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Laurus Labs Ltd.

BSE: 540222 Sector: Health care
NSE: LAURUSLABS ISIN Code: INE947Q01028
BSE 00:00 | 27 Nov 317.15 24.90
(8.52%)
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293.90

HIGH

320.90

LOW

291.10

NSE 00:00 | 27 Nov 316.85 24.50
(8.38%)
OPEN

292.65

HIGH

321.00

LOW

291.00

OPEN 293.90
PREVIOUS CLOSE 292.25
VOLUME 384963
52-Week high 345.00
52-Week low 61.90
P/E 28.96
Mkt Cap.(Rs cr) 16,999
Buy Price 317.15
Buy Qty 7638.00
Sell Price 317.15
Sell Qty 159.00
OPEN 293.90
CLOSE 292.25
VOLUME 384963
52-Week high 345.00
52-Week low 61.90
P/E 28.96
Mkt Cap.(Rs cr) 16,999
Buy Price 317.15
Buy Qty 7638.00
Sell Price 317.15
Sell Qty 159.00

Laurus Labs Ltd. (LAURUSLABS) - Director Report

Company director report

To

The Members of

Laurus Labs Limited

Your Directors have pleasure in presenting the 15th Annual Report of the Companytogether with the Audited Financial Statements for the Financial Year ended March 312020.

Standalone and Consolidated Financial Highlights:

(Rs. in Million)

Particulars Consolidated Standalone
2019-20 2018-19 2019-20 2018-19
Gross Income 28317 22919 27973 22361
Earnings Before Interest Tax Depreciation and Amortization (EBITDA) 5695 3712 5751 3667
Finance Charges 896 882 877 858
Depreciation/Amortization 1872 1642 1838 1605
Net Profit Before Tax 2936 1198 3045 1212
Provision for Tax 383 260 374 262
Net Profit After Tax carried to Balance Sheet 2553 938 2670 950
Interim Dividend paid - - 160 -
Dividend Tax on Interim Dividend - - 33 -
Proposed Dividend amount - - 107 160
Proposed Dividend Tax amount - - - 33

Company's Affairs:

(i) Operations:

During the year under review your Company achieved the following:

Formulation contributed significant revenue of `824 Cr serving to AfricaNorth America and Europe.

Formulation capacity utilization is at peak and we are planning forexpansion of formulation capacity.

All the units are operating at optimum capacity.

Revenue in Foreign currency (Exports) increased by 166%

Received approvals (EIR) for all regulatory inspections except for Unit 1&3.

Your Company is Certified as Great Place to Work by GPTW for the second timefor the year 2019-20

(ii) Covid 19

The world is facing an unprecedented challenge in this century with Corona Virus (Covid19). World Health Organization (WHO) Geneva has been guiding the world in handling Covid19 and has finally declared on 11th Mar 2020 as a Pandemic through an outbreak in Chinaduring December 2019. Time will tell the cause for the origin and spread but the world ison tender hook (or on its toes) to stop the spread through various measures includinglock-down or work from home or isolation with the concept of social distancing. Healthcare professionals are struggling to manage increasing Covid 19 cases across the globe.The human being is trying to adopt a new way of life and may soon see a significant changein the lifestyle of the people post-Covid 19.

As Virus is novel health regulators started screening of existing medications for thetreatment. Hydroxychloroquine (HCQ) was shortlisted as one of the preferred first-linetherapy for the treatment of Covid 19 by the ICMR along with Azithromycin and HCQ was alsorecommended for prophylaxis for health care professionals and members exposed to otherquarantined persons with confirmed Covid-19. There are few other drugs evaluated and beingused for treatment and Laurus is producing some of these drugs namely- Ritonavir andLopinavir.

The pharmaceutical industry was categorized under essential commodities and allowed tooperate during the lockdown.

At Laurus steps have been initiated to monitor and control the operations includingthe travel ban thermal screening sanitation of buses cafeteria and restrooms andawareness campaigns have been conducted through video mailers posters etc. The initialperiod (about a week) of lockdown operations were at a slow pace due to streamlining ofprocesses by the Government authorities for movement of materials and personnel. Postthis operations are started improving on a week by week basis. Sales of goods are almostnormal even in the initial period of lockdown.

