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Cipla Ltd.

BSE: 500087 Sector: Health care
NSE: CIPLA ISIN Code: INE059A01026
BSE 00:00 | 19 Aug 1030.35 -1.75
(-0.17%)
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1022.05

HIGH

1036.25

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1020.55

NSE 00:00 | 19 Aug 1030.10 -2.10
(-0.20%)
OPEN

1029.05

HIGH

1036.60

LOW

1020.10

OPEN 1022.05
PREVIOUS CLOSE 1032.10
VOLUME 10079
52-Week high 1083.15
52-Week low 850.00
P/E 28.42
Mkt Cap.(Rs cr) 83,149
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00
OPEN 1022.05
CLOSE 1032.10
VOLUME 10079
52-Week high 1083.15
52-Week low 850.00
P/E 28.42
Mkt Cap.(Rs cr) 83,149
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

Cipla Ltd. (CIPLA) - Director Report

Company director report

Dear Members

The Board of Directors are pleased to submit its report on theperformance of the Company along with the audited standalone and consolidated financialstatements for the year ended 31st March 2022.

Financial Summary and State of Affairs

(Rs in crores)

Year ended 31st March 2021 Particulars Year ended 31st March 2022
Standalone Consolidated Standalone Consolidated 1
11302.71 19159.59 Gross total revenue 13091.79 21763.34
2784.00 3290.06 Profit before tax and exceptional item from continuing operations 3546.23 3675.39
566.66 - Profit before tax from Discontinuing/Restructuring Operations 358.85 -
2044.65 2404.87 Profit for the year (after tax and attributable to shareholders) from continuing operations 2689.39 2516.75
423.63 - Profit for the year (after tax and attributable to shareholders) Discontinuing/Restructuring Operations 268.54 -
13.14 (37.46) Other Comprehensive Income for the year (not to be reclassified to P&L) from continuing operations 12.56 111.54
27.75 198.95 Other Comprehensive Income for the year (to be reclassified to P&L) from continuing operations (7.01) 272.13
0.57 - Other Comprehensive Income for the year (not to be reclassified to P&L) Discontinuing/Restructuring Operations 0.55 -
12479.72 11117.88 Surplus brought forward from last balance sheet 14961.71 13536.98
14961.71 13536.98 Profit available for appropriation 17938.12 16072.42
Appropriations:
- - Dividend (403.35) (403.35)
14961.71 13536.98 Surplus carried forward 17534.77 15669.07

The financial results and the results of operations including majordevelopments have been discussed in detail in the Management Discussion and Analysisreport.

The standalone as well as the consolidated financial statements havebeen prepared in accordance with the Indian Accounting Standards ("Ind AS").

Share Capital1

During the year under review the Company issued and allotted 350757equity shares to its employees under the Employee Stock Option Scheme 2013-A. As a resultthe issued subscribed and paid-up share capital of the Company increased from Rs1612926558 (divided into 806463279 equity shares of Rs 2 each) to Rs 1613628072(divided into 806814036 equity shares of Rs 2 each). The equity shares issued under theEmployee Stock Option Scheme 2013-A rank pari- passu with the existing equity shares ofthe Company.

Dividend

In line with the Dividend Distribution Policy of the Company werecommend a final dividend of Rs 5 per equity share (250% of face value) for the financialyear ended 31st March 2022. The dividend is subject to the approval of members at theensuing Annual General Meeting and shall be subject to deduction of income tax at source.

Upon approval the dividend will be paid to those members whose nameswill appear in the Register of Members as on the close of 10th August 2022. The totaldividend pay-out will be approximately Rs 403.41 crores resulting in a pay-out of 13.64%of the Standalone profit after tax of the Company. The Dividend Distribution Policy isuploaded on the website and is available on the Company's website athttps://www.cipla.com/sites/ default/files/2019-01/Dividend%20Distribution%20Policy.pdf

Management Discussion and Analysis Report

Pursuant to Regulation 34 of the Securities and Exchange Board of India(Listing Obligations and Disclosure Requirements) Regulations 2015 ("ListingRegulations") the Management Discussion and Analysis Report for the year underreview has been presented in a separate section on page no. 107 forming a part of thisreport.

