Fredun Pharmaceuticals Limited
Your Directors are pleased to present the Twenty Ninth Annual Report of your Companywith the Audited Accounts for the year ended March 312016..
FINANCIAL PERFORMANCE AND FUTURE PROSPECTS:
| || ||Amount in Rs. |
| ||March 31st 2016 ||March 31st 2015 |
|Sales Income ||423213498 ||253575495 |
|Other Income ||8618240 ||4864148 |
|Total Income ||431831738 ||258439643 |
|Profit/Loss before Interest & Depreciation ||47661493 ||21423059 |
|Finance Cost ||20593943 ||10477909 |
|Depreciation / Amortization ||8042758 ||5463803 |
|Profit/Loss before taxes ||19024792 ||5481347 |
|Exceptional Income /Expenses ||(632620) ||(289724) |
|Prior Period adjustments ||(42356) ||(500) |
|Profit/Loss before Taxes ||18349816 ||5191123 |
|Income Tax ||7655120 ||2634137 |
|Profit/Loss after tax. ||10694696 ||2556985 |
The Turnover and the profitability of the Company has increased substantially ascompared to the previous year on account of overall increase in the businessactivities.This also resulted in an exponential increase in the net profit for the yearcompared to that of the previous year.Revenue from operations for Financial Year 2015-16at ^431831738/- was higher compared to the revenue of? 258439642/- and Net profitwas? 10694696/- compared to the net profit of? 2556985/-
Your Directors are taking aggressive steps to increase the business activities of theCompany and they are confidentthat the Company will be able to show better results in thecurrent year.Your Company registered a growth of 318.25% as compared to last year.
The regulatory norms for approving pharma manufacturing units are getting tougher.Thereis intense competition and pricing pressure due to Governments' intervention and promotionof generics.The branded generics account for a fifth of the global market and is expectedto nearly double in the near future with the impending patent expiration in the next 4years.The generic market would reach 30% of Global Pharmaceutical Market.The Companyexpects good growth in the branded generics on a sustainable basis.
The Company has the capabilities to produce latest generics and enter niche areas wherethere are good sales potential with relatively limited competition.
Over the years the Company has focused on increasing the Export activities and as ondate the Company has its presence in various countries and plans to expand globally.TheCompany is in a continuous process of modernizing the technology and introducing newformulations to meet the growing requirements of different customers.The Company has madevarious process improvements to cut down the costs and improve the quality of theproducts.
The Company also caters to development of formulation of drugs that are equivalent tothe Innovator products for sale in the emerging markets.Highly technical personnel areinvolved in the process and analytical method validations and BA/BE studies.
To increase volumes of the product portfoliothe Company has been systematicallyinvesting in its productive infrastructure.It has invested more than? 4Cr in the last yearto increase the capacity of existing infrastructure and create new capacities for oraldosage department.To maintain the cGMP Standardsthe Company follows a well-documentedQuality Management System.The Company has installed the ERP System to modernize anddevelop the business with complete transparency and efficiency.
The Board of Directors are pleased to take on record the issue of Interim Dividend atSix percent (6%) per eauity share as declared by the Board of Directors.
CONSERVATION OF ENERGYTECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO:
The particulars required to be stated as per the provisions of Section 134(3) (m) ofThe Companies Act2013 relating to conservation of energy and technology absorption isprovided as under:
The Company has been complying with the requirements of the Pollution ControlRegulations- in the State of Maharashtra.
CONSERVATION OF ENERGY
The Company conducts In-House energy audit at regular intervals with proper monitoringand maintenance of all the machineries.Low energy lighting and high efficiency meters havebeen installed to yield significant investment benefits and additional savings.
TECHNOLOGY ABSORPTION & RESEARCH AND DEVELOPMENT
A patented drug is the result of research and innovation and a generic drug is only acontinuance of the same at a low price.World Health Organization (WHO) defines a genericdrug as "pharmaceutical productusually intended to be interchangeable with aninnovator product that is manufactured without a license from the Innovator Company andmarketed after the expiry date of the patent or other exclusive rights".Your Companyhas set up a complete R & D Department to develop new formulations with proper processand analytical method validations.Improvements in existing manufacturing processes arecontinuously carried out to economize the cost of production and improve the quality ofthe formulation.
FOREIGN EXCHANGE EARNINS AND OUTGO:
Foreign Exchange Earnings: - Rs.2357 lakhs Foreign Exchange Expenses: - Rs.55 lakhs
Details of the Depository System are given in the section 'Additional information'which forms a part of the Corporate Governance Report and is attached with the AnnualAccounts.
