Your Directors are pleased to present the Twenty Second Annual Report of your Companytogether with the Audited Standalone and Consolidated Financial Statements and theAuditors' Report thereon for the financial year ended March 31 2020.
1. Financial Highlights:
The highlights of Standalone and Consolidated financial results of your Company and itssubsidiaries are as follows:
(Rs. in million)
|Consolidated ||2019-20 ||2018-19 |
|Income from operations including Income from Govt Grants ||10956.4 ||9786.7 |
|Total Expenditure excluding Depreciation Interest cost and tax ||9234.6 ||8534.8 |
|Profit including income from govt. grant and before other income depreciation interest cost tax ||1721.8 ||1251.9 |
|Other income ||69.7 ||74.1 |
|Depreciation and Finance Charges ||2860.9 ||1549.9 |
|Share of (loss) of equity accounted investees ||-123.2 ||-109.8 |
|Loss before tax ||-1192.6 ||-333.8 |
|Loss after tax attributable to the owners of the Company ||-1067.0 ||-248.0 |
|Standalone || || |
|Income from operations including Income from Govt Grants ||6895.8 ||6414.3 |
|Total Expenditure excluding Depreciation Interest cost tax and exceptional items ||5726.1 ||5464.3 |
|Profit including income from govt. grant and before other income depreciation interest cost tax and exceptional items ||1169.7 ||950.0 |
|Other income ||108.6 ||125.5 |
|Depreciation Finance Charges and exceptional items ||1932.9 ||949.8 |
|Profit/(Loss) before tax ||-654.6 ||125.7 |
|Profit/(Loss) after tax ||-533.0 ||72.5 |
Note: The Company has adopted Ind AS 116 with effect from April 01 2019. The figuresfor FY 2019-20 are including the accounting treatment for Ind AS 116.
2. Performance Overview
The standalone and consolidated financial statements for the financial year ended March31 2020 forming part of this Annual Report have been prepared in accordance with theIndian Accounting Standards (Ind AS) as notified by the Ministry of Corporate Affairs.
The consolidated income from operations including income from government grant for FY2019-20 was RS 10956.4 million as compared to RS 9786.7 million in the previous fiscalyear reflecting a growth of 12%. EBITDA in FY 2019-20 was Rs.1721.8 million as comparedto RS 1251.9 million in FY 2018-19 reflecting an year-on-year increase of 37.5%. EBITDAmargin for the year was 15.7% as compared to 12.8% in FY 2018-19 reflecting an increaseof 2.9%. This was primarily due to the accounting impact on adoption of Ind AS 116partially offset by losses incurred by new centers. Profit (loss) after tax in the currentfiscal year was H (1067.0) million as compared to H (248.0) million in FY 2018-19 mainlyon account of adoption of Ind AS 116 and losses from newly set up centres.
The revenue growth was driven by 12.1% growth from HCG Centres (including themulti-specialty hospitals) while Revenue from Milann centres grew by 9.0%. HCG Centresconstituted 93.6% of the consolidated revenues for the Company and the remaining 6.4% ofthe consolidated revenue was contributed by Milann Centres.
The Company ended the year FY 2019-20 with income from operations including Govt.Grants of RS 6895.76 million as compared to RS 6414.3 million for the previous financialyear reflecting an increase of 7.5%. Our EBITDA before exceptional items for FY 2019-20was RS 1169.67 million with EBITDA margin of 17%.
For more information please refer to the Financial and Operating Highlights inManagement Discussion and Analysis Report.
3. Business and Strategy:
The Company is a provider of specialty healthcare in India focused on cancer andfertility. Under the "HCG" brand we operate the largest cancer care network inIndia in terms of the total number of private cancer treatment centres licensed by theAERB as of May 31 2015 (Government of India Atomic Energy Regulatory Board).
In our HCG network our specialist physicians adopt a technology-focused approach todiagnosis and treatment. For instance we use advanced technologies including molecularpathology and molecular imaging for accurate diagnosis and staging of cancer which enableus to decide upon the appropriate course of treatment for each patient. We also utilisetargeted nuclear medicine therapies as well as advanced radiation treatments to minimiseside effects and improve the outcome of treatments. By ensuring that we adopt thesediagnostic and treatment technologies throughout our HCG network we are able to provideconsistent quality of care to all patients.
Given the large number of patient cases treated across our HCG network we believe thatwe are able to efficiently utilise our equipment technologies and human resourcesthereby deriving economies of scale. We believe that our business model is scalable andwhen combined with efficient utilisation of resources it enables us to operate within acompetitive cost structure.
As a group we continue to deliver the highest standards of clinical outcomes acrossall our centres. Our standardised clinical protocols for diagnosis and treatment of cancerpatients have allowed us to manage the large volume of patient cases across our HCGnetwork with successful clinical outcomes. Mapping our own clinical outcomes andconstantly evolving HCG treatment guidelines has paved way for standardization of clinicalpathways and improvement in the functioning of the clinical departments. We believe thatwe are able to attract and retain highly skilled specialist physicians due to ourreputation for clinical excellence our technology-focused approach the exposure andexperience we provide in relation to clinical best practices and the training programmeswe offer for their ongoing development. We believe that the abilities and expertise of ourteam of specialist physicians differentiate us relative to our competitors.
We also provide fertility treatment under our "Milann" brand. Our Milannfertility centres provide comprehensive reproductive medicine services including assistedreproduction gynaecological endoscopy and fertility preservation; and follow amultidisciplinary and technology-focused approach to diagnosis and treatment. Our Milannnetwork also operates on a model similar to our HCG network wherein the various Milannfertility centres aim to provide medical services following established protocols with afocus on quality medical care across diagnosis and treatment.
As of March 31 2020 our HCG network consisted of 25 centres including comprehensivecancer centres and multispecialty hospitals across India and 1 centre in Africa. Each ofour comprehensive cancer centres offers at a single location comprehensive cancerdiagnosis and treatment services (including radiation medical oncology and surgicaltreatments). The details of our existing comprehensive cancer centres as on the date ofthis report and their facilities and service offerings including those under developmentforms part of the Management Discussion and Analysis Report.
a) Expand the reach of our cancer care network in India:
We plan to expand our network in India by establishing new cancer centres across Indiaand by expanding the capacity and service offering of the existing HCG cancer centres. Wecarry out a competitive assessment of the markets in which HCG plans to expand thenetwork based on a number of factors including the estimated incidence of cancer in theprimary and secondary catchment population the number of comprehensive cancer centres ifany in the catchment; the average distance patients have to travel to avail of suchcomprehensive cancer care; affordability of healthcare generally and cancer care inparticular; and the available third party payer options whether corporate government orprivate insurance. HCG will continue to expand its network through green field projectspartnership arrangements and acquisitions; and that the past experiences will aid theManagement in identifying potential opportunities in the future and assist HCG inintegrating new cancer centres into the existing HCG network. We believe that our plannednetwork will cater to the increasing unmet demand for cancer care in India.
b) Strengthen our HCG brand to reach more cancer patients:
We believe that our HCG brand distinguishes us from our competitors. As we establishnew comprehensive cancer centres across India we plan to invest in building our brandenhancing our market presence brand image and visibility. We intend to strengthen ourpatient support groups comprising cancer survivors to further spread awareness of cancerscreening and to educate patients regarding cancer treatment options and their relativeoutcomes and benefits. Through these initiatives we seek to further strengthen our brandand our commitment to the community cancer patients and their families.
