The Board of Directors are pleased to submit its report on the performance of theCompany along with the audited Standalone as well as Consolidated financial statements forthe year ended 31st March 2019.
Financial Summary and State of Affairs
|Particulars || |
Year ended 31st March 2019
Year ended 31st March 2018
| ||Standalone ||Consolidated ||Standalone ||Consolidated |
|Gross Total revenue ||12374.01 ||16362.41 ||11444.81 ||15219.25 |
|Profit before tax and exceptional item ||2492.83 ||2079.14 ||1988.92 ||1746.98 |
|Profit for the year (after tax and attributable to shareholders) ||1888.41 ||1527.70 ||1468.52 ||1410.53 |
|Other Comprehensive Income for the year (not to be reclassified to P&L) ||7.81 ||34.91 ||1.77 ||24.30 |
|Other Comprehensive Income for the year (to be reclassified to P&L) ||31.75 ||(324.85) ||0.47 ||369.23 |
|Surplus brought forward from last balance sheet ||9214.31 ||8988.78 ||7933.29 ||7774.11 |
|Profit available for appropriation ||11110.53 ||10535.40 ||9403.58 ||9188.05 |
|Appropriations: || || || || |
|Dividend ||(241.57) ||(241.57) ||(160.94) ||(160.94) |
|Tax on Dividend ||(40.40) ||(42.52) ||(28.33) ||(28.33) |
|Surplus carried forward ||10828.56 ||10251.31 ||9214.31 ||8998.78 |
The financial results and the results of operations including major developments havebeen further discussed in detail in the Management Discussion and Analysis section.
The Standalone as well as the Consolidated financial statements have been prepared inaccordance with the Indian Accounting Standards ('Ind AS').
During the year under review 582102 equity shares were issued and allotted underEmployee Stock Option Scheme. Consequently the issued subscribed and paid up sharecapital of the Company as on 31st March 2019 stood at H1611402532/-divided into 805701266 equity shares of H2/- each. The equity shares issued under theEmployee Stock Option Scheme 2013-A rank pari-passu with the existing equity sharesof the Company.
In line with the Dividend Distribution Policy of the Company we recommend a finaldividend of H3/- per equity share (i.e. 150 % of face value) for the FY 18-19. Thedividend if approved at the Annual General Meeting (AGM) will be paid to those memberswhose names will appear in the Register of Members as on close of Thursday 1stAugust 2019. The total dividend pay-out will amount to approximately H241.71 crore(excluding dividend distribution tax of H49.69 crore) resulting in a pay-out of 12.80% ofthe Standalone profit after tax of the Company.
The Company has not transferred any amount to the Reserve for the financial year ended31st March 2019.
Management Discussion and Analysis Report
Pursuant to Regulation 34 of the Securities and Exchange Board of India (ListingObligations and Disclosure Requirements) Regulations 2015 (Listing Regulations) theManagement Discussion and Analysis Report for the year under review is presented in aseparate section forming part of the Annual Report.
Corporate Social Responsibility (CSR)
At Cipla we consider it as our responsibility to support underprivileged people tolive a life with dignity and quality. Cipla undertake its CSR activities primarily inquality health education and skilling. A detailed report on Cipla's various CSRinitiatives has been provided in a separate section "Corporate SocialResponsibility". The Corporate Social Responsibility Report also contains the AnnualReport on CSR initiatives as required under section 135 of the Companies Act 2013 (theAct) which is annexed as Annexure I to this report.
Business Responsibility Report
As mandated by the Securities and Exchange Board of India (SEBI) the BusinessResponsibility Report (BRR) forms part of the Annual Report. Since the Company ispublishing Annual Report under International Integrated Reporting Council (IIRC)framework report on the nine principles of the National Voluntary Guidelines on socialenvironmental and economic responsibilities of business as framed by the Ministry ofCorporate Affairs is provided in relevant sections of the IR with suitable references tothe BRR.
In compliance with the provisions of the Listing Regulations the Report on CorporateGovernance for the year under review is presented in a separate section forming part ofthe Annual Report.
A certificate from M/s. BNP & Associates confirming compliance of conditions ofCorporate Governance as stipulated under the Listing Regulations is annexed as AnnexureII to this report.
