The Board of Directors ('Board') are pleased to submit its report on the performance ofthe Company along with the audited standalone and consolidated financial statements forthe year ended 31st March 2020.
Financial Summary and State of Affairs
Rs. in Crore
|Particulars ||Year ended 31st March 2019 ||Year ended 31st March 2020 |
| ||Standalone ||Consolidated ||Standalone ||Consolidated |
|Gross total revenue ||12374.01 ||16362.41 ||12659.15 ||17131.99 |
|Profit before tax and exceptional items ||2492.83 ||2079.14 ||2964.31 ||2178.18 |
|Profit for the year (after tax and attributable to shareholders) ||1888.41 ||1527.70 ||2318.17 ||1546.52 |
|Other comprehensive income for the year (not to be reclassified to P&L) ||7.81 ||34.91 ||(15.30) ||(9.42) |
|Other comprehensive Income for the year (to be reclassified to P&L) ||31.75 ||(324.85) ||(49.13) ||(119.98) |
|Surplus brought forward from last balance sheet ||9214.31 ||8988.78 ||10828.56 ||10251.31 |
|Profit available for appropriation ||11110.53 ||10535.40 ||13131.43 ||11782.08 |
|Appropriations: || || || || |
|Dividend ||(241.57) ||(241.57) ||(564.26) ||(564.26) |
|Tax on dividend ||(40.40) ||(42.52) ||(87.45) ||(99.94) |
|Surplus carried forward ||10828.56 ||10251.31 ||12479.72 ||11117.88 |
The financial results and the results of operations including major developments havebeen discussed in detail in the Management Discussion and Analysis report.
The standalone and the consolidated financial statements have been prepared inaccordance with the Indian Accounting Standards (Ind AS).
During the year under review the Company issued and allotted fully paid up 534063equity 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 fromH1611402532/- (divided into 805701266 equity shares of H2/- each) toH1612470658/- (divided into 806235329 equity shares of H2/- each). The equityshares issued under the Employee Stock Option Scheme 2013-A rank pari-passu with theexisting equity shares of the Company.
The Board of Directors at its meeting held on 12th March 2020 approvedpayment of interim dividend of H3 per equity share and one-time special dividend of H1 perequity share of face value of H2 each. The total dividend approved was H4 per equity share(i.e. 200%) of face value of H2 each. The dividend was paid to those shareholders whosename was registered in the Register of Members as on 20th March 2020 being therecord date. The Board does not recommend any final dividend and accordingly the totalinterim dividend of H4/- per equity share declared by the Board at its meeting held on 12thMarch 2020 is to be considered as the final dividend for FY 2019-20. The Companyhas paid approximately H322.49 crore (excluding dividend distribution tax of H66.29 crore)on account of dividend which is equivalent to 13.91% of the standalone profit after taxof the Company.
The Company is in compliance with its Dividend Distribution Policy as approved by theBoard. In compliance with the requirements under Regulation 43A of the Securities andExchange Board of India (Listing Obligations and Disclosure Requirements) Regulations2015 (Listing Regulations) the Policy is annexed as Exhibit B to the Report on CorporateGovernance.
The Company has not transferred any amount to any reserve for the financial year ended31st March 2020.
Nature of business
The Company is engaged in the development manufacture sale and distribution ofpharmaceutical generic and branded generic medicines. During the year there has been nochange in the nature of business of the Company.
Management Discussion and Analysis Report
Pursuant to Regulation 34 of the Listing Regulations the Management Discussion andAnalysis report for the year under review is presented in a separate section on page no.121 of this report.
Corporate Social Responsibility (CSR)
A detailed report on Cipla's CSR initiatives has been provided in the Social Capitalsection forming part of the Integrated Report on page no. 100 and the Annual Report on CSRinitiatives as required under section 135 of the Companies Act 2013 (Act) is annexed asAnnexure I to this report on page no. 149. Details of CSR Committee composition role andmeetings etc. have been provided in the Report on Corporate Governance on page no. 202.
