Your Directors are pleased to present the Twenty Second Annual Report and the FinancialStatements for the financial year ended on March 31 2017.
The financial statements of the Company have been prepared in accordance with theIndian Accounting Standards (Ind AS) notified under section 133 of the Companies Act2013 read with Rule 7 of the Companies (Accounts) Rules 2014. The financial statementsfor the Financial Year ended on March 31 2017 are the Company's first Ind AS compliantannual financial statements with comparative figures for the year ended March 31 2016 alsounder Ind AS. The transition date of Ind AS is April 1 2015.
The disclosure and effects of first time adoption of Ind AS are provided in Note 46 andNote 47 of the standalone financial statements and Note 52 and Note 53 of the consolidatedfinancial statements.
The standalone and consolidated financial performance of the Company for the FinancialYear ended on March 31 2017 is summarized below:
| || || |
|Particulars ||Standalone ||Consolidated |
| ||For the year ended on March 31 2017 ||For the year ended on March 31 2016 ||For the year ended on March 31 2017 ||For the year ended on March 31 2016 |
|Revenue from Operations and other Income ||38576 ||73033 ||97539 ||97326 |
|Profit before Interest Depreciation ||9042 ||27515 ||20319 ||24436 |
|Amortisation and Impairment Expenses & Tax || || || || |
|[PBIDT] || || || || |
|Less: Finance Cost ||111 ||265 ||450 ||528 |
|Less: Depreciation Amortisation and ||2509 ||2212 ||3750 ||2921 |
|Impairment Expenses || || || || |
|Profit Before Tax [PBT] ||6422 ||25038 ||16119 ||20987 |
|Less: Tax Expenses ||(197) ||4663 ||1289 ||1774 |
|Profit After Tax [PAT] ||6619 ||20375 ||14830 ||19213 |
|Share of Profit of Joint Venture (Net of Tax) ||- ||- ||338 ||430 |
|Profit After Tax including share of Joint Venture ||6619 ||20375 ||15168 ||19643 |
|Attributable to: || || || || |
|Owners of the Parent ||6619 ||20375 ||14877 ||19339 |
|Non-Controlling Interests ||- ||- ||291 ||304 |
|Other Comprehensive Income/(Loss) ||57 ||(392) ||51 ||(522) |
|(Net of Tax) || || || || |
|Total Comprehensive Income ||6676 ||19983 ||15219 ||19121 |
|Attributable to: || || || || |
|Owners of the Parent ||6676 ||19983 ||14928 ||18817 |
|Non-Controlling Interests ||- ||- ||291 ||304 |
|Opening balance in Retained Earnings ||44072 ||30658 ||38132 ||25878 |
|Amount available for appropriation ||50610 ||50863 ||54406 ||45032 |
|Dividend: || || || || |
|Interim - FY 2016-17 ||3276 ||- ||3276 ||- |
|Interim - FY 2015-16 ||- ||3276 ||- ||3276 |
|Final - FY 2014-15 ||- ||2457 ||- ||2457 |
|Corporate Dividend Tax on Interim Dividend ||19 ||1058 ||667 ||1167 |
|(Net of CDT Credit) || || || || |
|Closing Balance in Retained Earnings ||47315 ||44072 ||50463 ||38132 |
|Earnings Per Share [EPS] [Face Value of shares of Re. 1/- each] ||6.47 ||19.90 ||14.82 ||19.19 |
The Company proposes to retain an amount of Rs. 47315 mio in the Statement of Profitand Loss.
Results of Operations
During the year under review the consolidated revenue from operations and other incomewas Rs. 97539 mio. The company has achieved consolidated Profit Before Tax of Rs. 16119mio and Profit After Tax of Rs. 14830 mio. The Company achieved a consolidated TotalComprehensive Income of Rs. 15219 mio. The EPS on consolidated financials for the yearended on March 31 2017 was Rs. 14.82.
During the year under review your Directors had declared and paid an interim dividendof Rs. 3.20 per equity share of face value Re. 1 each to the shareholders holding sharesin physical form and whose names were listed on the Register of Members of the Company ason March 17 2017 being the Record Date fixed for the purpose. Those shareholders holdingshares in electronic form were paid dividend as per the beneficiary data provided by theDepositories. Your Directors did not recommend final dividend. The dividend payout ratiofor the current year [inclusive of corporate dividend tax on dividend distribution] is16.08%.
