Your Directors are pleased to present the Twenty First Annual Report of your Companytogether with the Audited Standalone and Consolidated Financial Statements and theAuditors' Report thereon for the financialyear ended March 31 2019.
1. Financial Highlights:
The highlights of Standalone and Consolidated financial results of your Company and itssubsidiaries are as follows:
| || ||Rs in Mn. |
|Consolidated ||2018-19 ||2017-18 |
|Income from operations including Government grants ||9786.7 ||8306.9 |
|Total Expenditure excluding Depreciation Interest cost tax and exceptional items ||8534.8 ||7118.7 |
|Profit before other income including Government grants Depreciation ||1251.9 ||1188.2 |
|Interest cost tax and exceptional items || || |
|Other income ||74.1 ||128.0 |
|Depreciation Finance Charges and exceptional items ||1549.9 ||1030.4 |
|Share of (loss) of equity accounted investees ||(109.8) ||(14.0) |
|Profit before tax ||(333.8) ||271.8 |
|Profit / (Loss) after tax attributable to the owner's of the Company ||(248.0) ||205.2 |
|Standalone || || |
|Income from operations including Government grants ||6414.3 ||5868.7 |
|Total Expenditure excluding Depreciation Interest cost tax and exceptional items ||5464.3 ||4981.4 |
|Profit before other income including Government grants Depreciation Interest cost tax and exceptional items ||950.0 ||887.3 |
|Other income ||125.5 ||159.3 |
|Depreciation Finance Charges and exceptional items ||949.8 ||677.8 |
|Profit/(Loss) before tax ||125.7 ||368.8 |
|Profit/(Loss) after tax ||72.5 ||248.9 |
2. Performance Overview:
The consolidated income from operations including Government grants for FY 2018 - 19was H9786.7 million as compared to
H8306.9 million in the previous fiscal a growth of 17.8%. EBITDA in FY 2018- 19 wasH1251.9 million as compared to H1188.2 million in FY 2017-18 reflectinga year-on-yearincrease of 5.36%. EBITDA margin for the year was 12.8% as compared to 14.3% in FY2017-18 reflecting a decrease of 1.5% primarily due to incremental losses incurred by newcentres.
Profit (loss) after tax (owner's share) in the current fiscal year wasyearreflectingH(248.0) million as compared to H205.2 million in FY 2017-18 mainly on account ofhigher Finance cost and depreciation for setting up of new centers and loss on account offoreign currency translation.
The revenue growth was driven by 19.7% growth from HCG Centres (including themulti-specialty hospitals) while Revenue from Milann centres de-grew by 3.8%. HCG Centresconstituted 93.4% of the consolidated revenues for the Company and the remaining 6.6% ofthe consolidated revenue was contributed by Milann Centres.
The Company ended the year FY 2018-19 with income from operations (including Governmentgrants) of H6414.3 million as compared to H5868.7 million for the previous financialyear reflecting an increase of 9.3%. Our EBITDA before exceptional items for FY 2018-19was H950.0 million with EBITDA margin of 14.8%.
3. Business and Strategy:
The Company is a provider of speciality 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 HCGnetwork our specialist physicians adopt a technology-focused approach to diagnosis andtreatment. For instance we use advanced technologies including molecular pathology andmolecular imaging for accurate diagnosis and staging of cancer which enable us to decideupon the appropriate course of treatment for each patient. We also utilise targetednuclear medicine therapies as well as advanced radiation treatments to minimise sideeffects and improve the outcome of treatments. By ensuring that we adopt these diagnosticand treatment technologies throughout our HCG network we are able to provide consistentquality 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 utilisation of resources it enables us to operate within a competitivecost 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 2019 ourHCG network consisted of 21 comprehensive cancer centres including our centre ofexcellence in Bengaluru 3 freestanding diagnostic centres and 1 day care chemotherapycentre across India and 1 centre in Africa. Each of our comprehensive cancer centresoffers at a single location comprehensive cancer diagnosis and treatment services(including radiation medical oncology and surgical treatments). Our freestandingdiagnostic centres and our day care chemotherapycentresofferdiagnosisandmedical oncologyservices respectively. The details of our existing comprehensive cancer centres as on thedate of this report and their facilities and service offerings including those underdevelopment forms part of the Management Discussion and Analysis Report.
