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Bal Pharma Ltd.

BSE: 524824 Sector: Health care
NSE: BALPHARMA ISIN Code: INE083D01012
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OPEN 45.85
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VOLUME 3024
52-Week high 78.50
52-Week low 24.10
P/E
Mkt Cap.(Rs cr) 65
Buy Price 45.85
Buy Qty 3823.00
Sell Price 45.85
Sell Qty 46.00
OPEN 45.85
CLOSE 41.70
VOLUME 3024
52-Week high 78.50
52-Week low 24.10
P/E
Mkt Cap.(Rs cr) 65
Buy Price 45.85
Buy Qty 3823.00
Sell Price 45.85
Sell Qty 46.00

Bal Pharma Ltd. (BALPHARMA) - Director Report

Company director report

Your Directors are pleased to present the thirty first (31 th) Annual report and theaudited financial statements of the Company for the financial year ended 31.03.2018.

FINANCIAL ANALYSIS

The following is the analysis of the standalone financial the Company during the yearunder review.

(in Rs. Crores)

Particulars F.Y 2017.18 F.Y 2016.17
Total income from operations 211.48 235.40
Profit from operations before interest 8.15 8.59
other income and exceptional items.
Tax Expense 2.51 3.27
Finance Cost 9.24 8.46
Profit after tax 5.94 5.31
Total Comprehensive Income 5.64 4.96
Earnings per share (In `) 3.98 3.50

Appropriations:

Your Directors are pleased to recommend a dividend of Rs. 1 /- per equity share of Rs.10 each i.e 10% of the Equity Share Capital of the Company thereby appropriating an amountof Rs. 1.41 Crores towards Dividend for the F.Y 2017.18 which is exclusive of thedividend distribution tax of Rs. 28.85 Lakhs. The Company has not transferred any amountto General Reserves. The register of members and share transfer books of the Company shallremain closed from 18th September 2018 to 22nd September 2018 (both daysinclusive) for the purpose of payment of dividend for the F.Y 2017-18 and for the 31stAnnual General Meeting scheduled to be held on 22.09.2018.

Share capital:

During the financial year under review Rs. 141723720/- comprising of 14172372equity shares of Rs. 10 each continues to be the issued and paid up capital of theCompany.

During the financial year 2017.18 the Company has not issued any Equity Shares withdifferential voting rights granted stock options nor issued sweat Equity Shares.

MANAGEMENT DISCUSSION AND BUSINESS ANALYSIS.

India enjoys an important position in the global pharmaceuticals sector. The countryalso has a large pool of scientists and engineers who have the potential to steer theindustry ahead to an even higher level. Presently over 80 per cent of the antiretroviraldrugs used globally to combat AIDS (Acquired Immuno Deficiency Syndrome) are supplied byIndian pharmaceutical firms. India is the largest provider of generic drugs globally.Indian pharmaceutical sector supplies over 50 per cent of global demand for variousvaccines 40 per cent of generic demand in the US and 25 per cent of all medicine in UK.

Market Size

The Indian pharmaceutical sector was valued at US$ 33 billion in 2017. The country'spharmaceutical industry is expected to expand at a CAGR of 22.4 per cent over 2015 2020 toreach US$ 55 billion. India's pharmaceutical exports stood at US$ 17.27 billion in 2017-18and are ofexpected to reach US$ 20 billion by 2020.

Indian companies received 304 Abbreviated New Drug Application (ANDA) approvals fromthe US Food and Drug Administration (USFDA) in 2017. The country accounts for around 30per cent (by volume) and about 10 per cent (value) in the US$ 70-80 billion US genericsmarket.

India's biotechnology industry comprising bio-pharmaceuticals bio-servicesbio-agriculture bio-industry and bioinformatics is expected grow at an average growthrate of around 30 per cent a year and reach US$ 100 billion by 2025. Biopharma comprisingvaccines therapeutics and diagnostics is the largest sub-sector contributing nearly 62per cent of the total revenues at Rs. 12600 crore (US$ 1.89 billion).