During the year the unclaimed dividend pertaining to the dividend for the year endedMarch 31 2009 was transferred to Investors Education and Protection Fund after givingnotice to the members to claim their unpaid / unclaimed dividend.
As per SEBI Notification the Company has formulated Dividend Distribution Policywhich is approved by the Board of Directors and is uploaded on Company's websitewww.zyduscadila.com. The link for the same is https://zyduscadila.com/wp-content/uploads/2017/05/Dividend-Distribution-Policy-CHL.pdf.
Scheme of Arrangement between Company and Zydus Healthcare Limited
In order to bring more focused and concentrated efforts the management has decided toconsolidate India Human Formulation Business of Zydus Group in one entity. To achieve thisobjective during the year Biochem Pharmaceutical Industries Limited a wholly ownedsubsidiary Company was amalgamated with Zydus Healthcare Limited another wholly ownedsubsidiary Company. As a part of the consolidation pursuant to order dated May 18 2017passed by the Hon'ble National Company Law Tribunal Bench at Ahmedabad [NCLT] the IndiaHuman Formulations Undertaking [as defined in the Scheme of Arrangement] was transferredand merged into Zydus Healthcare Limited on a cash consideration pursuant to approval ofthe Scheme of Arrangement between the Company and Zydus Healthcare Limited and theirrespective shareholders and creditors sanctioned by the NCLT.
Management Discussion and Analysis (MDA)
MDA for the year under review as stipulated under the SEBI (Listing Obligations andDisclosure Requirements) Regulations 2015 [Listing Regulations] is presented in aseparate section which forms a part of the Annual Report.
Consolidated Financial Statements
In accordance with the Ind AS110 on Consolidation of Financial Statements readwith Ind AS28 on Accounting for Investments in Associates and Joint Ventures and asprovided under the provisions of the Companies Act 2013 [hereinafter referred to as"Act"] read with Schedule III to the Act and Rules made thereunder and theListing Regulations the Audited Consolidated Financial Statements are provided in theAnnual Report which show the financial resources assets liabilities income profitsand other details of the Company its associate companies and its subsidiaries afterelimination of minority interest as a single entity.
As provided in section 136 of the Act the Balance Sheet Statement of Profit and Lossand other documents of the subsidiary companies are not being attached with the BalanceSheet of the Company. The Company will make available free of cost the Audited FinancialStatements of the subsidiary companies and the related detailed information to any memberof the Company who may be interested in obtaining the same. The Financial Statements ofthe subsidiary companies will also be kept open for inspection at the Registered Office ofthe Company and that of the respective subsidiary companies. The Consolidated FinancialStatements presented by the Company include financial results of its subsidiary companies.
During the year Biochem Pharmaceutical Industries Limited merged with Zydus HealthcareLimited [formerly known as German Remedies Limited] both wholly owned subsidiaryCompanies pursuant to Scheme of Amalgamation approved by the Hon'ble National Company LawTribunal Bench at Ahmedabad vide its final order dated March 15 2017.
During the year the Company has incorporated Zydus Holdings Inc. USA which hasacquired 100% shareholding of US specialty CompanySentynl Therapeutics Inc. USA("Sentynl"). After acquisition Zydus Holdings Inc. USA was merged withSentynl. Sentynl is now a wholly owned subsidiary Company.
During the year the Company has acquired all shares held by its subsidiary companiesin (1) Zydus Pharmaceuticals USA Inc. USA (ZPUI) (2) Zydus Healthcare USA LLC USA(ZHUL) (3) Zydus
Noveltech Inc. USA (ZNI) and (4) Bremer Pharma GmbH Germany (Bremer) and thereforethese four entities have become direct overseas subsidiary companies.
As provided under section 129 of the Act and Rules made thereunder a statementcontaining the salient features of the financial statements of its subsidiaries in theformat prescribed under the rules is attached to the financial statements. The policyrelating to material subsidiaries as approved by the Board may be accessed on theCompany's website at the link: http://zyduscadila.com/wp/content/uploads/2015/05/Policy-on-Material-Subsidiary. pdf.
