The Directors are pleased to present the 33rd Annual Report with the AuditedAccounts for the financial year ended 31 March 2021.
1. FINANCIAL RESULTS
| ||2020-21 ||2019-20 |
|Turnover ||17254 ||15110 |
|Profit before interest & depreciation ||3278 ||2769 |
|Interest ||362 ||524 |
|Profit before depreciation ||2916 ||2245 |
|Depreciation ||852 ||825 |
|Profit before taxation before exceptional item ||2064 ||1420 |
|Exceptional item ||- ||154 |
|Profit before taxation after exceptional item ||2064 ||1266 |
|Provision for taxation || || |
|- Current tax ||796 ||347 |
|- Deferred tax IiabiI ity/(assets) ||(63) ||75 |
|Profit after tax ||1331 ||844 |
|Reserves and surplus ||9088 ||7919 |
|Dividend on equity share ||148 ||197 |
|Tax on dividend ||- ||41 |
2. COMPANY PERFORMANCE
The Company achieved revenue of Rs. 17254 million in FY 2020-21 14.19% higher thanthat of Rs. 15110 million in the previous year. The sales of the pharmaceutical businessrecorded a growth by 19.48% to Rs. 10596 million while the sales of the Crop Protectionsaw a growth by 6.51% to Rs. 6608 million.
The EBIDTA margins stood at around 19% growing in line with the turnover from Rs.2769 million in the previous year to Rs. 3278 million in FY 2020-21. Absolute EBITDAalso increased by 18% amounting to Rs. 509 million. The Profit before Tax (PBT) went up by63% from Rs. 1266 million in the previous year to Rs. 2064 million in FY 2020-21. Profitafter Tax (PAT) witnessed a growth of 58% from Rs. 844 million in the previous year to Rs.1331 million in FY 2020-21. The Earning per Share (EPS) also increased from Rs. 6.85 inthe previous year to Rs. 10.80 in FY 2020-21.
The free cash generated by the Company out of operations is healthy and growing in linewith the turnover. The Company is incurring substantial capital expenditure for growth inthe Pharmaceutical and Crop Protection businesses to augment capacities for existingproducts and to create capacities for new products as well as investments in Research& Technology.
The Company has prudently been funding the growth Capex with a mix between internalaccruals and long-term loans. In doing so the Company ensures that it maintains a healthyliquidity position and that its financial gearing and debt service coverage are atcomfortable levels.
The Current Ratio of the Company is at a healthy 1.17 for FY 2020-21 as against 1.14in the previous year. The Debt to Equity Ratio improved from 0.71 in the previous year to0.61 in FY 2020-21 while the Debt Service Coverage Ratio (DSCR) strengthened from 1.61 inthe previous year to 1.94 in FY 2020-21.
ICRA reaffirmed the Long-Term Rating of the Company during the FY 2020-21 as"A" with a positive outlook while the Short-Term Rating was also reaffirmed asA1. The rating reflects the comfortable liquidity position and the overall strongfinancial health of the Company.
Exports for the year 2020-21 were Rs. 11822.62 million (69% of total sales) ascompared to Rs. 11089 million (74% of total sales) in the previous year. We diversifiedour customer base which included more local customers who in turn re-exported ourmanufactured products.
4. MANAGEMENT DISCUSSION AND ANALYSIS
The Management Discussion and Analysis on the Company's operations is provided in aseparate section and forms a part of this Annual Report.
5. BUSINESS RESPONSIBILITY REPORT
The Company's Business Responsibility Report in terms of Regulation 34 of SEBI(Listing Obligations & Disclosure Requirements) Regulations 2015 (ListingRegulations) is provided in a separate section and forms a part of this Annual Report.
The Board declared an interim dividend of 50% (previous year: 50%) which was paid toshareholders in March 2021 and recommended a final dividend of 50% (previous year: 10%)for the year 2020-21. If approved by the shareholders the dividend for the financial year2020-21 shall aggregate to 100% (previous year: 60%).
7. SHARE CAPITAL
There has been no change in the Company's paid-up share capital during the currentfinancial year. The paid-up equity share capital as on 31 March 2021 stood at Rs. 246.6million. During the year under review the Company did not issue shares with differentialvoting rights nor granted any stock options or sweat equity. As on 31 March 2021 none ofthe Company's Directors held instruments convertible into equity shares of the Company.