Business Responsibility Report
In compliance with the provisions of Regulation 34 of the Listing Regulations theBusiness Responsibility Report (BRR) is presented in a separate section on page no. 175 ofthis report. Since the Company has adopted the International Integrated Reporting Council(IIRC) framework for publishing the Annual Report reports on the nine principles of theNational Voluntary Guidelines on social environmental and economic responsibilities ofbusiness as framed by the Ministry of Corporate Affairs Government of India is providedin relevant sections of the Integrated Report with suitable references in the BRR.
In compliance with Regulation 34 read with Schedule V of the Listing Regulations aReport on Corporate Governance for the year under review is presented in a separatesection on page no. 182 of this report.
A certificate from M/s BNP & Associates confirming compliance with the conditionsof corporate governance as stipulated under the Listing Regulations is annexed asAnnexure II 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 2020 and of the profit of theCompany for the year ended 31st March 2020;
iii. Taken proper and sufficient care for maintenance of adequate accounting recordsin accordance with the provisions of the Act for safeguarding the assets of the Companyand 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 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 as Annexure III to this report.
Employee Stock Option Scheme
The Company has an Employee Stock Option Scheme namely 'Employee Stock Option Scheme2013-A' (ESOP scheme) that helps the Company to retain and attract the right talent. TheNomination and Remuneration Committee (NRC) administers the ESOP scheme. There was nochange in the ESOP scheme during the financial year under review. The ESOP scheme is incompliance with the Securities and Exchange Board of India (Share Based Employee Benefits)Regulations 2014 (SBEB Regulations). Details of the Employee Stock Option Scheme 2013-Ahave also been provided in note no. 42 of the standalone financial statement. During FY2019-20 no employee was issued options equal to or exceeding 1% of the issued sharecapital (AGM) of the Company at the time of grant.
In compliance with the requirements of the SBEB Regulations a certificate fromauditors confirming implementation of ESOP Scheme in accordance with the said regulationsand shareholder's resolution will be available electronically for inspection by themembers during the annual general meeting of the Company.
Details of the shares issued under ESOP scheme and the disclosures in compliance withSBEB Regulations are uploaded on the Company's website at https://www.cipla.com/investors/annual-reports .
Information required under section 197(12) of the Act read with rule 5(1) of theCompanies (Appointment and Remuneration of Managerial Personnel) Rules 2014 is providedin Annexure IV to this report.
Information required under section 197(12) of the Act read with rule 5(2) and rule 5(3)of the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014 formspart of this report. In terms of the provisions of section 136 of the Act the AnnualReport is being sent to members excluding the aforementioned information. The informationwill be available on the website of the Company at https://www.cipla.com/investors/annual-reports .
Particulars of loans guarantees and investments
Particulars of loans guarantees and investments under section 186 of the Act have beenprovided in Note No. 44 to the standalone financial statements.
Extract of annual return
Pursuant to the provisions of Section 92(3) and Section 134(3)(a) of the Act extractof the annual return as on
31st March 2020 in Form MGT-9 is annexed as Annexure V to this report andhas also been placed on the website of the Company at https://www.cipla.com/investors/annual-reports.
Cipla is committed to foster an environment of honest and open communication anddiscussion consistent with our values. The Company has formulated a Whistle-BlowerPolicy which lays down the process to convey genuine concerns to the management and seekresolution towards the same without fear of retaliation. This policy covers reporting ofany violation wrongdoing or non-compliance including without limitation those relatingto the Code of Conduct policies and standard procedures of Cipla and any incidentinvolving leak or suspected leak of unpublished price sensitive information (UPSI) orunethical use of UPSI in accordance with SEBI (Prohibition of Insider Trading)Regulations 2015.
