The Board takes pleasure in presenting the 38th Annual Report of the Company along withthe Audited Financial Statements and other reports for the year ended March 31 2021.
NATCO Pharma Limited (NATCO) is an Indian based vertically integrated pharmaceuticalCompany having presence in multiple speciality therapeutic segments. Over the years NATCOhas developed an innate ability to deliver molecules which are complex and hard tomanufacture. The Company has constantly innovated and manufactured speciality medicinesand niche pharmaceutical products.
NATCO is driven by its commitment to improve patient care with its nuclei of focus oninnovation and differentiation. Its products are now available to patients acrossgeographies at an affordable prices when compared with other Companies. With an emphasison innovation ingrained in NATCO's DNA the speciality product range is constantlyexpanded through tenacity in selective research programmes.
NATCO is constantly driven by its mission to Rs 1make specialty medicines accessibleto all'. Operating in an evolving industry scenario the Company is also strategicallyrepositioning itself to explore many opportunities of organic growth and at the same timefortifying its manufacturing capabilities to reinforce its impact.
(Rupees in Millions)
| || |
|Particulars ||Year ended 31st March 2021 ||Year ended 31st March 2020 ||Year ended 31st March 2021 ||Year ended 31st March 2020 |
|Net Revenue /Income ||17546 ||19140 ||21557 ||20224 |
|Gross profit before interest and depreciation ||5187 ||7018 ||7098 ||6900 |
|Finance Cost ||113 ||206 ||133 ||215 |
|Profit before depreciation and amortisation - (Cash Profit) ||5074 ||6812 ||6965 ||6685 |
|Depreciation and Amortisation ||1152 ||981 ||1169 ||998 |
|PBT before exceptional items ||3922 ||5831 ||5796 ||5687 |
|Exceptional items ||- ||- ||- ||- |
|Profit before Tax (PBT) ||3922 ||5831 ||5796 ||5687 |
|Provision for Tax -Current ||933 ||1291 ||1478 ||1311 |
|Provision for Tax -Deferred ||(106) ||(205) ||(106) ||(205) |
|Profit after Tax ||3095 ||4745 ||4424 ||4581 |
|Other comprehensive income (OCI) ||133 ||(64) ||87 ||(145) |
|Total Comprehensive income for the year ||3228 ||4681 ||4511 ||4436 |
The details of the Company's operations have been further discussed in detail in theManagement Discussion and Analysis Report.
Impact of COVID-19
In March 2020 the World Health Organisation declared COVID-19 to be a pandemic. YourCompany has adopted measures to curb the spread of infection in order to protect thehealth of its employees and ensure business continuity with minimal disruption. YourCompany has considered internal and external information while finalising variousestimates and recoverability of assets in relation to its financial statements up to thedate of approval of the financial statements by the Board of Directors. Considering theCompany is in the business of manufacturing and supplying of pharmaceutical products whichis categorised under essential goods there has been a minimal disruption with respect tooperations including production and distribution activities. The actual impact of theglobal health pandemic may be different from that which has been estimated as theCOVID-19 situation evolves in India and globally. The Group will continue to closelymonitor any material changes to the future economic conditions.
The Company declared three interim dividends for the FY 2020-21 the details of whichare as follows:
|No Date of Board Meeting ||Date of payment ||Interim Dividend Declared per equity share of face value D 2/- each |
|1. 12th August 2020 ||31st August 2020 ||1.25 |
|2. 12th November 2020 ||3rd December 2020 ||3.00 |
|3. 11th February 2021 ||3rd March 2021 ||1.00 |
|TOTAL || ||5.25 |
The total dividend pay-out amounted to C 956.48 million resulting in a pay-out of 30.90% of the standalone profit after tax of the Company.
The three Interim Dividends have been paid to all eligible shareholders. Accordinglyyour Directors recommend that the above three interim dividends be treated as the finaldividend of the Company for the Financial Year 2020-21. The said Dividend DistributionPolicy is placed on the website of the Company athttps://www.natcopharma.co.in/wp-content/uploads/2019/08/ Dividend-Distribution-Policy.pdf
Transfer to Reserves
The Company has not transferred any amount to the general reserve for the financialyear ended March 31 2021.