Directors' Responsibility Statement
Pursuant to section 134(3)(c) of the Act it is confirmed that the Directors have:
i. Followed applicable accounting standards in the preparation of the annual accountsand there are no material departures for the same;
ii. Selected such accounting policies and applied them consistently and made judgementsand estimates that are reasonable and prudent so as to give a true and fair view of thestate of affairs of the Company as on 31st March 2019 and of the profit of theCompany for the year ended 31st March 2019;
iii. Taken proper and sufficient care for maintenance of adequate accounting records inaccordance with the provisions of the Act for safeguarding the assets of the Company andfor 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 Company and that suchinternal financial controls are adequate and were operating effectively; and
vi. Devised proper systems to ensure compliance with the provisions of all applicablelaws and that such systems were adequate and operating effectively.
Conservation of Energy Technology Absorption Foreign Exchange Earnings and Outgo
The details of Energy Conservation Technology Absorption and Foreign Exchange Earningsand Outgo as required under section 134(3)(m) of the Act read with Rule 8(3) of theCompanies (Accounts) Rules 2014 is annexed to this report as Annexure III.
Employee Stock Option Scheme
The Company has an Employee Stock Option (ESOP) scheme namely "Employee StockOption Scheme 2013-A" (ESOP Scheme) which helps the Company to retain and attractright talent. The Nomination and Remuneration Committee (NRC) administers the Company'sESOP scheme. There were no changes in the ESOP scheme during the financial year underreview. The ESOP scheme is in compliance with the Securities and Exchange Board of India(Share Based Employee Benefits) Regulations 2014 [SEBI (SBEB) Regulations 2014].
In compliance with the requirement of SEBI (SBEB) Regulations 2014 a certificate fromauditor confirming implementation of ESOP Scheme in accordance with the said regulationsand shareholder's resolution will be placed at the ensuing annual general meeting of theCompany.
The requisite applicable disclosures under the SEBI (SBEB) Regulations 2014 as on 31stMarch 2019 will be uploaded on the Company's website at www.cipla.com.
Details of the Employee Stock Option Scheme 2013-A have also been provided under NoteNo. 42 of the Standalone financial statement.
Details of remuneration as required under section 197(12) of the Act read with rule5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014is annexed as Annexure IV.
Particulars of employee remuneration as required under section 197(12) of the Act readwith rule 5(2) and rule 5(3) of the Companies (Appointment and Remuneration of ManagerialPersonnel) Rules 2014 forms part of this report. In terms of the provisions of section136 of the Act the Annual Report is being sent to members excluding the aforementionedinformation. The information will be available on the Company's website www.cipla.com andis also available for inspection at the registered office of the Company during workinghours for a period of 21 days before the Annual General Meeting. Any member interested inobtaining such information may write to the Company Secretary at the Registered Office ofthe Company.
Particulars of Loans Guarantees and Investments
Particulars of loans guarantees and investments under section 186 of the Act areprovided in Note No. 44 to the Standalone financial statements.
Extract of Annual Return
An extract of the annual return of the Company has been placed on the website of theCompany and can be accessed at www.cipla.com under the investor information section. Theextract of the annual return for FY 18-19 is given as Annexure V.
The Company has formulated a Whistle-Blower Policy which serves as a mechanism for itsdirectors employees and external stakeholders to report genuine concerns regardingunethical behaviour actual or suspected fraud or violation of the Code of Conduct withoutfear of reprisal. An Ethics Committee consisting of the Global Chief People Officer (GCPO)as Chairperson the Global Chief Financial Officer (GCFO) the Global General Counsel (GC)and the Global Chief Internal Auditor has been constituted to investigate whistle-blowercomplaints. Directors employees and external stakeholders can report their genuineconcerns either in writing or by an email to the Chairperson of Ethics Committee or to theChief Internal Auditor at email@example.com or to the Chairperson of Audit Committee firstname.lastname@example.org. The complaints reports and actions taken are presented to theAudit Committee on a quarterly basis. The WhistleBlower Policy is available on theCompany's website at https://www.cipla.com//uploads/investor/1530187336_Whistle%20Blower%20Policy%20V1%20fc.pdf
A brief note on the highlights of the Whistle-Blower Policy and compliance with theCode of Conduct has also been provided in the Report on Corporate Governance which formspart of this Annual Report.
