Your Directors feel pleasure in presenting the 36th Annual Report on thebusiness and operations of the Company together with the Audited Standalone andConsolidated Financial Statements and the Auditors' Reports thereon for the financial yearended March 31 2020.
The highlights of Standalone Financial Results of the Company are as under:
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# Include figures for the discontinued operations
## Previous year's figures have been re-grouped re-classified and/or restated wherevernecessary
During the year ended March 31 2020 your Company's total revenue from continuing anddiscontinued operations has grown by 10% to Rs.4896.78 million as against Rs.4441.63million during the previous financial year. In view of the completion of the transfer ofpharmaceutical formulations business to the Company's wholly owned subsidiary PanaceaBiotec Pharma Limited ("PBPL") with effect from February 01 2020 and theongoing demerger of real estate undertaking including investment in Radhika HeightsLimited into the Company's wholly owned subsidiary Ravinder Heights Limited("RVHL") the financial results of the pharma business upto January 31 2020 andthose of the said real estate undertaking for full year that are considered as disposalgroup have been presented as discontinued operations in the Standalone FinancialStatements of the Company in accordance with the applicable accounting standards. TheCompany has earned revenue from operations of Rs.3315.93 million from such discontinuedoperations as against Rs.3479.53 million during previous year. The revenue fromcontinuing operations has increased to Rs.1580.85 million from Rs.962.10 million duringprevious financial year registering a growth of around 64% over previous year.
During the financial year the Vaccines business registered a turnover of Rs.1404.00million as against Rs.962.10 million during previous financial year registering a growthof around 46% over previous year. The Pharmaceutical Formulations business registered aturnover of Rs.3315.93 million as against Rs.3479.53 million during previous financialyear. The Company's total export revenue has grown to Rs.1115.18 million from Rs.848.80million in the previous financial year. The Company has earned positive EBITDA ofRs.100.53 million during financial year 2019-20 as against negative EBITDA of Rs.1466.06million during previous financial year. The Company's loss before tax and exceptionalitems has reduced to Rs.1205.74 million as compared to loss of Rs.2968.29 million duringprevious financial year. The loss after tax for financial year was Rs.1530.70 million asagainst PAT of Rs.265.70 million during previous financial year. During the year endedMarch 31 2020 Panacea Biotec as a Group has registered consolidated revenue fromoperations of Rs.5440.62 million as against Rs.4566.96 million during previous financialyear from continuing operations and discontinued operations resulting an increase of19.13%. The Company's consolidated loss before tax and exceptional items (from continuingoperations and discontinued operations) has significantly decreased to Rs.1619.47 millionfrom Rs.2877.84 million during previous financial year.
During the year under review: a) Your Company's Oncology Parenteral FormulationFacility at Baddi Himachal Pradesh India has received United States Food & DrugAdministration (USFDA) approval for manufacture and supply of Azacitidine Injection 100mg/ vial for the US market. Panacea Biotec's state-of-the-art pharmaceutical formulationfacility at Baddi is already approved by National Regulatory Authority (NRA) of India andUSFDA for other oral solids and injectable products. b) Your Company has launched brandVILACT in India. VILACT is used in the treatment of Uncontrolled Type 2 Diabetes Mellituspatients with HbA1c >6.5%. ViLACT is available in four formulations i.e. VILACT(Vildagliptin 50 mg Tablet) VILACT M 500 (Vildagliptin 50 mg + Metformin HCL 500 mgTablet) VILACT M 850 (Vildagliptin 50 mg + Metformin HCL 850 mg Tablet) and VILACT M 1000(Vildagliptin 50 mg + Metformin HCL 1000 mg Tablet). The total market size of thismolecule and its combination is Rs.9690 million as per AIOCD AWACS MAT October 2019 andis growing at the rate of 4%. c) Your Company has received awards worth US$24.32 million(over Rs.1700 million) from U.N. Agencies (UNICEF and PAHO) for supply of itsEasyfive-TT a fully liquid WHO prequalified wP based Pentavalent Vaccine (DTwP-HepB-Hib).UNICEF award is for calendar year 2020 and award of PAHO is for three (3) calendar yearsi.e. 2020-2022.
Further during the current financial year your Company has successfully completed itsPhase I/II study to evaluate the safety and immunogenicity of its vaccine DengiAlla single-dose live-attenuated tetravalent vaccine and Pneumococcal Conjugate Vaccine(Nucovac). A detailed discussion on operations of the Company for the year ended March 312020 is given in the Management Discussion and Analysis Report forming part of the AnnualReport.
During the year your Company has repaid all the long term loans and working capitalloans availed from the banks. Pursuant to such repayment Credit Analysis & ResearchLtd. (CARE) has withdrawn the earlier assigned credit rating of the bank facilities. TheCompany has not availed any new bank facilities and has consequently not accepted any newcredit rating.
Dividend and Transfer to Reserves
In view of losses during the year the Board of Directors has not recommended anydividend on the Equity as well as Preference Shares of the Company. Accordingly there hasbeen no transfer to general reserves.
TheissuedsubscribedandpaidupShareCapitaloftheCompany as on March 31 2020 remainsunchanged at Rs.224.25 million comprising of Rs.61.25 million equity share capital dividedinto 61250746 Equity Shares of Re.1 each and Rs.163.00 million preference share capitaldivided into 16300000 0.5% Non-Convertible Cumulative Non-Participating RedeemablePreference Shares ("NCCRPS") of Rs.10 each.