8. ANNUAL RETURN
The Annual Return of the Company as required under Section 92 of the Companies Act2013 read with the Rules framed thereunder in the prescribed Form MGT-7 will beuploaded on the website of the Company www.hikal.com.
9. SUBSIDIARY ACCOUNTS
The Company has one subsidiary viz. Acoris Research Limited. A statement containing thesalient features of the Financial Statements of the Subsidiary in the prescribed FormAOC-1 attached as "Annexure A" to this Report. The Company will provide theFinancial Statements of the Subsidiary and the related information to any member of theCompany who may be interested in obtaining the same. The financial statements of thesubsidiary will also be available for inspection in electronic mode. Members who wish toinspect the same are requested to write to the Company by sending an email tosecretarial_agm@hikal. com. The Consolidated Financial Statements of the Company formingpart of this Annual Report includes the Financial Statements of the Subsidiary. TheFinancial Statements of Subsidiary are also hosted on the website of the Companywww.hikal.com.
All Independent Directors have given declarations that they meet the criteria ofindependence as laid down under Section 149(6) of the Companies Act 2013 and Securitiesand Exchange Board of India (Listing Obligations & Disclosure Requirements)Regulations 2015.
The Board at its meeting held on 6 May 2021 proposed the appointment of Mr. JaiFliremath as the Executive Chairman and Mr. Sameer Hiremath as the Managing Director ofthe Company along with their remuneration effective from 1 October 2021 for theapproval of the members of the Company at the ensuing Annual General Meeting.
In accordance with the provisions of Section 152 of the Companies Act 2013 and theCompany's Articles of Association Mrs. Sugandha Fliremath (DIN - 00062031) Directorretires by rotation at the forthcoming Annual General Meeting (AGM) and being eligibleoffers herself for re-appointment. The Board has in its meeting held on 4 February 2021appointed Mr. Ravindra Kumar Goyal (DIN- 03050193) as an Additional Director of theCompany in the category of Independent Director for a term of three years with effectfrom
4 February 2021 subject to the approval of the members of the Company at the 33rdAnnual General Meeting. The Board proposes appointment of Mr. Ravindra Kumar Goyal as anIndependent Director of the Company for a term of three years w.e.f. 4 February 2021. Inthe opinion of the Board the Independent Director appointed during the year possesses theintegrity expertise and experience (including proficiency) required to contribute to thequality and better governance of the Board processes.
During the financial year Mr. Shivakumar Kheny resigned as an Independent Director ofthe Company w.e.f. 4 February 2021 due to personal reasons. The Board places on recordits appreciation for his invaluable contribution and guidance during his tenure as anIndependent Director.
Details of the number of Board meetings held during 2020-21 are mentioned in theCorporate Governance Report which forms a part of this Annual Report.
11. BOARD EVALUATION
Pursuant to the provisions of the Companies Act 2013 and Securities and ExchangeBoard of India (Listing Obligations & Disclosure Requirements) Regulations 2015 astructured questionnaire was prepared after taking into consideration the various aspectsof the Board's functioning like composition of the Board and its Committees cultureexecution and performance of specific duties obligations and governance.
The performance evaluation of the Independent Directors was completed. In a separatemeeting of Independent Directors performance of Non-Independent Directors the Board as awhole and the Chairman of the Company was evaluated taking into account the views ofExecutive Directors and Non-Executive Directors. The Board of Directors expressed theirsatisfaction with the evaluation process.
12. WHISTLE-BLOWER POLICY
The Company has a Whistle-Blower policy to report genuine concerns or grievances. TheWhistle-Blower Policy is posted on the Company's website www.hikal.com.
13. REMUNERATION AND NOMINATION POLICY
The Company has a policy which lays down a framework in relation to remuneration ofDirectors Key Managerial Personnel and Senior Management of the Company. TheRemuneration and Nomination Policy of the Company is attached as "Annexure B" tothis Report. This policy also lays down criteria for selection and appointment of Boardmembers. The details of this policy are explained in the Corporate Governance Report anduploaded on the Company's website www.hikal.com.
14. RELATED PARTY TRANSACTIONS
All related party transactions entered during the financial year were at an arm'slength basis and in the ordinary course of business. There were no materially significantrelated party transactions made by the Company with Promoters Directors Key ManagerialPersonnel or other designated persons which may have a potential conflict with theCompany's interest at large.