Failure to implement any Corporate Action
There were no instances where the Company failed to implement any corporate actionwithin the specified time limit.
Prevention of Sexual Harassment of Women at Workplace
The Company has in place a policy on Prevention of Sexual Harassment at Workplacewhich is available on the Company website at https://www.cipla.com//uploads/investor/1558508425_POSH-%20Cipla.pdf. All employees consultants traineesvolunteers third parties and/or visitors at all business units or functions of theCompany its subsidiaries and/or its affiliated or group companies are covered by the saidpolicy.
The Company is in compliance with the provisions relating to the constitution of anInternal Complaints Committee under the Sexual Harassment of Women at Workplace(Prevention Prohibition and Redressal) Act 2013.
Contract and Arrangements with Related Parties
A detailed note on procedure adopted by the Company in dealing with contracts andarrangements with related parties has been provided in the Report on Corporate Governancewhich forms part of this Annual Report.
All contracts arrangements and transactions entered by the Company with relatedparties during FY 18-19 were in the ordinary course of business and on an arm's lengthbasis. During the year the Company did not enter into any transaction contract orarrangement with related parties that could be considered material in accordance with theCompany's policy on related party transactions. Accordingly the disclosure of relatedparty transactions in Form AOC-2 is not applicable. However detailed disclosure onrelated party transactions as per IND AS-24 containing name of the related party anddetails of the transactions entered with such related party have been provided under NoteNo. 41 of the Standalone financial statements.
The policy on dealing with related party transactions is available on the Company'swebsite at https://www. cipla.com//uploads/investor/1532683654_Cipla%20Limited%20-%20Policy%20on%20Dealing%20with%20 Related%20Party%20Transactions.pdf
Material changes and commitments affecting financial position between end of financialyear and date of report
No material changes and commitments have occurred after the close of the year till thedate of this report which may affect the financial position of the Company.
Significant and Material Orders passed by regulators or courts or tribunals
No significant or material orders were passed by the regulators or courts or tribunalswhich could impact the going concern status of the Company and its future operations.
Internal Financial Controls and its Adequacy
Cipla has an adequate system of internal controls that is commensurate with the natureof our business and the size and complexity of our operations. The Company has adoptedpolicies and procedures covering all financial and operating functions. These controlshave been designed to provide reasonable assurance over:
Effectiveness and efficiency of operations
Prevention and detection of frauds and errors
Safeguarding of assets from unauthorised use or losses
Compliance with applicable laws and regulations
Accuracy and completeness of accounting records
Timely preparation of reliable financial information
The current system of internal financial controls is aligned with the requirements ofthe Act and is in line with the globally accepted risk-based framework issued by theCommittee of Sponsoring Organisations (COSO) of the Treadway Commission.
The Company has an internal audit function which is supported by dedicated outsourcedteams. The internal audit plan is approved by the Audit Committee at the beginning ofevery year. Every quarter the Audit Committee is presented with key control issues andthe actions taken on issues highlighted in the previous reports.
The Audit Committee deliberates with the management considers the systems as laiddown and meets the internal auditors and statutory auditors to ascertain their views onthe internal financial control systems. The Company recognises the fact that any internalcontrol framework would have some inherent limitations and hence has inculcated a processof periodic audits and reviews to ensure that such systems and controls are updated atregular intervals.
The Company has put in place an Enterprise Risk Management (ERM) framework. Everyquarter a detailed update on ERM is presented and deliberated upon in the meetings of theInvestment and Risk Management Committee of the Board. In terms of the provisions ofSection 134 of the Act a detailed note on Risk Management has been provided on page no.36 of this report.
During FY 18-19 the Company did not accept any deposit within the meaning of sections73 and 74 of the Act read together with the Companies (Acceptance of Deposits) Rules2014.
The evaluation of all the Directors including the Chairman the ExecutiveVice-Chairperson and the Managing Director and Global CEO Board committees and the Boardas a whole was carried out based on the criteria and framework approved by the Nominationand Remuneration Committee. A detailed disclosure on the parameters and the process ofBoard evaluation as well as the outcome has been provided in the Corporate GovernanceReport.