However during the year under review the terms of NCCRPS were amended wherein thetenure of NCCRPS has been increased to 15 years from the date of allotment with an optionwith the Company as well as the Preference Shareholders for early redemption of NCCRPSsubject to certain conditions stipulated in the amendment agreement.
Further during the current year pursuant to the order of the Hon'ble National CompanyLaw Tribunal Chandigarh Bench ("NCLT") dated September 09 2020 sanctioning theScheme of Arrangement for demerger of real estate business of Panacea Biotec Limited("Demerged Company") with and into Ravinder Heights Limited ("ResultingCompany") and their respective shareholders and creditors in terms of sections 230 to232 and section 66 and other applicable provisions of the Companies Act 2013("Scheme") and the Scheme becoming effective from September 10 2020 theauthorised share capital of the Company has reduced from Rs.1225.0 million to Rs.1223.37million on account of cancellation of preference share capital of Rs.1.63 million dividedinto 163000 NCCRPS of Rs.10 each. The paid-up preference share capital has also reducedfrom Rs.163.00 million to Rs.162.37 million.
During the year under review the Company has not issued any equity shares withdifferential rights/sweat equity shares under Rule 4 & Rule 8 of the Companies (ShareCapital and Debentures) Rules 2014.
Significant Events during the year/current year a) Issue of Warrants: As approvedby the shareholders in their Extraordinary General Meeting held on March 25 2019 theCompany has on April 08 2019 issued and allotted 7111111 convertible warrants("Warrants") at a price of Rs.180 each on a preferential basis to IndiaResurgence Fund - Scheme 1 India Resurgence Fund - Scheme 2 and Piramal EnterprisesLimited ("Warrant Holders/Investors").
The Company received an amount of ~Rs.320.00 million as upfront payment which wasequivalent to 25% of the total amount of Rs.1280.00 million proposed to be raised uponissuance of equity shares against Warrants as per the SEBI (Issue of Capital andDisclosure Requirements) Regulations 2018 ("SEBI ICDR Regulations"). TheCompany had fully utilized the funds received from the Warrant Holders as per the objectsstated in the Explanatory Statement to the Notice dated February 26 2019 sent to theshareholders of the Company. There were no unutilized funds under the same as on March 312020.
The Warrant Holders were entitled to exercise the right attached to the said Warrantsand subscribe to 1 Equity Share of face value of Re.1/- each at a premium of Rs.179/- pershare against each Warrant within the period starting on the date which was 10 businessdays prior to the date falling 18 months from the date of allotment of such Warrants andending on the date falling 18 months from such date of allotment i.e. during the periodstarting from September 23 2020 and ending on October 07 2020. However during thecurrent year since the Warrant Holders did not exercise the conversion option within theaforesaid period the Warrants stand cancelled / lapsed and the upfront amount of~Rs.320.00 million (equivalent to 25% of total consideration) as received by the Companyfrom the Warrant Holders towards allotment of the said Warrants stand forfeited inaccordance with the terms of the said Warrants and as per the provisions of Regulation169(3) of Chapter V of SEBI ICDR Regulations. b) Issue of Non-Convertible Debentures: TheCompany had raised funds by way of issue and allotment of 74300 secured unratedunlisted redeemable Non-Convertible Debentures ("NCDs") having the face valueof Rs.100000 each aggregating to Rs.7430 million under Series 1A Series 1B and Series2 NCDs through private placement to the Investors. Subsequently the Company has madepartial repayment of Series 1A NCDs amounting to Rs.305.69 million. c) One time settlementwith the existing lenders: During previous financial year in order to resolve the debtposition of the Company the Company reached bilateral settlements of its debts with eachconsortium bank individually. During the year under review the Company has paid all itsdebts to the said lenders including ECB from Bank of India pursuant to the said bilateralsettlements on April 09 2019 and obtained no dues' certificates from such lenders.d) Alteration in Memorandum and Articles of Association: The existing Memorandum ofAssociation ("MOA") of the Company has been replaced in its entirety by new setof MOA with a view to align the same with Table A of the Schedule I to the Act.
Further the existing Articles of Association ("AOA") of the Company havebeen replaced in its entirety by new set of AOA with a view:
to align the same with the requirements of the Act; and to suitably incorporate therelevant provisions of the Warrant Subscription and Shareholders Agreement and DebentureTrust Deed both dated April 06 2019 executed by the Company in connection with the issueof Share Warrants and NCDs to the Investors. e) Completion of Transfer of PharmaceuticalFormulations Business: As approved by the Shareholders in their Extraordinary GeneralMeeting held on March 25 2019 with an objective to segregate the different business ofthe Company to ensure smooth functioning of each business in the future the Company hasexecuted a Business Transfer Agreement on April 07 2019 as amended vide Business TransferAmendment Agreement dated February 04 2020 ("BTA") with Panacea Biotec PharmaLimited ("PBPL") to transfer Company's Pharmaceutical Formulations businessincluding pharmaceutical formulations facility at Baddi Himachal Pradesh and relatedresearch & development activities and natural products extraction activities of theCompany together with all assets (including any identified assets but excluding R&DCentre and natural product extraction facility at Lalru) contracts permissions andconsents rights registrations personnel & employees other assets and liabilitiesincluding the assumption of all or part of Company's obligations towards thenon-convertible debentures issued by the Company to the Investors either by way of anovation or otherwise to PBPL on a going concern basis through slump sale.