c) Expand our cancer care network overseas:
We believe that despite the growing incidence of cancer there is a shortage of cancercentres in many countries in Africa. As a result patients suffering from cancer oftentravel outside the region at a significant cost for availing quality cancer careincluding to our comprehensive cancer centres in India. In the past we have experiencedan increase in the number of patients travelling from Africa and other regions to ourcentre of excellence in Bengaluru as well as to our other comprehensive cancer centres inIndia for cancer treatment. We believe that this growing demand presents us with anopportunity to establish a network of speciality cancer centres in Africa. In addition weperiodically and selectively evaluate partnering opportunities in countries in the MiddleEast and South and Southeast Asia.
d) Upgrade and strengthen our information technology infrastructure:
We are in the process of significantly upgrading our information technologyinfrastructure in order to enhance the quality of care delivered to patients and tofurther enhance our clinical best practices and research capabilities. Our plannedinformation technology infrastructure will be based on a private cloud-computing systemand will encompass a centralised EMR system seamlessly integrated with various othercentralised systems including HIS and ERP system. We believe that the implementation ofthese information systems will maximise efficiencies through the greater integration ofour network and help us fine tune protocols through knowledge sharing and collaboration.Further we believe that these initiatives will enhance our ability to conductlongitudinal research studies (which are long-term observational research studies) andassociate clinical outcomes with mutation and other genomic findings in cancer patienttissues maintained at our biorepository. We believe that this will position us as apartner of choice for cancer researchers and academia.
4. Management Discussion and Analysis Report:
In terms of Regulation 34 of Securities and Exchange Board of India (ListingObligations and Disclosure Requirements) Regulations 2015 (hereinafter referred to as"SEBI LODR Regulations") the Management Discussion and Analysis Report(MD&A) on the Company's financial and operational performance industry trendsbusiness outlook and Initiatives and other material changes with respect to the Companyand its subsidiaries wherever applicable are presented in separate section which formspart of the Annual Report. The MD&A Report provides a consolidated perspective ofeconomic social and environmental aspects material to its strategy and its ability tocreate and sustain value to your Company's key stakeholders.
5. Transfer to Reserves and Surplus/Retained Earnings:
The adjustments made to the reserves and surplus/ retained earnings are available inthe Statement of Changes in Equity which forms part of the Financial Statements.
The Company continues to look at growth prospects through new investment opportunities.Considering that consolidation is taking place in the Healthcare Industry in India itpresents us with more challenges in terms of growth and it is imperative that the Companylooks at available options for organic as well as in-organic growth. Achieving aconsistent sustainable growth over the next few years and consolidating Company's positioncompetitively would be a key objective.
Keeping in view the growth strategy of the Company the Board of Directors of yourCompany have decided to plough back the profits and thus do not recommended any dividendfor the financial year under review.
In terms of Regulation 43A of the SEBI LODR Regulations the Company has adoptedDividend Distribution Policy setting out the parameters and circumstances that will betaken into account by the Board in determining the distribution of Dividend to theShareholders and/or retaining profits earned by the Company. The said policy is hosted onthe website of the Company at https://hcgel.com/policies-and-guidelines/.
7. Transfer of unpaid and unclaimed amount to IEPF:
Pursuant to the provisions of Section 124(5) of the Companies Act 2013 dividend andrefund of share application money due for refund which remains unpaid or unclaimed for aperiod of seven years from the date of its transfer to unpaid dividend/ unclaimed accountis required to be transferred by the Company to Investor Education and Protection Fund(IEPF) established by the Central Government under the provisions of Section 125 of theCompanies Act 2013. During the year no amount was due for transfer to IEPF.
8. Consolidated financial statements:
In accordance with the Companies (Indian Accounting Standards) Rules 2015 of theCompanies Act 2013 the Company has started following the Indian Accounting Standards(Ind AS) for preparation of its financial statements from April 1 2016.
9. Subsidiaries and Associates:
As on March 31 2020 the Subsidiaries Associates and Joint Venture Companies of theCompany are as under:
|Sl. No. ||Name of the entity ||Country of Incorporation ||Primary business activity for which it was formed ||% of ownership held by the Company as at March 31 2020 |
|1 ||HCG Medi-Surge Hospitals Private Limited ||India ||Cancer Care ||74.00% |
|2 ||Malnad Hospital & Institute of Oncology Private Limited ||India ||Cancer Care ||70.25% |
|3 ||HealthCare Global Senthil Multi Specialty Hospitals Private Limited ||India ||Cancer Care ||100.00% |
|4 ||Niruja Product Development And Healthcare Research Private Limited (name changed with effect from November 10 2016 from MIMS HCG Oncology Private Limited) ||India ||Research and Development ||100.00% |
|5 ||BACC Health Care Private Limited (Refer Note 46 to the Consolidated Financial Statements) ||India ||Fertility ||50.10% |
|6 ||HealthCare Diwan Chand Imaging LLP ||India ||Radiology/ Imaging ||75.00% |
|7 ||APEX HCG Oncology Hospitals LLP (along with the Shareholding of Niruja Product Development and Healthcare Research Private Limited) ||India ||Cancer Care ||100.00 % |
|8 ||HCG NCHRI Oncology LLP ||India ||Cancer Care ||76.00% |
|9 ||HCG Oncology LLP ||India ||Cancer Care ||74.00% |
|10 ||HCG EKO Oncology LLP ||India ||Cancer Care ||50.50% |
|11 ||HCG Manavata Oncology LLP ||India ||Cancer Care ||51.00% |
|12 ||HCG SUN Hospitals LLP ||India ||Health Care Services (Multi- Specialty) ||74.00% |
|13 ||HCG (Mauritius) Pvt. Ltd. (along with the Shareholding of Niruja Product Development and Healthcare Research Private Limited) ||Mauritius ||Health Care Services ||100.00% |
|14 ||Healthcare Global (Africa) Pvt. Ltd. ||Mauritius ||Health Care Services ||76.73% |
|15 ||HealthCare Global (Uganda) Private Limited (Wholly Owned Subsidiary of Healthcare Global (Africa) Pvt. Ltd) ||Uganda ||Cancer Care ||76.73% |
|16 ||HealthCare Global (Kenya) Private Limited (Wholly Owned Subsidiary of Healthcare Global (Africa) Pvt. Ltd) ||Kenya ||Cancer Care ||76.73% |
|17 ||HealthCare Global (Tanzania) Private Limited (Wholly Owned Subsidiary of Healthcare Global (Africa) Pvt. Ltd) ||Tanzania ||Cancer Care ||76.73% |
|18 ||Cancer Care Kenya Limited (Subsidiary of HealthCare Global (Kenya) Private Limited) ||Kenya ||Cancer Care ||59.47% |
|19 ||Strand Life Sciences Private Limited (shareholding on fully diluted basis) ||India ||Clinical Diagnostics Bioinformatics & Clinical Research ||38.2% |
|20 ||Advanced Molecular Imaging Limited (HealthCare Global (Kenya) Private Limited holds 50% of the share capital) ||Kenya ||Production of Fluro Deoxi Glucose (FDG) ||38.37% |
As on the date of the Report none of the subsidiary companies other than HCGMedi-Surge Hospitals Private Limited is a Material Subsidiary within the meaning ofMaterial Subsidiary as defined under the SEBI LODR Regulations as amended from time totime.
There were no new subsidiaries associates incorporated during the Financial Year.
During the year the Board of Directors reviewed the affairs of the subsidiaries.Pursuant to the provisions of Section 129(3) of the Companies Act 2013 a statementcontaining the salient features of the Financial Statements of the Company's Subsidiariesand Associates in Form AOC-1 that forms part of this Report is attached as Annexure 5.Pursuant to Section 129 of the Companies Act 2013 the Consolidated Financial Statementsof the Company prepared in accordance with the relevant Accounting Standards specifiedunder Section 133 of the Companies Act 2013 read with the Rules made thereunder formspart of this Annual Report.