Investments

The Union Cabinet has given its nod for the amendment of the existing Foreign DirectInvestment (FDI) policy in the pharmaceutical sector in order to allow FDI up to 100 percent under the automatic route for manufacturing of medical devices subject to certainconditions. The drugs and pharmaceuticals sector attracted cumulative FDI inflows worthUS$ 15.59 billion between April 2000 and December 2017 according to data released by theDepartment of Industrial Policy and Promotion (DIPP).

Some of the recent developments/investments in the Indian pharmaceutical sector are asfollows:

• During 2017-18 Indian pharmaceutical sector witnessed 46 merger &acquisition (M&A) deals worth US$ 1.47 billion.

• The exports of Indian pharmaceutical industry to the US will get a boost asbranded drugs worth US$ 55 billion will become off-patent during 2017-2019.

Government Initiatives

Some of the important initiatives taken by the government to promote the pharmaceuticalsector in India are as follows:

• The National Health Protection Scheme is largest government funded healthcareprogramme in the world which is expected to benefit 100 million poor families in thecountry by providing a cover of up to Rs. 5 lakh (US$ 7723.2) per family per year forsecondary and tertiary care hospitalisation. The programme was announced in Union Budget2018-19.

• In March 2018 the Drug Controller General of India (DCGI) announced its plansto start a single-window facility to provide consents approvals and other information.The move is aimed at giving a push to the Make in India initiative.

• The Government of India is planning to set up an electronic platform to regulateonline pharmacies under a new policy in order to stop any misuse due to easyavailability.

• The Government of India unveiled ‘Pharma Vision 2020' aimed at making Indiaa global leader in end-to-end drug manufacture. Approval time for new facilities has beenreduced to boost investments.

• The government introduced mechanisms such as the Drug Price Control Order andthe National Pharmaceutical Pricing Authority to deal with the issue of affordability andavailability of medicines.

Road Ahead

Healthcare spending in India is expected to increase at 9-12 per cent CAGR between2018-22 to US$ 50-55 billion driven by increasing consumer spending rapid urbanisationand raising healthcare insurance among others.

Going forward better growth in domestic sales would also depend on the ability ofcompanies to align their product portfolio towards chronic therapies for diseases such ascardiovascular anti-diabetes anti-depressants and anti-cancers which are on the rise.

The Indian government has taken many steps to reduce costs and bring down healthcareexpenses. Speedy introduction of generic drugs into the market has remained in focus andis expected to benefit Indian pharmaceutical companies. In addition the thrust on ruralhealth programmes lifesaving drugs and preventive vaccines also augurs well for theIndian pharmaceutical companies.

BUSINESS OPERATIONS: Turnover and Net profit:

Your company has registered a total revenue of Rs. 211.48 Crores for the financial yearended 31.03.2018 as against Rs. 235.40 Crores during the previous year. The drop in theturnover is due to the effect of implementation of GST during the financial year and alsodue to changes in the presentation of Profit & Loss Account as per IND AS.

The Company has registered a net profit of Rs. 5.93 Crores for the year ended31.03.2018 as against the net profit of Rs. 5.31 Crores during the previous year.

The company has recorded an EPS of Rs. 3.98 per equity share of Rs. 10 each as againstRs. 3.50 during the previous year. Formulations Business: The formulations business of theCompany has contributed a revenue of Rs. 103.10 Crores during F.Y 2017.18 as against therevenue of Rs. 106.31 Crores during F.Y 2016.17. Turnover from the export of formulationsduring F.Y 2017.18 is at Rs. 52.97 Crores as against Rs. 61.43 crores during F.Y 16.17.

Domestic sales of formulations mainly constituting branded formulations has contributeda revenue of Rs. 50.12 Crores during F.Y 2017.18 as against a revenue of Rs. 44.88 Croresduring F.Y 2016.17.

Bulk Drugs Business:

As against the total revenue of Rs. 120.49 Crores from the bulk drugs business duringF.Y 2016.17 the company has recorded a sales revenue of Rs. 103.17 Crores from bulk drugsfor the financial year 2017.18. Revenue from export of API products has resulted in aturnover of Rs. 60.33 Crores and domestic sales of the said products has yield a revenueof Rs. 42.85 Crores.

Diabetic and cardiac drugs of the Company continues to be the major revenue earners ofthe Company from both domestic and export markets during the financial year.

Export Business:

The Company has recorded export sales of Rs. 113.29 Crores as against Rs. 121.67 Croresrecorded during the previous financial year.