Created ‘Covid 19 Task Force' with all internal risk committee members functionalheads and senior team including CEO and organized to have twice a day calls to takedecisions on priority.

Team Laurus has exhibited very good teamwork to maintain and accelerate operationsduring these toughest days.

There is no significant impact on the operations of Laurus and the Company is poised togenerate growth in the operations.

(iii) Outlook:

Business prospects may remain positive because of the growing global demand forgenerics and opportunities provided by the expiry of patents in developed markets. PostCOVID-19 there may be new business opportunities for the pharmaceutical industry inparticular our Company.

Management Discussion & Analysis:

Various business aspects including market conditions business opportunitieschallenges etc. have been discussed at length in the Management's Discussion and Analysis(MD&A) which forms part of this Annual Report.

Dividend:

Your directors are pleased to inform you that the Board has declared an interimdividend @ 15% (i.e. Rs.1.50 per share of the face value of C 10/- each) and paid to theShareholders in March 2020 and also recommend a final dividend @ 10% (i.e. Rs.1 per shareof the face value of Rs.10/- each) for the Financial Year ended March 31 2020. Thefinal dividend if approved by the Members in their forthcoming Annual General Meeting tobe held on July 9 2020 will be paid to the Members on or after July 14 2020 whosenames appear on the Register of Members as on Book Closure Date.

Transfer to Reserves:

Your Company does not propose to transfer any portion of profits to Reserves.

Share Capital:

During the year under review the Company had allotted 477750 equity shares of C10/-each to the eligible employees under ESOP Schemes 2011 & 2016. Accordingly the sharecapital has increased as follows:

Paid Up Capital as on March 31 2019 Movement during the year 2019-20 Cumulative Paid Up Capital after such movement and as on March 31 2020
106436749 equity shares of Rs.10/- each Allotted 477750 equity shares of Rs.10/- each in September 2019 under ESOP Schemes 2011& 2016 106914499 equity shares of C10/- each

Change in the nature of the business if any:

There is no change in the nature of the business of the Company or any of itssubsidiaries or associates during the year under review.

Material Changes and commitments affecting the financial position of the Company:

There are no material changes and commitments affecting the financial position of theCompany that have occurred between the end of the financial year of the Company to whichthe financial statements relate and the date of the Report i.e. between March 312020 to April 30 2020.

Fixed deposits:

The Company did not accept any fixed deposits.

Subsidiaries Associates and Joint Ventures:

The Company has the following Wholly-Owned Subsidiaries namely (i) Sriam Labs PrivateLimited India (ii) Laurus Synthesis Inc. USA and (iii) Laurus Holdings Ltd. UnitedKingdom (UK).

Laurus Holdings Ltd. UK in turn holds two Wholly-Owned Subsidiaries namely (i)Laurus Generics Inc. USA; and (ii) Laurus Generics GmbH Germany.

As per Section 129(3) of the Companies Act 2013 the consolidated financial statementof the Company and all its Subsidiaries and Associates prepared in accordance with theapplicable accounting standards forms part of this Annual Report. Further a statementcontaining salient features of the financial statements of our subsidiaries and associatesin the prescribed form in AOC-1 is attached as Annexure-1 to the Directors' Report.

Consolidated financial Statements:

Consolidated Financial Statements have been prepared by the Company in accordance withthe requirements of applicable Accounting Standards and the provisions of Companies Act2013. As per the provisions of Section 136 of the Companies Act 2013 the Company hasplaced separately the audited financial statements of its subsidiaries on its websitewww.lauruslabs.com and copies of audited financial statements of the subsidiaries will beprovided to the Members at their request.

Particulars of Loans Guarantees and Investments:

During the year your Company has continued the Corporate Guarantee to Citi Bank Indiaand in turn Standby Letter of Credit issued by Citi Bank India to Citi Bank Inc. USA onbehalf of the Subsidiary Company namely Laurus Synthesis Inc. USA for US Dollars 2million to meet the objectives of the said Subsidiary Company.

Further the Company has also issued a Corporate Guarantee to the Bankers of Sriam LabsPrivate Limited in the previous financial year for an amount of C 500 million both ofwhich are well within the limits prescribed under Section186 of the Companies Act 2013.