In accordance with the provisions of BTA the above mentioned transfer has beencompleted with effect from February 01 2020. Since then PBPL is engaged into researchdevelopment manufacturing marketing and distribution of pharmaceutical products indomestic markets and is in the process of obtaining necessary approvals for change in thename of the Company in marketing authorizations/ registration of Products for variouscountries in international markets. While such approvals with respect to key products inthe key market has been obtained the approvals for other markets is expected in duecourse. Until receipt of such approvals PBPL is supplying the products through theCompany. f) Novation of Non-Convertible Debentures: In accordance with the provisions ofBTA and the deed of novation executed on February 04 2020 all issued and outstandingNCDs in the Company have been novated and NCDs of commensurate value of Rs.7124.31million have been allotted by PBPL on a private placement basis to the Investors onFebruary 01 2020 for consideration other than cash. Accordingly the liability of theCompany in respect of the NCDs has been transferred to and taken over by PBPL and thereare no outstanding NCDs in the Company as on date. g) Scheme of Arrangement for demergerof real estate business: The Board of Directors of the Company had at its meeting held onMay 30 2019 and equity shareholders & unsecured creditors of the Company at theirrespective NCLT convened meetings held on January 28 2020 approved the Scheme ofArrangement ("Scheme") between Panacea Biotec Limited and Ravinder HeightsLimited ("RVHL") and their respective shareholders and creditors for demerger ofreal estate business of the Company comprising of Radhika Heights Limited alongwith itsstep down subsidiaries and two real estate properties into RVHL subject to applicableapprovals. During the current year the Hon'ble NCLT vide its order dated September 092020 has approved the Scheme. The appointed date of the Scheme is April 01 2019 and theScheme has become effective from September 10 2020. Pursuant to the Scheme RVHL has inits Board Meeting held on September 24 2020 issued and allotted 61250746 EquityShares of Re.1 each and 163000 0.5% cumulative non-convertible and non-participatingredeemable preference shares of Rs.10/- each to the Company's equity and preferenceshareholders respectively whose names appeared in the register of members / record ofthe depositories as a beneficial owner as on the Record Date i.e. September 22 2020 inthe following manner: i. 1 (One) equity share of face value of Re.1/- each credited asfully paid-up for every 1 (One) equity share of face value of Re.1/- held in the Company;and ii. 1 (One) 0.5% cumulative non-convertible and non-participating preference share offace value of Rs.10/- each credited as fully paid-up for every 100 (One Hundred)preference shares (i.e. 0.5% cumulative non-convertible and non-participating RedeemablePreference Share) of face value of Rs.10/- held in the Company. The new Equity Sharesissued and allotted by RVHL to the shareholders of the Company in accordance with theScheme shall be listed and/or admitted to trading on the BSE Limited and National StockExchange of India Limited (NSE) subject to requisite approvals of Exchanges/SEBI. h)During the current year the Company has received a warning letter from USFDA relating tothe Pharmaceutical Formulations facility of PBPL located at Baddi Himachal Pradesh. TheCompany / PBPL has taken multiple steps after its inspection conducted during February2020 to address the observations received during the inspection. Panacea Biotec iscommitted to patient safety quality and takes all quality and compliance mattersseriously and stand by its commitment to fully comply with the cGMP quality standards.This letter does not materially affect the Company's existing business in US. Further therevenues from US markets are not significant as compared to the Company's consolidatedrevenues. The USFDA may however withhold approval of any new drug applications orsupplements till all the issues raised by the USFDA are addressed.
The Company has submitted the response to the said letter containing the proposedCorrective and Preventive Action Plan. The Company / PBPL will now actively engage withUSFDA and take all necessary steps required to address its concerns. Apart from theupdates mentioned above there were no significant events after the end of the financialyear ended March 31 2020.
Panacea Biotec Limited - Employee Stock Option Plan 2020 ("ESOP 2020"/"Plan")
With a view to motivate the key employees seeking their contribution to the corporategrowth to create an employee ownership culture to attract new talents and to retainthem for ensuring sustained growth the Board of Directors of the Company had at itsmeeting held on February 14 2020 proposed implementation of Panacea BiotecLimited-Employee Stock Option Plan 2020' ("ESOP 2020"/ "Plan") tocover eligible employees of the Company and its subsidiary company in or outside India.
The Shareholders have approved the Plan as well as grant of employee stock options tothe employees of the subsidiary company by passing special resolutions through postalBallot on July 17 2020. However no options have been granted under the ESOP 2020 tilldate.
Significant and material orders impacting the going concern status and Company'soperations in future
During the year under review no significant and material orders were passed by anyregulator or court or tribunal which may impact the going concern status and yourCompany's operations in future.
During the financial year 2011-12 a search operation was conducted by Income TaxDepartment in the premises of the Company and hence the Company re-filed the income taxreturns for the Assessment Years ("AY") 2006-07 to 2012-13. During the financialyear 2014-15 the Income Tax Department completed the assessment of the said yearsdisallowed certain expenses and issued demand of Rs.3294.9 million (including interest)on various grounds. The Company preferred appeals before CIT (Appeals) and after severalhearings in the matter and on the basis of facts of the matter the appeals were decidedin favour of the Company and the entire demand of Rs.3294.9 million was cancelled.However CIT (Appeals) made certain disallowances of Rs.60.2 million with respect to AY2010-11 & AY 2011-12 against which the Company has filed appeals before the Income TaxAppellate Tribunal ("ITAT"). The Income Tax Department has also filed appealsbefore ITAT against the orders of CIT (Appeals). The appeals before ITAT are pending atpresent.