During the year under review 269850 equity shares were issued and allotted underEmployee Stock Option Schemes (ESOP- NATSOP 2015 NATSOP 2016 & NATSOP 2017).Accordingly the issued and subscribed share capital of the Company as on March 31 2021stood at C 365 million divided into 182337825 equity shares of C 2/- each as against C364 million divided into 182067975 equity shares of C 2/- each as on March 31 2020.
During FY 2020-21 the Company did not accept any fixed deposit within the meaning ofSections 73 and 74 of the Companies Act 2013 read together with the Companies (Acceptanceof Deposits) Rules 2014 and therefore no amount of principal or interest was outstandingas on the date of balance sheet.
Change in the nature of Business if any
During the year there was no change in the nature of business of the Company or any ofits Subsidiaries.
The Company has seven (7) international subsidiaries including one step-down subsidiaryas on 31st March 2021. The consolidated financial statement of the Company and all itssubsidiaries prepared under Indian Accounting Standards (Ind AS) specified under Section133 of the Companies Act 2013 form part of the annual report. Further a statementcontaining the salient features of the financial statement of our subsidiaries in theprescribed Form AOC-1 is attached as "Annexure - I" to this Board'sReport. This statement also provides the details of the performance and financial positionof each subsidiary. In accordance with Section 136 of the Companies Act 2013 the auditedfinancial statements and related information of the subsidiaries where applicable willbe available for inspection during regular business hours i.e. from 9:00 AM to 5:30 PM atthe Company's registered office in Hyderabad Telangana.
As per Regulation 16 of the SEBI (Listing Obligations and Disclosure Requirements)Regulations 2015 ("Listing Regulations") a "material subsidiary" tomean a subsidiary whose income or net
worth exceeds ten percent of the consolidated income or net worth respectively of thelisted entity and its subsidiaries in the immediately preceding accounting year.
Under this definition NATCO Pharma (Canada) Inc Canada has now become the materialsubsidiary of the Company. In addition to the above Regulation 24 of the ListingRegulations requires that at least one Independent Director on the Board of Directors ofthe listed entity shall be a Director on the Board of Directors of an unlisted materialsubsidiary whether incorporated in India or not. For the purpose of this provisionmaterial subsidiary means a subsidiary whose income or net worth exceeds twenty percentof the consolidated income or net worth respectively of the listed entity and itssubsidiaries in the immediately preceding accounting year. An Independent Director of theCompany is also Director on the Board of the material subsidiary. But this requirement asof now will not be applicable to your Company.
The other requirements of Regulation 24 of the Listing Regulations with regard toCorporate Governance requirements for Subsidiary Companies have been complied with.
Particulars of Loans Guarantees and Investments
The Company provides investments loans and guarantees to its subsidiaries for itsbusiness purpose. Details of investments loans and guarantees covered under Section 186of the Companies Act 2013 form part of the notes to the financial statements provided inthis annual report.
Corporate Governance and additional Shareholders Information
Pursuant to the Listing Regulations a detailed report on the Corporate Governancesystems and practices of the Company is given under Corporate Governance Report which ispart of this Annual Report. Similarly other detailed information for shareholders isprovided in the chapter Additional Shareholders' Information.
A certificate from Mrs. D Renuka Company Secretary in Practice (C.P. No. 3460) on thecompliance with the conditions of Corporate Governance is part of the Corporate GovernanceReport. A certificate from her that none of the Directors on the Board of the Company aredisqualified from being appointed or continuing as a Directors of Company by the Ministryof Corporate Affairs or any to that effect statutory authority is attached to this AnnualReport.
Management Discussion and Analysis
A detailed report on the Management Discussion and Analysis is provided as a separatechapter in this annual report.
Board of Directors
In accordance with the provisions of the Companies Act 2013 Sri P.S.R.K Prasad (DIN:07011140) is liable to retire by rotation and being eligible offers himself forreappointment at the ensuing Annual General Meeting of the Company.
As per provisions of the Companies Act 2013 and the Listing Regulations as amendedfrom time to time an evaluation of the performance of the Board was undertaken. Thecontribution and impact of individual Directors were reviewed through a peer evaluation onparameters such as level of engagement and participation in Board/Committee meetings flowof information independence of judgment conflicts resolution managing relationshipswithin the Board and their contribution in enhancing the Board's overall effectiveness.The feedback obtained from the interventions was discussed in detail and where requiredindependent and collective action points for improvement put in place.