Domestic Business:

The Company has recorded a revenue of Rs. 92.97 Crores from its domestic business forthe financial year 2017.18 as against the domestic revenue of Rs. 105.13 crores during2016.17.

NEW PROJECTS:

During the year under review Bal Pharma Ltd has acquired 100% stake and managementcontrol of Golden Drugs Private Ltd an Udaipur Rajasthan based private limited Companyinvolved in the manufacture the of bulk drugs and intermediates. The total cost ofacquisition is Rs. 14 Crores which involves purchase of 100% shareholding of the Companywith a purchase consideration of Rs. 20.66/- per shares and also towards repayment of allthe past liabilities of the Company. With this acquisition Bal Pharma Ltd aims toincrease its production capacity by at least 20% and also enter into unexplored APImarkets both domestic and international.

In addition to this the Company assesses the future infrastructure requirements andcontinuously invests in the same on need basis.

AUDIT COMMITTEE: the Company for the

Audit Committee a subcommittee of the Board consists of Mr.Pramod Kumar.S Dr.G.S.RSubba Rao Mrs. Sarika Bhandari Independent Directors of the Company.

Audit Committee of the Company continues to discharge its duties as per the provisionsof Section 177 of the Companies Act 2013 and also SEBI (LODR) Regulations 2015.

AUDITORS AND AUDITORS REPORT:

a) Statutory Auditors:

Messers NSVM & Associates Chartered Accountants (FRN # 010072S) were appointed asStatutory Auditors of the Company from the conclusion of 30th Annual General Meeting heldon 22.09.2017 up to the conclusion of 35th Annual General Meeting i.e for a period of 5years.

There are no qualifications or adverse remarks or observations by the StatutoryAuditors in their report issued for the financial year 2017.18.

b) Cost Auditors:

Mr.M.R Krishna Murthy Cost accountant(FCMA # 7568) was reappointed as the CostAuditor of the Company for the financial year 2018-19 to conduct cost audit of the costrecords maintained by the Company.

c) Secretarial Auditors:

Mr.Parameshwar G Bhat Practising Company Secretary (CP # 11004) were appointed as theSecretarial Auditor of the Company for the financial year 2017.18. No adverse comments orremarks were made by the auditor in his report for the F.Y 2017.18 which is annexed tothis report.

d) Internal Auditors:

Messers Bharath & Co Chartered Accountants (MRN # 240163) were appointed as theInternal Auditors of the Company for the F.Y 2017.18 and the internal audit reports issuedby them were periodically reviewed by the Audit Committee and the management of theCompany is appraised about the observations of the internal auditor and on correctiveactions if any that needs to be taken.

Risk Management:

The Risk Management Committee of the Company comprising of the functional heads of theCompany will submit its periodical report to the Board of Directors on the measures to betaken for mitigation of potential risk factors that may affect the business of theCompany. The Risk Management Policy implemented by the Company which is designed to enablerisks to be identified assessed and mitigated appropriately is available on the websiteof the Company i.e www. balpharma.com.

Internal Control System and its Adequacy:

Your Company has an adequate system of internal controls with clearly defined authoritylimits. Internal controls ensure that the Company's assets are protected against loss fromunauthorised use or disposition and all transactions are authorised recorded and reportedin conformity with generally accepted accounting principles. The Company has in placeadequate internal financial controls with respect to Financial Statements. These systemsare designed to ensure accuracy and reliability of accounting data promotion ofoperational efficiency and adherence to the prescribed management principles. Thesepolicies are periodically reviewed to meeting business requirements.

Directors responsibility statement.