Subsidiaries and Associates
At the beginning of the year the Company had 49 subsidiaries and 1 associate asagainst 48 subsidiaries and 2 associates as on 31st March 2019. During theyear the following companies were incorporated acquired liquidated or divested:
During the year Madison Pharmaceuticals Inc. was incorporated in USA and Cipla GulfFZ- LLC in Dubai for strengthening its business operations. In South Africa Mirren (Pty)Limited was acquired as a part of strategy to strengthen its OTC portfolio. In USA 33.3%stake was acquired in Avenue Therapeutics Inc. for building specialty business in USA. TheCompany's wholly owned subsidiary Goldencross Pharma Private Limited acquired minoritystake i.e. 11.71% in Wellthy Therapeutics Private Limited.
During the year 4 non-operating subsidiaries viz. Xeragen Laboratories (Pty) LimitedGalilee Marketing (Pty) Ltd Med Man Care (Pty) Ltd in South Africa and Cipla FZE in Dubaiwere liquidated.
Details of these subsidiaries and associates are set out on Page 283 of the AnnualReport. Pursuant to section 129(3) of the Act read with rule 5 of the Companies (Accounts)Rules 2014 a statements containing salient features of the financial statement of thesubsidiary and associate companies is given on Page 334 of the Annual Report. Thestatement also provides details of the performance and the financial position of each ofthe subsidiaries and associates. The consolidated financial statements presented in thisannual report include financial results of the subsidiary and associate companies.
Copies of the financial statements of the subsidiaries will be available on theCompany's website www.cipla.com and will also be available for inspection by the membersat the registered office of the Company during business hours. Copies of the saidfinancial statements will be made available to any member of the Company and those of therespective subsidiaries upon request.
Directors and Key Managerial Personnel
Ms lreena Vittal Independent Director resigned from the Board of the Company effective1st April 2019 due to her other professional commitments resulting in herinability to devote as much time as she need to. She has confirmed that there were noother material reasons for her resignation other than the one stated above. Consequent tothe said resignation she also ceased to be the member of the Audit Committee and theNomination and Remuneration Committee w.e.f. 1st April 2019. The Board placeson record its sincere appreciation for the contribution made by her as a member of theBoard.
Mr Adil Zainulbhai was appointed as the member of Audit Committee and Dr Peter Mugyenyiwas appointed as the member of Nomination and Remuneration Committee w.e.f. 7thFebruary 2019
The tenure of appointment of Mr Ashok Sinha Dr Peter Mugyenyi and Mr Adil Zainulbhaias independent directors will conclude on 2nd September 2019 and the tenure ofappointment of Ms Punita Lal as independent director will conclude on 12thNovember 2019. Pursuant to the provisions of section 149 and 152 of the Companies Act2013 the recommendation of the Nomination and Remuneration Committee and the report ofperformance evaluation the Board recommends re-appointment of the above-mentionedIndependent directors for a further term of 5 consecutive years.
Mr Umang Vohra Managing Director and Global Chief Executive Officer retires byrotation and being eligible offers himself for re-appointment. The Board on the basis ofrecommendation of the Nomination and Remuneration Committee recommends the re-appointmentof Mr Umang Vohra as Director liable to retire by rotation.
Brief resume nature of expertise in specific functional areas names of companies inwhich the above-named directors hold directorships committee memberships/ chairmanshipsshareholding in Cipla etc. are furnished in notice of the ensuing AGM.
Criteria for determining qualification positive attributes and independence of adirector is given under Nomination Remuneration and Board Diversity Policy disclosed asExhibit A to the Report on Corporate Governance.
As on 31st March 2019 the Company had the following Key ManagerialPersonnel ("KMP") as per section 2(51) of the Act:
|Sr. No Name of the KMP ||Designation |
|1 Ms Samina Vaziralli ||Executive Vice-Chairperson |
|2 Mr Umang Vohra ||Managing Director and Global Chief Executive Officer |
|3 Mr Kedar Upadhye ||Global Chief Financial Officer |
|4 Mr Rajendra Chopra ||Company Secretary & Compliance Officer |
Except Mr Peter Lankau who received remuneration from InvaGen Pharmaceuticals Inc. awholly owned subsidiary of Cipla Limited none of the directors including the ManagingDirector and Global CEO nor the Whole-time Director received any remuneration orcommission from any of the Company's subsidiaries during the previous year.