As per the provisions of section 152 of the Companies Act 2013 Dr.(Mrs.) D.N.Medhoraretires by rotation and being eligible for appointment offers herself for re-appointment.
The Company has received the necessary declaration from each Independent Director inaccordance with section 149(7) of the Companies Act 2013that he/she meets the criteria ofIndependence as laid down in sub-section 6 of Section 149 of The Companies Act 2013andRegulation 25 of the SEBI (Listing Obligations and Disclosure Requirements)Regulations2015.
Details of Board Of Directors Meetings held during the year: -
A total of Six (6) Board Meetings were held during the yearthe details and attendanceof the Directors in regards to the same is mentioned in the Corporate Governance Report.
The Board has constituted various committees of the Board as per the provisions of lawand for the improvement in efficiency of the function of the management of the Company.Thevarious details such as its compositionattendancefunctioningetc.are mentioned in theCorporate Governance Report.
ANNUAL EVALUATION OF BOARD PERFORMANCE AND PERFORMANCE OF ITS COMMITTEES AND OFINDIVIDUAL DIRECTORS
Pursuant to the provisions of the Actthe Board of Directors has carried out an annualevaluation of its own performance.Board committees and Individual Directors.
The performance of the Board was evaluated by the Board after seeking inputs from allthe Directors on the basis of criteria such as the Board composition and structureeffectiveness of Board processparticipation in the long-term strategicplanninginformationfunctioning etc.The performance of the Committees was evaluated bythe Board after seeking inputs from the Committee members on the basis of the criteriasuch as the composition of Committeeseffectiveness of Committee Meetingsetc
The Board reviewed the performance of the Individual Directors on the basis of thecriteria such as the contribution of the Individual Director to the Board and CommitteeMeetingspreparedness on the issues to be discussedmeaningful and constructivecontribution and inputs in Meetingsetc.In additionthe Chairperson was also evaluated onthe key aspects of her role.
TRAINING AND HUMAN RESOURCE MANAGEMENT:
Morale of our professionals continued to be high.The Company continues to put concertedefforts in recruiting quality people.Development and training programs are undertakenwhere key focus is being given to areas like employee developmentgrowth and satisfactionalongwith employee relations during the year.The relationship between management andemployees continues to be one of mutual respectappreciation and cordial.
The Auditors M/s.Savla & Associates Mumbai Chartered Accountants (ICAi RegistrationNo.: 109361W) hold the office from the conclusion of this Annual General Meeting for Twoconsecutive years that is until the conclusion of the Thirty First Annual General Meetingof the Company that will be held in the year 2018.
Members are requested to consider their re-appointment and to fix their remunerationfor the same.Their appointment will be as per the provisions of Section 139 of TheCompanies Act 2013
The Company has received a confirmation from M/S.Savla & Associates to the effectthat their appointmentif madewill comply with the eligibility criteria in terms ofSection 141 (3) of The Companies Act2013.
In terms of Section 204 of the Act and Rules made thereunderMr.Rajendra Vaze ofM/s.Rajendra And Co.Practising Company Secretarieshave been appointed as SecretarialAuditors of the Company.The report of the Secretarial Auditors is annexed as Annexure I tothis Report.The report is self-explanatory and does not call for any further comments.
DETAILS OF SIGNIFICANT MATERIAL ORDERS
No significant and material orders were passed by the Regulatory Authorities or theCourts or Tribunals that may have an impact on the going concern status and Company'soperations in foreseeable future
EXTRACT OF ANNUAL RETURN:
Pursuant to Section 92(3) of the Act and rule 12(1) of the Companies (Management andAdministration) Rules2014extract of annual return in Form MGT 9 is annexed as AnnexureII to this Report
DIRECTORS RESPONSIBILITY STATEMENT
Based on the framework of internal financial controls and compliance systemsestablished and maintained by the Companywork performed by the InternalStatutoryandSecretarial Auditors and External consultant(s) and the reviews performed by managementand the relevant Board Committeesincluding the Audit Committeethe Board is of theopinion that the Company's internal financial controls were adequate and effective duringthe Financial Year 2015-16
Accordinglypursuant to Section 134(5) of the Actthe Board of Directorsto the best oftheir knowledge and abilityconfirm that:
(a) in the preparation of the annual accountsthe applicable Accounting Standards havebeen followed along with proper explanation relating to material departures;
(b) they have selected such Accounting Policies and applied them consistently and madejudgments and estimates that are reasonable and prudent so as to give a true and fair viewof the state of affairs of the Company at the end of the Financial Year and of the profitof the Company for that period;
(c) they have taken proper and sufficient care for the maintenance of adequateaccounting records in accordance with the provisions of this Act for safeguarding theassets of the Company and for preventing and detecting fraud and other irregularities;
(d) they have prepared the annual accounts on a "going concern basis";
(e) they have laid down internal financial controls to be followed by the Company andthat such internal financial controls are adeauate and were operating effectively; and
(f) they have devised proper systems to ensure compliance with the provisions of allapplicable laws and that such systems were adequate and operating effectively.