All related party transactions were placed before the Audit Committee and also theBoard for approval.
The policy on Related Party Transactions as approved by the Board is uploaded on theCompany's website www.hikal.com.
15. SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS
There were no significant and material orders passed by the regulators/courts thatcould impact the going concern status of the Company and its future operations.
16. RISK MANAGEMENT
The Company has a robust business risk management framework in place to identify andevaluate all business risks. The Company recognises risk management as a crucial aspect ofthe Company's management and is aware that identification and management of riskeffectively is instrumental to achieving its corporate objectives.
The Company has identified the business risks and the business heads who are termedas risk owners to assess monitor and manage these risks on an ongoing basis. The riskowners assess the identified risks and continually identify any new risks that can affectthe business. Different risks such as technological operational maintenance of qualityreputational competition environmental foreign exchange financial human resource andlegal compliances among others are assessed on a continuous basis. The Risk
Management Committee and Audit Committee review and submit to the Board of Directorstheir findings in the form of risk register at regular intervals. At the Board meetingsthe members have a detailed discussion to assess each risk and the measures that are inplace to lower them to acceptable limits.
The strategies are reviewed discussed and allocation of appropriate resources is doneas and when necessary. The risk management program internal control systems and processesare monitored and updated on an ongoing basis. A built-up mechanism has been establishedto identify measure control monitor and report the risks. Business heads areresponsible for rolling out the risk assessment and management plan within theorganisation.
17. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY
The Company has an internal control system commensurate with the size scale andcomplexity of its operations. To maintain its objectivity and independence the InternalAudit function reports to the Chairman of the Audit Committee of the Board.
The Internal Audit Department monitors and evaluates the efficacy and adequacy of theinternal control system in the Company its compliance with operating systems accountingprocedures and policies at all locations of the Company and its subsidiary. Based on thereport of internal audit function process owners undertake corrective action in theirrespective areas and thereby strengthen the controls. Significant audit observations andcorrective actions thereon are presented to the Audit Committee.
The Audit Committee actively reviews the adequacy and effectiveness of the internalcontrol systems and suggests improvements to strengthen them. The Company has a robustmanagement information system which is an integral part of the control mechanism.
During the year a thorough audit of the internal financial controls was carried out byan independent firm of chartered accountants.
18. KEY MANAGERIAL PERSONNEL
During the financial year Mr. Sham Wahalekar retired from the position of CompanySecretary and Compliance Officer of the Company w.e.f. 5 August 2020 and from theposition of the Chief Financial Officer of the Company w.e.f. 5 November 2020. Mr.Rajasekhar Reddy was appointed as the Company Secretary and Compliance Officer of theCompany w.e.f. 5 August 2020 and Mr. Kuldeep Jain was appointed as the Chief FinancialOfficer of the Company w.e.f. 5 November 2020.
Pursuant to the provisions of Section 203 of the Act following were the Key ManagerialPersonnel of the Company as on 31 March 2021:
Mr. Jai Hiremath Chairman & Managing Director
Mr. Sameer Hiremath Joint Managing Director & CEO (Whole-time Director)
Mr. Kuldeep Jain Chief Financial Officer Mr. Rajasekhar Reddy Company Secretary
19. PARTICULARS OF LOANS GUARANTEES AND INVESTMENTS BY THE COMPANY
The details under Section 186 of the Companies Act 2013 are given in the Note No. 52to the notes to the financial statements.
20. DIRECTOR'S RESPONSIBILITY STATEMENT
Your Directors state that:
(i) In the preparation of the annual accounts the applicable accounting standards readwith requirements set out under Schedule III to the Companies Act 2013 (the Act) werefollowed and there are no material departures from the same;
(ii) The Directors have selected such accounting policies and applied them consistentlyand made judgements and estimates that are 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 ended 31March 2021 and of the profit of the Company for that year;
(iii) The Directors have taken proper and sufficient care for the maintenance ofadequate accounting records in accordance with the provisions of the Act for safeguardingthe assets of the Company and for preventing and detecting fraud and other irregularities;
(iv) The annual accounts have been prepared on a going concern basis;
(v) The Directors have laid down internal financial controls to be followed by theCompany and that such internal financial controls are adequate and are operatingeffectively; and
(vi) The Directors have devised a proper system to ensure compliance with the provisionof all applicable laws and that such systems are adequate and are operating effectively.