Particulars of Loans Guarantees and Investments
Details of loans guarantees and investments covered under section 186 of the Act aregiven in the notes to the financial statements.
Related Party Transactions
All contracts / arrangements / transactions entered into by the Company during thefinancial year with related parties were in the ordinary course of business and on anarm's length basis. As provided under section 134[h] of the Act and Rules madethereunder disclosure of particulars of material transactions with related parties enteredinto by the Company in the prescribed format is annexed to this report as AnnexureA.Disclosures on related party transactions are set out in Note No. 41 to the financialstatements.
The Policy on materiality of related party transactions and dealing with related partytransactions as approved by the Board may be accessed on the Company's website at thelink: http://zyduscadila.com/wp-content/uploads/2015/05/Policy-on-Related-Party-Transactions.pdf.
i) Retirement by rotation:
In accordance with the provisions of section 152 of the Act and in terms of theArticles of Association of the Company Mr. Mukesh M. Patel NonExecutive Director[DIN00053892] will retire by rotation at the ensuing Annual General Meeting andbeing eligible offers himself for re-appointment. The Board recommends his reappointment.
The Board of Directors of the Company has subject to the approval of the shareholdersat the ensuing Annual General Meeting reappointed Dr. Sharvil P. Patel as a JointManaging Director of the Company for a period of five years with effect from April 12017.
ii) Declaration of independence:
The Company has received declarations of independence as stipulated under section149 of the Act and regulation 16[b] of the Listing Regulations from IndependentDirectors confirming that they are not disqualified for continuing as an IndependentDirector.
iii) Profile of Director seeking appointment / re-appointment:
As required under regulation 36  of the Listing Regulations particulars ofDirectors seeking appointment / re-appointment at the ensuing Annual General Meeting areannexed to the notice convening Twenty Second Annual General Meeting.
iv) Key Managerial Personnel:
The following persons are the Key Managerial Personnel:
1. Mr. Pankaj R. Patel Chairman and Managing Director 2. Dr. Sharvil P. Patel JointManaging Director 3. Mr. Nitin D. Parekh Chief Financial officer and 4. Mr. Upen H.Shah Company Secretary.
There is no change in the Key Managerial Personnel during the year.
v) Board Evaluation:
Pursuant to provisions of the Act and Rules made thereunder and as provided in ScheduleIV to the Act and the Listing Regulations the Nomination and Remuneration Committee /Board has carried out the annual performance evaluation of itself the Directorsindividually as well as the evaluation of its committees. The manner in which theevaluation was carried out has been provided in the Corporate Governance Report which isa part of this Annual Report.
vi) Nomination and Remuneration Policy:
The Board has on the recommendation of the Nomination and Remuneration Committeeframed a policy on selection and appointment of Directors Senior Management Personnel andtheir remuneration. The Remuneration Policy is stated in the Corporate Governance Reportwhich is a part of this Annual Report.
Directors' Responsibility Statement
In terms of section 134[c] of the Act and to the best of their knowledge and beliefand according to the information and explanations provided to them your Directors herebymake the following statements:
(a) that in preparation of the Financial Statements the applicable accountingstandards have been followed along with proper explanations relating to materialdepartures if any (b) that such accounting policies have been selected and appliedconsistently and judgments and estimates made that are reasonable and prudent so as togive a true and fair view of the state of affairs of the Company as on March 31 2017 andof the profit of the Company for the year ended on that date
(c) that proper and sufficient care has been taken for maintenance of adequateaccounting records in accordance with the provisions of the Act for safeguarding theassets of the Company and for prevention and detection of fraud and other irregularities(d) that the annual financial statements have been prepared on going concern basis (e)that proper internal financial controls were in place and that the financial controls wereadequate and were operating effectively and
(f ) that the systems to ensure compliance with the provisions of all applicable lawswere in place and were adequate and operating effectively.
Information of meetings of the Board of Directors is given in Corporate GovernanceReport forming a part of this report.
As provided in section 177 of the Act the information about composition of AuditCommittee and other details are given in Corporate Governance Report forming a part ofthis report. The Board has accepted the recommendations of the Audit Committee. The AuditCommittee comprises of Mr. Nitin R. Desai Chairman Mr. Humayun R. Dhanrajgir Mr.Mukesh M. Patel Mr. Apurva S. Diwanji and Ms. Dharmishta N. Rawal as members.