Further pursuant to the provisions of Section 136 (1) of the Companies Act 2013:
a) The Annual Report of the Company containing therein its standalone and consolidatedfinancial statements is placed on the website of the Company beinghttps://hcgel.com/investors.
b) The audited financial statements of subsidiary companies together with relatedinformation and other reports of each of the subsidiary companies would be placed on thewebsite of the Company https://hcgel.com/investors.
10. Public deposits:
Your Company has not accepted any deposits from public in terms of Section 73 of theCompanies Act 2013 and the Companies (Acceptance of Deposits) Rules 2014; and as suchno amount on account of principal or interest on public deposits was outstanding as on thedate of the balance sheet.
11. Unsecured loan from Directors:
In accordance with Section 179 and 73 of the Companies Act 2013 read with Companies(Acceptance of Deposits) Rules 2014 and other applicable provisions if any the Companyduring the year under review has received RS 50 Million as unsecured loan from Dr. B.S.Ajaikumar Whole time Director. As on March 31 2020 the total amount outstanding towardsPrincipal and interest was RS 31.23 Million. Subsequently all the amounts outstanding hasbeen repaid; and as on the date of the Report no such amounts are outstanding and payableto Dr. B.S. Ajaikumar in this regard.
12. Particulars of loans guarantees or investments under Section 186 of the CompaniesAct 2013:
Pursuant to Section 186 of the Companies Act 2013 and Schedule V of SEBI LODRRegulations disclosure on particulars relating to Loans/advances given guaranteesprovided and investments made are provided as part of the financial statements.
13. Related party transactions:
In line with the requirements of the Companies Act 2013 and SEBI LODR Regulationsyour Company has formulated a Policy on Related Party Transactions. This Policy intends toensure that proper reporting approval and disclosure processes are in place for alltransactions between the Company and Related Parties.
All Related Party Transactions are placed before the Audit Committee for review andapproval. Prior omnibus approval is obtained for Related Party Transactions on yearlybasis for transactions which are of repetitive nature and/or entered in the ordinarycourse of business and are at arm's length. All Related Party Transactions entered duringthe year were in ordinary course of the business and at arm's length basis. No MaterialRelated Party Transactions i.e. transactions exceeding 10% of the annual consolidatedturnover as per the last audited financial statements were entered into by your Companyduring the year.
A statement giving details of all related party transactions entered pursuant to theomnibus approval so granted is placed before the Audit Committee for their review on aquarterly basis. The policy on Related Party Transactions has been hosted on the Company'swebsite https://hcgel. com/policies-and-guidelines/ in terms of the SEBI LODR Regulationsrelating to Corporate Governance.
Disclosures as required under Section 134(3) (h) read with Rule 8(2) of the Companies(Accounts) Rules 2014 are given in Form AOC 2 as specified under Companies Act 2013which is annexed herewith as Annexure 6 and forms part of the report.
Pursuant to Regulation 23(9) of the Listing Regulations your Company has filed thereports on related party transactions with the Stock Exchanges.
14. Share capital as on March 31 2020 and changes made to the capital structure of theCompany from the Balance sheet date till the date of the Report:
14.1 Share Capital as on March 31 2020:
a) Authorized Share Capital: As on March 31 2020 the authorized share capitalof the Company is RS 1320000000 consisting of 132000000 equity shares of RS 10each
b) Issued Subscribed and Paid-up Share Capital: The Issued Subscribed andPaid-up Share Capital of the Company has increased from RS 879190330 consisting of87919033 equity shares of RS 10 each to RS 886906290 consisting of 88690629equity shares of RS 10 each during the year.
The increase in the Issued Subscribed and Paid-up Share Capital was on account ofallotment of shares as under:
|Name of allottee ||No. of shares allotted ||Issue price (Rs) ||Date of allotment |
|Employees (On exercise of ESOP) ||2500 ||10 ||23/05/2019 |
| ||8000 ||10 ||08/08/2019 |
|25700 ||10 ||07/11/2019 |
| ||24870 ||10 ||12/02/2020 |
|Preferential allotment of Equity shares to Dr. Kunnathu Philipose Geevarghese ||710526 ||10 ||24/06/2019 |
At the Extraordinary General Meeting of the Members of the Company ("EGM")held on Monday June 24 2019 shareholders of the Company by way of Special Resolutionapproved the issue of equity shares on preferential allotment/private placement basis toDr. Kunnathu Philipose Geevarghese. Subsequently the Board of Directors approved theallotment of 710526 equity shares of RS 10 each of the Company at a price per share ofRS 285 (including share premium of RS 275 per share).
14.2 Signing of the Investment Agreement:
The Company has signed an Investment Agreement ("Investment Agreement") byand between Aceso Company Pte. Ltd. Singapore ("Investor") and Dr. B.S.Ajaikumar ("Promoter") on June 04 2020. As per the Investment Agreement theInvestor had agreed to subscribe to 29516260 Equity Shares and 18560663 warrants(convertible to equal number of equity shares) of the Company in tranches at RS 130 perequity share aggregating to RS 625 Crore. The Investment Agreement sets out the rightsand obligations of the parties in relation to the investment by the Investor in theCompany interse rights and obligations of the Promoter and Investor as shareholders ofthe Company management of the Company and other matters in connection therewith.
14.3 Changes in the Share Capital including details of allotment of securities of theCompany since April 01 2020 till the date of the Report.
a) Authorized Share Capital:
As on the date of this report the authorizedsharecapitaloftheCompanyisRS2000000000 consisting of 200000000 equity shares of RS 10 each. Theshareholders of the Company through the Postal Ballot have approved on June 12 2020the increase of authorized share capital of the Company and consequent alteration ofCapital Clause V of the Memorandum of Association of the Company from RS 1320000000divided into 132000000 Equity shares of RS 10 each to RS 2000000000 divided into200000000 Equity Shares of RS 10 each aggregating to RS 2000000000.
b) Changes in Issued Subscribed and Paid-up Share Capital pursuant to theallotments of shares to the Investor as per the Investment Agreement: The IssuedSubscribed and Paid-up Share Capital of the Company has increased form RS 886906290consisting of 88690629 equity shares of RS 10 to RS 1252640840 consisting of125264084 equity shares upon the following allotments of securities of the Company tothe Investor on July 28 2020 based on the Investment Agreement and the approval of theshareholders of the Company received on June 12 2020.
(i) 29516260 equity shares of RS 10 each of the Company at a price per share of RS130 (including share premium of RS 120 per share) upon receipt of RS 3837113800.
(ii) 18560663 warrants ("Series A Warrants") to the Investor at asubscription price per warrant of RS 130 per warrant with a right to the Warrant Holder onexercise to apply for and be allotted 1 (One) Equity Share of the face value of RS 10 eachof the Company ("Equity Shares") at a premium of RS 120 per share for eachwarrant in one or more tranches within a period of 18 (Eighteen) months from the date ofallotment of the Series A Warrants. As required under the provisions of Issue of Capitaland Disclosure Requirements) Regulations 2018 as amended (the "ICDRRegulations") the Investor has remitted an amount equivalent to 25% of theConsideration i.e. RS 603221548 on allotment of series A Warrant and the remaining 75%of the consideration shall be payable by the Investor on the exercise of the Series AWarrant (s) in one or more tranches within a period of 18 (Eighteen) months from thedate of allotment of the Series A Warrants.