At the 31st Annual General Meeting held on 1 August 2019 S R B C & COLLP Chartered Accountants Mumbai (FRN: 324982E/E300003) were appointed as the StatutoryAuditors of the Company to hold office from the conclusion of 31st AnnualGeneral Meeting of the Company till the conclusion of the 36th Annual GeneralMeeting to be held in the year 2024.
The Auditor's report prepared by S R B C & CO. LLR to the members on the accountsof the Company for the year ended 31 March 2021 does not contain any qualificationsadverse or disclaimer remarks. No fraud has been reported by the Auditors to the AuditCommittee or the Board.
22. COST AUDITOR
The Company has re-appointed M/s. V. J. Talati & Co. as the Cost Auditor to carryout the audit of cost accounts for the financial year 2021-22. The requisite resolutionfor ratification of remuneration payable to Cost Auditors for the year 2021-22 by theshareholders has been set out in the Notice of AGM. The cost audit report for thefinancial year 2019-20 was filed with the Ministry of Corporate Affairs Government ofIndia on 31 August 2020.
23. SECRETARIAL AUDITOR
The Board has appointed M/s. Ashish Bhatt & Associates Practicing CompanySecretaries to conduct the Secretarial Audit for the financial year 2020-21.
The Secretarial Audit Report for the financial year ended 31 March 2021 is annexed tothis report as "Annexure C". The Secretarial Audit Report does not contain anyqualifications reservations or adverse remarks.
24. CORPORATE SOCIAL RESPONSIBILITY (CSR)
The Corporate Social Responsibility Committee (CSR Committee) has formulated andrecommended to the Board a Corporate Social Responsibility Policy (CSR Policy) indicatingthe activities to be undertaken by the Company which has been approved by the Board. TheCSR Policy may be accessed on the Company's website www.hikal.com.
As a socially responsible corporate member of the world community with long-termrelationships we believe that the future of our business is best served by respecting theinterests of society at large. Through our efforts we shall strive to improve the livingstandards of the community. Our CSR activities shall aim to make a difference to the livesof the needy underprivileged members of society including children women and seniorcitizens and the environment.
The key philosophy of all CSR initiatives of the Company is guided by three corecommitments of scale impact and sustainability. The Company has identified six focusareas of engagement which are as under:
Health: Affordable solutions for healthcare through improved access awarenessand sanitation
Education: Access to quality education training skill enhancement enhancementof vocation skills
Environment: Environmental sustainability ecological balance conservation ofnatural resources
Protection of national heritage art and culture: Protection and promotion oftraditional art culture and heritage
Overall development activities in surrounding areas of Hikal's manufacturingsites for the benefit of society
Contribution to Prime Minister's National Relief Fund or any other fund set upby the Central Government for socio-economic development or welfare
Implementation of the CSR Program:
1. Project activities identified under CSR are to be implemented either by personnel ofthe Company or through a registered trust or a registered society.
2. The duration of each project/program shall depend on its nature and intended impact.
The Company will also undertake other need-based initiatives in compliance withSchedule VII of the Act. During the year the Company has spent Rs.26.88 million on CSRactivities. Pursuant to the provisions of the Companies Act 2013 the Company should havespent Rs. 25.81 million (being 2% of the average net profits of the last three financialyears) during the financial year 2020-21.
The Annual Report on CSR activities is annexed herewith marked as "AnnexureD".
25. PREVENTION OF SEXUAL HARASSMENT OF WOMEN AT WORKPLACE
Pursuant to the provisions of the Prevention of Sexual Harassment of Women at Workplace(prevention prohibition and redressal) Act 2013 ("POSH Act") the Companyadopted a Policy on Appropriate Social Conduct at Workplace'. The policy isapplicable for all employees of the organisation which includes corporate office andmanufacturing units among others. The policy is applicable to non-employees as well i.e.business associates vendors and trainees among others.
A Complaints Committee has also been set up to redress complaints received on sexualharassment as well as other forms of verbal physical written or visual harassment.
During the financial year under review the Company did not receive any complaints ofsexual harassment and no cases were filed under the POSH Act.
26. TRANSFER TO INVESTOR EDUCATION AND PROTECTION FUND ("IEPF")
Transfer of Unclaimed Dividend to IEPF
During the year under review dividend amounting to Rs. 154375/- that had not beenclaimed by the shareholders for the year ended 31 March 2013 was transferred to thecredit of IEPF as required under Sections 124 and 125 of the Act.