Corporate Social Responsibility (CSR)

A detailed report on Company's CSR initiatives has been provided in theSocial Capital section forming a part of the Integrated Report on page no. 92 and AnnualReport on CSR initiatives as required under Section 135 of the Companies Act 2013("Act") which is annexed as Annexure I to this report on page no. 130. Detailsof the CSR Committee composition role and meetings etc. have been provided in the Reporton Corporate Governance on page no. 178.

Integrated Report

The Company has voluntarily provided the Integrated Report whichincludes both financial and non-financial information. The Integrated Report also coversaspects such as stakeholder engagement enterprise risk management materialityassessment value creation model strategic business objective strategy for sustainablegrowth performance and prospects of value creation based on the six forms of capitalsviz. financial capital manufactured capital intellectual capital human capital socialand relationship capital and natural capital.

The assurance report of DNV Business Assurance India Private Limitedan independent assurance partner is provided on page no. 193 The Report confirms that thenon-financial information has been adequately presented.

Business Responsibility & Sustainability Report

The Company for FY 2021-22 has voluntarily presented a BusinessResponsibility & Sustainability Report ("BRSR") in lieu of the BusinessResponsibility Report provided under a separate section on page no. 145 of this report.

Corporate Governance

In compliance with Regulation 34 read with Schedule V of the ListingRegulations a Report on Corporate Governance for the year under review has beenpresented in a separate section on page no. 164 of this report.

A certificate from M/s. BNP & Associates Company Secretariesconfirming compliance with corporate governance norms as stipulated under the ListingRegulations is annexed as Annexure II to this report.

Directors' Responsibility Statement

Pursuant to section 134(3)(c) of the Act it is confirmed that theDirectors have: i.

i. in the preparation of the annual accounts for the year ended 31stMarch 2022 followed the applicable accounting standards and there are no materialdepartures from the same;

ii. selected such accounting policies and applied them consistently andmade judgments and estimates that are reasonable and prudent so as to give a true and fairview of the state of affairs of the Company as of 31st March 2022 and of the profit ofthe Company for the year ended on that date;

iii. taken proper and sufficient care for the maintenance of adequateaccounting records in accordance with the provisions of the Act for safeguarding theassets of the Company and for preventing and detecting fraud and other irregularities;

iv. prepared the annual accounts on a going concern basis;

v. laid down internal financial controls to be followed by the Companyand that such internal financial controls are adequate and were operating effectively; and

vi. devised proper systems to ensure compliance with the provisions ofall applicable laws and that such systems were adequate and operating effectively.

Conservation of Energy Technology Absorption Foreign ExchangeEarnings and Outgo

The details of Energy Conservation Technology Absorption and ForeignExchange Earnings and Outgo as required under section 134(3)(m) of the Act read with Rule8(3) of the Companies (Accounts) Rules 2014 is annexed as Annexure III to this report.

Share-based incentive schemes

The Company has the following share-based incentive schemes in force:

Employee Stock Option Scheme 2013-A ("ESOS 2013 -A")

Cipla Employee Stock Appreciation Rights Scheme 2021("ESAR Scheme 2021")

The Nomination and Remuneration Committee ("NRC") administersthe ESOS 2013 - A and the ESAR Scheme 2021 (collectively referred to as"Schemes"). The Schemes are compliant with the Securities and Exchange Board ofIndia (Share Based Employee Benefits and Sweat Equity) Regulations 2021 ("SEBI ESOPRegulations"). Details of the Schemes have been provided in Note No. 40 of thestandalone financial statements. The disclosure in compliance with the SEBI ESOPRegulations is available on the Company's website athttps://www.cipla.com/investors/annual-reports.

Pursuant to the provisions of the SEBI ESOP Regulations and theshareholders' approval dated 22nd August 2013 for ESOS 2013 - A and 25th March 2021 forESAR Scheme 2021 the NRC being authorised approved the following non-material andnon-detrimental amendments to the Schemes for the welfare of employees:

allowed vesting of unvested options / ESARs till the lastworking day which earlier was restricted to the date of submission of resignation;

allowed the separated employees to exercise the vestedoptions / ESARs within 3 months post separation which was earlier restricted to a dayprior to the last working day of the employees with the Company;

allowed immediate vesting of unvested options / ESARs on thedate of retirement (subject to a minimum one-year vesting period) which were earlierlapsed on such date. The employees are allowed to exercise the vested options within 6months post retirement.

clarified to consider separation as formal termination andcancel all unexercised options / ESARs in case of misconduct/ breach of the Companypolicies/employment.

