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Laurus Labs Ltd.

BSE: 540222 Sector: Health care
NSE: LAURUSLABS ISIN Code: INE947Q01010
BSE 00:00 | 18 Oct 314.95 1.45
(0.46%)
OPEN

311.10

HIGH

320.95

LOW

310.65

NSE 00:00 | 18 Oct 316.20 5.95
(1.92%)
OPEN

310.40

HIGH

321.00

LOW

310.00

OPEN 311.10
PREVIOUS CLOSE 313.50
VOLUME 1888
52-Week high
52-Week low
P/E 35.03
Mkt Cap.(Rs cr) 3,367
Buy Price 310.20
Buy Qty 1000.00
Sell Price 326.40
Sell Qty 21.00
OPEN 311.10
CLOSE 313.50
VOLUME 1888
52-Week high
52-Week low
P/E 35.03
Mkt Cap.(Rs cr) 3,367
Buy Price 310.20
Buy Qty 1000.00
Sell Price 326.40
Sell Qty 21.00

Laurus Labs Ltd. (LAURUSLABS) - Director Report

Company director report

To

The Members of Laurus Labs Limited

Your Directors have pleasure in presenting the 14th Annual Report of the Companytogether with the Audited Financial Statements for the Financial Year ended 31st March2019.

Standalone and Consolidated Financial Highlights:

(द in million)

Particulars

Consolidated

Standalone

2018-19 2017-18 2018-19 2017-18
Net Revenue from Operations 22919 20562 22361 20392
Earnings Before Interest Tax Depreciation and Amortization (EBITDA) 3712 4417 3667 4369
Finance Charges 882 796 858 754
Depreciation/Amortization 1642 1254 1605 1212
Net Profit Before Tax 1198 2374 1212 2409
Provision for Tax 260 698 262 678
Net Profit After Tax carried to Balance Sheet 938 1676 950 1731
Proposed Dividend amount 160 159
Proposed Dividend Tax amount 33 33

Company's Affairs:

(i) Operations:

During the year under review your Company achieved the following:

• Commenced commercial operations from Unit 4

• Incorporated a step down subsidiary in Germany

• Unit 2 - Formulations Establishment Inspection Report (EIR) received from USFDA.

• Unit 6 - USFDA inspection completed successfully with one observation. EIRsreceived for all regulatory inspections.

• Formulation business generated first ' 500 million revenue and launchedTenofovir Metformin in US Tenofovir in Canada DLT (a three-product combination product)in LMIC countries under partnership with Global Fund for treatment of HIV/AIDS. Alsocommenced supply to Europe under contract manufacturing to an European partner

(ii) Outlook:

Business prospects will remain positive because of the growing global demand forgenerics and opportunities provided by expiry of patents in developed markets.

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 recommend a dividend @ 15% (i.e. '1.50 per share of facevalue of '10/- each) for the Financial Year ended March 312019. The dividend if approvedby the Members in their forthcoming Annual General Meeting to be held on July 112019will be paid to the Members on or after July 15 2019 whose names appear on the Registerof 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 407000 equity shares of '10/-each to the eligible employees under ESOP Schemes 2011 & 2016. Accordingly the sharecapital has increased as follows:

Paid Up Capital as on March 31 2018 Movement during the year 2018-19 Cumulative Paid Up Capital after such movement
106029749 equity shares of '10/- each Allotted 407000 equity shares of '10/- each in September 2018 under ESOP Schemes 2011& 2016 106436749 equity shares of '10/- each

Change in the nature of business if any:

There is no change in the nature of business of the Company or any of its subsidiariesor 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 312019 toMay 02 2019.

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; (ii) Laurus Synthesis Inc. USA and (iii) Laurus Holdings Ltd. United Kingdom(UK).

Laurus Holdings Ltd. UK in turn established two Wholly Owned Subsidiaries namely(i) Laurus Generics Inc. United States of America; and (ii) Laurus Generics GmbHGermany.

As per Sec.129(3) of the Companies Act 2013 the consolidated financial statement ofthe 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 2 Million to meet the objectives of the said Subsidiary Company.

