To the Members
Your Directors are pleased to present the thirtieth (30th) Annual report andthe audited financial statements of the Company for the financial year ended 31.03.2017.
The following is the analysis of the consolidated financial statements of the Companyduring the year under review.
| || ||(Rs in Crores) |
|Particulars ||F.y. 2016-17 ||F.y. 2015-16 |
|Total Income from operations ||234.95 ||202.48 |
|Profit from operations before Interest other income and exceptional items ||7.73 ||7.84 |
|Tax expense ||3.10 ||2.39 |
|Finance cost ||8.48 ||6.48 |
|Profit After Tax ||-0.73 ||0.26 |
|Profit After Taxes and Minority Interest ||1.98 ||0.26 |
|Earnings per Share (in Rupees) ||1.40 ||1.73 |
Your Directors are pleased to recommend a dividend of '1 /- per Equity Share of Rs 10each i.e 10% of the Equity Share Capital of the Company thereby appropriating an amount ofRs 1.41 Crores towards Dividend for the FY 2016-17 which is exclusive of the dividenddistribution tax of Rs 28.85 Lakhs.
During the financial year under review 1300000 warrants issued to the financialinvestors were converted into Equity Shares of the Company after receiving theconsideration amount of Rs 62/- per warrant thereby the paid up Share Capital of theCompany has risen to Rs 141723720/- divided into 14172372 Equity Shares of Rs 10each from the previous year's capital of Rs 128723720/-.
During the financial year 2016-17 the Company has not issued any Equity Shares withdifferential voting rights granted stock options nor issued sweat Equity Shares.
MANAGEMENT DISCUSSION AND BUSINESS ANALYSIS
Global Pharma Industry
Pricing pressures in the United States and unstable economic conditions in BrazilRussia and China which collectively drive 50 percent of global pharma revenue have ledto a slowdown in the pharma segment as have tightening government health care budgets orreductions in out-of-pocket expenditures in these countries and others. Fortunately themain factors driving health care demand among them aging populations the rise of chronicdiseases and the advent of innovative and frequently expensive treatments (e.g. forcancer and Hepatitis C) - has lead to increased pharma spending during 2016 and this maycontinue in subsequent years. However many countries have taken steps to contain healthcare costs - price cuts value-based pricing and reimbursement pro-generic policies andothers - are posing key challenges to research-based pharma companies.
Pharma companies are adapting to current market dynamics and positioning themselves forgrowth through portfolio transformation targeted deal-making cost-cutting measures andsharpened focus on high-performing therapeutic area (TA) and geographic markets.
Indian Pharma Industry
The Indian pharma industry is on a growth path during FY 2016-17 and is likely to be inthe top 10 global markets in value terms by 2020.
High burden of disease economic growth leading to higher disposable incomesimprovements in healthcare infrastructure and improved healthcare financing are drivinggrowth in the Indian domestic market.
The Indian pharma industry has been growing at a compounded annual growth rate (CAGR)of more than 15% over the last five years which is among highest in world pharma industryand has significant future growth opportunities. However for the industry to sustain thisrobust growth rate till 2020 companies will have to rethink their business strategy. Theywill have to adopt new business models and think of innovative ideas to service theirevolving customers faster and better.
The industry has seen many regulatory interventions over the last one year which willrequire careful consideration by Pharma companies as they plan their future strategies.
Pharma companies will continue to grow both organically and inorganically throughalliances and partnerships. They will continue to focus on improving operationalefficiency and productivity. Developments in the health insurance medical technology andmobile telephony can help the growth of the pharma industry by removing financial andphysical barriers to healthcare access in India.
BUSINESS OPERATIONS: (Standalone)
Turnover and Net profit:
Yaur Company has registered a total revenue of Rs 229.35 Crores for the financial yearended 31.03.2017 as against Rs 199.59 Crores during the previous year thereby registeringa growth of 14%.
