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Ipca Laboratories Ltd.

BSE: 524494 Sector: Health care
NSE: IPCALAB ISIN Code: INE571A01020
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VOLUME 4437
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P/E 25.25
Mkt Cap.(Rs cr) 10,019
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OPEN 808.50
CLOSE 800.90
VOLUME 4437
52-Week high 828.00
52-Week low 590.10
P/E 25.25
Mkt Cap.(Rs cr) 10,019
Buy Price 785.10
Buy Qty 100.00
Sell Price 791.00
Sell Qty 45.00

Ipca Laboratories Ltd. (IPCALAB) - Director Report

Company director report

TO THE MEMBERS

Your Directors have pleasure in presenting the 68th Annual Report andAudited Financial Statements for the year ended 31st March 2018.

STANDALONE FINANCIAL RESULTS

(Rs Crores)

For the year ended 31.3.2018 For the year ended 31.3.2017
Sales and other Income 3258.75 3178.87
Profit before finance cost & depreciation 481.18 452.54
Less : Finance cost 24.02 23.34
Depreciation and Amortisation 174.36 171.00
Profit before tax 282.80 258.20
Less : Provision for taxation
Current Tax 60.01 56.95
Short / (Excess) provision of taxes for earlier years (0.34) (0.04)
Deferred Tax liability / (asset) (9.98) 13.00
Net Profit 233.11 188.29

FINANCIAL STATEMENTS

The standalone and consolidated financial statements are prepared in accordance withthe Indian Accounting Standards (Ind-AS) as prescribed under Section 133 of the CompaniesAct 2013 read with Rule 3 of the Companies (Indian Accounting Standards) Rules 2015 andCompanies (Indian Accounting Standards) Amendment Rules 2016.

In accordance with Indian Accounting Standard (Ind AS-110) the audited consolidatedfinancial statements are provided in the Annual Report.

CREDIT RATING

During the year under report CARE Ratings has re-affirmed CARE AA; Stable / Care A1 +(Double A; Outlook: Stable / A One Plus) ratings to the Company's long term / short termbank facilities (fund based / non-fund based) amounting to Rs 1140 crores.

MANAGEMENT DISCUSSION AND ANALYSIS

a) Industry Structure and Development

The global pharmaceutical market is now estimated to be over US $ 1.2 trillion and isexpected to grow at a CAGR of about 4 to 5%. Though the pharmaceutical industry isdeveloping at a rapid pace the pharmaceutical manufacturing companies are confronted withenormous challenges such as cost and pricing new medicines and therapy dosages changingregulatory landscape and growing digitization. The market for pharmaceuticals is growingpersistently and this industry is expected to be US$ 1.5 trillions in size by 2020. Thegrowth in the pharmaceuticals market is led by 1% plus annual global increase in thepopulation increasing life expectancy leading to growth in the proportion of people agedabove 65 years to about 27% of world population as well as increasing urbanization andgrowing middle income population making drugs available and affordable for more people.Other potential growth drivers include improved economic activity in key geographies.

Thanks to advances in science and technology the research based pharmaceuticalindustry is entering an exciting new era in medicine development. The research methods areevolving and the innovative pharmaceutical industry aims to turn fundamental research intoinnovative treatments that are widely available and accessible to patients.

b) Outlook Risks and Concerns

Although economic woes of certain geographics are impending the pharmaceutical marketgrowth the long term outlook for the industry remains positive. The industry growth isdriven by ageing population and ever growing middle income group in emerging economiesboosting demand for the branded and generic formulations. Additionally the emergence ofnew viruses and drug resistant infections biological agents immune therapies etc.spurred research and development activities in the recent past providing the industry withmore products in their drug pipeline with revenue and growth streams.

The Indian pharmaceuticals market is the third largest in terms of volume and twelfthlargest in terms of value. India is the biggest provider of generic medicationsinternationally accounting for about 20 percent of global exports volume and enjoys asignificant position in the world pharmaceuticals sector. The country also has a huge poolof engineers and scientists having the capability to steer this industry forward to a muchgreater degree. The cost efficiency also continues to create opportunities for Indianpharmaceutical companies in the emerging global economies.

The Indian pharma industry is expected to outperform the global pharma industry andgrow over 10% per annum in next couple of years to a size of about US $ 55 billion by 2020thereby emerging as one of the top 10 pharmaceutical market globally by absolute size.Indian pharmaceutical export which was about US $ 16 billion in 2017 is expected to reacha size of about US $ 20 billion by 2020.