Report on Corporate Governance
Your Company has always placed thrust on managing its affairs with diligencetransparency responsibility and accountability. Your Directors support the broadprinciples of Corporate Governance and lays emphasis on its role to align and direct theactions of the Company in achieving its objectives. The report on Corporate Governance asstipulated under Regulation 34 read with Schedule V of the SEBI (Listing Obligations andDisclosures Requirements) Regulations 2015 ("SEBI LODR Regulations") for theyear under review together with a certificate from the Practicing Company Secretaryconfirming compliance thereof is attached and forms part of the Annual Report.
Management Discussion and Analysis Report
Management Discussion and Analysis Report for the year under review as requiredpursuant to Regulation 34 read with
Schedule V of SEBI LODR Regulations is presented in a separate section and forms anintegral part of this Report.
Business Responsibility Reporting
The Business Responsibility Report for the year under review as required pursuant toRegulation 34 of SEBI LODR Regulations is presented in a separate section and forms anintegral part of this Report.
Subsidiaries Associates and Joint Ventures A. Subsidiaries
As on March 31 2020 your Company had 5 wholly owned subsidiary ("WOS")companies viz. Ravinder Heights Limited ("RVHL") (w.e.f. April 15 2019)Radhika Heights Limited ("RHL") Panacea Biotec Pharma Limited("PBPL") Meyten Realtech Private Limited ("Meyten") (w.e.f. April 122019) Panacea Biotec (International) S.A. Switzerland ("PBS") and 7 indirectWOS companies as under:
Cabana Construction Private Limited Cabana Structures
Limited Nirmala Buildwell Private Limited Nirmala Organic Farms Resorts PrivateLimited Radicura Infra Limited and
Sunanda Infra Limited; all being WOS of RHL; and
Panacea Biotec Germany GmbH ("PBGG") the WOS of PBS.
RVHL was incorporated on April 15 2019 for the purpose of the above mentioneddemerger of real estate undertaking of the Company including its investment in RHL intoRVHL. The Company was holding 100000 equity shares of Re.1 each with an investment ofRs.0.10 million in RVHL as on March 31 2020. During the current year pursuant to theorder of the Hon'ble NCLT dated September 09 2020 sanctioning the above mentioned Schemeof Arrangement which has become effective from September 10 2020 RVHL has ceased to bethe subsidiary of the Company.
RHL inter-alia owns a prime immovable property which is being used by the Companyas its Corporate Office at New Delhi and land at Pataudi Road Gurugram (along with its 4WOSs). It has diversified its activities in construction and development of township aspart of its growth plans. Accordingly RHL along with its 4 WOS companies signed a termsheet with a developer for development of the integrated township on its land at PataudiRoad Gurugram during the earlier year however a dispute had emerged among the partiesand the matter was under arbitration. Since the arbitration proceedings were continuingsince long RHL has settled the matter with the developer and both the Parties havemutually entered into a Collaboration Agreement. The Company was holding 4776319 equityshares of Re.1 each with an investment of Rs.3385.65 million in RHL as on March 31 2020.During the current year pursuant to the above referred order of the Hon'ble NCLT RHLalongwith its step down subsidiaries and two real estate properties has been demergedinto RVHL and RHL and it's subsidiaries have ceased to be the subsidiary of the Companyw.e.f. September 10 2020.
Further the specified leasing business of RHL is proposed to be demerged into theCompany's another WOS i.e. Meyten and Cabana Structures Limited WOS of RHL is proposed tobe amalgamated with RHL pursuant to the Composite Scheme of Arrangement subject to theapproval of the Hon'ble NCLT and other applicable authorities. PBPL is engaged inthe research development manufacturing and exports of pharmaceutical formulations inIndia and international markets. The Company holds 1000000 equity shares of Re.1 eachwith an investment of Rs.1.00 million in PBPL as on March 31 2020.
Meyten was incorporated on April 12 2019 for the purpose of proposed demerger ofspecified Leasing Business of RHL into Meyten. The Company holds 100000 equity shares ofRe.1 each with an investment of Rs.0.10 million in Meyten as on March 31 2020.
PBS was earlier engaged in the business of trading of pharmaceutical products andis currently not pursuing any business. Since no further activity is envisaged to beundertaken by PBS it has been decided to liquidate PBS. The Company holds 6000 equityshares of CHF 100 each with an investment of Rs.34.36 million in PBS as on March 31 2020.PBGG WOS of PBS is engaged in marketing of pharmaceutical products including theCompany's products in Germany. PBGG is proposed to be converted into direct WOS of theCompany/ PBPL.
During the year under review Rees earlier WOS of the Company has been dissolved onMay 23 2019.
B. Joint Ventures and Associates
Your Company has 2 joint ventures viz. Adveta Power Private Limited("Adveta") and Chiron Panacea Vaccines Private Limited (Under Liquidation)("CPV") and 1 associate company viz PanEra Biotec Private Limited("PanEra"). Adveta and PanEra have been considered as subsidiaries for thepurpose of consolidation of accounts pursuant to the provisions of IND-AS.
Adveta: The Company's 50:50 joint venture with PanEra was granted in-principleapproval by Govt. of Arunachal Pradesh for allotment of two Power Projects of 80 MW and 75MW in Arunachal Pradesh in financial year 2012-13. Adveta has in the past initiated takingpreliminary steps in connection with the implementation of projects. However no majorinvestment has been made in this regard nor is envisaged during the current financialyear. Further as per the terms agreed with IndiaRF the Company has initiated thepreliminary steps for disposal of its investments in Adveta in due course of time.
CPV: The voluntary winding up process of CPV is currently in progress.