The Profit before tax (PBT) of the Company has registered a growth of 56% over theprevious year PBT of Rs 5.18 Crores.
The Company has registered a net profit of Rs 4.96 Crores for the year ended 31.03.2017as against the net profit of Rs 2.80 Crores for the previous year which is 77% growthwhen compared to previous year's net profits.
The Company has recorded an EPS of Rs 3.51 per Equity Share of Rs 10 each as against Rs2.18 during the previous year.
The formulations business of the Company has contributed a revenue of Rs 120.49 Croresduring FY 2016-17 as against the revenue of Rs 111.03 Crores during FY 2015.16. This willtranslate into a revenue growth of 8% from formulations business of the Company.
Turnover from the export of formulations during FY 2016-17 is at Rs 60.00 Crores asagainst Rs 61.51 crores during FY 15.16.
Domestic sales of formulations mainly constituting branded formulations has contributeda revenue of Rs 60.25 Crores during FY 2016-17 as against a revenue of Rs 36.00 Croresduring FY 2015.16.
Bulk Drugs Business:
As against the total revenue of Rs 87.3 1 Crores from the bulk drugs business during FY2015.16 the company has recorded a sales revenue of Rs 106.31 Crores from bulk drugs forthe financial year 2016-17 thereby registering a growth of 18%.
Revenue from export of API products has resulted in a turn over of Rs 61.43 Crores anddomestic sales of the said products has yield a revenue of Rs 44.88 Crores.
Diabetic and cardiac drugs of the Company continues to earn up to 35% of the total APIrevenues both from domestic and export markets.
Performance of Export Business:
The Company has recorded export sales of Rs 121.43 Crores as against Rs 115.11 Croresrecorded during the previous financial year. This 5% growth in exports sales is due to theCompany entering into newer markets and also due to the improvised socio economicconditions of the African markets.
Performance of Domestic Business:
The Company has recorded a revenue of Rs 105.37 Crores from its domestic business forthe financial year 2016-17 as against the domestic revenue of Rs 82.76 crores there byshowing a growth of 25% from its previous years domestic revenue.
The Company aims at further improving its domestic business by enhancing its productioncapacities and also by strengthening its marketing capabilities.
In order to mitigate the challenge of scarcity in capacity the Company has commencedits project on construction of an fully integrated API unit with an annual productioncapacity of 270 metric tonnes of assorted API products which includes GliclazideEbastine Amiloride HCL Benzydamine HCL Pregablin etc located at Gauribidanur nearBangalore with an estimated investment of Rs 45.00 Crores.
In the second phase the Company also have plans to commission a formulationsmanufacturing unit which will be on line with all the requirements of regulated markets.
In addition to this the Company assesses the future infrastructure requirements andcontinuously invests in the same.
The Audit Committee a subcommittee of the Board consists of Mr. Pramod Kumar.S Dr.G.S.R Subba Rao Mrs. Sarika Bhandari Independent Directors of the Company and Mr.Shrenik Siroya who is a Non-Executive Director of the Company.
The Audit Committee of the Company continues to discharge its duties as per theprovisions of Section 177 of the Companies Act 2013 and also the SEBI (LODR) Regulations2015.
AUDITORS AND AUDITOR'S REPORT:
a) Statutory Auditors:
Messers TD Jain and D I Sakaria Chartered Accountants were appointed as StatutoryAuditors of the Company from the financial year 2015-16 up to 2017-18 i.e for a tenure of3 years subject to ratification of their appointment at successive general meetings bythe members.
There are no qualifications or adverse remarks or observations made by the StatutoryAuditors in their report.
b) Cost Auditors:
Mr. M.R. Krishna Murthy Cost accountant was reappointed as the Cost Auditor of theCompany for the financial year 2017-18 to conduct audit of the cost records maintained bythe Company.
c) Secretarial Auditors:
Mr. Parameshwar G Bhat Practising Company Secretary was appointed as the SecretarialAuditor of the Company for the financial year 2016-17. No adverse comments or remarks weremade by the Auditor in his report for the year ended 31.3.2017 which is annexed to thisreport as Annexure 2.