PARTICULARS OF LOANSGUARANTEES AND INVESTMENTS:
The Company has not given any loans or any guarantee and has not done any Investmentsduring the year.
RELATED PARTY TRANSACTIONS
All related party transactions entered into during the financial year were on an arm'slength basisin the ordinary course of business and were in compliance with the applicableprovisions of the Act and the Listing Agreement.The details of the transactions withrelated parties are provided in the accompanying financial statements.
There were no materially significant related party transactions made by the Companyduring the year that would have required members approval under Regulation 23 of the SEBI(Listing Obligations and Disclosure Requirements)2015.The policy on materiality ofrelated party transactions and dealing with related party transactions has been approvedby the Board.
VIGIL MECHANISM/ WHISTLEBLOWER POLICY
The Company has adopted a Whistleblower Policyto provide a formal mechanism to theDirectorsemployees and its stakeholders to report their concerns about unethicalbehaviouractual or suspected fraud or violation of the Company's Code of Conduct orEthics Policy.
The policy provides for adequate safeguards against victimization of employees whoavail of the mechanism and also provides for direct access to the Chairman of the AuditCommittee.It is affirmed that no personnel of the Company has been denied access to theAudit Committee
MANAGEMENT DISCUSSION AND ANALYSIS AND REPORT OF THE DIRECTORS ON CORPORATE GOVERNANCE
Pursuant to Regulation 27 of the SEBI (Listing Obligations and DisclosureRequirements)2015 the Management Discussion and Analysis and the Corporate GovernanceReportas required under Regulation 27 of the SEBI (Listing Obligations and DisclosureRequirements)2015 is presented in a separate section forming part of the Annual Report.
The Company would like to acknowledge all its stakeholdersShamrao Vittal Co-operativeBank LtdIndusind BankCompany's various customers and associatesalso our other keypartners such as the Bombay Stock Exchangefor their support and all our employees fortheir dedication and hard work.
The Directors appreciate the continued guidance received from various RegulatoryAuthorities including RBISEBIMinistry of Corporate AffairsThe Registrar ofCompaniesThe Stock ExchangeMumbaiExcise AuthoritiesIncome Tax and Sales TaxAuthorities.
On Behalf of the Board of Directors
Date: 30th May 2016.
Secretarial Audit Report for the Financial Year ended 31st March2016
[Pursuant to Section 204 (1) of the Companies Act2013 and Rule 9 of the Companies(Appointment and Remuneration of Managerial Personnel) Rules2014]
FREDUN PHARMACEUTICALS LIMITED
We have conducted the Secretarial Audit of the compliance of applicable statutoryprovisions and the adherence to good corporate practices by Fredun Pharmaceuticals Limited(hereinafter called 'the Company').
Secretarial audit was conducted in a manner that provided us a reasonable basis forevaluating the corporate conducts/statutory compliances and expressing our opinionthereon.
Based on our verification of the Company's bookspapersminute booksforms and returnsfiled and other records maintained by the Companythe information provided by theCompanyits officersagents and authorised representatives during the conduct ofSecretarial Auditthe explanations and clarifications given to us and the representationsmade by the Managementwe hereby report that in our opinionthe Company hasduring theaudit period covering the financial year ended on 31 st March2016 generally complied withthe statutory provisions listed hereunder and also that the Company has proper Boardprocesses and compliance mechanism in place to the extentin the manner and subject to thereporting made hereinafter:
We have examined the bookspapersminute booksforms and returns filed and otherrecords made available to us and maintained by the Company for the financial year ended on31 st March2016 according to the provisions of:
(I) The Companies Act2013 ('the Act') and the rules made thereunder;
(ii) The Securities Contract (Regulation) Act1956 ('SCRA') and the rules madethereunder;
(iii) The Depositories Act1996 and the Regulations and Bye-laws framed thereunder;
(iv) Foreign Exchange Management Act1999 and the rules and regulations made thereunderto the extent of Foreign Direct InvestmentOverseas Direct Investment and ExternalCommercial Borrowings: - (Not applicable to the Company during the audit period);
v) The following Regulations and Guidelines prescribed under the Securities andExchange Board of India Act1992 (SEBI Act')
(a) The Securities and Exchange Board of India (Substantial Acquisition of Shares andTakeovers) Regulations2011;
(b) The Securities and Exchange Board of India (Prohibition of Insider Trading)Regulations1992 and The Securities and Exchange Board of India (Prohibition of InsiderTrading) Regulations2015;
(c) The Securities and Exchange Board of India (Issue of Capital and DisclosureRequirements) Regulations2009 and amendments from time to time;
(d)The Securities and Exchange Board of India (Employee Stock Option Scheme andEmployee Stock Purchase Scheme) Guidelines1999 and The Securities and Exchange Board ofIndia (Share Based Employee Benefits) Regulations2014 - (Not applicable to the Companyduring the audit period);
(e) The Securities and Exchange Board of India (Issue and Listing of Debt Securities)Regulations2008;
(f) The Securities and Exchange Board of India (Registrars to an Issue and ShareTransfer Agents) Regulations1993 regarding the Companies Act and dealing with client.