PanEra: PanEra was granted in principle approval by Govt. of Himachal Pradesh forallotment of a hydro-power project of 4 MW in Himachal Pradesh in earlier year. PanErawill be taking necessary steps in connection with the implementation of the project in duecourse of time. However no major investment has been made in this regard nor is envisagedduring the current financial year. Further as per the terms agreed with IndiaRF theCompany has initiated the preliminary steps for disposal of its investments in PanEra indue course of time.
A separate statement containing the salient features of financial statements of theCompany's Subsidiaries Joint Ventures and Associates in the prescribed Form AOC-1 formspart of the Annual Report and hence not repeated here for the sake of brevity. Theseparate audited Financial Statements of the Subsidiaries shall be kept open forinspection at the Company's Registered / Corporate Office during working hours for aperiod of 21 days before the date of the ensuing Annual General Meeting (AGM) of theCompany.
The separate Financial Statements of the subsidiaries are also available on the websiteof the Company at www. panaceabiotec.com and will also be made available upon request ofany member of the Company who is interested in obtaining the same.
The Company has formulated a Policy for determining material subsidiaries which may beaccessed on the Company's website at the link:https://www.panaceabiotec.com/statutory-policies. As on March 31 2020 Radhika HeightsLimited and Panacea Biotec Pharma Limited were material subsidiaries of the Companypursuant to SEBI LODR Regulations.
Consolidated Financial Statements
The Consolidated Financial Statements of the Company and its Subsidiaries jointventures and associates prepared in terms of Section 129 of the Companies Act 2013("the Act") Regulation 33 of SEBI LODR Regulations and in accordance with IndAS 110 read with Ind AS 28 and 31 as specified in the Companies (Indian AccountingStandards) Rules 2015 ("Ind-As Rules") and provisions of Schedule III to theAct are attached herewith and the same together with Auditors' Report thereon forms partof the Annual Report.
Indian Accounting Standards 2015
The annexed financial statements comply in all material aspects with Indian AccountingStandards ("Ind AS") notified under Section 133 of the Act Companies (IndianAccounting Standards) Rules 2015 and other relevant provisions of the Act.
Listing of Equity Shares
The Equity Shares of the Company continue to be listed on NSE and BSE. The requisiteannual listing fees for the financial year 2020-21 have been paid to these Exchanges.
During the year under review your Company has not invited or accepted any depositsfrom the public/members pursuant to the provisions of Sections 73 and 76 of the Act readwith Companies (Acceptance of Deposits) Rules 2014.
Directors and Key Managerial Personnel
i) Cessation of Directors:
(a) During the year under review Mr. Nithin Krishna Kaimal (DIN:05253046) who wasappointed as a non-executive director of the Company w.e.f. April 08 2019 has ceased tobe director of the Company w.e.f. December 10 2019.
(b) During the current year Mrs. Sunanda Jain (DIN: 03592692) and Mr. Sumit Jain (DIN:00014236) Whole-time Directors have ceased to be directors of the Company w.e.f. October07 2020. Your Directors place their sincere appreciation towards the invaluablecontributions guidance and support received from them during their tenure as Directors ofthe Company towards the progress of the Company. ii) Appointment of Independent Directors:During the year under review the Board of Directors on the recommendation of Nominationand Remuneration Committee of the Board ("NRC") has appointed Mr. BhupinderSingh (DIN:00062754) as an additional director and non-executive independent director ofthe Company for a period of five (5) years w.e.f. April 08 2019. iii) Re-appointment ofIndependent Directors: During the year under review Mrs. Manjula Upadhyay (DIN: 07137968)has been re-appointed as an Independent Director w.e.f. March 30 2020 for a second termof five (5) consecutive years up to March 29 2025.
Further the first term of office of Mr. Mukul Gupta (DIN: 00254597) as IndependentDirector will expire on March 31 2021. The Board of Directors has after taking intoaccount the report of performance evaluation and the recommendation of NRC in its meetingheld on November 11 2020 recommended his re-appointment as Independent Director for asecond term of five (5) consecutive years upto March 31 2026 subject to approval ofshareholders. The terms and conditions for his re-appointment are contained in theExplanatory Statement forming part of the Notice of the ensuing AGM of the Company. iv)Appointment of Non-Executive Nominee Director: During the year under review the Board ofDirectors on the recommendation of NRC has appointed Mr. Shantanu Yeshwant Nalavadi (DIN:02104220) as an additional director and non-executive nominee director of the Companyw.e.f. December 10 2019. He is proposed to be appointed as director not liable to retireby rotation subject to approval of shareholders in the ensuing AGM. The terms andconditions for his appointment are contained in the Explanatory Statement forming part ofthe Notice of the ensuing AGM of the Company. v) Retirement by Rotation: In accordancewith the provisions of Section 152 of the Act and Article 124 of the Article ofAssociation of the Company Mr. Soshil Kumar Jain (DIN: 00012812) Whole-time Director andChairman of the Company is liable to retire by rotation. Being eligible he has offeredhimself for re-appointment as director at the ensuing AGM. vi) Profile of Directorsseeking appointment/re-appointment: The brief resume of the Directors seeking appointment/re-appointment along with other details as stipulated under Regulation 36(3) of the SEBILODR Regulations and Secretarial Standards issued by The Institute of Company Secretariesof India are provided in the Notice convening the ensuing AGM of the Company and theCorporate Governance Report forming part of the Annual Report. vii) Declaration ofindependence: Your Company has received declarations from all the independent directors ofthe Company confirming that they meet the criteria of independence provided in Section149(6) of the Act and Regulation 16 of the SEBI LODR Regulations and there has been nochange in the circumstances which may affect their status as Independent director duringthe year under review. viii) Registration in Independent Directors' Data Bank: The Companyhas received confirmation from all it's Independent Directors that they have registeredthemselves in the Independent Director's Data Bank of Indian Institute of CorporateAffairs at Manesar for a period of 5 years in compliance with the provisions of sub-rule(1) of rule 6 of Companies (Appointment and Qualification of Directors) Rules 2014.