Indian pharma companies are focusing on global generic and API business R&Dactivities and contract research and manufacturing alliances. India is also fast emergingas a preferred pharmaceuticals manufacturing location. Increasing use of pharmaceuticalgenerics in developed markets to reduce healthcare cost will also provide attractivegrowth opportunities to Indian generic formulations manufacturers and thus Indianpharmaceutical industry is poised for an accelerated growth in the coming years. Howeverpoor public healthcare funding and infrastructure low per capita consumption of medicinesin developing and under developed countries including India currency fluctuationsregulatory issues government mandated price controls inflation and resultant all roundincrease in input costs are few causes of concern.

During the year under report there was no change in the nature of Company's business.

c) Financial Performance and Operations Review

During the financial year under report the Company registered on a standalone basis atotal income of Rs 3258.75 crores as against Rs 3178.87 crores in the previous year agrowth of 3%.

Withdrawal of exemptions given to certain APIs and formulations manufactured by theCompany from the import alert by US FDA in June 2017 as well as Global Fund not sourcingthe anti-malarial formulations manufactured by the Company impacted the Company'sinternational business growth during the financial year. The implementation of GST witheffect from 1st July 2017 in the country and the resultant inventoryrationalisation in the marketplace also impacted the Company's business growth in thedomestic market.

The Company has implemented comprehensive remedial measures at all its manufacturingsites to ensure quality and regulatory compliances. These remedial measures includedreview of all processes and procedures revamping of training system recruitment ofsenior quality personnel as well as automation of quality control laboratories. TheCompany is awaiting re-inspection by US FDA of its manufacturing facilities currentlyunder import alert. The Company is committed to its philosophy of highest quality inmanufacturing operations systems integrity and cGMP culture. Your management isconfident that implementation of remedial measures will ensure that the Company willregain all its regulatory approvals.

The Directors are happy to inform you that the Global Fund has once again selected yourCompany as their panel supplier of antimalarial medicines for the Global Fund PooledProcurement mechanism and private sector co-payment mechanism for an initial period of 3(three) years and this business is expected to restart from the current financial year.

During the financial year under report the earnings before interest depreciation andtaxation amounted to Rs 481.18 crores as against Rs 452.54 crores in the previousfinancial year. The operations have resulted in a net profit of Rs 233.1 1 crores duringthe financial year under report as against Rs 188.29 crores in the previous financialyear a growth of 24%.

Break-up of Sales

(Rs Crores)

2017-18

2016-17

Domestic Exports Total Growth Domestic Exports Total Growth
Formulations 1425.38 993.96 2419.34 1% 1388.55 995.89 2384.44 11%
APIs & Intermediates 178.45 570.25 748.70 5% 144.41 565.85 710.26 8%
Total Sales 1603.83 1564.21 3168.04 2% 1532.96 1561.74 3094.70 10%
Growth 5% --% 2% 12% 9% 10%

d) International Business

The products of the Company are now exported to nearly 120 countries across the globe.During the financial year under report the international business amounted to Rs 1564.21crores as against Rs 1561.74 crores in the previous year. Formulation exports of theCompany was flat at Rs 993.96 crores and exports of APIs and Drug Intermediates increasedby 1% to Rs 570.25 crores.

Continent-wise Exports

(Rs Crores)

2017-18

2016-17

Continent Formulations APIs and Intermediates Total % to exports Formulations APIs and Intermediates Total % to exports
Europe 290.34 205.78 496.12 32% 381.25 221.92 603.17 39%
Africa 264.21 20.99 285.20 18% 239.92 22.45 262.37 17%
Americas 102.52 154.34 256.86 16% 107.26 136.48 243.74 15%
Asia 66.50 172.84 239.34 15% 65.67 171.22 236.89 15%
CIS 142.15 11.87 154.02 10% 100.57 9.08 109.65 7%
Australasia 128.24 4.43 132.67 9% 101.22 4.70 105.92 7%
Total 993.96 570.25 1564.21 100% 995.89 565.85 1561.74 100%

Formulation Exports - Therapeutic Contribution

Therapeutic Group 2017-18 2016-17
Cardiovasculars & Anti-diabetics 31% 32%
Pain Management 20% 23%
Anti-malarials 18% 16%
Anti-bacterials 10% 13%
Anthelmintics 7% 6%
Central Nervous System (CNS) products 6% 5%
Gastro Intestinal (G.I) products 2% 2%
Cough Preparations 2% 1%
Others 4% 2%
TOTAL 100% 100%

Europe

The Company achieved European export sales of Rs 496.12 crores during the financialyear under report as against sales of Rs 603.17 crores in the previous year. Regulatoryimposition against one of the Company's major customer adversely impacted Company'sgenerics formulations business in the United Kingdom.