(iii) 7057195 equity shares of RS 10 each of the Company at a price per share of RS130 (including share premium of RS 120 per share) upon exercise of 7057195 Series AWarrants by the Investor out of the total 18560663 Series A Warrants upon receipt ofRS 688076513 towards 75% of the consideration for conversion of 7057195 Series AWarrants to Equity.
c) Issue and allotment securities to Dr. B.S. Ajaikumar Promoter("Promoter") on a preferential basis ("Preferential Allotment"):The Board of Directors of the Company on June 26 2020 pursuant to the approval of theshareholders of the Company received on June 12 2020 has made a preferential allotmentof 2000000 Series B Warrants to Dr. B.S. Ajaikumar Promoter ("Promoter")with a right to apply for and be allotted 1 Equity Share of the face value of RS 10 eachof the Company at a premium of RS 120 for each series
B Warrant. As required under the provisions of the ICDR Regulations Promotor hasremitted an amount equivalent to 25% of the Consideration i.e. RS 65000000 on allotmentof series B Warrant and the remaining 75% of the consideration i.e. RS 195000000 shallbe payable by him on the exercise of the Series B Warrant(s) in one or more trancheswithin a period of 18 (Eighteen) months from the date of allotment of the Series BWarrants.
14.4 Open Offer:
Upon signing of the Investment Agreement JM Financial Limited Manager appointed bythe Investor as required under Regulation 14(2) of the Securities and Exchange Board ofIndia (Substantial Acquisition of Shares and Takeover) Regulations 2011 ("SEBI(SAST) Regulations") has announced an Open Offer pursuant to and in compliance withRegulations 3(1) and 4 of the "SEBI (SAST) Regulations") where the Investor -Aceso Company Pte. Ltd. along with Aceso Investment Holdings Pte. Ltd. ("PAC1") CVC Capital Partners Asia V L.P. ("PAC 2") CVC Capital PartnersInvestment Asia V L.P ("PAC 3") and CVC Capital Partners Asia V Associates L.P.("PAC 4") (hereinafter PAC 1 PAC 2 PAC 3 and PAC 4 are collectively referredto as the "PACs") in their capacity as the persons acting in concert with theInvestor for acquisition of up to RS 32613192 fully paid-up equity shares of face valueof RS 10 each ("Equity Shares") from the Public Shareholders of the Companyrepresenting 26% of the Expanded Voting Share Capital at a price of RS 130/- per EquityShare aggregating to total consideration of RS 4239714960 payable in cash. In thisregard JM Financial Limited on behalf of the Investor has also filed the Draft Letter ofOffer with Securities and Exchange Board of India on June 18 2020.
Your Company has not issued shares with differential voting rights and sweat equityshares during the year under review.
15. Declaration by Independent Directors:
The Company has received necessary declaration from each Independent Director inaccordance with Section 149(7) of the Companies Act 2013 that he/she met the criteria ofindependence as laid out in sub-section (6) of Section 149 of the Companies Act 2013 andthe Regulation 16(1)(B) of the SEBI LODR Regulations. The Company has received and takenon record the necessary declaration from each of the independent directors under Section149 of the Companies Act 2013 that they meet with the criteria of their independence.
For the purpose of Rule 8(5) (iiia) of the Companies (Accounts) Rules 2014 there wereno independent directors appointed during the year ended March 31 2020. List of keyskills expertise and core competencies of the Board is provided in the CorporateGovernance Report forming part of the Annual Report.
16. Extract of Annual Return:
The extract of the Annual Return of your Company as on March 31 2020 as provided undersub-section (3) of Section 92 of the Companies Act 2013 and Rule 12 of the Companies(Management and Administration) Rules 2014 in the Form MGT 9 is annexed herewith asAnnexure 1. Additionally your Company has also placed a copy of Annual Return on itswebsite at https://hcgel.com/investors.
17. Board of Directors:
Our Board comprises of directors with a broad range of skills experience backgroundsand perspectives. This mix of skills knowledge and experience enriches the Boarddiscussion and contributes towards a high performing and effective Board.
As on March 31 2020 the Board comprised 5 (five) Independent Non-Executive Directors2 (two) Non Executive Non-Independent Directors and 2 (two) Executive Directors/Whole-timeDirectors. The Executive Director Dr. B. S. Ajaikumar is the Chairman of the Board. All 5Independent Directors are free from any business pecuniary or other relationship thatcould materially influence their judgment and satisfy the criteria of independence asdefined under the Companies Act 2013 and SEBI LODR Regulations. The Company has 1 (one)woman Director on the Board who is an Independent and Non-Executive Director. Theprofiles of these Directors forms part of the Annual Report.
17.1 Appointment of Directors:
During the year under review there were no new appointments to the Board of Directorsof the Company. Since the initial term of 5 years of Dr. Sudhakar Rao and Mr. ShankerAnnaswamy Independent Directors was expiring on February 24 2020 the Nomination andRemuneration Committee of the Board evaluated the performance of Dr. Sudhakar Rao and Mr.Shanker Annaswamy and based on the annual performance evaluation conducted by the Boardduring their tenure and considering their integrity expertise and experience has madeits recommendation to the Board for their reappointment. The Board of Directors and theshareholders of the Company have reappointed Dr. Sudhakar Rao and Mr. Shanker Annaswamy asIndependent Directors for a second term of 5 years effective from February 25 2020.
However there have been changes to the constitution of the Board after the year underreview. The changes in the constitution of the Board from April 01 2020 till the date ofthe Report is as under:
(a) Dr Ramesh S Bilimagga has completed his tenure as Executive Director on May 212020. Dr. B.S. Ramesh has continued on the Board of the Company as NonExecutive Directorfrom May 22 2020. Subsequently
he has resigned from the Directorship of the Company effective from the closing ofbusiness hours of June 30 2020. Dr B.S. Ramesh has informed the Board that he intends toseek approval of the Board for the declassification of his current categorization as a'promoter' of the Company to that of a public shareholder of the Company; pursuant towhich he has resigned as a Director of the Company.
(b) Initial term of 5 years of Mr. Suresh Chandra Senapaty and Dr. Sampath ThattaiRamesh as Independent Directors have come to an end on May 28 2020. The said Directorshave conveyed their desire not to seek appointment as an Independent Directors of theCompany for the second term due to their personal commitments.
(c) On July 28 2020 Mr. Siddharth Patel and Mr Amit Soni have been appointed asAdditional Directors as nominees of Asceo Company Pte Ltd on the Board of the Companyas per the Investment Agreement dated June 04 2020 entered into by and amongst theCompany Dr. B. S. Ajaikumar and Aceso Company Pte. Ltd ("InvestmentAgreement").
Members of the Board placed on record their appreciation for the remarkable support andguidance provided by Dr. B. S. Ramesh Mr. Suresh Chandra Senapaty and Dr. Sampath ThattaiRamesh during their tenure as Directors and for their active participation in all thedecision making processes of the Board.
17.2 Reappointment of Directors:
(a) Reappointment of Dr. B. S. Ajaikumar (DIN 00713779) as Whole-time Director and CEOof the Company: Nomination and Remuneration Committee of the Board recommended the Boardof Directors and the Shareholders of the Company have approved re-appointment of Dr. B. S.Ajaikumar as Whole-time Director and CEO of the Company for a period of 4 years witheffect from July 01 2019.
(b) Reappointment of Dr. Sudhakar Rao (DIN 00267211) and Mr. Shanker Annaswamy (DIN00449634) as Independent Non-Executive Directors of the Company: Dr. Sudhakar Rao and Mr.Shanker Annaswamy were appointed as Independent Directors of the Company for a term of 5years with effect from February 25 2015 till February 24 2020.
The Nomination and Remuneration Committee of the Board (the Committee') evaluatedthe performance of Dr Sudhakar Rao and Mr. Shanker Annaswamy based on the annualperformance evaluation conducted by the Board during their tenure and made itsrecommendation to the Board on November 07 2019 for the reappointment of Dr. SudhakarRao and Mr. Shanker Annaswamy.