Your Directors recommend appointment/re-appointment of the above said directors in theensuing AGM.
Apart from the above there was no other change in the directors and Key ManagerialPersonnel ("KMP") during the year under review and thereafter.
In terms of the provisions of the Act and Regulation 19(4) of SEBI LODR Regulationsthe Board has adopted a formal mechanism for evaluating its performance as well as that ofits Committees and individual directors including the Chairman of the Board. The exercisewas carried out through a structured evaluation process covering various aspects such asBoard composition & quality strategic & risk management board functioning etc.which are brie_y stated in the Corporate Governance Report forming part of the AnnualReport.
Performance evaluation of independent directors was conducted by the Board of Directorsexcluding the director being evaluated on the criteria such as ethics and valuesknowledge and pro_ciency behavioral traits etc. The Board of Directors has expressed itssatisfaction with the evaluation process.
During the year under review four (4) Board Meetings were held on May 30 2019 August12 2019 November 14 2019 and February 14 2020. The intervening gap between two BoardMeetings was within the maximum period prescribed under the Act. The detailed informationis furnished in the Corporate Governance Report forming part of the Annual Report.
The Audit Committee of the Board of Directors consisted entirely of IndependentDirectors. The details of the composition and number of meetings of the Audit Committeeare furnished in the Corporate Governance Report forming part of the Annual Report.During the year all the recommendations made by the Audit Committee were accepted by theBoard.
Policy on Directors' appointment & remuneration
Pursuant to the provisions of Section 178(3) of the Act and Regulation 19(4) of SEBILODR Regulations and as per the recommendations of NRC the Board has adopted a policy forappointment and remuneration of the Directors Key Managerial Personnel Senior ManagementPersonnel and other employees of the Company. The components of remuneration policy arebrie_y stated in the Corporate Governance Report forming part of the Annual Report.
Energy Conservation Technology Absorption & Foreign Exchange
As required under Section 134 of the Act read with Rule 8 of the Companies (Accounts)Rules 2014 ("Accounts Rules'') the particulars regarding conservation of energytechnology absorption and foreign exchange earnings & outgo are given in AnnexureA hereto and forms part of this Report.
Extract of Annual Return
As required pursuant to Section 134 and 92(3) of the Act an extract of Annual Returnin Form MGT-9 as on financial year ended on March 31 2020 is annexed as Annexure Bhereto and forms part of this Report. The same is available on Company's website at:https://www.panaceabiotec.com.
Related Party Transactions
As per the provisions of the Act and SEBI LODR Regulations your Company has formulateda policy on Related Party Transactions which is available on Company's website at:https://www.panaceabiotec.com/statutory-policies.
The policy intends to ensure that proper reporting approval and disclosure processesare in place for all transactions between the Company and the Related Parties.
This policy specifically deals with the review and approval of material related partytransactions keeping in mind the potential or actual conflicts of interest that may arisebecause of entering into these transactions. All related party transactions are placedbefore the Audit Committee for its review and approval. Wherever applicable priorapproval is obtained for related party transactions on a quarterly basis for transactionswhich are of repetitive nature and / or entered in the ordinary course of business and areat arm's length basis.
During the year all related party transactions entered into were in the ordinarycourse of business and on an arm's length basis. The Company has not entered into anymaterial related party transactions i.e. transactions exceeding 10% of the annualconsolidated turnover as per the last audited financial statements. Accordingly thedisclosure of Related Party Transactions as required under Section 134(3)(h) of the Actread with Rule 8(2) of the Accounts Rules in the prescribed Form AOC-2 is not applicable.Suitable disclosures as required under Accounting Standard AS-18 have been made in thenotes to the Financial Statements forming part of the Annual Report.
Particulars of Employees and Related disclosures
Disclosures pertaining to remuneration and other details as required under Section197(12) of the Act read with Rule 5(1) of the Companies (Appointment and Remuneration ofManagerial Personnel) Rules 2014 ("Managerial Personnel Rules") are provided inAnnexure C hereto and the same forms part of this Report.
In terms of the provisions of Section 197(12) of the Act read with Rules 5(2) and 5(3)of the Managerial Personnel Rules a statement showing the names and other particulars ofthe employees drawing remuneration in excess of the limits set out in the said Rules isprovided in Annexure D hereto and the same forms part of this Report.
Auditors and Audit Reports i) Statutory Auditors and Audit Report: Pursuant to theprovisions of Section 139 of the Act and the rules framed thereunder M/s. Walker Chandiok& Co. LLP Chartered Accountants (Regn. No. 001076N/N500013) were reappointed asstatutory auditors of the Company for a second term of five (5) consecutive years to holdoffice from the conclusion of the 35th AGM of the Company held on September 302019 till the conclusion of the 40th AGM of the Company. The Statutory Auditorshave confirmed they are not disqualified from continuing as Auditors of the Company.
The Auditors have not given any qualified opinion or made any reservation adverseremark or disclaimer in their Audit Report.
The management response to the Emphasis of Matters and observations/comments containedin the Auditors' Report and Annexure thereto have been suitably given in the respectiveNotes to the Financial Statements referred to therein.