Further the Company has also issued two Corporate Guarantees to the Bankers of SriamLabs Private Limited in the previous financial year for an amount of '500.00 Million bothof which are well within the limits prescribed under Sec.186 of the Companies Act 2013.

Board of Directors and Key Management Personnel:

As per the provisions of the Companies Act 2013

Mr. Chandrakanth Chereddi and Dr.Venkata Lakshmana Rao

Directors will retire at the ensuing annual general meeting and being eligible seekreappointment. The Board of Directors recommends their re-appointment.

Mr. Chandrakanth Chereddi and Dr.Venkata Lakshmana Rao have been appointed as WholeTime Directors for a period of 5 years with effect from August 9 2016 and March 8 2018respectively and have been approved by the Members in their respective Annual GeneralMeetings and they continue to function as Whole Time Directors of the Company. Dr.M.VenuGopala Rao has been appointed as the Chairman of the Board for a further period of twoyears in May 2018.

Board Meetings:

The Board and Committee meetings are pre-scheduled and a tentative calendar of themeetings shall be finalized 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 seven board meetings wereheld. The details of the meetings including composition of various committees are providedin 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 Board.

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 05 201 7.

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 be paidremuneration by way of sitting fees and commission. The remuneration/ commission/compensation to the NEDs will be determined by the Nomination and Remuneration

Committee ("Compensation Committee") and recommended to the Board for itsapproval.

• 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 Board everyyear for its consideration and approval. The sitting fee payable to the NEDs for attendingthe Board and Compensation Committee meetings will be fixed subject to the statutoryceiling. The fee will be reviewed periodically and aligned to comparable best in classcompanies.

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

• The compensation paid to the executive directors (including managing director)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 Personnel asdefined 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 at the website of the Company

https://lauruslabs.com/Investors/PDF/Policies/Dividend Policy.pdf.

Risk Management:

Your Company had formulated a risk management policy for dealing with different kindsof risks which it faces in day-to-day operations of the Company. Risk Management Policy ofthe company outlines different kinds of risks and risk mitigating measures to be adoptedby the Board. The Company has adequate internal financial control systems and proceduresto mitigate the risk. The risk management procedure is reviewed by the Risk ManagementCommittee and Board of Directors on regular basis at the time of review of quarterlyfinancial results of the Company. Further your Company had constituted a Risk ManagementCommittee which lays down various risk mitigating practices that your Company is requiredto 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 judgments 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 Sec.188(1) of the Act have been providedin 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 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.1 17366W/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 Sec.139(1) that "the Company shall place thematter 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 2019-20. 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 2018-19. 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 Sec. 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 Programs 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 in the Website of the Company atwww.lauruslabs.com.

Statement of Particulars of Appointment and Remuneration of Managerial Personnel/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 inAnnexure-7 to this Report.

Human resources:

The management believes that the competent and committed human resources are vitallyimportant to attain success in the organization. In line with this philosophy utmost careis being exercised to attract quality resources and suitable training is imparted onvarious skill-sets and behavior. Annual sports and games were conducted across theorganization 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 407000 (Four Lakhs Seven Thousand only)equity shares of '10/- to various eligible employees of the Company under Employee StockOption Schemes-2011&2016 upon exercise of their vesting rights.

The details of stock options are as mentioned in Annexure 8 and forms part of thisReport. Further the details of the stock options stated in the notes to accounts of thefinancial 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 9 andforms 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 any complaints under thepolicy.

The Company has many systems processes and policies to ensure professional ethics andharmonious working environment. We follow Zero Tolerance towards Corruption and unethicalconduct. These are ensured through Whistle Blower Policy Anti-Corruption Policy GiftPolicy 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 312017.

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 with regardto compliance of conditions of corporate governance as stipulated under Schedule V (E) ofthe 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 capitalization. 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 & Executive Director &
Chief Executive Officer Chief Financial Officer
DIN:00211921 DIN: 01424180
Place: Hyderabad
Date: 2nd May 2019