Board of Directors and Key Management Personnel:

As per the provisions of the Companies Act 2013 Mr. Narendra Ostawal and Mr. RaviKumar V. V. Directors will retire at the ensuing annual general meeting and beingeligible seek reappointment. The Board of Directors recommends their re-appointment.

Mr. Ramesh Subrahmanian has resigned from the Board of the Company with effect fromFebruary 27 2020 due to his pressing personal commitments. Mr. Chandrakanth Chereddi whoserved in the capacity of Executive Director for a period of around 4 years and in variousother capacities in the Company for a period of around 8 years became a non-executivedirector with effect from April 1 2020.

Board Meetings:

The Board and Committee meetings are pre-scheduled and a tentative calendar of themeetings shall be finalised in consultation with the Directors to facilitate them to plantheir schedule. However in case of urgent business needs approval is taken by passingresolutions through circulation. During the year under review five board meetings wereheld. The details of the meetings including the composition of various committees areprovided in the Corporate Governance Report.

Performance Evaluation:

The formal annual evaluation of the performance of the Board as well as non-independentdirectors was undertaken by the Nomination and Remuneration Committee. The performance ofBoard Committees and of individual independent directors was undertaken by the Boardmembers.

The manner of the evaluation of the Board and other Committees has been determined bythe Nomination and Remuneration Committee as per SEBI circular dated January 5 2017.

Declaration from Independent Directors:

The independent directors have submitted the declaration of independence stating thatthey meet the criteria of independence as prescribed in sub-section (6) of Section 149 ofthe Companies Act 2013 as well as under Regulation 16(1)(b) of SEBI (Listing Obligationsand Disclosure Requirements) Regulations 2015.

Policy on Directors' Appointment and Remuneration:

The policy of the Company on directors' appointment and remuneration includingcriteria for determining qualifications positive attributes independence of a directorand other matters are adopted as per the provisions of the Companies Act 2013. Theremuneration paid to the Directors is as per the terms laid out in the nomination andremuneration policy of the Company.

The nomination and remuneration policy is adopted by the Board and the salient featuresof the policy are as follows:

Non-Executive and Independent Directors ("NEDs") will bepaid remuneration by way of sitting fees and commission. The remuneration/ commission/compensation to the NEDs will be determined by the Nomination and Remuneration Committee ("CompensationCommittee") and recommended to the Board for its approval.

As approved by the shareholders at the shareholders meeting held on July 202016 commission will be paid at a rate not exceeding 1% per annum of the profits of theCompany computed in accordance with Section 198 of the Act.

The payment of the Commission to the NEDs will be placed before the Boardevery year for its consideration and approval. The sitting fee payable to the NEDs forattending the Board and Compensation Committee meetings will be fixed subject to thestatutory ceiling. The fee will be reviewed periodically and aligned to comparable best inclass companies.

NEDs will not be eligible to receive stock options under the existingemployee stock option scheme(s) ("ESOP") of the Company.

The compensation paid to the executive directors (including the ManagingDirector) will be within the scale approved by the shareholders. The elements of the totalcompensation approved by the Compensation Committee will be within the overall limitsspecified under the Act.

The Company's total compensation for Directors and Key Managerial Personnelas defined under the Act/other employees will consist of:

fixed compensation

variable compensation in the form of annual incentive

benefits

work related facilities and perquisites

Changes made to the policy: Nil

The Nomination and Remuneration Policy is placed on the Company's website and thefollowing is web address of the said policy.

http://www.lauruslabs.com/sites/all/themes/lauruslab//Investors/PDF/Policies/Remuneration_Policy.pdf

Dividend Distribution Policy:

The Dividend Policy of the Company is attached as Annexure-2 to this Report.

The said Dividend Distribution policy is placed on the website of the Companyhttps://lauruslabs.com/Investors/PDF/Policies/ Dividend_Policy.pdf.

Risk Management:

Your Company had formulated a risk management policy for dealing with different kindsof risks that it faces in the day-to-day operations of the Company. Risk Management Policyof the Company outlines different kinds of risks and risk mitigating measures to beadopted by the Board. The Company has adequate internal financial control systems andprocedures to mitigate the risk. The risk management procedure is reviewed by the RiskManagement Committee and Board of Directors on a regular basis at the time of review ofquarterly financial results of the Company. Further your Company had constituted a RiskManagement Committee which lays down various risk mitigating practices that your Companyis required to implement in the Company.