Further the Emphasis of Matters as contained in the Auditors' Report on the StandaloneFinancial Statements are also mentioned as Emphasis of Matters in the Auditors' Report onthe Consolidated Financial Statements in similar manner. The management responses theretohave been suitably given in the respective Notes to the Consolidated Financial Statementsreferred to therein.
The notes to accounts and other observations if any in the Auditors' Report areself-explanatory and therefore do not call for any further comments. ii) Cost Accountsand Auditors: The Company is required to maintain cost records as specified by the CentralGovernment under Section 148(1) of the Act and accordingly such accounts and records havebeen duly made and maintained by the Company in compliance with the provisions of the Act.
Pursuant to the provisions of Section 148 of the Act M/s. GT & Co. CostAccountants (Firm's Registration Number: 000253) were appointed as the Cost Auditors toconduct the audit of the Company's Cost Records for the financial year ended March 312020 and their remuneration has been rati_ed by the shareholders in the 35thAGM of the Company held on September 30 2019.
The cost audit for the said period has been completed and the Cost Auditors Report hasalso been submitted with the Central Government within the prescribed time. The Cost AuditReport for the financial year 2018-19 was filed on September 11 2019.
Based on the recommendations of the Audit Committee the Board of Directors hasre-appointed M/s. GT & Co. Cost Accountants as cost auditors of the Company for thefinancial year 2020-21 pursuant to the provisions of Section 148 of the Act. As requiredthe item for rati_cation of remuneration of cost auditor has been included in the noticeof the ensuing AGM for shareholders' approval. iii) Secretarial Auditors and SecretarialAudit Report: Pursuant to the provisions of Section 204 of the Act read with Rule 9 of theManagerial Personnel Rules the Board of Directors has appointed M/s. R&D CompanySecretaries Practicing Company Secretaries to conduct the Secretarial Audit of the Companyfor the financial year ended March 31 2020. The Secretarial Audit Report for the saidperiod is annexed as Annexure E to this Report.
The management response to the observation contained in the Secretarial Audit Report isgiven below: a) The Company has paid managerial remuneration for the financial years ended31st March 2019 2018 2017 2016 2014 and 2013 which was in excess of thelimits specified under the relevant provisions of the Companies Act 2013 / the CompaniesAct 1956 by Rs.154 million for the said years. The Company's applications to the CentralGovernment seeking approval for payment of such excess remuneration were not approved andconsequently the Company was required to recover the excess amount thus paid for the saidyears. The Company recorded an amount of Rs.154 million as recoverable from the directorstowards such excess remuneration paid. The Company again submitted applications to theCentral Government for waiver of recovery of excess remuneration paid. Further pursuantto the notification of the effective date of Section 67 of the Companies (Amendment) Act2017 amending Section 197 (overall maximum managerial remuneration and managerialremuneration in case of absence or inadequacy of profits) of the Companies Act 2013 theaforesaid applications pending with the Central Government stood abated. In compliancewith the aforesaid amended provisions of the Act the Company had during the yearobtained necessary approval from its shareholders in the Extraordinary General Meetingheld on September 10 2019 and after receipt of such approval an amount of Rs.154 millionwhich was shown as receivable as on March 31 2019 was written off by the Company.
The above observation in the Secretarial Audit Report is self-explanatory andtherefore does not require any further comment.
In addition to the above and in compliance with SEBI Circular No. CIR/CFD/CMD/1/27/2019dated February 08 2019 a report on secretarial compliance issued by M/s. R&D CompanySecretaries for the year ended March 31 2020 has been submitted to stock exchanges.
As per the requirements of the SEBI LODR Regulations the material subsidiaries of theCompany viz. Radhika Heights Limited and Panacea Biotec Pharma Limited have got undertakensecretarial audit for the Financial Year 2019-20.
Dealing with COVID-19 Pandemic
The outbreak of current novel coronavirus (Covid-19) pandemic globally and in India iscausing significant disturbance and slowdown of economic activity. In view of the Covid-19pandemic several restrictions were imposed by governments across the globe on the travelgoods movement and transportation considering public health and safety measures which hasadversely impacted the Company's operations since late March 2020. However the Company'soperations including its supply chain has been handled by the Company in an effectivemanner by applying various approaches on case to case basis and ensuring that its productsreaches up to the last point. Since the Company is engaged in the business ofmanufacturing of pharmaceutical products accordingly the operations at manufacturingfacilities and warehouses kept on going albeit with limited no. of workers in the initialdays during the lockdown however the same increased gradually after obtaining requisitegovernment approvals. For ensuring the health and well-being of its employees the Companyhas implemented Work from Home for most of its employees. Also the Company took severalmeasures such as sanitization of premises on regular basis video training sessions foremployees to create awareness about the spreading of virus and prevention of same strictfollow of social distancing norms at its offices and plants etc. Furthermore varioussteps were taken by the Company to render support to employees.
Although there are uncertainties due to the pandemic the Company is confident aboutadapting to the changing business environment and respond suitably to fulfill the unmettherapeutic needs of its customers.
Material changes and commitments affecting the financial position which have occurredbetween March 31 2020 and date of the Report
Except as disclosed elsewhere in the Annual Report there have been no material changesand commitments which can affect the financial position of the Company between the end ofthe financial year and the date of this Report.
As required under Section 134(3) of the Act the Board of Directors inform the membersthat during the financial year there have been no material changes except as disclosedelsewhere in the Annual Report:
in the nature of Company's business;
in the Company's subsidiaries or in the nature of business carried out by them; and inthe classes of business in which the Company has an interest.