The Company has complied with the Corporate Governance requirements under the Act andas stipulated under Listing Regulations. A separate section on detailed report on theCorporate Governance practices followed by the Company under the Listing Regulations alongwith a certificate from the Statutory Auditors confirming the compliance forms a part ofthis Annual Report.
i) Statutory Auditors and Audit Report:
Mukesh M. Shah & Co. Chartered Accountants the existing Statutory Auditors havebeen in the office for a period of more than 10 years at the commencement of the CompaniesAct 2013 which provides a transition period of 3 years for appointing new StatutoryAuditors.
Further as per the Companies (Removal of Difficulties) Third Order 2016 dated June30 2016 of Ministry of Corporate Affairs the Company is required to appoint newStatutory Auditors at the ensuing Annual General Meeting (AGM).
Based on the recommendation of the Audit Committee the Board of Directors haveapproved the appointment of Deloitte Haskins & Sells LLP Chartered Accountants asStatutory Auditors of the Company for a period of five years from the conclusion ofensuing Twenty Second AGM till the conclusion of Twenty Seventh AGM subject to approvalof the members at the ensuing AGM. Further the appointment shall be ratified by themembers at each AGM.
Deloitte Haskins & Sells LLP Chartered Accountants have informed to the Companythat their appointment if made would be within the limits prescribed under section 141of the Act. They have also furnished a declaration confirming that their independence aswell as their arm's length relationship with the Company and that they have not taken upany prohibited non-audit assignments for the Company.
The Board has duly reviewed the Statutory Auditor's Report of Mukesh M. Shah & Co.Chartered Accountants and the observations and comments appearing in the report areself-explanatory and do not call for any further explanation / clarification by the Boardof Directors as provided under section 134 of the Act.
ii) Cost Auditors:
Pursuant to provisions of section 148 of the Act read with the Companies [CostRecords and Audit] Amendment Rules 2014 the cost audit records maintained by the Companyin respect of the Drugs and Pharmaceuticals are required to be audited. The Board had onthe recommendation of the Audit Committee appointed Dalwadi & Associates CostAccountants to audit the cost records of the Company for the Financial Year 2016-2017 on aremuneration of Rs. 1.00 mio. As required under the Act and Rules made thereunder theremuneration payable to the Cost Auditors is required to be placed before the Members in ageneral meeting for ratification. Accordingly a resolution seeking ratification bymembers for the remuneration payable to Dalwadi & Associates is included at Item No. 6of the Notice convening Twenty Second AGM.
iii) Secretarial Auditors and Secretarial Audit Report:
Pursuant to provisions of section 204 of the Act and the Companies [Appointment andRemuneration of Managerial Personnel] Rules 2014 the Board has appointed Manoj Hurkatand Associates a firm of Company Secretaries in Whole-time Practice to undertake theSecretarial Audit of the Company for the Financial Year 2016-2017. The Secretarial AuditReport is annexed herewith as AnnexureB. The Board has duly reviewed the SecretarialAuditors' Report and the observations and comments appearing in the report areself-explanatory and do not call for any further explanation / clarification by the Boardof Directors as provided under section 134 of the Act.
Business Responsibility Reporting
As per Regulation 34[f ] of the Listing Regulations a separate section on BusinessResponsibility Reporting forms a part of this Annual Report.
Corporate Social Responsibility [CSR]
Your Company being a Pharmaceutical Company having objective as "Dedicated toLife" has contributed for healthcare education and research in cancer as a part ofinitiatives under "Corporate Social Responsibility" for the year under review.Pursuant to section 135 of the Act and the relevant rules the Board has constituted aCorporate Social Responsibility [CSR] Committee under the Chairmanship of Mr. Pankaj R.Patel. The other members of the Committee are Dr. Sharvil P. Patel and Ms.Dharmishta N. Rawal. CSR Policy has been framed and placed on the Company's website. Otherdetails of the CSR activities as required under section 135 of the Act are given in theCSR Report at AnnexureC.
Business Risk Management
Pursuant to provisions of section 134[n] of the Act and requirements under theListing Regulations the Company has constituted a Risk Management Committee. The detailsof the Committee and its terms of reference are set out in the Corporate GovernanceReport which forms a part of this Annual Report.
