentatively approved under the US President's Emergency Plan for AIDS Relief(PEPFAR) while 189 ANDAs are currently under review.
Your Company registered a 6.9% growth in its Europe formulationsbusiness to '64802.9 million in FY22 compared to the previous year's revenue of'60607.9 million. Your Company is listed among the top 10 generics businesses in 6 of the9 EU/UK nations where it operates having a presence in all market channels such aspharmacies hospitals and tenders as well as sales infrastructure and 550+ INNscommercialised (International Non-proprietary Names). Despite headwinds yourCompany's performance in France Portugal Poland and Italy led to overall growth inEurope. Your Company's focus during the year was to improve the profitability of theacquired Apotex business.
The ARV Formulations business stood at '8329.9 million in FY22 vs.'18627.7 million in FY21 due to COVID impact as well as excess procurement in theprevious FY.
Growth Markets which include Brazil Canada Columbia and South Africagrew by 4.6% to '15039.4 million.
FY22 was different in every aspect and held more than its fair share ofchallenges as the world reeled under the pandemic through the year we stayed focused ondiversifying our product basket and launching new products consistently. Your Company hasplans to leverage the infrastructure of the acquired business to drive penetration andoptimise value creations.
Your Company remains focused on developing on complex anddifferentiated products in multiple areas comprising oncology and hormonal productsbiosimilars depot injections vaccines topicals transdermal patches inhalers nasalsand complex peptide products which will drive the next phase of growth.
Your Company is also in the process of commissioning the capacities forsome of the complex therapeutic areas.
Your Company is committed to grow in its key geographies i.e. US andEurope. In the US around 220 ANDAs are awaiting final approval and annual sales as perIQVIA data is US$105 billion as on March 31 2022. Apart from this as of March 31 2022Your Company is seeking final clearance for 128 ANDAs with a goal of expanding the numberof submissions and approvals across treatments in oral solids and for 48 ANDAs ininjectables. With the pandemic situation easing Your Company will resume its developmenttrajectory with a focus on developing a product range of complicated injectables. As morepharmaceuticals transition from prescription to OTC the array of branded OTC productswill grow.
For Europe markets your Company have total 58 products filed andawaiting approval. Additionally there are nearly 200 products under development ingeneral oral/ general/ oncology product categories which will be launched in the next twoto three years. Your Company is also building a dedicated injectable facility for Europeand Growth Markets to strengthen its presence in the Hospital segment. The facility willstart filing new injectable products in FY23 with earliest possible commercialisation inFY24.
In the ARV space due to the Covid effect as well as surplusprocurement in the previous fiscal year this category had a 55 percent year-on-yeardecline to ' 8330 million. Your Company intends to maintain a substantial chunk of itsmarket position in the ARV sector via Dolutegravir-based regimen which is the first linetherapy in HIV by utilising big capacities at low pricing. This regimen is projected tobe the standard therapy in the future years.
In Growth Markets Canada South Africa Brazil and China are the keygeographies for your Company. In Canada your Company has a robust product pipeline withover 43 products awaiting approval. In China so far we have approval for 2 products andare awaiting approval for additional 29 products.
In its API business your Company produces and sells Betalactam andNon-Betalactam products from its 10 API and intermediate plants. To satisfy consumerdemands while being cost-effective the Company has focused on growing capacity andcontinually upgrading its production processes. The Indian government establishedproduction linked incentives (PLI) to enhance local manufacturing capacity includinghigh-value items across the global supply chain. We replied by launching a plant inKakinada Andhra Pradesh to produce 15000 tonnes of Penicillin G.
In R&D your Company will maintain focus on difficult-to-manufacture differentiated products with possible low competitive pressure. Filingmomentum is in line with the strategy of moving towards complex and differentiatedproducts.
RESEARCH AND DEVELOPMENT (R&D)
Aurobindo over the years has consistently invested in R&D forimproving capabilities and on-boarding talented people across the globe. Your Company nowhas a team of more than 1500 scientists and analysts. This enables your Company todevelop a wide range of medications from generics to complex speciality products.Currently Aurobindo has nine Research and Development (R&D) centres of which fiveare in India and four are in the USA. The R&D centres are equipped with cutting-edgetechnologies where the talented scientists develop generics and difficult-to-developproducts and strive to improve productivity. During FY22 your Company invested 6.7% ofits consolidated revenue or '15813.5 million as against '15095.7 million or 6.1% of itsconsolidated revenue in FY21 in R&D.
Your Company is focused on developing specialty anddifficult-to-develop complex products in the respiratory and dermatological therapeuticareas including metered dose inhalers (MDIs) dry powder inhalers (DPIs) nasal spraystopical lotions creams ointments and transdermal patches.
The products are developed for global markets where your Company willbe able to file the product get approval and market the product globally. Your Company isfurther diversifying its product portfolio by working on multiple R&D initiatives.