With respect to the observation made by the Secretarial Auditor regardingextending loans to other companies which have common Directors' your Directorswould like to clarify that
Lifezen Healthcare Pvt Ltd was initially incorporated as a wholly owned subsidiary ofBal Pharma Ltd and the loans extended to the said Company for meeting its working capitalrequirements in the normal course of business and are arm's length transactions.
d) Internal Auditors:
Messers Bharath & Co Chartered Accountants were appointed as the InternalAuditors of the Company for the F.Y 2016-17 and the internal audit reports issued by themwere periodically reviewed by the Audit Committee and the Management of the Company isapprised about the observations of the Internal Auditor and on corrective actions if anythat needs to be taken.
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 is available on the website ofthe Company i.e www.balpharma.com.
Internal Control System and its Adequacy:
Yaur 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. These systems are designed toensure accuracy and reliability of accounting data promotion of operational efficiencyand adherence to the prescribed management principles. These policies are periodicallyreviewed to meeting business requirements.
Directors' responsibility statement:
In compliance with the provisions of Section 134(5) of the Companies Act 2013 yourDirectors wish to confirm:
a) That in preparing the annual accounts all the applicable accounting standards hadbeen followed along with proper explanation relating to material departures.
b) That the Directors had selected such accounting policies and applied themconsistently and made judgements and estimates that are reasonable and prudent so as togive a true and fair view of the state of affairs of the Company at the end of theFinancial year and of the profit and loss of the Company for 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 arm's length basis.As such no particulars of such contracts or arrangements are furnished. For RPT's whichare foreseen & repetitive in nature Omni bus approval of Audit Committee is obtainedat the beginning of the financial year. During the year the Company has not entered intoany contract/arrangement/transaction with the related parties that could be consideredmaterial i.e exceeding 10% of the annual consolidated turnover of the Company as definedin the SEBI(LODR) Regulations 2015.
The Company's policy on the related party transactions as approved by the Board can beassessed from the website i.e www.balpharma.com.
For disclosure relating to the related party transactions please refer to note # 35 ofthe financial statements.
Subsidiary Joint Venture and Associate Companies:
During the year under review the following Companies continued to be the subsidiariesjoint ventures or associates of Bal Pharma Ltd. A report on the financial performance ofeach of the subsidiaries joint ventures or associate companies as per the Companies Act2013 is provided in Annexure 1 to the Board's Report and hence not repeated here for thesake of brevity:
|Sl. No. Name of the Company/LLP ||Nature of Business ||% of stake with Bal Pharma as on 31.03.2017. |
|01 Lifezen Healthcare Private Limited ||Marketing of OTC products. ||50% |
|02 Bal Research Foundation ||Research and Development. ||80% |
|03 Balance Clinics LLP ||Diabetic care clinics. ||80% |
Directors and Key Management Personnel (KMPs):
In accordance with the provisions of the Companies Act 2013 and the Articles ofAssociation of the Company Dr. Subba Rao Prasanna Executive Director of the Companyretires by rotation at the ensuing Annual General Meeting and being eligible offershimself for reappointment.
The remuneration payable to Mr. Shailesh D. Siroya Managing Director of the Company isdue for revision at the ensuing General Meeting and the Board has proposed a revisedremuneration of Rs 850000/- per month which is subject to the approval of shareholdersat the ensuing general meeting.
The Company has received declarations from all the Independent Directors confirmingthat they meet the criteria of independence as prescribed under Section 149(6) of theCompanies Act 2013.
The Company has devised a policy for familiarization of Independent Directors on theirroles rights responsibilities with the Company and the said policy is available on ourwebsite.
The Company has also in place a Policy for nomination and remuneration of KMPs SeniorManagement personnel and Directors of the Company which is in compliance with Section 178of the Companies Act 2013.