Adequacy of Internal Financial Controls:

The internal financial controls with reference to the Financial Statements apart fromstatutory audit internal audit and cost compliance are adequate to the size andoperations of the Company.

Directors' Responsibility Statement:

In terms of Section 134(3)(c) of the Companies Act 2013 the Board of Directors of theCompany states that:

(a) in the preparation of the annual accounts the applicable accounting standards hadbeen followed along with proper explanation relating to material departures;

(b) the directors had 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 and ofthe profit and loss of the Company for that period;

(c) the directors had taken proper and sufficient care for the maintenance of adequateaccounting records in accordance with the provisions of Companies Act for safeguarding theassets of the Company and for preventing and detecting fraud and other irregularities;

(d) the directors had prepared the annual accounts on a going concern basis;

(e) the directors had laid down internal financial controls to be followed by theCompany and that such internal financial controls are adequate and were operativeeffectively; and

(f) the directors had devised proper systems to ensure compliance with the provisionsof all applicable laws and that such systems were adequate and operative effectively.

Related Party Transactions:

In accordance with Sec 134(h) of the Companies Act 2013 and Rule 8(2) of Companies(Accounts) Rules 2014 the particulars of contracts or arrangements entered into by theCompany with the Related Parties referred to in Section 188 (1) of the Act have beenprovided in Form AOC-2 and attached the same as Annexure-3

The details of related party disclosures as stated in the notes to the financialstatements forms part of this annual report.

Vigil Mechanism:

The Company established a whistle-blower policy in order to assure that the business isconducted with integrity and that the Company's financial information is accurate.

Auditors:

(i) Statutory Auditors:

M/s. Deloitte Haskins & Sells LLP Firm Registration No.117366W/W-100018 who wereappointed as Statutory Auditors of the Company by the Shareholders of the Company in their12th Annual General Meeting held in July 2017 for a period of five years shall be theStatutory Auditors of the Company.

The requirement under the proviso to Section 139(1) that "the Company shall placethe matter relating to such appointment (of auditors) for ratification by members at everyannual general meeting" has been omitted from the Companies Act 2013. Therefore theCompany does not propose ratification of appointment of statutory auditors for theapproval of the members.

(ii) Cost records and Auditors:

The Company is required under Section 148(1) of the Companies Act 2013 read withCompanies (Audit & Auditors') Rules 2014 and the Companies (Cost Records and Audit)Amendments Rules 2014 the Company is required to maintain the cost records in respect ofits business and accordingly such accounts and records are made and maintained.

Your Board has appointed M/s. Bharathula & Associates Cost Accountants as theCost Auditors of the Company for the Financial Year 2020-21. As required by the Act theremuneration of the Cost Auditors has to be ratified by the Members and accordingly theresolution relating to the Cost Auditors is being placed before the Members for theirratification.

(iii) Secretarial Auditors & Secretarial Audit Report:

Pursuant to the provisions of Section 204 of the Companies Act 2013 and Rule 9 of theCompanies (Appointment and Remuneration of Managerial Personnel) Rules 2014 the Companyhas appointed Y. Ravi Prasada Reddy Practising Company Secretary (CP No. 5360) proprietorof RPR & Associates to undertake the Secretarial Audit of the Company for thefinancial year 2019-20. The Secretarial Audit Report issued in Form MR-3 is in Annexure-4to this Report. There are no qualifications reservations or adverse remarks in theSecretarial Audit Report.

Auditors' Qualifications/ reservations/ adverse remarks/ Frauds reported:

There are no Auditors' Qualifications or reservations or adverse remarks on thefinancial statements of the Company. The Auditors have not reported any frauds to theAudit Committee as prescribed under Section 143(12) of the Companies Act 2013.

Significant and material orders passed by the Courts/ Regulators:

There are no significant and material orders passed by the Courts or Regulators againstthe Company.

Rating:

CARE has reaffirmed its rating of AA- with a stable outlook on the long-term bankfacilities of the Company and A1+ on the short-term bank facilities of the Company.