The Directors state that applicable Secretarial Standards i.e. SS-1 and SS-2 relatingto Meetings of the Board of Directors' and General Meetings' respectivelyhave been duly followed by the Company.
Transfer to Investor Education and Protection Fund
During the year under review no amount was required to be transferred by the Companyto the Investor Education and Protection Fund.
Directors' Responsibility Statement
The Directors hereby confirm that: a) in the preparation of the annual financialstatements for the financial year ended March 31 2020 the applicable AccountingStandards have been followed along with proper explanation relating to materialdepartures; b) the 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 as at March 31 2020 andof the loss of the Company for the year ended March 31 2020; c) the directors have takenproper and sufficient care for the maintenance of adequate accounting records inaccordance with the provisions of the Act for safeguarding the assets of the Company andfor preventing and detecting fraud and other irregularities; d) the directors haveprepared the annual accounts on a going concern basis; e) the directors have laid downinternal financial controls to be followed by the Company and that such internal financialcontrols are adequate and are operating effectively; and f) the directors have devisedproper systems to ensure compliance with the provisions of all applicable laws and thatsuch systems were adequate and operating effectively.
Details in respect of frauds reported by auditors under Section 143(12)
During the year under review there were no frauds reported by the auditors to theAudit Committee or the Board under Section 143(12) of the Act.
Particulars of loans guarantees or investments
The Company has made investments or extended loans/ guarantees to its wholly ownedsubsidiaries for their business purposes. The details of loans guarantees and investmentscovered under the provisions of Section 186 of the Act have been disclosed in the notesto the Financial Statements forming part of the Annual Report.
The Company has formulated a Risk Management Policy and monitors the risk managementplan on a periodic basis. The Company has defined a structured approach to manageuncertainty and to make use of these in the decision making in business decisions andcorporate functions.
The Company has regularly invested in insuring itself against unforeseen risks. TheCompany's stocks and insurable assets like building plant & machinery computerequipment office equipment furniture & fixtures lease hold improvements andupcoming projects have been adequately insured against major risks. The Company has alsotaken appropriate product liability insurance policies for conducting clinical trials andfor insuring its products (manufactured and sold) with an extension of unnamed vendorliability and add on cover of public liability inclusive of pollution liability to coverthe risk on account of claims if any filed against the Company.
Internal Control System
Your Company has established a system of internal controls to ensure that assets aresafeguarded and transactions are appropriately authorized recorded and reported. Thedetailed explanation is provided in the Management Discussion and Analysis Report formingpart of this Report.
Internal Financial Controls
The Company has designed and implemented a process driven framework for InternalFinancial Controls (IFC) within the meaning of the explanation to Section 134(5)(e) of theAct. For the year ended on March 31 2020 the Board is of the opinion that the Companyhas sound IFC commensurate with the size scale and complexity of its business operations.The IFC operates effectively and no material weakness exists. The Company has a process inplace to continuously monitor the same and identify gaps if any and implement new and /or improved controls whenever the effect of such gaps have a material effect on theCompany's operations.
As required pursuant to the provisions of Section 177(9) of the Act read with Rule 7 ofthe Companies (Meetings of Board and its Powers) Rules 2014 Regulation 22 of SEBI LODRRegulations and Regulation 9A of Securities and Exchange Board of India (Prohibition ofInsider Trading) Regulations 2015 your Company has adopted a Vigil Mechanism/WhistleBlower Policy with a view to provide its employees an avenue to raise any sensitiveconcerns regarding any unethical behavior or wrongful conduct and to enable employees toreport instances of leak of unpublished price sensitive information and to provideadequate safeguards for protection from any victimization. This Policy is available on thewebsite of the Company and can be accessed at: https://www.panaceabiotec.com/statutory-policies. This Policy inter-alia provides a direct access to the Chairmanof the Audit Committee.
Your Company hereby afirms that no director/employee has been denied access to theChairman of the Audit Committee and that no complaint has been received during the year.
Corporate Social Responsibility
The provisions of Section 135 of the Act and the Rules made thereunder regardingCorporate Social Responsibility are not attracted to the Company as the Company does notfall under the threshold limit of net worth of Rs.5000 million or more or turnover ofRs.10000 million or more or a net profit (as defined under Section 198 of the Act) ofRs.50 million or more during the financial year. However the Company has been over theyears pursuing Corporate Social Responsibility by putting continuous efforts in the areasof health education and patient awareness/assistance programs towards the development ofhappier and healthier society.
Prevention of Sexual Harassment at Workplace
The Company has in place a Prevention of Sexual Harassment Policy in line with therequirements of The Sexual Harassment of Women at the Work Place (Prevention Prohibitionand Redressal) Act 2013. All employees (permanent contractual temporary trainees) arecovered under this policy.
Your Company has complied with the provisions relating to constitution of InternalComplaints Committee under The Sexual Harassment of Women at Workplace (PreventionProhibition and Redressal) Act 2013 for dealing with the complaint if any relating tosexual harassment of women at workplace. No case has been reported during the year underreview.
Your Directors acknowledge with gratitude the co-operation and assistance received fromthe UN Agencies Central Government State Governments and all other Government agenciesand encouragement they have extended to the Company. Your Directors also thank theshareholders financial institutions banks/ other lenders customers vendors and otherbusiness associates for their confidence in the Company and its management and lookforward for their continuous support. The Board wishes to place on record its appreciationfor the dedication and commitment of the employees at all levels which has continued to beour major strength.
| ||For and on behalf of the Board |
|Place : New Delhi ||Soshil Kumar Jain |
|Dated: November 11 2020 ||Chairman |