The vigil mechanism of the Company which also incorporates Whistle Blower Policy asprescribed by the SEBI(LODR) Regulations 2015 includes compliance task force comprisingof senior 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 and Additional Information to the shareholders:
A detailed report on the corporate governance system and practises of the Company aregiven in a separate section of this report. Additional information to the shareholders isgiven in shareholders information section.
Particulars of Loans given investments made Guarantee's given or security provided bythe Company:
The Company makes investments loans and advances to its subsidiaries for theirbusiness purpose. Details of loans investments and advances covered under Section 186 ofthe Companies Act 2013 form part of the notes to the financial statements provided inthis annual 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:
The Management of the Company has decided to suspend the operations of its IV Fluid andparenterals manufacturing facility at Pune as this unit has been consistently incurringoperational losses due to various reasons such as higher costs of raw materialsescalation in production cost employees cost lack of adequate orders and thin margins onproducts manufactured. The above have led to a situation wherein any further efforts torestore the profitability of this Unit will be futile.
This decision was taken as part of the restructuring exercise undertaken by the Companyto streamline its operations and to exit from its noncore businesses so that furtherdeterioration of its noncore business revenues can be plugged.
All the statutory dues pertaining to the said facility has been paid by the Companywhich also includes the employees' liability.
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 2016-17 in Form MGT-9 is annexed tothis report as Annexure-4.
Corporate Social Responsibility:
Bal Phrma Limited has always been committed to the cause of social responsibility andhas channalized a part of its resources and activities such that it positively affectsthe society. The Company has taken up various Corporate Social Responsibility (CSR)initiatives during the year which includes promoting awareness on prevention and cure ofDiabetes financial assistance to the hospitals in its vicinity for upgradation of theirdiagnostic facilities meant for poor people who can not afford expensive diagnosticprocedure drive against polluting industries and undertaking remedial measures tominimise air and water pollution in the surrounding areas of its operations.
The Company has contributed both in cash and kind for its CSR activities and cashcomponent of the CSR activities is mentioned in notes to the financial statements.
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.
The Board of Directors of the Company has carried out annual performance evaluation ofits own performance its Committees and individual Directors. The manner of evaluation ofthe Board is more fully explained in the Corporate Governance Report.
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 2017-18 to the exchanges.
CEO & CFO certification:
The CEO and CFO of the Company in their submission to the Board have confirmed througha certificate stating that the annual financial statements presents a true and fair viewof the Company's affairs and do not omit any material facts which may make the statementsor figures contained therein either misleading or false.
The Management of the Company wishes to confirm that all the movable and immovableassets of the Company are covered with comprehensive and adequate insurance cover.
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 year2016-17. The Management of the Company aims at further improving its credit rating duringthe current financial year.
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 in lines with therequirements of the Sexual Harassment of Women at the Work Place (Prevention Prohibitionand Redressal) Act 2013. All the employees of the Company permanent contractualtemporary or trainees are covered within the scope of the policy.
The following is the summary of the complaints regarding sexual harassment receivedand redressed during the financial year 2016-17.
|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 furnished asAnnexure 5".
Your Directors report that no disclosure or reporting is required in respect of thefollowing items as there were no transactions on these items during the year underreviews.
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 or material orders were passed by the regulators or courts ortribunals which impacts the going concern status of the Company and its operations infuture.
Your Directors express their gratitude to the Company's customers shareholdersbusiness partners viz. distributors suppliers medical professionals bankers financialinstitutions including investors for their valuable sustainable support and co-operation.
Your Directors commend the continuing commitment and dedicated efforts of employees atall levels without whose contribution the Company's progress would have remained withinthe Board room.
| ||For and on behalf of the Board of Directors |
|Bengaluru ||Dr. S. Prasanna ||Shailesh D Siroya |
|10.08.2017 ||Whole Time Director ||Managing Director |