Appointment of Directors and Remuneration Policy
The assessment and appointment of members to the Board is based on a combination ofcriterion that includes ethics personal and professional stature domain expertisegender diversity and specific qualification required for the position. The IndependentBoard member is also assessed on the basis of independence criteria defined in Section149(6) of the Companies Act 2013 and Regulation 16(1)(b) of the Listing Regulations
In accordance with Section 178(3) of the Companies Act 2013 and on recommendations ofNomination and Remuneration Committee the Board adopted a remuneration policy forDirectors Key Management Personnel (KMPs) and Senior Management which is available on thewebsite of the Company www.natcopharma.co.in.
Upon recommendation of the Nomination and Remuneration Committee the Board ofDirectors at their meeting held on 11th February 2021 approved the re-appointment of theSri V.C. Nannapaneni Chairman and Managing Director Sri Rajeev Nannapaneni ViceChairman and Chief Executive Officer Sri P.S.R.K Prasad Director and Executive VicePresident (Corporate Engineering Services) and Dr. D. Linga Rao Director and President(Tech. Affairs) of the Company for a period of one (1) year from 1st April 2021 to 31stMarch 2022.
Declaration by Independent Directors
All Independent Directors of the Company have submitted requisite declarationsconfirming that they continue to meet the criteria of independence as prescribed underSection 149(6) of the Companies Act 2013 and Regulation 16(1)(b) of the SEBI ListingRegulations. The Independent Directors have also confirmed that they have complied withthe Company's Code of Conduct.
Registration of Independent Directors in Independent Directors Databank
All the Independent Directors have been registered and are members of IndependentDirectors Databank maintained by Indian Institute of Corporate Affairs.
Confirmation from the Board
All the Independent Directors of the Company have given their respectivedeclaration/disclosures under Section 149(7) of the Act and Regulation 25(8) of theListing Regulations and have confirmed that they fulfill the independence criteria asspecified under Section 149(6) of the Act and Regulation 16 of the Listing Regulations andhave also confirmed that they are not aware of any circumstance or situation which existor may be reasonably anticipated that could impair or impact their ability to dischargetheir duties with an objective independent judgment and without any external influence.Further the Board after taking these declaration/disclosures on record and acknowledgingthe veracity of the same concluded that the Independent Directors are persons ofintegrity and possess the relevant expertise and experience to qualify as IndependentDirectors of the Company and are Independent of the Management.
Opinion of the Board
The Board opines that all the Independent Directors of the Company strictly adhere tocorporate integrity possesses requisite expertise experience and qualifications todischarge the assigned duties and responsibilities as mandated by the Companies Act 2013and Listing Regulations diligently.
Number of Meetings of the Board and its Committees and other Committees
The Board currently has eight (8) Committees namely Audit Committee StakeholdersRelationship Committee Nomination and Remuneration Committee Compensation CommitteeCorporate Social Responsibility Committee Risk Management Committee Committee Dealingwith Land Property and Buyback Committee.
A detailed update on the Board its composition detailed charter including terms ofreference of various Board Committees number of Board and Committee meetings held duringFY 202021 and attendance of the Directors is provided in the Corporate Governance Reportwhich forms part of this Annual report.
All the recommendations made by the Committees of Board including the Audit Committeewere accepted by the Board.
Meeting of Independent Directors
A separate meeting of the Independent Directors was held on 11th February 2021inter-alia to discuss evaluation of the performance of Non-Independent Directors theBoard as a whole evaluation of the performance of the Chairman taking into account theviews of the Executive and Non-Executive Directors and the evaluation of the qualitycontent and timeliness of flow of information between the management and the Board that isnecessary for the Board to effectively and reasonably perform its duties.
The Independent Directors expressed satisfaction with the overall performance of theDirectors and the Board as a whole.
Business Risk Management
The Company has a risk management mechanism in place to manage uncertainties throughidentification analysis assessment implementing and monitoring to reduce the impact ofrisks to the business which is discussed in detail in the Management Discussion andAnalysis section of this Annual Report.