Board of Directors and shareholders of the Company on January 16 2020 and February 202020 respectively have approved the re-appointment of Dr. Sudhakar Rao and Mr. ShankerAnnaswamy as Independent Non-Executive Directors of the Company for a second term of 5years w.e.f February 25 2020. With regard to the reappointment of Dr. Sudhakar Raoconsent of the shareholders by way of Special Resolution was also obtained in terms ofSection 149 of the Act and Regulation 17 of the SEBI LODR Regulations 2015 forcontinuation of Dr. Sudhakar Rao as Independent Director beyond the age of seventy-fiveyears as Dr. Sudhakar Rao will attain the age of seventy-five years on 3rd September2024 which is during the second term of 5 years of reappointment.
(c) Reappointment of Ms. Bhushani Kumar (DIN: 07195076) as Independent Non-ExecutiveDirector : On May 21st 2020 the Board of Directors of your Company have approved there-appointment of Ms. Bhushani Kumar (DIN: 07195076) as an Independent Director of theCompany for a second term for a period of 1 (one) year effective from May 29 2020subject to shareholders' approval. The Company proposes to seek and obtain the approval ofthe shareholders before the Annual General Meeting (AGM).
(d) Retirement by rotation: As per the provisions of the Companies Act 2013 Dr. AmitVarma Non Independent Non-Executive Director of the Company is retiring by rotation atthe forthcoming Annual General Meeting and being eligible has offered himself forreappointment.
18. Number of meetings of the Board:
The Board met four times during the financial year 201920 viz. on May 23 2019August 08 2019 November 07 2019 and February 12 2020. The maximum interval between anytwo meetings did not exceed 120 days.
Detailed information regarding the meetings of the Board and meetings of the Committeesof the Board is included in the report on Corporate Governance which forms a part ofDirectors' Report.
19. Key Managerial personnel:
Pursuant to the provisions of Section 203 of the Companies Act 2013 the KeyManagerial Personnel (KMPs) of the Company are:
a) Dr. B. S. Ajaikumar - Chairman & CEO
b) Mr. Srinivasa V Raghavan - Chief Financial Officer
c) Ms. Sunu Manuel - Company Secretary
During the year under review there were no changes in KMPs of the Company.
20. Committees of the Board and their constitution:
The Board has formed the following five Committees. The composition of Committees ofthe Board along with relevant information pertaining to Directors are detailed in theCorporate Governance Report which forms a part of this Report.
1. Audit and Risk Management Committee
2. Nomination and Remuneration Committee
3. Stakeholders' Relationship Committee
4. Corporate Social Responsibility Committee and
5. Strategy Committee.
Keeping in view the requirements of the Companies Act 2013 and SEBI LODR Regulationsas amended from time to time the Board reviews the Terms of Reference of these Committeesand the nomination of Board Members to various Committees. The recommendations if any ofthese Committees are submitted to the Board for approval.
(a) Audit and Risk Management Committee
Pursuant to the requirements of Section 177 of the Companies Act 2013 and Rule 6 ofthe Companies (Meetings of Board and its Powers) Rules 2014 the Company has an Audit andRisk Management Committee and the composition of the committee as on March 31 2020 was asunder:
1. Mr. Suresh Chandra Senapaty Chairman
2. Dr. Sudhakar Rao Member ; and
3. Mr. Shanker Annaswamy Member
Since the initial term of Mr. Suresh Chandra Senapaty as an Independent Director of theCompany has come to an end on May 28 2020 he has ceased to be a member of the Committeeon the same day. In this regard the Board of Directors has appointed Dr. Sudhakar RaoIndependent Director member of the Audit and Risk Management Committee as the Chairman ofthe Audit and Risk Management Committee effective from June 12 2020. Mrs. BhushaniKumar Independent Director was also appointed as a member of the Audit and RiskManagement Committee effective from June 12 2020.
Subsequently as per the Investment Agreement Mr Amit Soni has been nominated as amember of the Committee on July 28 2020.
(b) Nomination and Remuneration Committee
Pursuant to the requirements of Section 178 of the Companies Act 2013 and Rule 6 ofthe Companies (Meetings of Board and its Powers) Rules 2014 the Board of Directors havereconstituted the Nomination and Remuneration Committee.
The members of the Nomination and Remuneration Committee as on March 31 2020 were:
1. Mr. Shanker Annaswamy Chairman;
2. Dr. Sampath Thattai Ramesh Member; and
3. Mr. Gangadhara Ganapati Member
Since the initial term of Dr. Sampath Thattai Ramesh as an Independent Director of theCompany has come to an end on May 28 2020 he has ceased to be a member of the Committeeon the same day. The members of the Board have appointed Dr. Sudhakar Rao as member ofNomination and Remuneration Committee effective from June 12 2020.
Subsequently as per the Investment Agreement Mr. Siddharth Patel has been nominated asa member of the Committee on July 28 2020.
(c) Stakeholders' Relationship Committee
The Stakeholders' Relationship Committee was constituted by our Board of Directors attheir meeting held on May 29 2015. The scope and function of the Stakeholders'Relationship Committee is in accordance with Section 178 of the Companies Act 2013.
The members of the Stakeholders' Relationship Committee as on March 31 2020 were :
1. Mr. Gangadhara Ganapati Chairman
2. Dr. B. S. Ajaikumar Member; and
3. Ms. Bhushani Kumar Member.
As per the Investment Agreement Mr Amit Soni has been nominated as a member of theCommittee on July 28 2020.
(d) Corporate Social Responsibility Committee
The Corporate Social Responsibility Committee was constituted by our Board of Directorsat their meeting held on May 29 2015. The terms of reference of the Corporate SocialResponsibility Committee of our Company are as per Section 135 of the Companies Act 2013and the applicable rules thereunder.
The members of the Corporate Social Responsibility Committee as on March 31 2020 were:
1. Dr. Sampath Thattai Ramesh; Chairman
2. Dr. Sudhakar Rao Member;
3. Ms. Bhushani Kumar Member; and
4. Dr. B. S. AjaiKumar Member.
Corporate Social Responsibility Committee of the
Board was reconstituted by appointing Dr. Sampath Thattai Ramesh Independent Directormember of the Committee as Chairman of the Committee in place of Dr. Sudhakar Rao witheffect from the closing of the business hours of 23rd May 2019.
Since the initial term of Dr. Sampath Thattai Ramesh as an Independent Director of theCompany has come to an end on May 28 2020 he has ceased to be a member of the Committeeon the same day. In this regard the Board of Directors has appointed Dr. B.S. Ajaikumarmember of the Committee as the Chairman of the Committee effective from June 12 2020.
As per the Investment Agreement Mr. Siddharth Patel has been nominated as a member ofthe Committee on July 28 2020.
(e) Strategy Committee
The Committee was constituted by our Board of Directors at their Meeting held on May26 2016 with the scope of reviewing strategic initiatives; and for having an ooversightof the strategic direction of the Company.
The members of the Committee as on March 31 2020 were:
1. Dr. B. S. Ajaikumar Chairman;
2. Mr. Gangadhara Ganapati Member;
3. Mr. Suresh Chandra Senapaty Member;
4. Mr. Shanker Annaswamy Member; and
5. Dr. Amit Varma Member
Mr. Suresh Chandra Senapaty has ceased to be a Member of Strategy Committee effectivefrom May 28 2020.
As per the Investment Agreement Mr. Siddharth Patel and Mr Amit Soni have beennominated to the Strategy Committee as members of the Committee on July 28 2020.
Details of terms of reference of the Committees attendance at meetings of theCommittees are provided in the Corporate Governance report. The Company Secretary acts asthe Secretary of all the Committees of the Board.