Our biosimilars are developing steadily. We filed two cancerbiosimilars in FY22. One cancer biosimilar monoclonal antibody is expected to end patientenrolment in its Phase III efficacy and safety trial in early FY23. This product should befiled in select markets by Q4FY2022. In Q4 FY22 a Phase 1 clinical trial for one of ourbiosimilar antibodies started.
In our North Carolina R&D centre we develop respiratory medicineproducts including MDIs and DPIs for asthma and COPD (Chronic Obstructive PulmonaryDisease). Our India and US R&D centres create dermatological products. 33 items areunder development at different levels (ANDA filed for 1 product 32 products are underdevelopment development to be initiated for another 6 products). At least 30% ofdeveloping goods need clinical or BE studies. First clinical trial and show batches for 6items in FY22. Our India and US factories will make these items.
10-transdermal patches are under development. The underdevelopmentitems have a $3 billion market. In FY22 we submitted 1 product's technical data packageand began 1 exhibit batch.
We have bacterial and viral vaccines in the works. We are developing afifteen serotype PCV via our Company Tergene Biotech (Pneumococcal Conjugate Vaccine). Wehave completed one phase 3 clinical investigation for PCV which we intend to move forwardto the filing stage in FY23. Our research and development centres in Hyderabad India andthe United States are working on various candidate vaccines that are in the early stagesof development.
ENVIRONMENT HEALTH AND SAFETY (EHS)
The Company continuously monitors its energy usage regulates theemissions released and waste generated and makes sure it follows responsible waterconsumption practices. To commit itself further to protect the environment it holds treeplanting initiatives and drives to protect the ecology of the regions it operates in.
Health & Safety
Aurobindo undertakes a number of steps to upgrade and enhance employeesafety. For all new projects existing production units distribution centres and so onthe Company observes and monitors the safety laws and procedures. In order to avoidmishaps the Company also offers several safety training programmes to its employees.
Engagement in national and global initiatives on AntimicrobialResistance (AMR)
As a healthcare service provider the Company is partnering with 'TheAccess to Medical Foundation' which is monitoring what the 30 most active firms inantimicrobial R&D and production are doing to combat antibiotic resistance. TheCompany is also a member of the 'AMR Industry Alliance' which is driving antimicrobialresistance progress via common objectives and commitment to increase access tohigh-quality antimicrobial products encourage responsible usage and reduce environmentalconcerns.
AWARDS AND ACCOLADES
Excellence in Business Partnering Economic Times Human CapitalAwards
Significant Achievement in HR Excellence 12th CIINational HR Excellence Award
Transformance Forums "HR Innovation & Tech Fest2021" winner in the categories of Most Collaborative Hiring Team' andInnovation in Employee Engagement'
Aurobindo Pharma Limited Unit XIV Visakhapatnam was adjudgedthe WINNER of Golden Peacock Occupational Health & Safety Award - 2021'conducted by The Institute of Directors (IOD)
SUBSIDIARIES / JOINT VENTURES
As per the provisions of Section 129 of the Companies Act 2013 readwith the Companies (Accounts) Rules 2014 a separate statement containing the salientfeatures of the financial statements of Subsidiary companies/Associate companies/Jointventures is detailed in Form AOC-1 and is in Annexure-1 to this Report.
The Company has formulated a Policy for determining MaterialSubsidiaries. The Policy is available on the Company's website and can be accessed athttps://www.aurobindo.com/wp- content/uploads/2022/04/Policy-MaterialSubsidiary-2021.pdf
Eugia Pharma Specialities Limited a wholly owned subsidiary of theCompany is engaged in oncology hormonals and sterile products. Its Board of Directorscomprises of professionals having managerial experience and business acumen in diversefields. Eugia is independently run by professionally qualified and experienced team ofprofessionals in the field of quality control quality assurance and manufacturing. It hasits own strong R&D team.
During the year the following changes were implemented in thesubsidiaries of the Company:
During the period under review Aurobindo Pharma Gmbh Germany mergedwith Puren Pharma GmbH w.e.f. October 1 2021. CuraTeQ Biologics GmbH was Liquidatedw.e.f. October 7 2021 and Longxiang Pharma Taizhou Co. Ltd. was Liquidated w.e.f. August31 2021.
During the period under review following subsidiary/step-downsubsidiary companies were incorporated/acquired:
CuraTeQ Biologics s.r.o was incorporated in Czech Republic as awholly-owned subsidiary of Helix Healthcare B.V. w.e.f. July 27 2021.
Eugia Pharma B.V. was incorporated in The Netherlands as awholly-owned subsidiary of Eugia Pharma Specialities Ltd. w.e.f. September 8 2021.
Eugia Pharma (Malta) Limited was incorporated in Malta as awholly-owned subsidiary of Eugia Pharma B.V. w.e.f. October 14 2021.