Directors employees and external stakeholders can report their genuine concerns eitherin writing or by email to the Chairperson of the Ethics Committee or to the Chief InternalAuditor at email@example.com or to the Chairperson of the Audit Committee ataudit.chairman@ cipla.com . An Ethics Committee consisting of the Global Chief PeopleOfficer (GCPO) as Chairperson the Global Chief Financial Officer (GCFO) the GlobalGeneral Counsel (GC) and the Global Chief Internal Auditor investigate whistle-blowercomplaints. A report on functioning of the mechanism including the complaints received andactions taken is presented to the Audit Committee on a quarterly basis. The Whistle-BlowerPolicy is available on the Company's website at https://www.cipla.com/sites/default/files/2020-02/Whistle%20 Blower%20Policy%20V3-%20Final.pdf .
Detailed updates on the functioning of the WhistleBlower Policy and compliance with theCode of Conduct have also been provided in the Report on Corporate Governance on page no.207.
Failure to implement any corporate action
During the year under review the Company issued shares under its ESOP scheme paid thefinal dividend for FY 2018-19 and Interim and Special Dividend for FY 2019-20. There wereno instances where the Company failed to implement any corporate action mentionedherewith within the specified time limit.
Prevention of Sexual Harassment of Women at Workplace
The Company has instituted a policy on Prevention of Sexual Harassment at Workplacewhich is available on the Company website at https://www.cipla.com/sites/default/files/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. Adequate workshops and awareness programmes against sexual harassment areconducted across the organisation.
Your Company has constituted an Internal Complaints Committee in compliance with theprovisions of the Sexual Harassment of Women at Workplace (Prevention Prohibition andRedressal) Act 2013 and is accordingly fully compliant.
Details of complaints received/disposed during FY 2019-20 are provided in the Report onCorporate Governance on page no. 211.
Related party transactions
A detailed note on the procedure adopted by the Company in dealing with contracts andarrangements with related parties has been provided in the Report on Corporate Governance.
All contracts arrangements and transactions entered into by the Company with relatedparties during FY 2019-20 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 dealing with related party transactions. Accordingly the disclosureof related party transactions in Form AOC-2 is not applicable. However detaileddisclosure on related party transactions as per IND AS- 24 containing the name of therelated party and details of the transactions entered with such related party have beenprovided under Note No. 41 of the standalone financial statements on page no. 295.
The policy on dealing with related party transactions is available on the Company'swebsite https://www.cipla.com/ sites/default/files/2020-06/Policy%20on%20dealing%20with%20Related%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 their adequacy
Cipla has laid down an adequate system of internal controls policies and proceduresfor ensuring orderly and efficient conduct of the business including adherence to theCompany's policies safeguarding of its assets prevention and detection of frauds anderrors accuracy and completeness of the accounting records and timely preparation ofreliable financial disclosures.
The current system of internal financial controls is aligned with the statutoryrequirements and is in line with the globally accepted risk-based framework issued by theCommittee of Sponsoring Organisations (COSO) of the Treadway Commission. The internalfinancial controls are adequate and operating effectively.
Effectiveness of internal financial controls is ensured through management reviewscontrolled selfassessment and independent testing by the Internal Audit Team.
The Chairman on behalf of Audit Committee has confirmed the adequacy of internalfinancial controls in the Audit Committee Report which forms part of Report of CorporateGovernance on page no. 196.
The Board of Directors of the Company has formed an Investment and Risk ManagementCommittee (IRMC) which oversees the Enterprise Risk Management (ERM) process. An update onERM activities is presented and deliberated upon in the IRMC meetings on quarterly basisand atleast once in a year at the Board level. The Audit Committee has additionaloversight in the area of financial risks and controls. The major risks identified by thebusinesses and functions are systematically addressed through mitigating actions on acontinuing basis. In terms of the provisions of Section 134 of the Act a detailed note onRisk Management has been provided on page no. 48 of this report.
During FY 2019-20 the Company did not accept any deposit within the meaning ofsections 73 and 74 of the Act read together with the Companies (Acceptance of Deposits)Rules 2014 and accordingly no amount on account of principal or interest on publicdeposits was outstanding as on 31st March 2020.