A well-defined risk management mechanism covering the risk mapping and trend analysisrisk exposure potential impact and risk mitigation process is in place. The objective ofthe mechanism is to minimize the impact of risks identified and taking advance actions tomitigate them. The mechanism works on the principles of probability of occurrence andimpact if triggered. A detailed exercise is being carried out to identify evaluatemonitor and manage both business and non-business risks. The Company has formally framed aRisk Management Policy to identify and assess the key risk areas monitor and reportcompliance and effectiveness of the policy and procedure.
Discussion on risks and concerns are covered in the Management Discussion and AnalysisReport which forms a part of this Annual Report.
Internal control system and its adequacy
The Company has designed and implemented a process driven framework for InternalFinancial Controls [IFC] within the meaning of the explanation to section 134[e] of theAct. For the year ended on March 31 2017 the Board is of the opinion that the Companyhas sound IFC commensurate with the size scale and complexity of its business operations.The IFC operates effectively and no material weakness exists. The Company has a process inplace to continuously monitor the same and identify gaps if any and implement new and /or improved internal controls whenever the effect of such gaps would have a materialeffect on the Company's operations.
Managing the Risks of fraud corruption and unethical business practices
i) Vigil Mechanism / Whistle Blower Policy:
The Company has established vigil mechanism and framed whistle blower policy forDirectors and employees to report concerns about unethical behavior actual or suspectedfraud or violation of the Company's Code of Conduct or Ethics Policy. Whistle BlowerPolicy is disclosed on the website of the Company.
ii) Zydus Business Conduct Policy:
The Company has framed "Zydus Business Conduct Policy" and is monitored bythe Group President [Human Resources and Corporate Communication]. Every employee isrequired to review and sign the policy at the time of joining and an undertaking shall begiven for adherence to the Policy. The objective of the Policy is to conduct the businessin an honest transparent and ethical manner. The policy provides for anti-bribery andavoidance of other corruption practices by the employees of the Company.
Disclosure as per the Sexual Harassment of Women at Workplace [Prevention Prohibitionand Redressal] Act 2013
The Company has zero tolerance towards sexual harassment at the workplace and hasadopted a policy on prevention prohibition and redressal of sexual harassment atworkplace in line with the provisions of the Sexual Harassment of Women at Workplace(Prevention Prohibition and Redressal) Act 2013 and the Rules thereunder.
The Company always endeavors to create and provide an environment that is free fromdiscrimination and harassment including sexual harassment. The Company has in place arobust policy on prevention of sexual harassment at workplace. The policy aims atprevention of harassment of employees as well as contractors and lays down the guidelinesfor identification reporting and prevention of sexual harassment.
During the Financial Year 2016-2017 the Company has not received any complaint ofsexual harassment.
Extract of annual return
As per the provisions of section 92 of the Act an extract of the Annual Return inthe proscribed form MGT 9 is attached to this report as AnnexureD.
Particulars of Employees
The information required under section 197 of the Act read with rule 5 of theCompanies [Appointment and Remuneration of Managerial Personnel] Rules 2014 is given inAnnexureE.
Energy Conservation Technology Absorption and Foreign Exchange Earnings and Outgo
Information on conservation of energy technology absorption foreign exchange earningsand outgo as required to be disclosed under section 134[m] of the Act read with rule8 of the Companies [Accounts] Rules 2014 is provided in AnnexureF and forms apart of this Report.
Your Directors state that the Company has made disclosures in this report for the itemsprescribed in section 134 of the Act and rule 8 of the Companies [Accounts] Rules 2014to the extent the transactions took place on those items during the year.
There are no material changes and commitments affecting the financial position of theCompany between the end of the financial year and the date of this report.
Your Directors place on record their sincere appreciation for the continuedco-operation and support extended to the Company by various Banks. Your Directors alsothank the Medical Profession the Trade and Consumers for their patronage to the Company'sproducts. Your Directors also place on record sincere appreciation of the continued hardwork put in by the employees at all levels. The Directors also thank the Company'svendors investors business associates Stock Exchanges Government of India StateGovernment and various departments and agencies for their support and co-operation.
On behalf of the Board of Directors
Pankaj R. Patel
Place : Ahmedabad
Date : May 27 2017