The Company has developed and submitted 62 generic formulation dossiers forregistration in Europe out of which 61 dossiers are registered. The Company has alsoobtained certificate of suitability (COS) of 43 APIs from European Directorate for QualityMedicines.

Africa

The Company achieved export sales of Rs 285.20 crores to Africa during the financialyear under report as against Rs 262.37 crores in the previous year a growth of 9%.

The Company exports branded and generic formulations as well as APIs to many Africancountries. The Company markets branded formulations in Africa through dedicated fieldforce. The Company also supplies generics formulations to South Africa. The Company isexpanding its branded formulations business in this continent through expansion ofgeographical coverage and increase in the number of branded formulations marketed. TheCompany is also continuously filing new formulation dossiers for registration in theAfrican countries.

During the year under report the Global Fund has once again selected your Company astheir panel supplier of anti-malarial medicines for the Global Fund Pooled Procurementmechanism and private sector co-payment mechanism for an initial period of 3 (three)years.

The Company has filed 64 dossiers of generic formulations for registration in SouthAfrica out of which 42 dossiers are registered till date.

Americas

The Company achieved sales of Rs 256.86 crores in this continent as against Rs 243.74crores in the previous year. As reported earlier the US formulations and APIs businesscontinues to be impacted due to ongoing US FDA import alert for three of the Company'smanufacturing facilities.

47 ANDA applications of generic formulations developed by the Company are filed with USFDA out of which 18 ANDA applications are granted till date. 47 DMFs of the Company arealso currently filed with US FDA.

Asia

The Asian business (excluding India) recorded sales of Rs 239.34 crores as against Rs236.89 crores in the previous year. The Company exports formulations as well as APIs toseveral Asian countries. In countries like Nepal Srilanka Myanmar Philippines andVietnam the Company markets its branded formulations through dedicated field force.

Confederation of Independent States (CIS)

The Company's CIS business recorded sales of Rs 154.02 crores as against Rs 109.65crores in the previous year a growth of 40%. Most of the business is from brandedformulation sales in Russia Ukraine Kazakhstan and Belarus. The Company's brandedformulations are marketed in this continent by its own field force appointed through itsnon-trading offices.

Australasia

The Company exports APIs to Australia and formulations to Australia and New Zealand inthis sub-continent. The business from this continent was Rs 132.67 crores during thefinancial year under report as against Rs 105.92 crores in the previous year a growth of25%.

The Company has developed and submitted 70 generic formulation dossiers forregistration in this market out of which 65 dossiers are registered.

e) Domestic Formulations Business

The Company's formulations business in India now comprises of 14 marketing divisionsfocusing on key therapeutic segments. Your Company is now the 20th largest inthe domestic formulations market as per IMS Health - MAT April 2018.

During the financial year under report the domestic formulations business recorded amodest growth of 3% at Rs 1425.38 crores as against Rs 1388.55 crores in the previousyear.

Inventory rationalization in the market place due to implementation of GST with effectfrom 1st July 2017 coupled with lower incidences of malaria in the countryimpacted the Company's Indian branded formulations business.

Domestic Branded Formulations - Therapeutic Contribution

Therapeutic segment 2017-18 % to sales 2016-17 % to sales
Pain Management 44% 41%
Cardiovasculars & Anti-diabetics 21% 21%
Anti-malarials 8% 12%
Anti-bacterials 6% 6%
Dermatology 5% 4%
Gastro Intestinal (G I) products 4% 4%
Cough Preparations 4% 5%
Neuro Psychiatry 3% 3%
Urology 3% 2%
Neutraceuticals 1% 1%
Others 1% 1%
Total 100% 100%

f) Active Pharmaceutical Ingredients (APIs) and Intermediates Business

During the financial year under report the APIs and Intermediates business recordedsales of Rs 748.70 crores as against Rs 710.26 crores in the previous financial year agrowth of 5%. Nearly 76% of the APIs and Intermediates business is from exports.