3.2 Strategy: efficient
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.
e) Expand our Milann network of fertility centres across India and strengthen Milannbrand
We believe that in expanding our Milann network we are well-positioned to leverageHCG's successful track record of growing through partnerships with specialist physiciansand hospitals as well as our relationship base within the medical community.
We intend to invest in building our Milann brand through targeted media campaignsfocusing on building patient awareness of fertility treatment primarily through patienttestimonials and socially relevant messages. We also intend to undertake communityoutreach programmes strengthen our patient support groups and undertake other awarenessbuilding activities among corporate entities. In addition we intend to undertake variousdirect consumer marketing activities including advertising in print television outdoorand digital media.
4. Management Discussion and Analysis Report
In terms of Regulation 34 of Securities and
Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations2015
(hereinafter referred to as "SEBI LODR Regulations") the ManagementDiscussion and Analysis
Report (MD&A) on the Company's financial and operational performance industrytrends business outlook and Initiatives and other material changes with respect to theCompany and its subsidiaries wherever applicable are presented in separate section whichforms part of the Annual Report. The MD&A Report provides a consolidated perspectiveof economic 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 in theStatement 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 adopted Dividend Distribution Policy setting out theparameters and circumstances that will be taken into account by the Board in determiningthe distribution of
Dividend to the Shareholders and/or retaining profits earned by the Company. The saidpolicy is hosted on the 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 Associates and Joint Ventures
We along with our Subsidiaries and Associates provide speciality healthcare focusedon cancer fertility clinical diagnostics and research.
As on March 31 2019 the Subsidiaries Associates and Joint Venture Companies of theCompany are as under:
|Sl. Name of the entity No. ||Country of Incorporation ||Primary business activity for which it was formed ||% of ownership held by the Company as at March 31 2019 |
|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 ||India ||Cancer Care ||100.00% |
|(along with the Shareholding of Niruja Product Devlopment and Healthcare Research Private Limited) || || || |
|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 (Mauritius) Pvt. Ltd. ||Mauritius ||Health Care Services ||100.00% |
|13 Healthcare Global (Africa) Pvt. Ltd. (Subsidiary of HCG (Mauritius) Pvt Ltd.) ||Mauritius ||Health Care Services ||76.73% |
|14 HealthCare Global (Uganda) Private Limited (Wholly Owned Subsidiary of Healthcare Global (Africa) Pvt. Ltd) ||Uganda ||Cancer Care ||76.73% |
|15 HealthCare Global (Kenya) Private Limited (Wholly Owned Subsidiary of Healthcare Global (Africa) Pvt. Ltd) ||Kenya ||Cancer Care ||76.73% |
|16 HealthCare Global (Tanzania) Private Limited (Wholly Owned Subsidiary of Healthcare Global (Africa) Pvt. Ltd) ||Tanzania ||Cancer Care ||76.73% |
|17 HCG SUN Hospitals LLP ||India ||Health Care Services (Multi- Specialty) ||74.00% |
|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% |
Effective from August 01 2018 Apex Criticare LLP the minority partner holding 49.9%of Apex HCG
Oncology Hospitals LLP Borivali (Apex HCG LLP) has retired from Apex HCG LLP and haveceased to be a partner of Apex HCG LLP. Consequent to the retirement/exit of ApexCriticare LLP Niruja
Product Development and Healthcare Research
Private Limited a wholly owned subsidiary of the Company ("Niruja") has beenadmitted as the other partner in Apex HCG LLP; and as on date HCG and Niruja are thepartners of Apex HCG LLP with a capital contribution in the ratio of 99.9% and 0.1%respectively.
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 of Material Subsidiary asdefined under the SEBI LODR Regulations as amended from time to time. During the yearthe Company along with
Strand Life Sciences Private Limited have made an application to the Registrar ofCompanies Karnataka for striking off the name of Strand-
Triesta Cancer Genomics LLP ("Strand Triesta LLP") as Strand Triesta LLPhad been inoperative since its incorporation. The capital contribution of the
Company proposed to be made in respect of
Strand Triesta LLP was 30% of the total contribution.