In compliance with the provisions of Section 134(5) of the Companies Act2013 yourDirectors wish to confirm a) That in preparing the annual accounts all the applicableaccounting standards had been followed along with proper explanation relating to materialdepartures. b) That the Directors had selected such accounting policies and applied themconsistently and made judgements and estimates that

Name of the Company/LLP Nature of Business % of stake with Bal Pharma as on 31.03.2018
01 Lifezen Healthcare Private Limited Marketing of OTC products 50.50%
02 Bal Research Foundation Research and Development 80%
03 Balance Clinics LLP Diabetic care clinics. 80%
04 Golden Drugs Private Limited Manufacturing of API's 100%

are reasonable and prudent so as to give a true and fair view of the state of affairsof the Company at the end of the Financial year and of the profit and loss of the Companyfor that period

c) That the Directors had taken proper and sufficient care for the maintenance ofadequate accounting records in accordance with the provisions of the act for safeguardingthe assets of the Company and for preventing / detecting fraud and other irregularities.

d) That the Directors had prepared the annual accounts on a going concern basis.

e) That the Directors had laid down internal financial controls to be followed by theCompany and that such internal financial controls are adequate and are operatingeffectively.

f) That the Company had devised proper systems to ensure compliance with the provisionsof all applicable laws and that such systems are adequate and operating effectively.

Related party Transactions:

All contracts /arrangements / transactions entered by the Company during the financialyear with related parties were in ordinary course of business and at arms length basis.During the year the Company has not entered into any contract/arrangement/transactionwith the related parties that could be considered material as per the policy of theCompany on materiality of related party transactions.

There were no materially significant could have potential conflict with the interestsof the Company at large. The Company's policy on the related party transactions asapproved by the Board can be assessed from the website i.e www.balpharma.com. Fordisclosure relating to the related party transactions please refer to note # 34 of thefinancial statements.

Subsidiary Joint Venture and Associate Companies:

During the year under review the following Companies listed below continues to be thesubsidiaries joint ventures or associates of Bal Pharma Ltd. A report on the financialperformance of each of the subsidiaries joint ventures or associate companies as persection 129(3) of the Companies Act 2013 is provided in Annexure 1 to the Board's reportand hence not repeated here for the sake of brevity.

Secretarial Standards:

Secretarial Standards i.e SS1 & SS2 relating to the meetings of Board of Directorsand General meetings respectively have been duly followed by the Company.

Directors and Key Managerial Personnel (KMP's):

The Nomination and Remuneration Committee has recommended for reappointing Dr.Subba RaoPrasanna as whole time Director of the Company for a further period of 2 years. Hisreappointment is being considered at the ensuing Annual General Meeting by a specialresolution. The Company has received declarations from all the Independent Directorsconfirming that they meet the criteria of independence as prescribed under Section 149(6)of the Companies Act 2013. The Company has devised a policy for familiarization ofIndependent Directors on their roles rights responsibilities with the Company and thesaid policy is available on our website.

The Company has also in place a Policy for nomination and remuneration of KMP's SeniorManagement personnel and Directors of the Company which is in compliance with Section 178of the Companies Act 2013. The Company has devised a policy for performance evaluation ofthe Board committees and Individual directors. The evaluation process inter aliaconsiders attendance of Directors at Board and Committee meetings acquaintance withbusiness communication within Board members effective participation domain knowledgecompliance with the internal code of conduct vision and strategy.

The Board carried out annual performance evaluation of itself Committees IndividualDirectors and Chairman. The performance of each committee is evaluated based on thereports of evaluation received from the respective committees.

Report on performance evaluation of the individual Directors was reviewed by theChairman and feedback was given to the Directors. Details of Board and Committee Meetingsheld during the year is disclosed in the Corporate Governance Report.

Vigil Mechanism:

The vigil mechanism of the Company which also incorporates Whistle Blower Policy asprescribed by SEBI(LODR) Regulations 2015 includes compliance task force comprising ofsenior executives of the Company. The policy of whistle blower is available on ourwebsite.

Conservation of Energy Technology Absorption Foreign Exchange Earnings and Outflow:

As per the provisions of Section 134 of the Companies Act 2013 details relating tothe conservation of energy technology absorption foreign exchanges earnings and outfloware given as Annexure -3 to this report.

Corporate Governance:

The Company is committed to maintaining highest standards of Corporate Governancerequirements set out by the Securities and Exchange Board of India. A detailed report onthe corporate governance system and practises of the Company along with a certificatepractising Company secretary confirming to the compliance with the corporate governancerequirements are given in a separate section of this report.

Particulars of Loans given investments made Guarantee's given or security provided bythe Company.

The Company makes investments and trade advances to its subsidiaries for their businesspurpose. Details of loans investments and advances covered under Section 186 of theCompanies Act 2013 form part of the notes to the financial statements provided in thisannual report.