21. Board Evaluation:
In terms of the requirement of the Companies Act 2013 and the SEBI LODR Regulationsan annual performance evaluation of the Board was undertaken. The Board evaluationframework has been designed in compliance with the requirements under the Companies Act2013 and the SEBI LODR Regulations and in consonance with Guidance Note on BoardEvaluation issued by SEBI in January 2019. The Board evaluation was conducted throughquestionnaire having qualitative parameters and feedback based on rating.
Evaluation of the Board was based on criteria such as composition and role of theBoard Board communication and relationships functioning of Board Committees review ofperformance and compensation to Executive Directors succession planning strategicplanning etc.
Evaluation of Directors was based on criteria such as participation and contribution inBoard and Committee meetings representation of shareholder interest and enhancingshareholder value experience and expertise to provide feedback and guidance to topmanagement on business strategy governance and risk understanding of the organization'sstrategy risk and environment etc. The process also covered separate evaluation ofChairperson of the Board Executive Directors Non- Executive Directors and IndependentDirectors.
Evaluation of Committees was based on criteria such as adequate independence of eachCommittee frequency of meetings and time allocated for discussions at meetingsfunctioning of Board Committees and effectiveness of its advice/recommendation to theBoard etc.
The Board had during the year opportunities to interact and make an assessment of itsfunctioning as a collective body. In addition there were opportunities for Committees tointeract for Independent Directors to interact amongst themselves and for eachIndependent Director to interact with the Chairman. The Board found that there wasconsiderable value and richness in such discussions and deliberations.
The Board Evaluation discussion was focused around how to make the Board and itsCommittees more effective as a collective body in the context of the business and theexternal environment in which the Company functions. From time to time during the yearthe Board was appraised of the business issues and the related opportunities and risks.The Board discussed various aspects of the functioning of the Board and its Committeessuch as structure composition meetings functions and interaction with Management andwhat needs to be done to further improve the effectiveness of the Board's functioning.
Additionally during the evaluation discussion the Board also focused on thecontribution being made by the Board as a whole through its Committees and discussions ona one on one basis with the Chairman.
The process of Board Evaluation was led by the Chairman of the Nomination andRemuneration Committee. The overall assessment of the Board was that it was functioning asa cohesive body including the Committees of the Board that were functioning well withperiodic reporting by the
Committees to the Board on the work done and progress made during the period. The Boardacknowledged the efforts and contributions made by the Chairperson Executive and Non-Executive Directors and Independent Directors towards the Company's performance.
The Board also noted that the actions identified in the past evaluation had been actedupon. Subsequent to the evaluation done in the financial year 2019-20 given the changingexternal environment some areas have been identified for the Board to engage itself withand these will be acted upon.
22. Risk Management:
Pursuant to Regulation 21 of SEBI LODR Regulations your Company has developed androlled out a comprehensive Enterprise Risk Management Policy. The policy aims atelimination or reduction of risk exposures through identification and analysis of varioustypes of risks and facilitating timely action for taking risk mitigation measures. TheRisk Management and Steering Committee (RMSC) reviews the Company's portfolio of risks andconsiders it against the Company's risk appetite and recommends changes to the RiskManagement technique and/or associated frameworks processes and practices of the Company.The enterprise risk management process of the Company is progressing satisfactorily butthe entire process is yet to reach a level of maturity. RMSC also advises and guides theCompany for making the process more robust and to achieve prudent balance between risk andreward in both ongoing and new business activities. The Audit and Risk ManagementCommittee periodically reviews the risk management process.
For further details on the enterprise wide risk management framework refer toManagement and Discussion Analysis Report forming part of the Annual Report.
23. Compliance Management Framework:
For monitoring compliances to applicable laws your Company has instituted an onlinecompliance management system within the organization to monitor compliances and provideupdate to the senior management and Board on a periodic basis. The Audit and RiskManagement Committee and the Board periodically monitor status of compliances withapplicable laws.
24. Corporate Social Responsibility:
Your Company has been taking initiatives under Corporate Social Responsibility (CSR)for society at large well before it has been prescribed thorough the Companies Act 2013;and over the years had been pursuing as a part of its corporate philosophy an unwrittenCSR policy voluntarily which goes much beyond mere philanthropic gestures and integratesinterest welfare and aspirations of the community with those of the Company itself andcreate an environment of partnership for inclusive development.
As per the provisions of Section 135 of the Companies Act 2013 the Company has welldefined policy on CSR which covers the activities as prescribed under Schedule VII of theCompanies Act 2013. The CSR Policy is available on the website of the Company athttps://hcgel.com/policies- and-guidelines/.
For more information on CSR please refer to the Annual Report on Corporate SocialResponsibility annexed herewith as Annexure 7.
25. Internal Audit:
Your Company has continued its engagement with M/s. Ernst & Young LLP CharteredAccountants to conduct internal audit across the organization. We have also strengthenedthe in-house internal audit team to supplement and support the efforts of M/s. Ernst &Young LLP.
26. Internal Financial Control system and their adequacy:
The Management has laid down internal financial controls to be followed by the Company.We have adopted policies and procedures for ensuring the orderly and efficient conduct ofthe business including adherence to the Company's policies the safeguarding of itsassets the prevention and detection of frauds and errors the accuracy and completenessof the accounting records and the timely preparation of reliable financial disclosures.
The internal control system is commensurate with the nature of business size andcomplexity of operations and has been designed to provide reasonable assurance on theachievement of objectives in effectiveness and efficiency of operations reliability offinancial reporting and compliance with applicable laws and regulations. In furtherance tothis your Company has instituted an online compliance management system within theorganization to monitor compliances and provide update to senior management and Board on aperiodic basis. The Audit and Risk Management Committee and the Board periodically monitorstatus of compliances with applicable laws.
As part of the Corporate Governance Report CEO/ CFO certification is provided forassurance on the existence of effective internal control systems and procedures in theCompany.
The internal control framework is supplemented with an internal audit program thatprovides an independent view of the efficacy and effectiveness of the process and controlenvironment and supports a continuous improvement program. The internal audit program ismanaged by an Internal Audit function; and the Audit and Risk Management Committee of theBoard oversees the Internal Audit function.
The scope and authority of the Internal Audit Function is derived from the AuditCommittee Charter approved by the Audit and Risk Management Committee of the Board. TheInternal Audit function develops an internal audit plan to assess control design andoperating effectiveness as per the risk assessment methodology. The Internal Auditfunction provides assurance to the Board and management that a system of internal controlis designed and deployed to manage key business risks and is operating effectively.
27. Vigil Mechanism for Directors and employees:
Section 177(9) and (10) of the Companies Act 2013 mandates every listed company toestablish a Vigil mechanism for its directors and employees which shall function as achannel for receiving and redressing their complaints. The Vigil Mechanism provides for(a) adequate safeguards against victimization of persons who use the Vigil Mechanism; and(b) direct access to the Chairperson of the Audit Committee of the Board of Directors ofthe Company in appropriate or exceptional cases.
Under this policy we have adopted a vigil mechanism which would encourage ourdirectors employees and all other stakeholders to report any incidence of fraudulentfinancial or other information to the stakeholders reporting of instance(s) of leak orsuspected leak of unpublished price sensitive information and any conduct that results inviolation of the Company's code of business conduct to the management (on an anonymousbasis if employees so desire). Further your Company has prohibited discriminationretaliation or harassment of any kind against any employee who reports under the VigilMechanism or participates in the investigation.
Awareness of policies is created by inter alia training and sending group mailershighlighting actions taken by the Company against the errant employees. All complaintsreceived through the Vigil mechanism are reviewed and investigated by the Ombudsperson.Dedicated email address has been created to facilitate receipt of complaints directly bythe Ombudsperson.
The Audit and Risk Management Committee periodically reviews the functioning of thismechanism. No individual in the Company has been denied access to the Audit and RiskManagement Committee or its Chairman.