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 forms part 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 being https://hcgel.com/investors. b) The audited financial statements of subsidiary companies together withrelated information and other reports of each of the subsidiary companies have also beenplaced on the website of the
Company at https://hcgel.com/investors.
10. Public deposits
Your Company has not accepted anyhalf yearly deposits from public in terms of Section73 of the Companies Act 2013 and the Companies (Acceptance of Deposits) Rules 2014; andas such no amount on account of principal or interest on public deposits was outstandingas on the date of the balance sheet.
11. 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.
12. Related party transactions
In line with the requirements of the Companies Act
2013 and SEBI LODR Regulations your Company has formulated a Policy on Related PartyTransactions. This Policy intends to ensure that proper reporting approval and disclosureprocesses are in place for all transactions 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 enteredpursuant to the omnibus approval so granted is placed before the Audit Committee fortheir review on a quarterly basis. The policy on Related Party Transactions has beenhosted on the Company's website https://hcgel. com/policies-and-guidelines/ in terms ofthe SEBI
LODR Regulations relating 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 underCompanies Act 2013which is annexed herewith as Annexure 6 and forms part of the report.
Pursuant to Regulation 23(9) of the SEBI LODRM Regulations your Company has filedreport on Related Party Transactions with the Stock Exchanges for the year ended March31 2019.
13. Initial Public Offer
During the year 2015-16 the Company had completed its Initial Public Offering of29800000 equity shares of H10 each comprising of Fresh
Issue of 11600000 equity shares and Offer for Sale of 18200000 equity shares at apremium of H208 per equity share. The total issue size was H6496.4 million. The shares gotlisted on the National Stock Exchange of India Limited and BSE Limited on March 30 2016.
The proceeds of the initial public offer are fully utilized during the year for thefollowing purposes:
1. Purchase of medical equipment
2. Investment in IT software services and hardware
3. Pre-payment of debt; and
4. General Corporate Purposes
The Company has not deviated on the utilization of the proceeds of the IPO.
14. Share capital
a) Authorized Share Capital: As on the date of this report the authorized sharecapital of the Company is H1320000000 consisting of 132000000 equity shares ofH10 each. b) Issued Subscribed and Paid-up Share Capital: The Issued Subscribed andPaid-up Share Capital of the Company has been increased from H869044730 consisting of86904473 equity shares of H10 each to H879190330 consisting of 87919033equity shares of H10 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 (J) ||Date of allotment |
|Employees (On exercise of ESOP) ||30750 ||10 ||07-02-2019 |
| ||32940 ||10 ||09-11-2018 |
| ||16370 ||10 ||22-05-2018 |
|Preferential allotment of Equity shares to Dr. M Gopichand ||934500 ||10 ||09-04-2018 |
15. Number of meetings of the Board
The Board met five times during the financial year
2018-19 viz. on May 22 2018 July 12 2018 August 09 2018 November 09 2018 andFebruary 07 2019. The maximum interval between any two 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.
16. 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 taken on record the necessarydeclaration from each of the independent directors under Section 149 of the Companies Act2013 that they meet with the criteria of their independence.
17. Extract of Annual Return
The extract of the Annual Return of your Company as on March 31 2019 as provided undersubsection (3) of Section 92 of the Companies Act 2013 and Rule 12 of the Companies(Management and Administration) Rules 2014 is annexed in the Form MGT 9 is annexedherewith as Annexure 1. Additionally your Company has also placed a copy of Annual Returnon its website at https:// hcgel.com/investors.
18. Director's 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 theannual accounts the applicable accounting standards have been followed along with properexplanation 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 concernbasis; 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 2018-19.
19. Appointment of Directors
During the year under review there were no changes in the constitution of the Board ofDirectors of the Company.
20. Reappointment of Directors
As per the provisions of the Companies Act 2013 Mr. Gangadhara GanapatiNon-Independent Non-Executive Director of the Company is retiring by rotation at theforthcoming Annual General Meeting and being eligible has offered himself forreappointment.