The evaluation of all the directors including the Chairman the ExecutiveVice-Chairperson and the Managing Director and Global Chief Executive Officer Boardcommittees and the Board as a whole was carried out based on the criteria and frameworkapproved by the Nomination and Remuneration Committee. A detailed disclosure on theparameters and the process of Board evaluation as well as the outcome has been provided inthe Report on Corporate Governance on page no. 190.
Subsidiaries associates and joint ventures
At the beginning of the year the Company had 49 subsidiaries and 1 associate asagainst 51 subsidiaries and 4 associates as on 31st March 2020. During theyear the following companies were incorporated acquired liquidated or divested:
o Incorporation of Cipla Pharmaceuticals Limited in India for setting up facilitiesfor DPI dosage and for further expansion of MDI and FFS Respule Dosage Cipla (Colombia)SAS in Colombia and Cipla (China) Pharmaceutical Co. Limited in China for strengtheningits business portfolio in foreign markets;
o Incorporation of Cipla (Jiangsu) Pharmaceutical Co Limited as Joint venturebetween Cipla (EU) Limited and Jiangsu Acebright Pharmaceutical Co. Limited for exploringbusiness opportunities and manufacture of pharmaceutical products in China;
o Acquisition of the remaining 40% stake in Cipla Pharma Lanka Private Limited(CPL) by Cipla (EU) Limited to further strengthen its presence in Sri Lanka. Uponacquisition CPL has become a wholly owned subsidiary of Cipla (EU) Limited;
o Acquisition of a 30% stake in Brandmed (Pty) Limited by Cipla Medpro South Africa(Pty) Limited to enhance its diversified portfolio in the noncommunicable diseases area;
o Acquisition of a 26% stake in AMPSolar Power Systems Private Limited to enhancethe proportion of renewable (solar) based power consumption and to comply with regulatoryrequirement for captive power consumption under electricity laws; and
o Liquidation of Tasfiye Halinde Cipla ilag Ticaret Anonim irketi Turkey.
Details of these subsidiaries and associates are set out on page no. 361 of the AnnualReport. Pursuant to section 129(3) of the Act read with rule 5 of the Companies (Accounts)Rules 2014 a statement containing salient features of the financial statement of thesubsidiary and associate companies in Form AOC-1 is given on page no. 420 of the AnnualReport. The statement also provides details of the performance and the financial positionof each of the subsidiaries and associates. The consolidated financial statementspresented in this annual report include financial results of the subsidiary and associatecompanies.
Copies of the financial statements of the subsidiary companies are available in theInvestors section on the Company's website www.cipla.com .
Directors and Key Managerial Personnel
Mr Peter Lankau Independent Director resigned from the Board of the Company effective1st July 2019 due to his other professional engagement in the same industry inthe USA resulting in conflict of interest. He confirmed that there were no other materialreasons for his resignation other than the one stated above.
Pursuant to the provisions of sections 149 and 152 of the Act the recommendation ofthe Nomination and Remuneration Committee and on the basis of the performance evaluationreport the Board after considering the integrity expertise and experience of Ms NainaLal Kidwai recommends her re-appointment as Independent Director of the Company for asecond term of five consecutive years w.e.f. the expiry of her present term i.e. 6thNovember 2020.
The Board on the basis of recommendation of the Nomination and Remuneration Committeerecommends the re-appointment of Ms Samina Hamied as a Whole-Time Director designated asExecutive Vice-Chairperson of the Company for a period of five years w.e.f. 10thJuly 2020.
Mr S Radhakrishnan Non-Executive Director retires by rotation and being eligiblehas offered himself for re-appointment. Based on the recommendation of the Nomination andRemuneration Committee the Board recommends the re-appointment of Mr S Radhakrishnan asdirector liable to retire by rotation.