Insurance:

All properties and insurable interests of the Company including buildings plant andmachinery and stocks have been fully insured.

Corporate Social Responsibility initiatives:

Pursuant to the provisions of Section 135 and Schedule VII of the Companies Act 2013CSR Committee of the Board of Directors had framed the policy on Corporate SocialResponsibility and the Projects and Programmes undertaken by the Company during the yearunder review have been provided in Annexure-5 and forms part of this Report.

Extract of Annual Return:

As required pursuant to Section 92(3) of the Companies Act 2013 and rule 12(1) of theCompanies (Management and Administration) Rules 2014 an extract of annual return in MGT9 is given in the Annexure-6 and forms part of this Report.

Further the Annual Return is placed on the Website of the Company atwww.lauruslabs.com.

Statement of Particulars of Appointment and Remuneration of ManagerialPersonnel/employees:

In accordance with the provisions of Section 134 and Rule 5 of Companies (Appointmentand Remuneration of Managerial Personnel) Rules 2014 the statement of particulars ofappointment and remuneration of managerial personnel and employees is attached in Annexure-7to this Report.

Human resources:

The management believes that competent and committed human resources are vitallyimportant to attain success in the organisation. In line with this philosophy utmost careis being exercised to attract quality resources and suitable training is imparted onvarious skill-sets and behaviour. Annual sports and games were conducted across theorganisation apart from family day celebrations to enhance the competitive spirit andencourage bonding teamwork among the employees.

Employee Stock Options:

During the year the Company has allotted 477750 (Four Lakhs Seventy-Seven ThousandSeven Hundred and Fifty only) equity shares of C10/- to various eligible employees of theCompany under Employee Stock Option Schemes– 2011 & 2016 upon exercise of theirvesting rights.

The details of stock options are as mentioned in Annexure-8 and forms part ofthis Report. Further the details of the stock options stated in the notes to accounts ofthe financial statements also forms part of this Annual Report.

Conservation of energy technology absorption and foreign exchange earnings/outgo:

The information required under Section 134 (3) (m) of the Companies Act 2013 readwith Rule 8(3) of Companies (Accounts) Rules 2014 is appended hereto as Annexure-9and forms part of this Report.

Policy on Prevention of Sexual Harassment:

The Company has formulated and implemented a policy for Prevention of Sexual Harassmentof Women at workplace. During the year under review the Company has not received anycomplaints under the policy.

The Company has many systems processes and policies to ensure professional ethics andharmonious working environment. We follow Zero Tolerance towards Corruption andunethical conduct. These are ensured through Whistle-Blower Policy Anti-CorruptionPolicy Gift Policy Sexual Harassment Policy and Redressal Guidelines.

The Company has complied with provisions relating to the constitution of InternalComplaints Committee under the Sexual Harassment of Women at Workplace (PreventionProhibition and Redressal) Act 2013.

BSE 500:

The Equity Shares of your Company have been inducted in S&P BSE 500 indices witheffect from March 31 2017.

Corporate Governance:

A separate Section on Corporate Governance practices followed by your Company asstipulated under Schedule V(C) of the SEBI (LODR) Regulations 2015 is enclosed andforming part of this report.

The certificate of the Practising Company Secretary Mr. Y. Ravi Prasada Reddy withregard to compliance of conditions of corporate governance as stipulated under Schedule V(E) of the SEBI (LODR) Regulations 2015 is annexed to the Report on Corporate Governance.

Business Responsibility Report (BRR)

The Listing Regulations mandate the inclusion of the BRR as part of the Annual Reportfor top 500 listed entities based on market capitalisation. In accordance with the ListingRegulations we have integrated BRR disclosures into our Annual Report.

Acknowledgements:

Your Directors would like to place on record their sincere appreciation to customersbusiness associates bankers vendors government agencies and shareholders for theircontinued support.

Your Directors are also happy to place on record their sincere appreciation to theco-operation commitment and contribution extended by all the employees of the Laurusfamily and look forward to enjoying their continued support and cooperation.

For and on behalf of the Board
Dr. Satyanarayana Chava Ravi Kumar V. V.
Executive Director & Chief Executive Officer Executive Director & Chief Financial Officer
DIN: 00211921 DIN: 01424180
Hyderabad
April 30 2020

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