21. Key Managerial personnel
Pursuant to the provisions of Section 203 of the Companies Act 2013 the KeyManagerial Personnels (KMPs) of the Company are: a) Dr. B. S. Ajaikumar Chairman & CEO
b) Mr. Srinivasa V Raghavan Chief Financial Officer c) Ms. Sunu Manuel CompanySecretary During the year Mr. Yogesh Patel has resigned as Chief Financial Officer of theCompany w.e.f August 12 2018; and Mr. Srinivasa V. Raghavan was appointed as ChiefFinancial Officer of the Company w.e.f. July 27 2018.
22. Board of Directors and Committees of the Board and their constitution
Your Company's Board of Directors comprises of Executive Directors Non-ExecutiveDirectors and Independent Directors. The Composition of the Board along with relevantinformation pertaining to Directors are detailed in the Corporate Governance Report whichforms a part of this Report.
The Board has formed the following five Committees:
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 andSEBI LODR Regulations as amended from time to time the Board reviews the Terms ofReference of these Committees and the nomination of Board Members to various Committees.The recommendations if any of these 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 is as under:
1. Mr. Suresh Chandra Senapaty Chairman
2. Dr. Sudhakar Rao
3. Mr. Shanker Annaswamy
The Audit committee was reconstituted and renamed as the "Audit and RiskManagement Committee" by a meeting of the Board of Directors held on May 29 2015.
(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 andRemuneration Committee are:
1. Mr. Shanker Annaswamy Chairman
2. Dr. Sampath Thattai Ramesh
3. Mr. Gangadhara Ganapati
(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 are:
1. Mr. Gangadhara Ganapati Chairman
2. Dr. B. S. Ajaikumar
3. Ms. Bhushani Kumar
Ms. Bhushani Kumar was admitted as member of Stakeholders' Relationship Committee onFebruary 07 2019.
(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 are:
1. Dr. Sudhakar Rao Chairman
2. Dr. Sampath Thattai Ramesh
3. Ms. Bhushani Kumar
4. Dr. B. S. Ajai Kumar
(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 are:
1. Dr. B. S. Ajaikumar Chairman
2. Mr. Gangadhara Ganapati
3. Mr. Suresh Chandra Senapaty
4. Mr. Shanker Annaswamy
5. Dr. Amit Varma
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.
23. 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 ofthe Board was based on criteria such as composition and role of the Board Boardcommunication and relationships functioning of Board Committees review of performanceand compensation to Executive Directors succession planning strategic planning 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 BoardEvaluation discussion was focused around how to make the Board and its Committees moreeffective as a collective body in the context of the business and the external environmentin which the Company functions. From time to time during the year the Board was appraisedof the business issues and the related opportunities and risks. The Board discussedvarious aspects of the functioning of the Board and its Committees such as structurecomposition meetings functions and interaction with Management and what needs to be doneto 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 theChairman of the Nomination and Remuneration Committee. The overall assessment of the Boardwas that it was functioning as a cohesive body including the Committees of the Board thatwere functioning well with periodic reporting by the Committees to the Board on the workdone and progress made during the period. The Board acknowledged the efforts andcontributions made by the Chairperson Executive and Non- Executive Directors andIndependent 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 2018-19 given the changingexternal environment some areas have been identified for the Board to engage itself withand these will be acted upon.
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 Risk
Management technique and / or associated frameworks processes and practices of theCompany. The enterprise risk management process of the Company is progressingsatisfactorily but the entire process is yet to reach a level of maturity. RMSC alsoadvises and guides the Company for making the process more robust and to achieve prudentbalance between risk and reward in both ongoing and new business activities. The Audit andRisk Management Committee periodically reviews the risk management process. For furtherdetails on the enterprise wide risk management framework refer to Management andDiscussion Analysis Report forming part of the Annual Report.
25. 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 ofSection 135 of the Companies Act 2013 the Company has well defined policy on CSR whichcovers the activities as prescribed under Schedule VII of the Companies Act 2013. The CSRPolicy is available on the website of the Company athttps://hcgel.com/policies-and-guidelines/.