Eugia (UK) Limited was incorporated in U.K as a wholly-ownedsubsidiary of Eugia Pharma B.V. w.e.f.
October 21 2021.
Aurosalud SA De CV was incorporated in Mexico as subsidiary ofHelix Healthcare B.V. & Agile Pharma B.V. w.e.f. July 16 2021.
Auro PR Inc was incorporated in Puerto Rico as a wholly-ownedsubsidiary of Helix Healthcare B.V w.e.f. September 22 2021.
Eugia Pharma Inc was incorporated in Canada as a wholly-ownedsubsidiary of Eugia Pharma B.V. w.e.f.
October 29 2021.
Eugia Pharma (Australia) Pty. Limited was incorporated inAustralia as a wholly-owned subsidiary of Eugia Pharma B.V. w.e.f. December 15 2021.
Eugia Pharma Industria Farmaceutica Limitada was incorporated inBrazil as a wholly-owned subsidiary of Eugia Pharma B.V. w.e.f. December 20 2021.
Mylan LLC was acquired in Puerto Rico as a wholly-ownedsubsidiary of Auro PR Inc w.e.f. December 30 2021.
Aurobindo Pharma Ukraine LLC was incorporated in Ukraine as awholly-owned subsidiary of Helix Healthcare B.V. w.e.f. February 2 2022.
Eugia Pharma Colombia S.A.S was incorporated in Colombia as awholly-owned subsidiary of Eugia Pharma B.V w.e.f. March 2 2022.
Auro Steriles LLC was incorporated in USA as a wholly- ownedsubsidiary of Aurobindo Pharma USA Inc. w.e.f. April 1 2021.
Vespyr Brands Inc (formerly known as Nurya Brands Inc) wasincorporated in USA as a wholly-owned subsidiary of Auro Health LLC w.e.f. April 28 2021.
Eugia US Manufacturing LLC was incorporated in USA as awholly-owned subsidiary of Aurobindo Pharma USA Inc. w.e.f. August 31 2021.
Eugia Injectable Inc was incorporated in USA as a wholly-ownedsubsidiary of Eugia Pharma Specialities Ltd. w.e.f. April 1 2021.
Eugia Inc was incorporated in USA as a wholly-owned subsidiaryof Eugia Pharma Specialities Ltd. w.e.f. February 23 2022.
Auro vaccines Private Limited was incorporated in India as awholly-owned subsidiary of the Company w.e.f. November 8 2021
The name of Aurovitas Nederland B.V (formerly Apotex Nederland B.V.) awholly-owned subsidiary of Aurobindo Pharma B.V. was changed w.e.f. February 1 2022
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Financial Statements have been prepared by the Company inaccordance with the Indian Accounting Standards (Ind AS) 110 and 111 as specified in theCompanies (Indian Accounting Standards) Rules 2015 and as per the provisions of CompaniesAct 2013. The Company has placed separately the audited accounts of its subsidiaries onits website www. aurobindo.com in compliance with the provisions of Section 136 of theCompanies Act 2013. Audited financial statements of the Company's subsidiaries willbe provided to the Members on request.
CODE FOR PREVENTION OF INSIDER TRADING
On December 31 2018 Securities and Exchange Board of India amended theProhibition of Insider Trading Regulations 2015 prescribing various new requirementswith effect from 1st April 2019. In line with the amendments your Company hasadopted an amended Code of Conduct to regulate monitor and report trading by DesignatedPersons and their Immediate Relatives under the Securities and Exchange Board of India(Prohibition of Insider Trading) Regulations 2015. This Code of Conduct also includescode of practices and procedures for fair disclosure of unpublished price sensitiveinformation and has been made available on the Company's website athttps://www.aurobindo. com/investors/corporate-governance/code-of-conduct/
The Board of Directors have adopted the Whistle Blower Policy which isin compliance with Section 177(9) of the Companies Act 2013 and Regulation 22 of the SEBI(Listing Obligations and Disclosure Requirements) Regulations 2015. The Whistle BlowerPolicy aims to conduct the affairs in a fair and transparent manner by adopting thehighest standards of professionalism honesty integrity and ethical behaviour.
All permanent employees and Whole-time Directors of the Company arecovered under the Whistle Blower Policy.
A mechanism has been established for employees to report their concernsabout unethical behaviour actual or suspected fraud or violation of the Code of Conductand Ethics and leak of price-sensitive information under the Company's Code ofConduct formulated for regulating monitoring and reporting by Insiders under SEBI(Prohibition of Insider Trading) Regulations 2015 as amended from time to time. It alsoprovides for adequate safeguards against the victimisation of employees who avail of themechanism and allows direct access to the Chairperson of the Audit Committee inexceptional cases. The Whistle Blower Policy is available on the Company's websitehttps://www.aurobindo.com/wp-content/uploads/2022/04/Whistle-Blower-Policy-APL-New-March2022.pdf
PREVENTION AND PROHIBITION OF SEXUAL HARASSMENT
Your Company has a policy and framework for employees to report sexualharassment cases at the workplace and the said process ensures complete anonymity andconfidentiality of information. Your Company has constituted an Internal ComplaintsCommittee in compliance with the Sexual Harassment of Women at Workplace (PreventionProhibition and Redressal) Act 2013 and the Rules there under. The Company has a policyon prevention and prohibition of sexual harassment at the workplace. The policy providesfor protection against sexual harassment of women at the workplace and for the preventionand redressal of such complaints. During the year the Company has not received anycomplaint. The Company has been conducting regular awareness programmes aimed atprevention of sexual harassment.