The Company exports its APIs across the globe. Most of the international customers ofthe Company are end user formulations manufacturers including several multinationalcompanies.

Your Company is in the process of commercializing several new APIs for the globalmarket.

g) Intellectual Property Protection

The Company has created intellectual property management group within the Research andDevelopment centers to deal with management and protection of intellectual property. TheCompany has filed many patent applications till date in India USA and other countries.These applications relate to novel and innovative manufacturing processes for themanufacture of APIs and pharmaceutical formulations.

h) Internal Control Systems and its adequacy

The Company has adequate internal control systems including suitable monitoringprocedures commensurate with its size and the nature of the business. The internal controlsystems provide for all documented policies guidelines authorisation and approvalprocedures. The Company has an internal audit department which carries out auditsthroughout the year. The statutory auditors while conducting the statutory audit reviewand evaluate the internal controls and their observations are discussed with the Auditcommittee of the Board.

i) Human Resources

The human resource plays a vital role in the growth and success of an organization. TheCompany has maintained cordial and harmonious relations with employees across variouslocations.

During the year under review various training and development workshops were conductedto improve the competency level of employees with an objective to improve the operationalperformance of individuals. The Company has built a competent team to handle challengingassignments. The Company strives to enhance the technical work related and general skillsof employees through dedicated training programs on a continuous basis.

The Company has 13254 permanent employees as on 31st March 2018 out ofwhich 6035 employees are engaged in the marketing and distribution activities.

j) Cautionary Statement

Certain statement in the management discussion and analysis may be forward lookingwithin the meaning of applicable securities law and regulations and actual results maydiffer materially from those expressed or implied. Factors that would make differences toCompany's operations include competition price realisation currency fluctuationsregulatory issues changes in government policies and regulations tax regimes economicdevelopment within India and the countries in which the Company conducts business andother incidental factors.

MATERIAL CHANGES AND COMMITMENTS AFTER THE END OF THE FINANCIAL YEAR

No material changes or commitments affecting the financial position of the Company haveoccurred between the end of the financial year to which financial statements in thisreport relate and the date of this report except allotment of 153000 equity shares of Rs2/- each fully paid-up @ Rs 300/- per share by the Company on 29th May 2018upon conversion of options granted under Ipca Laboratories Ltd. Employees Stock OptionScheme - 2014.

SHARE CAPITAL

The paid-up equity share capital of the Company as at 31st March 2018 wasRs 25.24 crores.

The Company on 29th May 2018 allotted 153000 equity shares of Rs 2/- eachfully paid-up at a price of Rs 300/- per share upon conversion of options granted underIpca Laboratories Ltd. Employees Stock Option Scheme - 2014. With this allotment thepaid-up share capital of the Company has now increased to 126352109 equity shares of Rs2/- each aggregating to Rs 25.27 crores.

Post the allotment the Company currently has no outstanding shares issued withdifferential rights sweat equity or ESOS.

EMPLOYEES STOCK OPTION SCHEME (ESOS)

The Company has a scheme - Ipca Laboratories Ltd. Employees Stock Option Scheme - 2014(ESOS) approved by the Board of Directors as well as Company's shareholders. This ESOS isin compliance with SEBI (Share Based Employee Benefits) Regulations 2014. There was nochange made in this ESOS Scheme during the financial year under report.

At the meeting of the Board of Directors of the Company held on 25th April2017 and as recommended by the Nomination and Remuneration Committee of the Board theCompany had issued options under the said ESOS to selected permanent employees of theCompany including one Wholetime Non-Promoter Director.

Each option granted gave a right but not an obligation to the Option Grantees to applyfor 1 equity share of Rs 2/- each fully paid up of the Company at a price of Rs 300/- pershare upon completion of 1 year from the date of grant of options.

The Company on 29th May 2018 has allotted 153000 equity shares of Rs 2/-each fully paid-up at a price of Rs 300/- per share upon conversion of options grantedunder this ESOS.

The necessary disclosure pursuant to Regulation 14 of SEBI (Share Based EmployeeBenefits) Regulations 2014 is furnished on the website of the Company www.ipca.com(weblink https://www.ipca.com/pdf/finance/ESOP-2014.pdf).