Material changes and commitments affecting financial position between end of financialyear and date of report
No material changes and commitments have occurred after the close of the financial yeartill the date of this report which may affect the financial position of the Company.
Business Responsibility Report
As mandated by the Securities and Exchange Board of India (SEBI) the BusinessResponsibility Report (brr) forms part of this Annual Report. The brr contains a detailedreport on business responsibilities vis-a-vis the nine principles of the NationalVoluntary Guidelines on Social Environmental and Economic Responsibilities of Businessframed by the Ministry of Corporate Affairs.
Internal Financial Controls
The Company has in place adequate Internal Financial Controls commensurate with thebusiness operations of the Company which are operating effectively. Your Company hasadopted policies and procedures for ensuring the orderly and efficient conduct of itsbusiness including adherence to the Company's policies the safeguarding of its assetsprevention and detection of frauds and errors accuracy and completeness of the accountingrecords and timely preparation of reliable financial disclosure.
The Company's plant property equipment and stocks are adequately insured against allmajor risks. The Company also has appropriate liability insurance covers particularly forproduct liability and clinical trials. The Company has also taken Directors' and Officers'Liability Policy to provide coverage against the liabilities arising on them.
Directors Responsibility Statement
Pursuant to Section l34(3)(c) of the Companies Act 2013 in relation to FinancialStatements of the Company for the year ended March 31 2021 the Board of Directors statethat:
a) I n 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 the Companies Act 2013 forsafeguarding the assets of the Company and for preventing and detecting fraud and otherirregularities;
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 operatingeffectively; and
f) The Directors had devised proper systems to ensure compliance with the provisions ofall applicable laws and that such systems were adequate and operating effectively.
Related Party Transactions
In accordance with Section l34(3)(h) of the Companies Act 2013 and Rule 8(2) of theCompanies (Accounts) Rules 2014 the particulars of contract(s) or arrangement(s) enteredinto by the Company with related parties referred to in Section 188(1) in Form AOC-2 isattached as "Annexure - II" to this Board's Report.
The details of related party disclosures form part of the notes to the FinancialStatements provided in this Annual Report.
Vigil Mechanism/Whistle Blower Policy
The Company believes in upholding professional integrity and ethical behavior in theconduct of its business. To uphold and promote these standards the Company has a VigilMechanism / Whistle Blower Policy which serves as a mechanism for its Directors andemployees to report genuine concerns about unethical behavior actual or suspected fraudor violation of the Code of Conduct without fear of reprisal. The policy also providesemployee(s) access to the Chairperson of the Audit Committee under certain circumstances.The details of the procedures are also available on the website of the Companywww.natcopharma. co.in.
A brief note on the Whistle Blower Policy is also provided in the Report on CorporateGovernance which forms part of this Annual Report.
Internal Complaints Committee
The Company has Internal Complaints Committees in place in the required units asmandated in line with the Sexual Harassment of Women at Workplace (Prevention Prohibitionand Redressal) Act 2013. A brief note on the same is provided in the Report on CorporateGovernance which forms part of this Annual Report.
Auditors Statutory Auditors
The members of the Company at their Annual General Meeting held on September 5 2019appointed M/s B S R & Associates LLP (Firm Registration No. 116231W/W-100024) as theStatutory Auditors of the Company to act as such from the conclusion of 36th AnnualGeneral Meeting (AGM) held for the financial year 2018-19 till the conclusion of the 41stAGM to be held for the FY 2023-24.
Pursuant to Section 204 of the Companies Act 2013 read with Rule 9 of the Companies(Appointment & Remuneration of Managerial Personnel) Rules 2014 CS B. Kiran Kumarwith Certificate of Practice (CP) No. 15876 M/s. BK & Associates a PracticingCompany Secretary conducted the Secretarial Audit of the Company for FY 2020-21. TheSecretarial Audit Report in form No. MR-3 is attached as "Annexure - III" tothis Board's Report.
Upon recommendation of the Audit Committee the Board has re-appointed CS B. KiranKumar (CP No. 15876) M/s. BK & Associates a Practicing Company Secretary asSecretarial Auditor of the Company for the FY 2021-22.