MEETINGS OF THE BOARD
The Board and Committee meetings are prescheduled and a tentativecalendar of the meetings are created in consultation with the Directors. However in caseof special and urgent business needs approval is taken by passing resolutions throughcirculation. During the year under review nine Board Meetings and six Audit CommitteeMeetings were convened and held. The details of the meetings including composition of theAudit Committee are provided in the Corporate Governance Report. During the year all therecommendations of the Audit Committee were accepted by the Board.
DETAILS OF DIRECTORS AND KEY MANAGERIAL PERSONAL
Key Managerial Personnel
Mr. K. Nithyananda Reddy Whole-time Director and Vice Chairman up toDecember 31 2021 and Vice Chairman and Managing Director from January 1 2022 Mr. N.Govindarajan Managing Director (up to December 31 2021) Dr. M. Sivakumaran Whole-timeDirector Mr. M. Madan Mohan Reddy Whole-time Director Mr. P Sarath Chandra ReddyWhole-time Director Mr. Santhanam Subramanian Chief Financial Officer and Mr. B. AdiReddy Company Secretary are the Key Managerial Personnel of the Company in accordancewith the provisions of Section(s) 2(51) and 203 of the Companies Act 2013 read with theCompanies (Appointment and Remuneration of Managerial Personnel) Rules 2014. During theyear Mr. N. Govindarajan resigned as Managing Director of the Company w.e.f. January 12022 and Mr. K. Nithyananda Reddy Vice Chairman and Whole-time Director was appointed andredesignated as Vice Chairman and Managing Director from January 1 2022.
None of the Directors of the Company are disqualified under theprovisions of the Companies Act 2013 (Act') or under the SEBI (ListingObligations and Disclosure Requirements) Regulations 2015. All Independent Directors haveprovided confirmations as contemplated under Section 149(7) of the Act. As required bySEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 a certificatefrom the Company Secretary in practice that none of the Directors on the Board of theCompany have been debarred or disqualified from being appointed or continuing as Directorsof companies by the Board/Ministry of Corporate Affairs or any such statutory authorityforms part of Corporate Governance Report as Annexure-A.
Appointments/Re-appointment of Directors
As per the provisions of the Companies Act 2013 Mr. K. NithyanandaReddy and Mr. Madan Mohan Reddy will retire as Directors at the ensuing Annual GeneralMeeting and being eligible seek re-appointment. The Board recommends theirre-appointment.
The re-appointment of Mr. P Sarath Chandra Reddy as Whole-time Directoris being proposed.
DIRECTORS' RESPONSIBILITY STATEMENT
Pursuant to Section 134(3)(c) of the Companies Act 2013 yourDirectors confirm that:
a) in the preparation of the annual accounts the applicable accountingstandards have been followed along with proper explanation relating to materialdepartures if any;
b) appropriate accounting policies have been selected and appliedconsistently. Judgement and estimates which are reasonable and prudent have been made soas to give a true and fair view of the state of affairs of your Company as at the end ofthe financial year and of the profit of your Company for the year;
c) proper and sufficient care has been taken for the maintenance ofadequate accounting records in accordance with the provisions of the Companies Act 2013for safeguarding the assets of your Company and for preventing and detecting fraud andother irregularities;
d) the annual accounts have been prepared on an on-going concern basis;
e) proper internal financial controls have been laid down to befollowed by your Company and such internal financial controls are adequate and areoperating effectively; and
f) proper systems to ensure compliance with the provisions of allapplicable laws have been devised and such systems are adequate and are operatingeffectively.
DECLARATION FROM INDEPENDENT DIRECTORS
The Independent Directors have submitted the declaration ofindependence stating that they meet the criteria of independence as provided insub-section (6) of Section 149 of the Companies Act 2013 as well as clause (b) ofsub-regulation (1) of Regulation 16 of the Listing Regulations (including any statutorymodification(s) or re-enactment(s) thereof for the time being in force) and confirmed thatthey have registered their names in the Independent Directors' Data bank. In terms ofRegulation 25(8) of the Listing Regulations the Independent Directors have confirmed thatthey are not aware of any circumstance or situation which exist or may be reasonablyanticipated that could impair or impact their ability to discharge their duties.