In compliance with the requirements of the SEBI ESOP Regulations acertificate from the secretarial auditor confirming implementation of the Schemes inaccordance with the said regulations and shareholder's resolution is uploaded on thewebsite of the Company at https://www.cipla.com/investors/ annual-reports. The certificatewill also be available for electronic inspection by the members during the AGM of theCompany.

Human Resources

Information required under Section 197(12) of the Act read with Rule5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014is provided in Annexure IV to this report.

Information required under Section 197(12) of the Act read with Rule5(2) and Rule 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel)Rules 2014 is provided in a separate exhibit forming part of this report and is availableon the website of the Company at https://www.cipla.com/ investors/annualreports.

Particulars of Loans Guarantees and Investments

Particulars of loans guarantees and investments under Section 186 ofthe Act have been provided in Note No. 42 to the standalone financial statements.

Annual Return

The Annual return for the FY 2021-22 has been placed on the website ofthe Company at https://www.cipla.com/investors/ annual-reports.

Vigil Mechanism

The Company has a Whistle Blower Policy which lays down the process toconvey genuine concerns and seek resolution towards the same without fear of retaliation.

A detailed update on the functioning of the Whistle Blower Policy andweblink of the Policy has been provided in the Report on Corporate Governance on page no.180.

Prevention of Sexual Harassment of Women at Workplace

The Company is committed to providing a safe and conducive workenvironment to all its employees and associates. The Company has

a policy on Prevention of Sexual Harassment at Workplace in placewhich is available on the Company website at https://www.cipla.com/sites/default/files/1558508425_POSH-%20Cipla.pdf.

All employees consultants trainees volunteers third parties and/ orvisitors at all business units or functions of the Company its subsidiaries and/or itsaffiliated or group companies are covered by the said policy. Adequate workshops andawareness programmes against sexual harassment are conducted across the organisation.

The Company has constituted an Internal Complaints Committee incompliance with the provisions of the Sexual Harassment of Women at Workplace (PreventionProhibition and Redressal) Act 2013 and is fully compliant of the Committee compositionrequirements. The Audit Committee periodically reviews the complaints.

Details of complaints received/disposed during FY 2021-22 are providedin the Report on Corporate Governance on page no. 184.

Related Party Transactions

A detailed note on procedure adopted by the Company in dealing withcontracts and arrangements with related parties has been provided in the Report onCorporate Governance on page no. 181.

All contracts arrangements and transactions entered by the Companywith related parties during FY 2021-22 were in the ordinary course of business and on anarm's length basis. During the year the Company did not enter into any transactioncontract or arrangement with related parties which could be considered material inaccordance with the Company's Policy on dealing with Related Party Transactions ("RPTPolicy"). Accordingly the disclosure of related party transactions in Form AOC-2 isnot applicable. The disclosure on related party transactions as per Ind AS-24 has beenprovided under Note No. 39 of the standalone financial statements on page no. 262 and NoteNo. 48 of the consolidated financial statements on page no. 368

During the year the Company revised its RPT Policy to align it withamendments in the RPT framework under the Listing Regulations. The RPT policy is availableon the Company's website at https://www.cipla.com/sites/default/files/2022-05/Policy-on-Related-Party-Transaction.pdf.

Internal Financial Controls and their adequacy

Cipla has laid down an adequate system of internal controls policiesand procedures for ensuring orderly and efficient conduct of the business includingadherence to the Company's policies safeguarding of its assets prevention and detectionof frauds and errors accuracy and completeness of the accounting records and timelypreparation of reliable financial disclosures.

The current system of internal financial controls is aligned with thestatutory requirements and is in line with the globally- accepted risk-based frameworkissued by the Committee of Sponsoring Organisations ("COSO") of the TreadwayCommission. The internal financial controls are adequate and operating effectively.

Effectiveness of internal financial controls is ensured throughmanagement reviews controlled self-assessment and independent testing by the internalaudit team.