Pursuant to Section 148 of the Companies Act 2013 read with the Companies (Audit andAuditors) Rules 2014 and the Companies (Cost Records and Audit) Rules 2014 the Companymaintains the Cost Audit records in respect of its pharmaceutical business. The Board hason the recommendation of the Audit Committee appointed M/s. S.S. Zanwar & Associates(Firm Registration No.:100283) as Cost Auditors of the Company for FY 2021-22. Theprovisions also require that the remuneration of the Cost Auditors be ratified by theshareholders and accordingly the same is put forward to the shareholders for theirratification in the ensuing AGM. The Cost Audit report for the FY 2020-21 will be filedwith the Central Government within the stipulated timeline and the relevant Cost Auditreports for FY 2019-20 were filed within the due date to the Central Government.'
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
During FY 2020-21 there were no significant and/or material orders passed by anyCourt or Regulator or Tribunal which may impact the going concern status or the Company'soperations in future.
Corporate Social Responsibility Initiatives
The Board formulated a Corporate Social Responsibility (CSR) Policy which is in fullforce and operation and is subject to monitoring by the CSR Committee of Directors fromtime to time.
The details about the CSR initiatives taken during the FY 202021 are discussed in aseparate head "Creating a positive Social impact" which forms a part of thisAnnual Report.
The Annual Report on CSR activities of the Company is attached as "Annexure -IV" to this Board's Report.
Transfer of unpaid and unclaimed dividend amounts to Investor Education and ProtectionFund
Pursuant to the provisions of Section 124(5) of the Companies Act 2013 the declareddividends which remained unpaid or unclaimed for a period of seven years have beentransferred by the Company to the Investor Education and Protection Fund (IEPF)established by the Central Government pursuant to Section 125 of the said Act the detailsof which are disclosed in the notice of ensuing Annual General Meeting of the Company.
Employees Stock Option Scheme
Details pertaining to the Employee Stock Option Schemes is disclosed in the CorporateGovernance Report which forms a part of this Annual Report.
ICRA Limited has reaffirmed their rating "AA" (which means high degreeof safety regarding timely servicing of financial obligations and has very low creditrisk) for various banking facilities enabling your Company to avail facilities from banksat attractive interest rates indicating a very strong degree of safety for timely paymentof financial obligations such as payment of interest and repayment of principal if any.
Particulars of Employees
The information as required under Section 197 of the Act read with Rule 5(1) of theCompanies (Appointment and Remuneration of Managerial Personnel) Rules 2014 are attachedas "Annexure-V" to this Board's Report.
The information required under Rule 5(2) and (3) of the Companies (Appointment andRemuneration of Managerial Personnel) Rules 2014 is provided in an Annexure forming partof this Report. In terms of the second proviso to Section 136 of the Act the Report andAccounts are being sent to the Members excluding the aforesaid Annexure. The said annexureis open for inspection at the Registered Office of the Company and any member interestedin obtaining the same may write to the Company Secretary at the Registered Office of theCompany.
Conservation of Energy Research and Development Technology Absorption ForeignExchange Earnings and Outgo
The details of Energy Conservation Research and Development Technology Absorption andForeign Exchange Earnings and Outgo as required under Section 134(3)(m) of the CompaniesAct 2013 read with Rule 8(3) of the Companies (Accounts) Rules 2014 is attached as "Annexure-VI"to this Board's Report.
Pursuant to Section 92(3) read with Section l34(3)(a) of the Act the Annual Return ason 31st March 2021 is available on the Company's website on www.natcopharma.co.in.
Compliance with Secretarial Standards
The Company has complied with Secretarial Standards issued by the Institute of CompanySecretaries of India.
To preserve environment the Company has undertaken number of green initiatives whichnot only reduce burden on environment but also ensure secured dissemination ofinformation. Such initiatives include energy saving water conservation and usage ofelectronic mode in internal processes and control statutory and other requirement(s).
The Board wish to place on record their appreciation to shareholders governmentauthorities banks business partners
medical practitioners and other stakeholders for the assistance co-operation andencouragement extended to the Company. The Board also commend the continuing commitmentand dedication of the employees at all levels which has been critical for the Company'ssuccess. The Board look forward to their continued unstinted support in future also.
For and on behalf of the Board of Directors
| ||V.C. Nannapanei |
|Place: Hyderabad ||Chairman and Managing Director |
|Date: June 17 2021 ||DIN: 00183315 |