The Company recognises and embraces the importance of a diverse Boardin its success. The Board has adopted the Board Diversity Policy which sets out with anapproach to diversify the Board of Directors. The Board Diversity Policy is available onthe Company's website: https://www.aurobindo.com/wp-content/uploads/2018/10/Policy-on-Board-Diversity.pdf
SEBI (Listing Obligations and Disclosure Requirements) Regulations2015 mandates that the Board shall monitor and review the Board evaluation framework. TheCompanies Act 2013 states that a formal annual evaluation needs to be conducted by theBoard of its own performance and that of its committees and individual Directors. ScheduleIV of the Companies Act 2013 states that the performance evaluation of IndependentDirectors shall be conducted by the entire Board of Directors excluding the Directorbeing evaluated.
The Annual Performance Evaluation was conducted for all Board Membersfor the Board and its Committees for the financial year 2021-22. This evaluation was ledby the Nomination and Remuneration/Compensation Committee of the Company. The Boardevaluation framework has been designed in compliance with the requirements under theCompanies Act 2013 and the Listing Regulations and in accordance with the Guidance Noteon Board Evaluation issued by SEBI in January 2017. The Board evaluation was conductedthrough questionnaires designed with qualitative parameters and feedback based on ratings.
Evaluation of Committees was based on criteria such as adequateindependence of each Committee frequency of meetings and time allocated for discussionsat meetings functioning of Board Committees and effectiveness of itsadvice/recommendation to the Board etc.
Evaluation of Directors was based on criteria such as participation andcontribution in Board and Committee meetings representation of shareholders interest andenhancing shareholders value experience and expertise to provide feedback and guidanceto top management on business strategy governance risk and understanding of theorganisation's strategy etc.
POLICY ON DIRECTORS' APPOINTMENT AND REMUNERATION
The policy of the Company on Directors' appointment andremuneration including criteria for determining qualifications positive attributesindependence of a Director and other matters are adopted as per the provisions of theCompanies Act 2013. The remuneration paid to the Directors is as per the terms laid outin the Nomination and Remuneration Policy of the Company. The Nomination and RemunerationPolicy as adopted by the Board is available on the Company's website:https://www.aurobindo.com/wp-content/uploads/2022/02/ Nomination RemunerationPolicy-APL.pdf
TRANSFER TO RESERVES
Your Company has not transferred any amount to reserves during the yearunder review.
LOANS GUARANTEES AND INVESTMENTS
Loans guarantees and investments covered under Section 186 of theCompanies Act 2013 form part of the Notes to the financial statements provided in thisAnnual Report.
CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES
All transactions entered with Related Parties for the year under reviewwere on arm's length basis and in the ordinary course of business. All Related Partytransactions are mentioned in the Notes to the Financial Statements. The Company hasdeveloped a framework through Standard Operating Procedures for the purpose ofidentification and monitoring of such Related Party Transactions. A statement givingdetails of all Related Party Transactions are placed before the Audit Committee and theBoard for review and approval. The policy on Related Party Transactions as approved bythe Board of Directors has been uploaded on the website of the Companyhttps://www.aurobindo.com/wp-content/uploads/2022/04/ PolicyOnRPT-Feb2022.pdf.
The particulars of contracts or arrangements with Related Partiesreferred to in sub-section (1) of Section 188 of the Companies Act 2013 is prepared inForm No. AOC-2 pursuant to clause (h) of sub-section (3) of Section 134 of the Act andRule 8(2) of the Companies (Accounts) Rules 2014 and is in Annexure-2 to thisReport.
There were no materially significant Related Party Transactions whichcould have potential conflict with the interests of the Company at large.
CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION FOREIGN EXCHANGEEARNINGS & OUTGO
Information with respect to conservation of energy technologyabsorption foreign exchange earnings & outgo pursuant to Section 134(3)(m) of the Actread with Companies (Accounts) Rules 2014 is in Annexure-3 to this Report.
The Annual Return of the Company as on March 31 2022 is available onthe Company's website and can be accessed at:https://www.aurobindo.com/investors/results-reports- presentations/annual-returns/
RISK MANAGEMENT COMMITTEE
Risk Management Committee of the Company consists of the followingDirectors viz. Mr. Girish Paman Vanvari Mr. P. Sarath Chandra Reddy and Mr. K.Ragunathan as on March 31 2022.
Mr. N. Govindarajan ceased to be member of Risk Management Committeew.e.f. January 1 2022 on his resignation.