The Board recommends the aforementioned appointments for approval of the members at theensuing AGM. Brief resume expertise in specific functional areas names of listedcompanies in which the above-named directors hold directorships committee memberships/chairmanships disclosure of relationships between directors inter-se shareholding inCipla etc. are furnished in notice of the ensuing AGM.
Criteria for determining qualification positive attributes and independence of adirector is given under the Nomination Remuneration and Board Diversity Policy disclosedas Exhibit A to the Report on Corporate Governance.
As on 31st March 2020 the Company has the following Key ManagerialPersonnel (KMPs) as per section 2(51) of the Act:
|Sr. No ||Name of the KMP ||Designation |
|1 ||Ms Samina Hamied ||Executive ViceChairperson Managing Director |
|2 ||Mr Umang Vohra ||and Global Chief Executive Officer |
|3 ||Mr Kedar Upadhye ||Global Chief Financial Officer |
| || ||Company Secretary |
|4 ||Mr Rajendra Chopra ||& Compliance officer |
Except for Mr Peter Lankau Dr Peter Mugyenyi and Mr S Radhakrishnan none of thedirectors including the Managing Director and Global Chief Executive Officer and theWhole-Time Director received any remuneration or commission from any of the Company'ssubsidiaries during the previous year.
Declaration by independent directors
All independent directors have submitted requisite declarations confirming that theycontinue to meet the criteria of independence as prescribed under section 149(6) of theAct and Regulation 16(1)(b) of the Listing Regulations and are independent. Theindependent directors have also confirmed compliance with the Code of Conduct laid downunder Schedule IV of the Act. Details on the same have also been provided in the
Report on Corporate Governance which forms part of this report.
Committees of the 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 six times during the year under review. The maximum gap between two Boardmeetings did not exceed 120 days. A detailed update on the Board its committees itscomposition detailed charter including terms of reference number of Board and Committeemeetings held and attendance of the directors at each meeting is provided in the Report onCorporate Governance which forms part of this report.
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) was appointed as the Statutory Auditor of the Company at the AGM held on 28thSeptember 2016 to hold the office till the conclusion of the 85th AGM of 2021.The Statutory Auditor has confirmed that they continue to remain eligible to act as theStatutory Auditor of the Company.
There are no instances of any fraud reported by the Auditors to the Audit Committee orto the Board pursuant to section 143(12) of the Act. The Auditor's Report for FY 2019-20does not contain any qualification reservation or adverse remark.
Secretarial Auditor and its Audit Report
The Secretarial Audit Report for the financial year ended 31st March 2020is annexed as Annexure VI to this report. The Report does not contain any qualificationreservation disclaimer or adverse remark.
The Board on the recommendation of the
Audit Committee has reappointed M/s BNP & Associates Company Secretaries Mumbaito conduct the secretarial audit of the Company for FY 2020-21. They have theireligibility for the re-appointment.
Cost Auditor and Cost Audit Report
The Board on the 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 2020.The Cost Auditors have certified that their appointment is within the limits of Section141(3)(g) read with Section 148 of the Act. The Cost Auditors will submit their report forFY 2019-20 on or before the due date.
The Cost Records of the Company are maintained in accordance with the provisions ofsection 148(1) of the Act and the Cost Audit Report for the year ended 31stMarch 2019 was filed with the Central Government within the prescribed time.
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 Auditors forFY 2020-21 is required to be ratified by the members the Board recommends the same forapproval of the members at the ensuing AGM. The proposal forms part of the notice of theAGM.
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 under various Capitals in the Integrated Report section of this report.
We wish to place on record our appreciation to the governments of various countrieswhere the Company has its operations. We thank Ministry of Chemicals & FertilizersIndia Central Government State governments and other regulatory bodies/ authoritiesbanks business partners shareholders medical practitioners and other stakeholders forthe assistance co-operation and encouragement extended to the Company. We would also liketo place on record our deep sense of appreciation to Cipla employees for theircontribution and services.
| ||On behalf of the Board |
|Date: 15th May 2020 ||Y K Hamied |
|Place: London ||Chairman |