Risk Management

The Board of Directors has an Investment and Risk Management Committee("IRMC") which oversees the Enterprise Risk Management ("ERM")process. An update on ERM activities is presented and deliberated upon in the IRMCmeetings on a quarterly basis and periodically at the Board level at least once a year.The Audit Committee has an additional oversight in the area of financial risks andcontrols. The major risks identified by the businesses and functions are systematicallyaddressed through mitigating actions on a continuing basis. In terms of the provisions ofSection 134 of the Act a detailed note on Risk Management has been provided on page no.42 of this report.

Board Evaluation

A detailed disclosure on the parameters and the process of Boardevaluation as well as the outcome has been provided in the Report on Corporate Governanceon page no. 168.

Subsidiaries Associates and Joint Ventures

At the beginning of the year the Company had 46 subsidiaries and 5associates as against 45 subsidiaries and 8 associates as on 31st March 2022. Changesduring the year were as follows:

Acquisition of 32.49% stake in AMP Energy Green ElevenPrivate Limited and 33% partnership interest in Clean Max Auriga Power LLP in line withCipla's commitment to enhance the share of renewable power source in its operation and tocomply with regulatory requirement for being a captive user under Indian electricity laws.

Incorporation of Cipla Digital Health Limited as a wholly-owned subsidiary of the Company on 25th February 2022 for creation of patient-facingDigital Therapeutics platform.

On 3rd May 2021 GoApptiv Private Limited existingassociate of Cipla incorporated wholly-owned subsidiary - Iconphygital Private Limitedfor providing manpower staffing services.

The following wholly-owned step down subsidiaries werevoluntarily deregistered /dissolved as these were operationally inactive and not required:

• Cipla Biotec South Africa (Pty) Limited with effect from 3rdFebruary 2022.

• Inyanga Trading 386 (Pty) Limited with effect from 10thDecember 2021.

Details of these subsidiaries and associates are set out on page no.292 of the Annual Report. Pursuant to Section 129(3) of the Act read with Rule 5 of theCompanies (Accounts) Rules 2014 a statements containing the salient features of thefinancial statement of the subsidiary and associate companies in Form no. AOC-1 isprovided on page no. 377 of the Annual Report.

The statement also provides details of the performance and thefinancial position of each of the subsidiaries and associates. The consolidated financialstatements presented in this annual report include financial results of the subsidiary andassociate companies.

Copies of the financial statements of the subsidiary companies will beavailable on the Company's website www.cipla.com.

Transfer of undertaking by way of a slump sale on a going concern basis

The Board approved a draft scheme of arrangement ("Scheme")which entailed the following:

(i) Demerger of the India-based US business undertaking (DemergedUndertaking 1) of Cipla Limited (Demerged Company) into its wholly-owned subsidiary CiplaPharma and Life Sciences Limited (formerly known as Cipla BioTec Limited) (herein afterreferred to as "CPLS") and

(ii) Demerger of the Consumer Business Undertaking (DemergedUndertaking 2) of Cipla Limited into its wholly- owned subsidiary Cipla Health Limited(herein after referred to as "CHL").

Post approval due to certain regulatory developments which made itfeasible for this transaction to be effected through an alternate option the AuditCommittee and the Board approved to effect the above transfer of undertakings by way of aslump sale on a going concern basis instead of a Scheme of Arrangement.

The details of the proposed transactions are disclosed in Note No. 36to the standalone financial statements.

Nomination Remuneration and Board Diversity Policy

The Board has on the recommendation of the NRC framed a NominationRemuneration and Board Diversity Policy ('NRC Policy') for selection appointment andremuneration of directors key managerial personnel and senior management employees andother matters as provided under Section 178(3) of the Act.

During the year under review the Board based on the recommendation ofthe NRC Committee revised the NRC Policy for including the revised sitting fees fornon-executive directors for attending the board and board committee meetings.

The salient features of the NRC Policy are as follows:

To provide criteria and terms and conditions with regard toidentifying persons who are qualified to become directors (executive and non-executiveincluding independent directors) key managerial personnel and persons who may beappointed in senior management positions.

To recommend the remuneration of the directors keymanagerial personnel and senior management personnel and align with the Company's businessstrategies values key priorities and goals.