Mr. Girish Paman Vanvari was appointed as a Chairman of Risk ManagementCommittee w.e.f. April 1 2021. The Company has established a separate department tomonitor the enterprise risk and for its management. The Committee had formulated a RiskManagement Policy for dealing with different kinds of risks which the Company faces in itsday-to-day operations. The Risk Management policy of the Company outlines a framework foridentification of internal and external risks specifically faced by the Company inparticular including financial operational sectoral sustainability (particularlyESG-related risks) information cyber security risks or any other risk as may bedetermined by the Committee; measures for risk mitigation including systems and processesfor internal control of identified risks; and Business continuity plan. Risk is anintegral part of the Company's business and sound risk management is critical to thesuccess of the organisation. The Company has adequate internal financial control systemsand procedures to combat the risk. The risk management procedure is reviewed by the AuditCommittee and Board of Directors on a regular basis at the time of review of the quarterlyfinancial results of the Company. A report on the risks and their management is enclosedas a separate section forming part of this report.
AUDITORS & AUDITORS' REPORT
Pursuant to Section 139 (2) of the Companies Act 2013 read with theCompanies (Audit and Auditors) Rules 2014 the Company at its 30th AnnualGeneral Meeting (AGM) held on August 31 2017 had appointed B S R & Associates LLPChartered Accountants as Statutory Auditors for a period of 5 years i.e. up to theconclusion of the 35th AGM to be held in the year 2022. The present term of B SR & Associates LLP as Statutory Auditors of the Company would expire at the conclusionof the ensuing AGM.
The Board of Directors of the Company has proposed the appointment ofDeloitte Haskins & Sells Chartered Accountants (Firm's Registration No. 008072S) asthe Statutory Auditors of the Company to hold office from the conclusion of 35thAGM until the conclusion of the 40th AGM in place of retiring auditors B S R& Associates LLP on completion of their term.
The Company has received a letter from Deloitte Haskins & SellsChartered Accountants confirming that they are eligible for appointment as StatutoryAuditors of the Company under Section 139 of Companies Act 2013 and meet the criteria forappointment as specified in Section 141 of the Companies Act 2013.
The statutory Auditors' Report forms part of the Annual Report.The notes on financial statements referred to in the Auditors' Report areself-explanatory and do not call for any further comments. There are no qualificationsreservations adverse remarks or disclaimers by the statutory auditors in their report.They have not reported any incident of fraud to the Audit Committee of the Company duringthe year under review.
Ernst & Young LLP are the Internal Auditors of the Company and tomaintain its objectivity and independence the Internal Auditors report to the Chairman ofthe Audit Committee. The scope and authority of the Internal Audit function is clearlydefined by the Audit Committee of the Board. The Internal Auditors monitor and evaluatethe efficacy and adequacy of the internal control system of the Company its compliancewith applicable laws/regulations accounting procedures and policies. Based on the reportsof the Internal Auditors corrective actions will be undertaken thereby strengthening thecontrols. Significant audit observations and action plans were presented to the AuditCommittee of the Board on a quarterly basis.
As per Section 148 of the Companies Act 2013 the Company is requiredto have the audit of its cost records conducted by a Cost Accountant. The Board ofDirectors of the Company has on the recommendation of the Audit Committee approved theappointment of EVS & Associates a firm of Cost Accountants in Practice (RegistrationNo. 000175) as the Cost Auditor of the Company to conduct audit of cost records of theCompany for relevant products as prescribed under the Companies (Cost Records and Audit)Rules 2014 for the year ending on March 31 2023. The Board on recommendations of theAudit Committee has approved the remuneration payable to the Cost Auditor subject toratification of its remuneration by the Members in the forthcoming AGM. EVS &Associates has under Section 139(1) of the Companies Act 2013 and the Rules framedthereunder furnished a certificate of its eligibility and consent for appointment.
INTERNAL FINANCIAL CONTROLS
The internal financial controls (IFC) framework institutionalised inAurobindo has been evaluated in-depth for its adequacy and operating effectivenesswherein the Company has covered financial reporting controls operational controlscompliance- related controls and also Information Technology (IT) controls comprising ITgeneral controls (ITGC) and application-level controls. The ITGC would include controlsover IT environment computer operations access to programmes and data programmedevelopment and programme changes. The application controls would include transactionprocessing controls in ERP Oracle system which supports accurate data input dataprocessing and data output workflows reviews and approvals as per the definedauthorisation levels.
To further strengthen the existing IFC framework and support thegrowing business the Company has redefined all the process level controls at activitylevel which has brought in more clarity and transparency in day-to-day processing oftransactions and in addressing any related risks. All the controls so redefined andidentified have been properly documented and tested with the help of an independentauditor to ensure their adequacy and effectiveness.
The Internal Auditors conduct Process & control review'on a quarterly basis as per the defined scope and submit the audit findings along withmanagement comments and action taken reports to the Audit Committee for its review.
The IFC framework at Aurobindo ensures the following:
Establishment of policies and procedures assignment ofresponsibility delegation of authority segregation of duties to provide a basis foraccountability and controls;
Physical existence and ownership of assets at a specified date;
Enabling proactive anti-fraud controls and a risk managementframework to mitigate fraud risks to the Company;
Recording of all transactions occurred during a specific period.Accounting of assets liability and revenue and expense components at appropriateamounts;
Preparation of financial information as per the timelinesdefined by the relevant authorities.