This meets the requirement under Section 177(9) and (10) of the Companies Act 2013 andRegulation 22 of SEBI (LODR) Regulations.
Mechanism followed under the process is appropriately communicated within the Companyacross all levels and has been displayed on the Company's intranet and website athttps://hcgel.com/policies-and-guidelines/. The Audit and Risk Management Committeeperiodically reviews the functioning of this mechanism.
28. Code for Prevention of Insider Trading:
Your Company has adopted a Code of Conduct to regulate monitor and report trading byDesignated Persons and their Immediate Relatives under the Securities and Exchange Boardof India (Prohibition of Insider Trading) Regulations 2015. This Code of Conduct alsoincludes code of practices and procedures for fair disclosure of unpublished pricesensitive information which has been made available on the Company's website at https://hcgel.com/policies-and-guidelines/.
29. Company's Policy on Appointment and Remuneration of Directors:
The Nomination & Remuneration Committee has framed a policy for selection andappointment of Directors including determining qualifications and independence of aDirector Key Managerial Personnel (KMP) senior management personnel and theirremuneration as part of its charter and other matters provided under Section 178(3) of theCompanies Act 2013.
The Policy of the Company on the Director's appointment and remuneration includingcriteria for determining qualifications positive attributes independence of a directorand other matters as required under sub-section (3) of section 178 of the Companies Act2013 is available on our website https://hcgel.com/policies-and-guidelines/. We affirmthat the remuneration paid to Directors is as per the terms laid out in the nomination andremuneration policy of the Company.
30. Particulars of employees:
The information required in terms of Section 197 (12) of the Companies Act 2013 readwith Rule 5 (1) of the Companies (Appointment and Remuneration of Managerial personnel)Rules 2014 for the year ended March 31 2020 is provided as Annexure 4 to this Report.
A statement containing inter alia names of top ten employees and employees ifemployed throughout the financial year and in receipt of remuneration of RS 102 Lakhs ormore employees employed for part of the year and in receipt of RS 8.50 Lakhs per month ormore pursuant to Rule 5(2) the Companies (Appointment and Remuneration of ManagerialPersonnel) Rules 2014 is also provided in Annexure 4 to this report.
31. Significant and Material orders:
During the period under report there have been no material or significant orderspassed by the Regulators/ Courts which would have an impact on the going concern statusand operations of the Company in future.
32. Statutory Auditors:
Under Section 139 of the Companies Act 2013 and Rules made thereunder it is mandatoryto rotate the Statutory Auditors on completion of the maximum term permitted under thesaid section.
The shareholders at the 19th Annual General Meeting of the Company have approved theappointment of M/s. B S R & Co. LLP (Firm Registration No. 101248W/W-100022) asStatutory Auditors for a term of 5 years commencing from the conclusion of the AnnualGeneral Meeting of the Company held on August 10 2017 till the conclusion of the AnnualGeneral Meeting to be held in the year 2022.
Vide notification dated May 7 2018 issued by Ministry of Corporate Affairs therequirement of seeking ratification of appointment of statutory auditors by members ateach AGM has been done away with. Accordingly no such item has been considered in noticeof the 22nd AGM.
33. Statutory Auditors' Report:
There are no qualifications reservations or adverse remarks made by M/s B S R &Co. LLP Statutory Auditors in their report for the financial year ended March 31 2020.The Statutory Auditors under the Companies (Auditors' Report) Order 2016 as providedunder Annexure A to the Independent Auditor's Report Clause (vii) (a) have observed that"According to the information and explanations given to us and on the basis of ourexamination of the records of the Company amounts deducted/ accrued in the books ofaccount in respect of undisputed statutory dues including Employees' State InsuranceGoods and Services tax duty of Customs and other material statutory dues have generallybeen regularly deposited during the year by the Company with the appropriate authorities.However undisputed income tax (tax deducted at source) and Provident Fund have not beenregularly deposited with the appropriate authorities though the delays in deposit have notbeen serious. Further as explained to us the Company did not have any dues on account ofSales tax Service tax Duty of excise and Value added tax during the year.
In this regard the Board of Directors places its response as under:
(i) With respect to Provident fund (PF) - The Company was restructuring the salaries ofits employees at the beginning of the year. The Company had paid its provident fund as perthe prevailing salary structure for the months form April 2019 to June 2019. However soonafter the restructuring got completed the differential Provident Fund was paid along withinterest; and thereafter there has been no delay in payment of provident fund.
(ii) With respect to Tax deducted at source (TDS) the Company would like to statethat as Yes Bank's operations were completely shut down during first half of March 2020as per the RBI guidelines and since the Company's money was lying in the Yes bankaccount including collection of receivables the Company due to this complete shut-downwas unable to access funds lying in the Company's bank accounts maintained with Yes Bankincluding transfer of money from Yes Bank to other bank accounts to remit the TDS amountfor the month of February 2020. Subsequent to this event complete lock down across thenation was officially announced by government due to COVID -19; and the government hadannounced certain relaxations with respect to payment of TDS for the period March to June2020. The Company has availed the relaxation offered and remitted the amount with reducedrate of interest @ 0.75% per month.
Pursuant to provisions of Section 143(12) of the Companies Act 2013 the StatutoryAuditors have not reported any incident of fraud to the Audit and Risk ManagementCommittee during the year under review.
34. Material changes and commitments if any affecting the financial position of theCompany occurred between the end of the financial year to which these financial statementsrelate and the date of the report:
Information regarding potential impact of COVID-19 pandemic on your Company's businessoperations and financial position are provided as part of the Management Discussion andAnalysis Report.
There has been no change in the nature of business of the Company during the lastfinancial year.
35. Secretarial Audit:
Pursuant to the provisions of Section 204 of the Companies Act 2013 and The Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 your Company hasappointed Mr. V Sreedharan Partner M/s V Sreedharan & Associates a firm of CompanySecretaries in Practice to undertake the Secretarial Audit of the Company for thefinancial year ended March 31 2020. The said Report of the Secretarial Audit in Form MR3 is annexed herewith as Annexure 2 and forms part of the report.
The Secretarial Auditors in their report for the financial year ended March 31 2020under the Companies (Auditors' Report) Order 2016 have opined that "During theperiod under review the Company has complied with the provisions of the Act RulesRegulations Guidelines Standards etc. mentioned in their report except for thefollowing observation: The Annual Compliance Report for the year ended March 31 2019as required under Sl. No. 3(b) (iii) of the SEBI Circular CIR/CFD/CMD1/27/2019 datedFebruary 08 2019 effective from the year ended March 31 2019 under Securities andExchange Board of India (Listing Obligations and Disclosure Requirements) Regulations2015 was uploaded to the stock Exchanges on June 10 2019 with a marginal delay of 10days. The Company has informed the National Stock Exchange about submission of the AnnualCompliance Report.''
In this regard the Board of Directors places its response as under:
The Company has filed the Annual Compliance Report for the year ended March 31 2019as required under Sl. No. 3(b) (iii) of the SEBI Circular CIR/CFD/CMD1/27/2019 datedFebruary 08 2019 effective from the year ended March 31 2019 under Securities andExchange Board of India (Listing Obligations and Disclosure Requirements) Regulations2015 on June 10 2019. This was an inadvertent delay.
The Institute of Company Secretaries of India had revised the Secretarial Standards onMeetings of the Board of Directors (SS-1) and Secretarial Standards on General Meetings(SS-2) with effect from 1st October 2017. The Company has devised proper systems to ensurecompliance with its provisions and is in compliance with the same. Your Company hascomplied with the applicable Secretarial Standards relating to Meetings of the Boardof Directors' and General Meetings' during the year.