To provide rewards linked directly to the effortperformance dedication and achievement of the Company's targets by the employees.

To monitor and periodically review the Board Diversity andrecommend to the Board to improve one or more aspects of its diversity and measureprogress accordingly.

Undertake any other matters as the Board may decide fromtime to time.

The Policy is available on the website of the Company athttps://www.cipla.com/sites/default/files/2021-06/Nomination-Remuneration-and-Board-Diversity-Policy.pdf.

Directors and Key Managerial Personnel

At the 85th Annual General Meeting of the Company held on 25th August2021 the shareholders approved (i) the reappointment of Mr M K Hamied as Non-executiveDirector liable to retire by rotation (ii) the re-appointment of Mr Umang Vohra asManaging Director and Global Chief Executive Officer for a period of five years witheffect from 1st April 2021 (iii) the appointment of Mr Robert Stewart as an IndependentDirector for a period of five years with effect from 14th May 2021 (iv) the appointmentof Mr P R Ramesh as an Independent Director for a period of five years with effect from1st July 2021.

In accordance with the provisions of the Act and the Articles ofAssociation of the Company Ms Samina Hamied is due to retire by rotation at the ensuing86thAnnual General Meeting and being eligible has offered herself for re-appointment.Based on the recommendation of the NRC the Board of Directors recommends herre-appointment as Director liable to retire by rotation.

In the opinion of the Board all the directors as well as thedirectors appointed / re-appointed during the year possess the requisite qualificationsexperience and expertise and hold high standards of integrity. All Independent Directorsexcept Mr Robert Stewart are exempt from the requirement of passing the proficiency test.Unless exempted Mr Robert Stewart will be required to pass the proficiency test withinthe permissible time limit. The list of key skills expertise and core competencies of theBoard of Directors is provided in the Report on Corporate Governance at page no. 166 ofthis Annual Report.

Criteria for determining qualification positive attributes andindependence of a director is given under the NRC Policy.

Ms Naina Lal Kidwai resigned from the position of Independent Directorof the Company w.e.f close of business hours on 31st March 2022. The Board placed onrecord its sincere appreciation for the contribution made by her as a member of the Board.

Mr Kedar Upadhye resigned from the position of Global Chief FinancialOfficer and Key Managerial Personnel of the Company w.e.f. close of business hours on 3rdMay 2022. The Board placed on record its sincere appreciation for the contribution madeby him over the years.

Mr Dinesh Jain Senior Vice-President and Head - Corporate Finance wasappointed by the Board as the Interim Chief Financial Officer effective 10th May 2022

As on the date of this report the Company has the following KeyManagerial Persons as per section 2(51) and 203 of the Act:

Sr. Name No. Designation
1 Ms Samina Hamied Executive Vice-Chairperson
2 Mr Umang Vohra Managing Director & Global Chief Executive Officer
3 Mr Dinesh Jain* Interim Chief Financial Officer
4 Mr Rajendra Chopra Company Secretary & Compliance officer

* Mr Dinesh Jain appointed as Interim Chief Financial Officer w.e.f.J0lh May 2022

Ms Samina Hamied Mr Umang Vohra Dr Peter Mugyenyi Mr Ashok Sinha MrRobert Stewart and Mr S Radhakrishnan received remuneration/sitting fees from theCompany's subsidiaries during FY 2021-22.

Declaration by Independent Directors

All Independent Directors have submitted requisite declarationsconfirming that they (i) continue to meet the criteria of independence as prescribed underSection 149(6) of the Act and Regulation 16(1)(b) of the Listing Regulations and areindependent; and (ii) continue to comply with the Code of Conduct laid down under ScheduleIV of the Act. Details on the same have also been provided in the Report on CorporateGovernance which forms a part of this report.

The Directors have further confirmed that they are not debarred fromholding the office of director under any SEBI order or any other such authority.

Board Committees and number of meetings of the Board and BoardCommittees

As on the date of this report the Board has the following committees:

i) Audit Committee

ii) Nomination and Remuneration Committee

iii) Corporate Social Responsibility Committee

iv) Stakeholders Relationship Committee

v) Investment and Risk Management Committee

vi) Operations and Administrative Committee

The Committee of Independent Directors was constituted specifically forthe purpose of the Scheme of Arrangement in FY 2020-21. The Committee was dissolved on25th January 2022 since it was approved to effect the transaction by way of slump saleand hence no longer required.