These controls cover the policies and procedures adopted by the Companyfor ensuring the orderly and efficient conduct of its business including adherence to theCompany's policies safeguarding of its assets of the Company prevention anddetection of its frauds and errors accuracy and completeness of accounting records andtimely preparation of reliable financial information. The Company has an internal controlsystem commensurate with the size scale and complexity of its operation.
SECRETARIAL AUDIT REPORT
Pursuant to the provisions of Section 204 of the Companies Act 2013and Rule 9 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules2014 the Company has appointed Mr. A. Mohan Rami Reddy a Company Secretary in Practiceto undertake the secretarial audit of the Company for the for the financial year 2021-22.The Secretarial Audit Report issued in form MR-3 is in Annexure-4 of this Report.
There are no qualifications reservations or adverse remarks in theSecretarial Audit Report. Also pursuant to Regulation 24A of the SEBI (ListingObligations and Disclosure Requirements) Regulations 2015 the Company has obtained theAnnual Secretarial Compliance Report from a Practicing Company Secretary and submitted thesame to stock exchanges where the shares of the Company are listed.
CORPORATE SOCIAL RESPONSIBILITY
In compliance with Section 135 of the Companies Act 2013 read with theCompanies (Corporate Social Responsibility Policy) Rules 2014 the Company has establishedthe Corporate Social Responsibility Committee (CSR Committee).
The Board on the recommendation of the CSR Committee adopted a CSRPolicy. The same is available on the Company's website athttps://www.aurobindo.com/wp- content/uploads/2021/07/CSR-policy.pdf. The CSR objectivesare designed to serve societal local and national goals in the locations that we operatein to create a significant and sustained impact on local communities. During thefinancial year 2021-22 the Company's CSR efforts included COVID-19 relief work overand above its usual CSR commitments.
The Company undertakes its CSR activities through Aurobindo PharmaFoundation a wholly-owned subsidiary of the Company incorporated under Section 8 of theCompanies Act 2013.
The CSR projects approved by the Board for the year 202122 is availableon the Company's website at https://www. aurobindo.com/sustainability/.Report. TheAnnual Report on Corporate Social Responsibility as per Rule 8 of the Companies (CorporateSocial Responsibility Policy) Rules 2014 is annexed as Annexure-5 to this Report.
PARTICULARS OF EMPLOYEES
The statement of particulars of appointment and remuneration ofmanagerial personnel as required under Section 197(12) of the Companies Act 2013 readwith Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel)
Rules 2014 is in Annexure-6 to this Report. The statementcontaining particulars of employees pursuant to Section 197(12) of the Companies Act 2013read with Rule 5(2) of the Companies (Appointment and Remuneration of ManagerialPersonnel) Rules 2014 is open for inspection at the Registered Office of the Companyduring business hours on all working days of the Company up to the date of the ensuingAnnual General Meeting. Any shareholder interested in obtaining such details may write tothe Company Secretary of the Company.
Affirmation that the remuneration is as per the remuneration policy ofthe Company.
In compliance with the provisions of the Companies Act 2013 and SEBIListing Regulations the Board on the recommendation of the Nomination and Remuneration/Compensation Committee approved the Policy for Selection Appointment of Directors KMPsand Senior Management persons. The said Policy provides a framework to ensure thatsuitable and efficient succession plans are in place for appointment of Directors on theBoard and other management members. The Policy also provides for selection andremuneration criteria for the appointment of Directors and senior management persons. TheCompany affirms that the remuneration is as per the remuneration policy of the Company.
All properties and insurable interests of the Company includingbuilding plant and machinery and stocks have been fully insured. The Company has alsotaken D&O Insurance Policy covering Company's Directors and Officers.
MATERIAL CHANGES AND COMMITMENTS
There are no material changes and commitments in the businessoperations of the Company from the financial year ended March 31 2022 to the date ofsigning of the Board's Report.
A separate section on Corporate Governance standards followed by yourCompany as stipulated under Schedule V (C) of the SEBI (Listing Obligations andDisclosure Requirements) Regulations 2015 is enclosed as a separate section forming partof this report. The certificate of the Practicing Company Secretary Mr. S. Chidambaramwith regard to compliance of conditions of corporate governance as stipulated underSchedule V(E) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations2015 is annexed to the Corporate Governance Report.
MANAGEMENT DISCUSSION AND ANALYSIS
Management Discussion and Analysis Report for the year under review asstipulated under SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015is presented in a separate section forming part of this report.
Your Company has not accepted any deposits from the public within thepurview of Chapter V of the Companies Act 2013
Industrial relations at all units of the Company have been harmoniousand cordial. The employees are motivated and have shown initiative in improving theCompany's performance even during the prevalence of COVID-19 pandemic challenges.