SUBSIDIARY JOINT VENTURE AND ASSOCIATE COMPANIES

During the year under report the Company acquired 100% share capital of Pisgah LabsInc. (Pisgah) a North Carolina Corporation Old Hendersonville Highway Pisgah ForestNorth Carolina USA through Ipca Pharmaceutical Inc. USA (Company's wholly ownedsubsidiary) and Onyx Scientific Ltd. U.K (Onyx) (Company's wholly owned step downsubsidiary) for US$ 9.65 millions free of debt. Pisgah was originally founded in the year1981 as a contract manufacturer and developer of active pharmaceutical ingredients (APIs)and intermediates.

Pisgah Labs Inc. has been a chemistry solutions provider for over three decades andwill continue to operate out of its North Carolina manufacturing facility under the Pisgahtrade name. Onyx and Pisgah's capabilities in chemistry services will dovetail effectivelywith Company's capabilities in supporting Phase II to commercial scale programmes and alsoenable the Company to manufacture small volume APIs for US market.

There has been no material change in the nature of the business of the subsidiaries.The Company has no subsidiary which can be considered as material within the meaning ofSEBI (Listing Obligations and Disclosure Requirements) Regulations 2015.

In accordance with the provisions of Section 136(1) of the Companies Act 2013 thefollowing have been placed on the website of the Company www.ipca.com .

a) Annual Report of the Company containing therein its standalone and the consolidatedfinancial statements; and

b) Audited annual accounts of each of the subsidiary companies.

As required the financial data of the subsidiaries joint venture and associatecompanies is furnished in the prescribed Form AOC-1 as an Annexure to the consolidatedfinancial statements.

Pursuant to the provisions of Section 129(3) of the Companies Act 2013 theconsolidated financial statements of the Company are attached.

RESEARCH & DEVELOPMENT (R&D)

The Company has always considered Research and Development (R&D) as crucial for thesustained growth of the Company. In the recent years the Company has stepped-upinvestments in R&D to keep pace with the changing domestic and global scenario.

The Company has R&D centers at Mumbai Ratlam Athal and Ranu duly recognized bythe Government of India Ministry of Science and Technology Department of Scientific& Industrial Research (DSIR). These R&D centers are also approved by theprescribed authority under Section 35 (2AB) of the Income Tax Act 1961 for availingweighted tax benefit on the R&D expenditure.

The R&D expenditure of the Company during the financial year was Rs 118.10 crores(3.73% of the turnover) as against Rs 125.67 crores (4.06% of the turnover) in theprevious year.

With qualified and experienced research scientists and engineers manning the researchand development activities the Company has focused its thrust on new and innovativeprocess and product development for the manufacture of APIs with non-infringing processes.Apart from development of new dosage forms and drug delivery systems improvement inprocesses and yield as well as cost reduction are also focus areas.

DIVIDEND

Your Directors had not declared any interim equity dividend during the year. Yourdirectors are now pleased to recommend an equity dividend of Rs 1/- per share (50%) forthe financial year under report.

The dividend and the applicable dividend tax if approved at the ensuing Annual GeneralMeeting will be appropriated and paid out of the profits for the year.

DIRECTORS

Mr. Ajit Kumar Jain and Mr. Pranay Godha retire by rotation at the ensuing AnnualGeneral Meeting and being eligible offer themselves for re-appointment.

At the meeting of the Board of Directors of the Company held on 7thFebruary 2018 Mr. Premchand Godha was re-appointed as the Managing Director of theCompany for a further period of 5 years w.e.f 1st April 2018. The necessaryspecial resolution in this regard is being proposed at the ensuing Annual General Meetingfor the approval of the members.

Mr. Babulal Jain Mr. Anand Kusre Mr. Dev Parkash Yadava Dr. Ramakanta Panda and Dr.(Mrs.) Manisha Premnath who are independent directors have submitted declaration thateach of them meets the criteria of independence as provided in Section 149(6) of theCompanies Act 2013 and there has been no change in the circumstances which may affecttheir status as independent directors during the year.

In the opinion of the Board the independent directors possess appropriate balance ofskills experience and knowledge as required. A brief note on Directors retiring byrotation and eligible for re-appointment is furnished in the Report on CorporateGovernance annexed herewith.