Unclaimed dividend as on March 312021
The Shareholders are requested to lodge their claims with the Registrar and ShareTransfer Agents of the Company i.e. Universal Capital Securities Pvt. Ltd. for unclaimeddividend.
Pursuant to the provisions of Investor Education and Protection Fund Authority(Accounting Audit Transfer and Refund) Rules 2016 the Company has uploaded the detailsof unpaid and unclaimed amounts lying with the Company as on 31 March 2020 on thewebsite of the Company www.hikal. com. The same are also available on the website of theIEPF Authority www.iepf.gov.in.
Transfer of Equity Shares
As required under Section 124 of the Act during the financial year 14381 EquityShares in respect of which dividend has not been claimed by the members for sevenconsecutive years or more were transferred by the Company to the IEPF Authority. Detailsof such shares transferred have been uploaded on the website of the Company www.hikal.com.The same are also available on the website of the IEPF Authority www.iepf.gov.in.
27. SAFETY AND ENVIRONMENT
The Company continued to maintain the highest standards in environment health andsafety. The Company has become the first Indian life sciences company to receive theResponsible Care certification. It is applicable to all manufacturing and research sitesof the Company. Continuous training and awareness programs for the employees areundertaken on a frequent basis.
The Company did not accept any deposits and as such there were no overdue depositsoutstanding as on 31 March 2021.
The Company considers its human capital as an invaluable asset. The Company continuedto have cordial relationships with all its employees. Management and employee developmentprograms and exercises were conducted at all sites. Employees had various team buildingexercises and were sponsored for various external seminars and other developmentalprograms to enhance their skill sets. The total workforce of the Company stood at 2308 ason 31 March 2021 including 1528 permanent employees.
The statement containing particulars of employees as required under Section 197(12) ofthe Companies Act 2013 read with Rule 5 of the Companies (Appointment and Remunerationof Managerial Personnel) Rules 2014 forms a part of this Report. Further the Report andthe financial statements are being sent to the members excluding the aforesaid statement.In terms of Section 136 of the Companies Act 2013 the said statement is open forinspection. Any member interested in obtaining such particulars may write to the CompanySecretary at email@example.com.
30. CONSERVATION OF ENERGY RESEARCH & DEVELOPMENT TECHNOLOGY ABSORPTION ANDFOREIGN EXCHANGE EARNINGS AND OUTGO
In accordance with the requirements of Section 134(3)(m) of the Companies Act 2013read with rule 8(3) of the Companies (Accounts) Rules 2014 a statement showingparticulars with respect to Conservation of Energy Technology Absorption and ForeignEarnings and Outgo forming a part of the Directors' Report is given in the enclosed"Annexure E" which forms a part of this Report.
31. CORPORATE GOVERNANCE
A report on Corporate Governance along with a certificate from the Auditors of theCompany regarding the compliance of the requirements of Corporate Governance asstipulated under the provisions of Regulation 34 of the Securities and Exchange Board ofIndia (Listing Obligations & Disclosure Requirements) Regulations 2015 is annexed tothis Annual Report.
32. SECRETARIAL STANDARDS
The Company has complied with the applicable Secretarial Standards issued by theInstitute of Company Secretaries of India during the Financial Year 2020-21.
The Board of Directors place on record their appreciation of the contribution andsincere support extended to the Company by our bankers financial institutions and valuedcustomers and suppliers.
The Board also places on record its appreciation for the impeccable service andgenerous efforts rendered by its employees at all levels across the Board towards theoverall growth and success of the Company.
34. CAUTIONARY STATEMENT
Statements in the Board's Report and the Management Discussion and Analysis describingthe Company's objectives expectations or forecasts may be forward looking within themeaning of applicable securities laws and regulations. Actual results may differmaterially from those expressed in the statement. Important factors that could influencethe Company's operations include global and domestic demand and supply conditionsaffecting selling prices of finished goods input availability and prices changes inGovernment regulations tax laws economic developments within the country and otherfactors such as litigation and industrial relations.
| ||For and on behalf of the Board of Directors |
| ||Sd/- |
| ||Jai Hiremath |
|Date: 6 May 2021 ||Chairman & Managing Director |
|Place: Mumbai ||DIN: 00062203 |