Material Changes and Commitments affecting the financial position of the Companybetween the end of the financial year and up to the date of this report.

There have been no material changes or commitments affecting the financial position ofthe Company between the end of the financial year and date of this report. There has beenno change in the nature of business or constitution of the Company.

Extract of the Annual Return:

In accordance with Section 134 (3) (a) of the Companies Act 2013 an extract of theAnnual return of the Company for the financial year 2017-18 in Form MGT-9 is annexed tothis report as Annexure-5.

Corporate Social Responsibility:

As per the provisions of Section 135 of the Companies Act2013 the Company hasconstituted a CSR committee with the following Composition.

1.Dr.G.S.R Subba Rao Chairman
2.Mr.Pramod Kumar.S Member
3.Dr.S.Prasanna - Member
4.Mr.Shailesh Siroya - Member

The Committee has formulated an Corporate Responsibility policy which recommends theactivities to be undertaken by the Company as specified in Schedule VII of CompaniesAct2013. A copy of the said policy is available on the website i.e www.balpharma.com. TheCommittee has not recommended any CSR budget for the financial year 2018.19 due toinadequate profits

Human Resources:

Human resources of the Company has major share in the growth and development of theCompany. The Company continues to hire new talent in order to keep pace with the newprojects and initiatives undertaken. The Management of the Company aims to strengthen itsemployee relations through progressive people management.

Board Evaluation:

The Board of Directors of the Company has carried out annual performance evaluation ofits own performance its Committees and individual Directors at their meeting held on14.02.2018. The Board has expressed satisfaction over the overall functioning of the Boardmembers and their committees which are in line with the objectives and goals of theCompany.

Listing with Stock Exchanges:

The Equity Shares of the Company continued to be listed on BSE Limited Mumbai andNational Stock Exchange of India Ltd Mumbai and the Company has paid the annual listingfees for F.Y 2018-19 to the exchanges.

CEO & CFO certification:

The CEO and CFO of the Company in their submission to the Board have confirmed that theannual financialstatements presents a true and fair view of the Company's affairs and donot omit any material facts contained therein which may make either statements orfigures misleading or false.

Insurance Coverage:

The Management confirmthat all the of the Company wishes to movable immovable andcurrent assets of the Company are covered with comprehensive and adequate insurance cover.

Credit Rating:

The discipline with which the Company conducts its financial transactions is reflectedin the BBB(stable) rating given by the credit rating agency ICRA for the financial year2017-18. The Management of the Company aims at further improving its credit rating duringthe current financial

Disclosure under the sexual harassment of Women at work place (Prevention Prohibitionand Redressal) Act 2013:

The Company has in place an anti-sexual harassment policy on lines with therequirements of the sexual harassment of women at the work place (Prevention Prohibitionand Redressal) Act2013. All the employees of the Company either they are permanentcontractual temporary or trainees are covered by the policy.

The following is the summery of the Complaints regarding sexual harassment receivedand redressed during the financial year 2017-18

Number of Complaints received during the year : Nil
Number of Complaints resolved : NA
Number of Complaints pending at the end of the year : NA

Particulars of Employees:

Disclosures pertaining to remuneration and other details as required under Section197(12) of the Companies Act 2013 read with Rules 5(1) 5(2) & 5(3) of the Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 are attached as"Annexure 4" to this report.

General Information:

Your Directors reports that no disclosure or reporting is required in respect of thefollowing items as there were no transactions on these items during the year under review.

1 Details relating to the deposits covered under Chapter V of the Companies Act 2013.

2 Issue of equity shares with differential voting rights with respect to dividendvoting etc.

3. Issue of shares (including sweat equity shares) to the employees of the Companyunder any scheme.

4. Neither the Managing Director nor the whole time Directors of the Company receiveany remuneration or commission from any of its subsidiaries.

5. No significant courts or tribunals which impacts the going concern status of theCompany and its operations in future.

6. No fraud has been reported by the Auditors to Audit Committee or the Board duringthe year.

Appreciation:

Your Directors express their gratitude to the Company's customers shareholdersemployees business partners' viz. distributors suppliers medical professionalsCompany's bankers financial institutions including investors for their valuablesustainable support and . co-operation.