(g) The Securities and Exchange Board of India (Delisting of Equity Shares)Regulations2009 - (Not applicable to the Company during the audit period); and
(h) The Securities and Exchange Board of India (Buyback of Securities) Regulations1998(Not applicable to the Company during the audit period).
(vi) Other laws applicable specifically to the Company namely:
1. Bombay Shops and Establishments Act.
2. The Factories Act1948 and rules and regulations thereunder;
3. Income Tax Act 1961 relating to Tax Deducted at source.
5. The Employees Provident Fund Act.
6. The Payment of Wages Act1936
7. The Minimum Wages Act1948
8. The payment of Bonus Act1965
We have also examined compliance with the applicable clauses of the following:
(I) Secretarial Standards issued by The Institute of Company Secretaries of India withrespect to Board and General Meetings.
(ii) The Listing Agreements entered into by the Company with BSE Limited read with theSEBI (Listing Obligations and Disclosure Requirements) Regulations2015 made effectivefrom 1 st December2015.
During the period under reviewthe Company has complied with the provisions of the Actrulesregulationsguidelinesstandardsetc.mentioned above.
We further report that:
The Board of Directors of the Company is duly constituted with proper balance ofExecutive DirectorsNon-Executive Directors and Independent Directors.The changes in thecomposition of the Board of Directors that took place during the period under review werecarried out in compliance with the provisions of the Act.
Adequate notice was given to all Directors to schedule the Board Meetingsagendaand detailed notes on agenda were sent at least seven days in advanceand a system existsfor seeking and obtaining further information and clarifications on the agenda itemsbefore the meeting and for meaningful participation at the meeting.
Decisions at the Board Meetings were taken unanimously.
We further report that there are adequate systems and processes in the Companycommensurate with the size and operations of the Company to monitor and ensure compliancewith applicable lawsrulesregulationsguidelinesetc.
We further report that during the audit period the Company has following event whichhad bearing on the Company's affairs in pursuance of the above referredlawsrulesregulationsguidelinesetc.
The company is now listed with Bombay Stock Exchange with effect from 21 st March 2016.
The shareholders have passed necessary resolutions in an Extra Ordinary General Meetingheld on 10th July 2015 for the following:
a. Increasing the Authorized Capital from Rs.3 Crores to Rs.6 Crores.
b. The appointment of Mr.Fredun Medhora as the Managing Director and Mr.Nariman Medhoraas the Whole Time Director designated as the Joint Managing Director.
For Rajendra And Co.
FCS No: 4247 CP No 1975
Date: 30th May2016
This Report is to be read with our letter of even date which is annexed as Annexure Aand forms an integral part of this report.
FREDUN PHARMACEUTICALS LIMITED
Our report of even date is to be read along with this letter.
1. Maintenance of secretarial record is the responsibility of the management of theCompany.Our responsibility is to express an opinion on these secretarial records based onour audit.
2. We have followed the audit practices and process as were appropriate to obtainreasonable assurance about the correctness of the contents of the secretarial records.Theverification was done on test basis to ensure that correct facts are reflected insecretarial records.We believe that the process and practiceswe followed provide areasonable basis for our opinion.
3. We have not verified the correctness and appropriateness of financial records andBooks of Accounts of the Company.
4. Wherever requiredwe have obtained the Management representation about thecompliance of lawsrules and regulations and happening of eventsetc
5. The compliance of the provisions of Corporate and other applicablelawsrulesregulationsstandards is the responsibility of management.Our examination waslimited to the verification of procedure on test basis.
6. The Secretarial Audit report is neither an assurance as to the future viability ofthe Company nor of the efficacy or effectiveness with which the management has conductedthe affairs of the Company.
For Rajendra And Co.
CS Rajendra R.Vaze
FCS No.: 4247 CP No.: 1975
Date: 30th May2016