Declaration by Independent Directors
All Independent Directors of the Company have submitted requisite declarationsconfirming that they continue to meet the criteria of independence as prescribed undersection 149(6) of the Act and Regulation 16(1)(b) of the Listing Regulations. TheIndependent Directors have also confirmed that they have complied with Schedule IV of theAct and the Company's Code of Conduct.
Committees of Board Number of Meetings of the Board and Board Committees
The Board currently has six committees namely the Audit Committee the Nomination andRemuneration Committee the Corporate Social Responsibility Committee the StakeholdersRelationship Committee the Investment and Risk Management Committee and the Operationsand Administrative Committee. All the recommendations made by the Committees of Boardincluding the Audit Committee were accepted by the Board.
The Board met five times during the year under review. The maximum gap between twoBoard meetings did not exceed 120 days. A detailed update on the Board its Committeesits composition detailed charter including terms of reference of various BoardCommittees number of board and committee meetings held and attendance of the directors ateach meeting is provided in the Report on Corporate Governance which forms part of thisreport.
The Company has complied with the applicable Secretarial Standards i.e. SS-1 and SS-2relating to 'Meetings of the Board of Directors' and 'General Meetings' respectively.
Auditor and Auditor's Report
M/s. Walker Chandiok & Co LLP Chartered Accountants (Firm Registration No.001076N/ N500013) were appointed as the Statutory Auditor of the Company at the AGM heldon 28th September 2016 to hold office till the conclusion of 85thAGM of 2021. The Company has received a certificate from the Statutory Auditor confirmingthat they continue to remain eligible to act as the Statutory Auditor of the Company.
There are no instances of any fraud reported by the Auditor to the Audit Committee orthe Board pursuant to section 143(12) of the Act. The Auditor's Report for FY 18-19 doesnot contain any qualification reservation or adverse remark.
Secretarial Auditor & its Audit Report
The Secretarial Audit Report for the financial year ended 31st March 2019is annexed to this report as Annexure VI. The Report does not contain any qualificationreservation disclaimer or adverse remark.
The Board on the recommendation of the Audit Committee has re-appointed M/s BNP &Associates Company Secretaries Mumbai to conduct the secretarial audit of the Companyfor the FY 19-20. They have confirmed that they are eligible for the said appointment.
Cost Auditor and Cost Audit Report
The Cost Records of the Company are maintained in accordance with the provisions ofsection 148(1) of the Act as specified by the Central Government. The Cost Audit Reportfor the year ended 31st March 2018 was filed with the Central Governmentwithin the prescribed time.
The Board on recommendation of the Audit Committee had appointed Mr D. H. Zaveripractising Cost Accountant (Fellow Membership No. 8971) as cost auditor to conduct theaudit of Company's cost records for the financial year ended 31st March 2019.The Cost Auditor will submit his report for the FY 18-19 on or before the due date.
In accordance with the provisions of section 148 of the Act read with the Companies(Audit and Auditors) Rules 2014 since the remuneration payable to the Cost Auditor forFY 19-20 is required to be ratified by the members the Board recommends the same forapproval by members at the ensuing AGM.
Key initiatives with respect to Stakeholder relationship Customer relationshipEnvironment Sustainability Health and Safety
The key initiatives taken by the Company with respect to stakeholder relationshipcustomer relationship environment sustainability health and safety are providedseparately in the Integrated Report section of the Annual Report.
We wish to place on record our appreciation to the Government of various countrieswhere the Company has its operations. We thank the Ministry of Chemicals &Fertilizers Central Government State Government and other regulatory bodies /authorities banks business partners shareholders medical practitioners and otherstakeholders for the assistance co-operation and encouragement extended to the Company.We also like to place on record our deep sense of appreciation to the employees for theircontribution and services.
| ||On behalf of the Board |
|Date: 22nd May 2019 ||Y. K. Hamied |
|Place: New York ||Chairman |