During the year the Board of Directors of the Company at the recommendation of theCorporate Social Responsibility Committee have agreed to support certainprojects/activities of
International Human Development and Upliftment Academy ("IHDUA" or "theTrust") a trust based in Mysore which includes providing support for rural schoolprogramme vocational training to provide partial/full-time employment and healtheducation to rural community.
Annual Report on Corporate Social Responsibility is annexed herewith as Annexure 7.
26. 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.
27. 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 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 is managed by an Internal Audit function; and the Audit andRisk Management Committee of the Board 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.
28. 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 their genuine concern of anyconduct that results in violation of the ethical behaviour or to report any act if notconducted in a fair transparent manner thereby compromising professionalism honesty andintegrity (on an anonymous basis if stakeholders so desire). Likewise under this policywe have prohibited discrimination retaliation or harassment of any kind against anyemployees who based on the employee's reasonable belief that such conduct or practicehave occurred or are occurring reports that information or participates in the saidinvestigation. No individual in the Company has been denied access to the Audit and RiskManagement Committee or its Chairman. This policy of the Company was amended to align withthe requirements under Regulation 9A of Securities and Exchange Board of India(Prohibition of Insider Trading) Regulations 2015.
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.
29. Code for Prevention of Insider Trading:
On December 31 2018 Securities and Exchange Board of India amended the Prohibition ofInsider Trading Regulations 2015 prescribing various new requirements with effect fromApril 1 2019. In line with the amendments your Company has adopted an amended Code ofConduct to regulate monitor and report trading by Designated Persons and their ImmediateRelatives under the Securities and Exchange Board of India (Prohibition of InsiderTrading) Regulations 2015. This Code of Conduct also includes code of practices andprocedures for fair disclosure of unpublished price sensitive information which has beenmade available on the Company's website at https://hcgel.com/investors.
30. Company's Policy on Appointment andRemuneration 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 independence of a director and othermatters as required under sub-section (3) of section 178 of the Companies Act 2013 isavailable on our website https://hcgel.com/policies-and-guidelines/. We affirm that theremuneration paid to Directors is as per the terms laid out in the nomination andremuneration policy of the Company.
31. 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 2019 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 H10.2 million ormore employees employed for part of the year and in receipt of H0.85 million permonth or more pursuant to Rule 5 (2) and 5 (3) the Companies (Appointment andRemuneration of Managerial Personnel) Rules 2014 is also provided in Annexure 4 tothis report.
32. 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 status andoperations of the Company in future.
Under Section 139 of the Indian Companies Act 2013 and Rules made thereunder it ismandatory to rotate the Statutory Auditors on completion of the maximum term permittedunder the said 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 the requirement of seeking ratification of appointmentof statutory auditors by members at each AGM has been done away with. Accordingly no suchitem has been considered in notice of the 21st AGM.
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 2019;and hence do not call for any further comments under Section 134 of the Companies Act2013.
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.
35. 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:
There are no other material changes affecting the financial position of the Companybetween the end of the financial year to which this financial statements relate and thedate of the report.
There has been no change in the nature of business of the Company during the lastfinancial year.
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 2019. The said Report of the Secretarial Audit in Form MR3 is annexed herewith as Annexure 2 and forms part of the report.
There are no qualifications reservations or adverse remarks made by the SecretarialAuditor of the Company in their Secretarial Audit Report except with regard to the CostAudit Report for not having obtained within 180 days as required under Rule
6 (5) of the Companies (Cost Records And Audit) Rules 2014; and for not disclosing thenames of the top ten employees of the Company in the
Annual Report of the financial year 2017-18 in terms of remuneration drawn as requiredunder Rule
5 (2) & (3) of the Companies (Appointment and Remuneration of Managerial Personnel)Rules 2014.