KEY MANAGERIAL PERSONNEL

During the financial year under report the following persons were the Key ManagerialPersonnel of the Company:

Mr. Premchand Godha - Chairman & Managing Director/CEO
Mr. Ajit Kumar Jain - Joint Managing Director / CFO
Mr. Pranay Godha - Executive Director
Mr. Prashant Godha - Executive Director
Mr. Harish P. Kamath - Corporate Counsel & Company Secretary

There was no change in the Key Managerial Personnel during the financial year.

POLICY ON DIRECTORS' APPOINTMENT AND REMUNERATION AND OTHER DETAILS

The Nomination and Remuneration Committee has laid down the criteria for Directors'appointment and remuneration including criteria for determining qualification positiveattributes and independence of a Director. The following attributes/criteria for selectionhave been laid by the Board on the recommendation of the Committee:

the candidate should possess the positive attributes such as leadershipentrepreneurship business advisor or such other attributes which in the opinion of theCommittee are in the interest of the Company;

the candidate should be free from any disqualification as provided under Sections 164and 167 of the Companies Act 2013;

the candidate should meet the conditions of being independent as stipulated under theCompanies Act 2013 and SEBI (Listing Obligations and Disclosure Requirements)Regulations 2015 in case of appointment as an independent director; and

the candidate should possess appropriate educational qualification skills experienceand knowledge in one or more fields of finance law management sales marketingadministration research corporate governance technical operations infrastructuremedical social service professional teaching or such other areas or disciplines whichare relevant for the Company's business.

BOARD EVALUATION

The Nomination and Remuneration Committee lays down the criteria for performanceevaluation of independent directors Board of Directors and Committees of the Board. Thecriteria for performance evaluation is based on the various parameters like attendance andparticipation at meetings of the Board and Committees thereof contribution to strategicdecision making review of risk assessment and risk mitigation review of financialstatements business performance and contribution to the enhancement of brand image of theCompany.

The Board has carried out evaluation of its own performance as well as that of theCommittees of the Board and all the Directors.

The annual evaluation was carried out in the following manner:

Sr. No. Performance evaluation of Performance evaluation performed by
1. Board and individual directors Board after seeking inputs from all directors
2. Board Committees Board seeking inputs from all committee members
3. Individual Directors Nomination and Remuneration committee
4. Non-independent directors Board as a whole and the Chairman Separate meeting of independent directors after taking views from executive directors
5. Board its Committees and individual Directors At the board meeting held after the meeting of the independent directors based on evaluation carried out as above.

REMUNERATION POLICY

The objective and broad framework of the Company's Remuneration Policy is to considerand determine the remuneration based on the fundamental principles of payment forperformance for potential and for growth. The Remuneration Policy reflects on certainguiding principles of the Company such as aligning remuneration with the longer terminterests of the Company and its shareholders promoting a culture of meritocracy andcreating a linkage to corporate and individual performance and emphasising on lineexpertise and market competitiveness so as to attract the best talent. It also ensures theeffective recognition of performance and encourages a focus on achieving superioroperational results. The Nomination and Remuneration Committee recommends the remunerationof Directors and Key Managerial Personnel which is approved by the Board of Directorssubject to the approval of shareholders where necessary. The level and composition ofremuneration shall be reasonable and sufficient to attract retain and motivate thedirectors key managerial personnel and other employees of the quality required to run theCompany successfully. The relationship of remuneration to performance should be clear andmeet appropriate performance benchmarks. The remuneration to directors key managerialpersonnel and senior management personnel should also involve a balance between fixed andincentive pay reflecting short and long term performance objectives appropriate to theworking of the Company and its goals. The Remuneration Policy is placed on the Company'swebsite www.ipca.com.

Information about elements of remuneration package of individual directors is providedin the extract of the Annual Return as provided under Section 92(3) of the Companies Act2013 which is annexed.

FAMILIARISATION PROGRAM FOR INDEPENDENT DIRECTORS

Details of the familiarisation programs for independent directors are disclosed on thewebsite of the Company www.ipca.com . MEETINGS OF THE BOARD AND COMMITTEES THEREOF

This information has been furnished under Report on Corporate Governance which isannexed.