36. Cost Records and Cost Auditor:
The Company maintains cost records as specified by the Central Government undersub-section (1) of section 148 of the Companies Act 2013.
Pursuant to Section 148 of the Companies Act 2013 read with The Companies (CostRecords and Audit) Amendment Rules 2014 your Directors on the recommendation of theAudit and Risk Management Committee have appointed M/s. Rao Murthy & Associates(Firm Registration No. 00065) Costs Accountants as the cost auditors of the Company forFY 2020-21 at a remuneration of RS 175000 (H One Lakh Seventy-Five Thousand Only)(exclusive of taxes and re-imbursement of actual out-of-pocket expenses if any inconnection with the cost audit).
The Board of Directors of the Company proposes the ratification of remuneration of M/s.Rao Murthy & Associates Cost Accountants as the Cost Auditor of the Company for FY2020-21 at the ensuing Annual General Meeting.
Cost Audit Report for the financial year ended March 31 2019 has been filed with theRegistrar of Companies.
37. Particulars regarding Conservation of energy Technology absorption and Foreignexchange earnings and outgo as per Section 134(3)(m) of the Companies Act 2013:
The information on conservation of energy technology absorption and foreign exchangeearnings and outgo stipulated under Section 134(3)(m) of the Companies Act 2013 read withRule 8 of the Companies (Accounts) Rules 2014 is detailed in Annexure 8.
38. Prevention of Sexual Harassment Policy:
The Company has in place a Prevention of Sexual Harassment policy in line with therequirements of the Sexual Harassment of Women at the Workplace (Prevention Prohibitionand Redressal) Act 2013. An Internal Complaints Committee has been set up to redresscomplaints received regarding sexual harassment. All employees (permanent contractualtemporary trainees) are covered under this policy. The Company has complied withprovisions relating to the constitution of Internal Complaints Committee under the SexualHarassment of Women at Workplace (Prevention Prohibition and Redressal) Act 2013.
The Company's process ensures complete anonymity and confidentiality of information.Adequate workshops and awareness programmes against sexual harassment are conducted acrossthe organization.
During the year 2019-2020 Five (5) complaints were received. All the complaints wereresolved and there are no complaints outstanding as on March 31 2020.
39. Green initiative:
As a green initiative in corporate governance Ministry of Corporate affairs havepermitted companies to send electronic copies of Annual Report notices etc. to thee-mail IDs of shareholders. We are accordingly arranging to send soft copies of thesedocuments to the e-mail IDs of shareholders available with us.
In case any of the shareholders would like to receive physical copies of thesedocuments the same shall be forwarded on request to the Company by post or an e-mail.
We are also in the process of starting a sustainability initiative with the aim ofbeing carbon neutral and minimize our impact on the environment. Sustainability practiceswill be implemented and tracked diligently to ensure that we comply with the goals we setfor ourselves.
40. Employee Stock Option Schemes:
As required under Securities and Exchange Board of India (Share Based EmployeeBenefits) Regulation 2014 the applicable disclosures as on March 31 2020 are annexed tothis Report as Annexure 3.
Pursuant to regulation 12(1) of the Securities and Exchange Board of India (Share BasedEmployee Benefits) Regulation 2014 the Company has obtained the approval of the membersat the Annual General Meeting held on September 29 2016 for ratifying Employee StockOption Scheme of the Company (HCG ESOS 2014) the pre-IPO plan. HCG ESOS 2014 is incompliance with Securities and Exchange Board of India (Share Based Employee Benefits)Regulation 2014 and there have been no material changes to the plan during the financialyear. Disclosures on various plans details of options granted shares allotted uponexercise etc. as required under the Employee Benefits Regulations read with Securitiesand Exchange Board of India circular no. CIR/CFD/POLICY CELL/2/2015 dated June 16 2015are available on the Company's website at https:// www.hcgel.com/investors/. No employeewas issued stock options during the year equal to or exceeding 1% of the issued capital ofthe Company at the time of grant.
The Nomination and Remuneration Committee of the board evaluates the performance andother criteria of employees and approves the grant of options based on the recommendationof the Management. These options vest with employees over a specified period subject tofulfilment of certain conditions. Upon vesting employees are eligible to apply and secureallotment of Company's shares at a price determined on the date of grant of options.
The stock compensation cost is computed under fair value method and accounted in linewith graded vesting of options over the total vesting period of four years. For the yearended March 31 2020 the Company has recorded stock compensation expense of RS27186754 (FY 2019: RS 30559323).
For further details on the Scheme refer Annexure 3 of the Director's report.
41. Directors' Responsibility Statement:
Pursuant to Section 134 (3) (C) and 134 (5) of the Companies Act 2013 the Board ofDirectors of the Company hereby state and confirm that:
a) in the preparation of the annual accounts the applicable accounting standards havebeen followed along with proper explanation relating to material departures if any;
b) the Directors have selected such accounting policies and applied them consistentlyand made judgments and estimates that were reasonable and prudent so as to give a true andfair view of the state of affairs of the Company at the end of the financial year and ofthe profit and loss of the Company for that period;
c) the Directors have taken proper and sufficient care for the maintenance of adequateaccounting records in accordance with the provisions of the Companies Act 2013 forsafeguarding the assets of the Company and for preventing and detecting fraud and otherirregularities;
d) the Directors have prepared the annual accounts on a going concern basis;
e) the Directors have laid down internal financial controls to be followed by theCompany and that such internal financial controls are adequate and were operatingeffectively.
f) The Directors have devised proper systems to ensure compliance with the provisionsof all applicable laws and such systems are adequate and operating effectively.
Based on the framework of internal financial controls and compliance systemsestablished and maintained by the Company work performed by the internal statutory andsecretarial auditors including audit of internal financial controls over financialreporting by the statutory auditors and the reviews performed by management and therelevant Board Committees the Board is of the opinion that the Company's internalfinancial controls were adequate and effective during FY 2019-20.
42. Corporate Governance:
The Company is committed to observe good corporate governance practices. The report onCorporate Governance practices followed by your Company as per regulation 34(3) read withSchedule V of the SEBI LODR Regulation including Certificate from CEO and CFO as perRegulations 17 of SEBI LODR Regulations is provided in the Annual Report and it formsintegral part of this Report.
Further a certificate from Mr. V Sreedharan Partner M/s V Sreedharan &Associates a firm of Company Secretaries in Practice confirming the compliance with theconditions of Corporate Governance as stipulated by Regulation 34 (3) of SEBI LODRRegulations 2015 is attached to this report.
43. Declaration on Code of Conduct:
The Company has adopted the Code of Conduct for all its Senior Management Personnel andDirectors and the same is affirmed by all the Board Members and Senior ManagementPersonnel as required under Regulation 34 read with Part D of Schedule V of the SEBI LODRRegulations. A declaration signed by Dr. B. S. Ajaikumar Chairman & CEO of theCompany affirming the compliance with the Code of Conduct of the Company for the financialyear 2019-20 has been annexed as part of this Report.
44. Acknowledgements and Appreciations:
We stay committed to partnering for value creation and take this opportunity to thankone and all who have participated in our journey this far. Your Directors desire to placeon record its sincere appreciation to all employees at all levels who with sustaineddedicated effort and hard work enabled the Company to deliver a good allroundperformance. Your Directors also wish to place on record their appreciation andacknowledge with gratitude the support and co-operation extended by the vendors businessassociates consultants bankers regulatory and government authorities shareholders andinvestors at large and look forward to their continued support. We also take thisopportunity to express sincere thanks to the medical fraternity and patients for theircontinued cooperation patronage and trust reposed in the Company and its healthcareservices.
For and on behalf of the Board of Directors
Dr. B.S. Ajaikumar
Chairman & CEO
DIN : 00713779
Date: July 28 2020