On the observations/remarks contained in the Secretarial Auditors' Report our responseis as under: a) with regard to the Cost Audit Report for not having obtained the samewithin 180 days as required under Rule 6 (5) of the Companies (Cost Records And Audit)Rules 2014 we would like to state that in view of the change in cost segmentation forFY 2017- 2018 and considering the time taken for deriving the merged financial statementsand the cost statements on account of the merger of HCG Pinnacle
Oncology Private Limited (a subsidiary of the Company) with the Company the coststatements could not be placed before the Board within 180 days from the financial yearend. The Company has subsequently obtained the Cost Audit Report and the same was approvedby the Board of Directors on the 09th November 2018 and the same was filed with theRegistrar of Companies Karnataka. The Company has also made a compounding application inthis regard. b) With regard to not disclosing the names of the top ten employees of theCompany in the Annual Report of the financial year 2017-18 in terms of remuneration drawnas required under Rule 5 (2) & (3) of the Companies (Appointment and Remuneration ofManagerial Personnel) Rules 2014 we would like to state that considering the firstproviso to Section 136(1) of the Companies Act 2013 the Annual Report excluding theaforesaid information was sent to the members of the Company and others entitled thereto.The said information was available for inspection at the Registered Office of the Company.
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.
37. 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 had appointed M/s. M. Thimmarayaswamy & Co. CostAccountants to audit the cost records of the Company for the Financial Year 2018-19. M/s.M. Thimmarayaswamy & Co. Cost Accountants have resigned as cost auditor of theCompany on 22nd March 2019. The Board on the recommendation of the Audit and RiskManagement Committee has appointed M/s. Rao Murthy & Associates (Firm
Registration No. 00065) Costs Accountants as the cost auditors of the Company for FY2018-19 to fill the vacancy caused by resignation of M/s.
M. Thimmarayaswamy & Co. Cost Accountants; and have also approved the appointmentof M/s.
Rao Murthy & Associates as the Cost Auditor of the Company for FY 2019-20 at aremuneration of H175000 (Rupees One Lakh Seventy-Five Thousand Only) (exclusiveof taxes and re-imbursement of actual out-of-pocket expenses if any in connection withthe 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 FY2019-20 at the ensuing Annual General Meeting.
Cost Audit Report for the financial year ended 31st March 2018 has been filed with theRegistrar of Companies.
38. 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 readwith Rule 8 of the Companies (Accounts) Rules 2014 is detailed in
39. 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. During the year 2018-2019 threecomplaints were received at a group level and the same were investigated out of which twowere resolved as per the provisions of the Act. One complaint was pending as on the dateof this report.
In order to build awareness in this area the Company has been conducting programmes inthe organization on a continuous basis.
40. 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 the e-mail IDs of shareholders. We are accordinglyarranging to send soft copies of these documents to the e-mail IDs of shareholdersavailable with us. In case any of the shareholders would like to receive physical copiesof these documents the same shall be forwarded on request to the Company by post or ane-mail. Wearealsointheprocessofstartingasustainability initiative with the aim of beingcarbon neutral and minimize our impact on the environment. Sustainability practices willbe implemented and tracked diligently to ensure that we comply with the goals we set forourselves.
41. 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 2019 are annexed tothis Report as
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 duringthe financial year. Disclosures on various plans details of options granted sharesallotted upon exercise etc. as required under the Employee Benefits Regulations read withSecurities and Exchange Board of India circular no. CIR/CFD/POLICY CELL/2/2015 dated June
16 2015 are available on the Company's website at https://www.hcgel.com/investors/. Noemployee was issued stock options during the year equal to or exceeding 1% of the issuedcapital of the 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 2019 the Company has recorded stock compensation expense of H30559323(2018: H27093288).
For further details on the Scheme refer Annexure 3 of the Director's report.
The Company is committed to observe good corporate governance practices. The report onCorporate Governance for the financial year ended March 31 2019 as per regulation 34(3)read with Schedule V of the SEBI LODR Regulation including Certificate from CEO and CFO asper Regulation 17 of SEBI LODR Regulations forms integral 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 LODR
Regulations 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 2018-19 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 all-roundperformance. 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 co-operation patronage and trust reposed in the Company and its healthcareservices.
|For and on behalf of the Board of Directors |
|Dr. B. S. Ajaikumar |
|Date: May 23 2019 |
|Place: Bengaluru |