DIRECTORS' RESPONSIBILITY STATEMENT

Your Directors confirm:

i) that in the preparation of the annual accounts the applicable accounting standardshave been followed alongwith proper explanation relating to material departures;

ii) that your Directors have selected such accounting policies and applied themconsistently and made judgments and estimates that are reasonable and prudent so as togive a true and fair view of the state of affairs of the Company at the end of thefinancial year March 312018 and of the profit of the Company for the financial year;

iii) that your 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) that your Directors have prepared the annual accounts on a going concern basis;

v) that your Directors have laid down internal financial controls to be followed by theCompany and that such internal financial controls are adequate and were operatingeffectively; and

vi) that your Directors have devised proper systems to ensure compliance with theprovisions of all applicable laws and that such systems were adequate and operatingeffectively.

CORPORATE GOVERNANCE

As per the requirement of SEBI (Listing Obligations and Disclosure Requirements)Regulations 2015 the Company has complied with the requirements of Corporate Governancein all material aspects.

A report on Corporate Governance (Annexure 1) together with a certificate of itscompliance from a Practising Company Secretary forms part of this report.

FIXED DEPOSITS

During the year under review the Company has not accepted any fixed deposits and assuch no amount of principal or interest on deposits from public was outstanding as on thedate of the balance sheet.

AUDIT COMMITTEE

Details of the Audit Committee along with its constitution and other details areprovided in the Report on Corporate Governance which is annexed.

AUDITORS AUDIT REPORT AND AUDITED ACCOUNTS

M/s. G. M. Kapadia & Co. Chartered Accountants (Firm Registration No. 104767W)were appointed as the Statutory Auditors at the 67th Annual General Meeting(AGM) of the Company for a term of 5 (Five) years i.e. till the conclusion of 72ndAGM and which appointment was subject to ratification at every AGM and the necessaryresolution in this regard is proposed to be passed by the members of the Company at theensuing Annual General Meeting.

The Auditors' Report read with the notes to the accounts referred to therein areself-explanatory and therefore do not call for any further comments. There are noqualifications reservations or adverse remarks made by the Auditors.

COST AUDIT

Pursuant to the provisions of Section 148 of the Companies Act 2013 M/s. ABK &Associates Cost Accountants (Firm Registration No. 000036) were appointed as the CostAuditors to conduct audit of cost records of the Company for the financial year 2017-18.

The Cost Audit Report for the financial year 2016-17 which was due to be filed withthe Ministry of Corporate Affairs by 20th October 2017 was filed on 5thOctober 2017.

SECRETARIAL AUDIT

Pursuant to the provisions of Section 204 and other applicable provisions if any ofthe Companies Act 2013 M/s. Parikh & Associates Practising Company Secretaries wereappointed as the Secretarial Auditors for auditing the secretarial records maintained bythe Company for the financial year 2017-18.

The Secretarial Auditors' Report is annexed hereto. There are no qualificationsreservations or adverse remarks made by the Secretarial Auditors.

CORPORATE SOCIAL RESPONSIBILITY (CSR)

The Company is committed to good corporate citizenship. As a part of its corporatesocial responsibility the Company continues to undertake a range of activities includingin the field of healthcare and education to improve living conditions of the needy people.The CSR policy of the Company is placed on the website of the Company(https://www.ipca.com/pdf/corporate_policy/Corporate_ Social_Responsibility_Policy.pdf).

During the year under report the Company has also supported healthcare and educationalprojects undertaken by charitable institutions and organizations.

In accordance with the provisions of Section 135 of the Companies Act 2013 anabstract on Company's CSR activities is furnished as Annexure 2 to this report.

SAFETY ENVIRONMENT AND HEALTH

The Company considers safety environment and health as the management responsibility.Regular employee training programmes are carried out in the manufacturing facilities onsafety environment and health.

PARTICULARS OF LOANS GUARANTEES AND INVESTMENTS

The Company has not given any loans or guarantees or made any investments incontravention of the provisions of the Section 186 of the Companies Act 2013. The detailsof the loans and guarantees given and investments made by the Company are provided in thenotes to the annexed financial statements.

RELATED PARTY TRANSACTIONS

All related party transactions that were entered into during the financial year were onarm's length basis and were in the ordinary course of Company's business. The Company hasnot entered into any contract arrangement or transaction with any related party whichcould be considered as material as defined under SEBI (Listing Obligations and DisclosureRequirements) Regulations 2015. The Board has approved a policy for related partytransactions which has been uploaded on the website of the Company (https://www.ipca.com/pdf/corporate_policy/ Related_Party_Transactions.pdf).