TRANSFER OF UNPAID AND UNCLAIMED AMOUNT TO IEPF
The dividends that remained unpaid/unclaimed for a period of sevenyears have been transferred on due dates by the Company to the Investor Education andProtection Fund (IEPF) established by the Central Government. Section 124 of the CompaniesAct 2013 read with the Investor Education and Protection Fund Authority (AccountingAudit Transfer and Refund) Rules 2016 (the Rules') mandates that companiesshall apart from transfer of dividend that has remained unclaimed for a period of sevenyears in the unpaid dividend account to the IEPF also transfer the corresponding shareswith respect to the dividend which has not been paid or claimed for seven consecutiveyears or more to IEPF.
Accordingly the dividends that remain unclaimed for seven years andalso the corresponding shares have been transferred to IEPF account on due dates. Thedetails of amount of unclaimed unpaid dividend and corresponding shares transferred toIEPF during the financial year 2021-22 have been provided in the AGM Notice.
During the financial year under review Authorised Share Capitalincreased from '760000000/- (Rupees Seven Hundred and
Sixty million only) to '2611500000 (Rupees Two Thousand Six HundredEleven million and Five Hundred Thousands only) as per Clause 12.11 of the Scheme ofAmalgamation as approved by Hon'ble National Company Law Tribunal Hyderabad BenchHyderabad as per its order dated March 30 2021. The paid- up share capital of the Companyas on March 31 2022 was '585938609 divided into 585938609 equity shares of '1 each.The Company has not issued any shares debentures bonds or any non-convertible securitiesduring the financial year under review.
BUSINESS RESPONSIBILITY REPORT
A detailed Business Responsibility Report in terms of the provisions ofRegulation 34 of SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015is available as a separate section in this Annual Report.
There were no significant material orders passed by the Regulators orCourts or Tribunals that would impact the going concern status of the Company and itsoperations in future.
The Company has complied with the applicable Secretarial Standardsissued by the Institute of Company Secretaries of India i.e. SS-1 and SS-2 relating toMeetings of the Board of Directors' and General Meetings'respectively.
Acquisitions/ Disinvestment/ demerger/ merger
The Company has transferred 100% stake in Auro Cure Private Limited awholly-owned subsidiary of the Company to Eugia Pharma Specialities Limited also awholly-owned subsidiary of the Company. Auro Cure Private Limited has become wholly- ownedstep-down subsidiary of the Company.
Transfer of business undertaking comprised in Unit-16 of the Companyon a going concern basis to Wytells Pharma Private Limited a wholly-owned step-downsubsidiary of the Company. Wytells Pharma Private Limited is a 100% subsidiary of EugiaPharma Specialities Limited which in turn is a wholly-owned subsidiary of the Company.
Transfer of vaccines business undertaking comprised in Unit-18 on agoing concern basis to Auro Vaccines Private Limited a wholly-owned subsidiary of theCompany; and transfer of equity shares of Tergene Biotech Private Limited a subsidiaryto Auro Vaccines Private Limited a wholly-owned subsidiary of the Company.
The Board of Directors of the Company at its meeting held on July 12021 has approved the transfer of business undertaking comprised in Unit-4 on anon-going concern basis to Eugia Pharma Specialities Limited a wholly-owned subsidiary ofthe Company.
During the year Auro PR Inc a subsidiary of Helix Healthcare B.V.Netherlands acquired certain properties including rights title and interest in theassets and liabilities owned by Mylan LLC USA.
The Company has approved the acquisition of business and certain assetsof Veritaz Healthcare Limited on slump sale basis for a consideration of '1710 millionand accordingly entered into a Business Transfer Agreement dated March 28 2022. Veritazoperates in the pharmaceutical industry in India and sells branded generic formulationsand other health care related products
Pursuant to the provisions of Sections 230 to 232 read with Companies(Compromises Arrangement and Amalgamation) Rules 2016 and other applicable provisions ofthe Companies Act 2013 the Board of Directors of the Company at its meeting held onAugust 12 2021 has approved the Scheme of Amalgamation for merger of its wholly-ownedsubsidiaries viz. Auronext Pharma Private Limited and Mviyes Pharma Ventures PrivateLimited with the Company and the Company is yet to file the necessary applications withthe concerned authorities in this matter seeking sanction for the aforesaid merger.
The Company has obtained the Credit ratings from India Ratings &Research Private Limited and it has assigned ND AA+/Stable/ IND A1+on Rating WatchEvolving for Company's fund based working capital facilities and ND A1+ on RatingWatch Evolving for Company's non-fund-based working capital limits vide their letterdated August 4 2021.
Your Directors are grateful for the invaluable contribution made by theemployees and are encouraged by the support of the customers business associates banksand government agencies. The Directors deeply appreciate their faith in the Company andremain thankful to them. The Board shall always strive to meet the expectations of all thestakeholders.