All the recommendations made by the Board committees including theAudit Committee were accepted by the Board.

The Board met seven times during the year under review. The details ofthe meetings are provided in the Report on Corporate Governance which forms a part ofthis report.

Statutory Auditor and their report

M/s Walker Chandiok & Co LLP Chartered Accountants (FirmRegistration No 001076N/ N500013) were re-appointed as the Statutory Auditor of theCompany at the 85th AGM held on 25th August 2021 to hold the office till the conclusionof the 90th AGM to be held in year 2026.

The Statutory Auditor's Report does not contain any qualificationreservation adverse remarks or observation.

Secretarial Auditor and their reports

M/s BNP & Associates Company Secretaries was appointed as theSecretarial Auditor for the financial year ended 31st March 2022. The SecretarialAuditors have furnished their report annexed as Annexure V to this report.

Further in compliance with Regulation 24A of the Listing Regulationsthe Annual Secretarial Compliance Report issued by the Secretarial Auditor was submittedto the stock exchanges within the statutory timelines.

The Secretarial Audit Report and the Secretarial Compliance Report doesnot contain any qualification reservation observation or adverse remarks.

The Board of Directors on the recommendation of the Audit Committeehas re-appointed M/s BNP & Associates Company Secretaries to conduct the secretarialaudit of the Company for FY 2022-23. They have confirmed their eligibility for the saidre-appointment.

Cost Auditor and their report

Mr D H Zaveri practising Cost Accountant (Fellow Membership No. 8971)was appointed as the Cost Auditor to conduct the audit of Company's cost records for thefinancial year ended 31st March 2022. Mr Zaveri has confirmed his eligibility for thesaid appointment.

The Cost Auditor will submit their report by the due date. The CostAudit Report for the year ended 31st March 2021 was filed with the Central Governmentwithin the prescribed time. The Company maintains the cost records as per the provisionsof Section 148(1) of the Act.

In accordance with the provisions of Section 148 of the Act read withthe Companies (Audit and Auditors) Rules 2014 since the remuneration to be paid to theCost Auditor for FY 2022-23 is required to be ratified by the members the Board ofDirectors recommends the same for approval by members at the ensuing AGM. The proposalforms a part of the notice of the AGM.

During the year under review the Statutory Secretarial and CostAuditors have not reported to the Audit Committee under Section 143(12) of the Act anyinstances of fraud committed against the Company by its officers or employees the detailsof which need to be mentioned in the Board's report.

Other Disclosures

During the financial year under review:

There was no amount proposed to be transferred to theReserves;

There were no changes made in the nature of business of theCompany;

The Company has complied with the applicable SecretarialStandards i.e. SS-1 and SS-2 relating to 'Meetings of the Board of Directors' and'General Meetings' respectively;

The Company issued and allotted equity shares as per itsESOS 2013-A Scheme and there was no instance wherein the Company failed to implement anycorporate action within the statutory time limit;

The Company did not accept any deposit within the meaning ofSections 73 and 74 of the Act read with the Companies (Acceptance of Deposits) Rules 2014and accordingly no amount on account of principal or interest on public deposits wasoutstanding as on 31st March 2022;

The Company has not issued shares with differential votingrights and sweat equity shares during the year under review;

There were no significant or material orders passed by theregulators or courts or tribunals which could impact the going concern status of theCompany and its future operations;

There were no material changes and commitments whichoccurred after the close of the year till the date of this report which may affect thefinancial position of the Company.

Acknowledgements

We wish to place on record our appreciation to the Government ofvarious countries where the Company has its operations. We thank the Ministry of Chemicalsand Fertilisers India; Central Government; State Government and other regulatory bodies /authorities; banks; business partners; shareholders; medical practitioners and otherstakeholders for the assistance cooperation and encouragement extended to the Company. Wewould also like to place on record our deep sense of appreciation to the employees fortheir contribution and services.

On behalf of the Board of Directors
Date: 10th May 2022 Y K Hamied
Place: London Chairman

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