All the related party transactions are placed before the Audit Committee as well as theBoard for approval on a quarterly basis. Omnibus approval was also obtained from the AuditCommittee and the Board on an annual basis for repetitive transactions.

Related party transactions under Indian Accounting Standard - Ind AS 24 are disclosedin the notes to the financial statements. Prescribed Form No. AOC-2 pursuant to clause (h)of sub-section (3) of Section 134 of the Act and Rule 8(2) of the Companies (Accounts)Rules 2014 is furnished as Annexure 3 to this report.

EMPLOYEES

Pursuant to the provisions of Section 197 of the Companies Act 2013 read with Rule 5of the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014 astatement showing the names and other particulars of the employees drawing remunerationand other details as set out in the said rules is furnished under Annexure 4 to thisreport.

However having regard to the provisions of the first proviso to Section 136(1) of theAct and as advised the Annual Report excluding the information under explanation (2) tothe above Rule is being sent to the members of the Company. The said information isavailable for inspection at the registered office of the Company during working hoursexcluding Saturdays and any member interested in obtaining such information may write tothe Company Secretary and the same will be furnished on request. The full Annual Reportincluding the aforesaid information is available on the Company's website www.ipca.com .

CODE OF CONDUCT

The Board has laid down a code of conduct for board members and senior managementpersonnel of the Company. The code incorporates the duties of independent directors aslaid down in the Companies Act 2013. The said code of conduct is posted on Company'swebsite www.ipca.com . The Board members and senior management personnel have affirmedcompliance with the said code of conduct. A declaration in this regard signed by theChairman & Managing Director / CEO is given at the end of the Corporate GovernanceReport.

WHISTLE BLOWER POLICY / VIGIL MECHANISM

There is a Whistle Blower Policy in the Company and that no personnel has been deniedaccess to the Chairman of the Audit Committee. The policy provides for adequate safeguardsagainst victimization of persons who use vigil mechanism. The Whistle Blower Policy isposted on the website of the Company www.ipca.com.

PREVENTION OF INSIDER TRADING

The Company has also adopted a code of conduct for prevention of insider trading. Allthe Directors senior management employees and other employees who have access to theunpublished price sensitive information of the Company are governed by this code. Duringthe year under Report there has been due compliance with the said code of conduct forprevention of insider trading.

The Board at its meeting held on 30th May 2015 has adopted a revised Code ofPrevention of Insider Trading based on the SEBI (Prohibition of Insider Trading)Regulations 2015. The same has been placed on the website of the Company www.ipca.com.

BUSINESS RISK MANAGEMENT

Pursuant to the provisions of Section 134 of the Companies Act 2013 the Company hasconstituted a Risk Management Committee. The details of the Committee and its terms ofreference are provided in the Report on Corporate Governance which is annexed.

SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS

There are no significant or material orders passed by any regulator tribunal or courtthat would impact the going concern status of the Company and its future operations.

CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO

In accordance with the requirements of Section 134 of the Companies Act 2013statement showing particulars with respect to conservation of energy technologyabsorption and foreign exchange earnings and outgo is furnished as Annexure 5 to thisreport.

EXTRACT OF ANNUAL RETURN

In accordance with the requirements of Section 92 (3) of the Companies Act 2013 andrule 12 (1) of the Companies (Management and Administration) Rules 2014 an extract ofAnnual Return in Form MGT-9 is furnished as Annexure 6 to this report.

BUSINESS RESPONSIBILITY REPORT

The Business Responsibility Report of the Company for the financial year ended 31stMarch 2018 forms part of this Report. The same is also uploaded on the Company's websitewww.ipca.com.

SECRETARIAL STANDARDS

The Company has complied with all the applicable Secretarial Standards issued by TheInstitute of Company Secretaries of India.

ACKNOWLEDGEMENTS

Your Directors place on record their appreciation for the continued co-operation andsupport extended to the Company by the bankers and financial institutions. Your Directorsalso thank the medical profession the trade and consumers for their patronage of theCompany's products. Your Directors also place on record their profound admiration andsincere appreciation of the continued hard work put in by employees at all levels.

For and on behalf of the Board
Mumbai Premchand Godha
29th May 2018 Chairman & Managing Director