Your Directors feel pleasure in presenting the 35th 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 2019.
The highlights of financial results of the Company are as under:
(Rs. in million)
|Particulars || |
| ||2018-19# ||2017-18## |
|Revenue from operations ||4441.63 ||5775.54 |
|Other Income ||81.20 ||176.16 |
|Total Income ||4522.83 ||5951.70 |
|Earnings/(Loss) Before Interest ||(1384.88) ||990.41 |
|Tax Depreciation & Amortisation || || |
|(EBITDA)* || || |
|Profit/ (Loss) before exceptional ||(2968.29) ||(612.34) |
|items and tax || || |
|Exceptional items ||3340.08 ||- |
|Profit/(Loss) before Tax (PBT) ||371.78 ||(612.34) |
|Profit/(loss) after tax ||265.70 ||(718.76) |
|Total comprehensive income ||259.19 ||(732.92) |
# Include figures for the discontinued operations
## Previous year's figures have been re-grouped re-classified and/or restatedwherever necessary
* Includes Other Income
During the year ended March 31 2019 the Company has registered revenue fromoperations of Rs.4441.63 million as against Rs.5775.54 million during the correspondingprevious financial year. However in view of the proposed transfer of pharmaceuticalformulations business including related research and development activities and naturalproducts extraction activities ("Pharma business") to the Company's wholly ownedsubsidiary Panacea Biotec Pharma Limited ("PBPL") and proposed demerger of realestate undertaking including investment in Radhika Heights Limited into the Company'swholly owned subsidiary Ravinder Heights Limited ("RVHL") the activities ofthe Pharma business as well as the income from real estate activities of the Company thatare considered as disposal group have been presented as a discontinued operation in theStandalone Financial Statements of the Company in accordance with the applicableaccounting standards. The Company has earned revenue from operations of Rs.3479.53million (previous year Rs.3935.74 million) from such discontinued operations. The revenuefrom continuing operations have been Rs.962.10 million as against Rs.1839.80 millionduring corresponding previous financial year.
The pharmaceutical formulations segment registered a turnover of Rs.3479.41 million asagainst Rs.3839.14 million during the previous financial year. The vaccines segmentregistered a turnover of Rs.962.10 million as against Rs.1839.80 million during theprevious financial year. The Research & Development segment earned revenue of Rs.0.12million as against Rs.96.60 million during the previous financial year. The Company'stotal export revenue was Rs.1065.58 million as compared to Rs.1675.30 million in theprevious financial year.
The Company has earned profit before tax of Rs.371.78 million as against net lossbefore tax of Rs.612.34 million in the previous financial year. The Company has earnedprofit after tax and exceptional items of Rs.265.70 million as against loss after tax ofRs.718.76 million in the previous year. Profit after tax from continuing operations wasRs.219.40 million as against loss after tax of Rs.1431.68 million during previousfinancial year. Profit after tax from discontinued operations was Rs.46.30 million asagainst Rs.712.92 million during previous financial year.
During the year ended March 31 2019 the Group has registered consolidated revenuefrom operations of Rs.4566.96 million as against Rs.5961.61 million during the previousfinancial year. On consolidated basis the Group has earned profit before tax (afterexceptional items) of Rs.486.15 million during the year under review as against lossbefore tax of Rs.637.35 million during previous financial year. The consolidated profitafter tax was Rs.409.08 million during FY2018-19 as against loss after tax of Rs.735.93million during previous financial year.
During the year under review your Company along with its partner Apotex Inc. andApotex Corp. (Apotex) have entered into a Settlement Agreement with Celgene Corporation aglobal biopharmaceutical company headquartered in USA and its subsidiary AbraxisBioScience LLC for settlement of disputes regarding patents covering Abraxane drugproduct and the Company's Abbreviated New Drug Application (ANDA) for paclitaxel proteinbound particles for injectable suspension 100mg/vial a generic version of Abraxane. Aspart of the Settlement Agreement Panacea Biotec and Apotex have received a non-exclusivelicense under which Panacea Biotec may through its partner Apotex begin selling PanaceaBiotec's generic version of Abraxane in the U.S. and its territories on a mutuallyagreed-upon date and also in certain jurisdictions outside of the U.S. on a mutuallyagreed-upon date. As a part of the settlement the Company has also received an amount ofRs.206.59 million as its share of the Litigation Avoidance Fee.
Your Company has also entered into a tripartite agreement with Natco Pharma Ltd.("Natco") and Breckenridge Pharmaceutical Inc. ("Breckenridge") forthe manufacture and supply of Azacitidine Injection for the U.S. market underBreckenridge's already-approved ANDA. Under the terms of the agreement Natco has providedthe technology for manufacturing Azacitidine to Panacea Biotec's facility located atBaddi Himachal Pradesh India. Panacea Biotec will be responsible for manufacture andsupply of the product which will be marketed sold and distributed by Breckenridge in theU.S. The Company has received USFDA approval for this product and has launched the same inUSA during current financial year through Breckenridge.
Further during the current financial year India Resurgence Fund("IndiaRF") promoted by Piramal Enterprises Limited and Bain Capital Creditalong with its affiliates has committed an investment of upto Rs.9920 million in theCompany. This investment is structured by way of Non-Convertible Debentures (NCDs) of upto Rs.8640 million and subscription amount of Rs.320 million towards share warrantsallotted on a preferential basis. The subscription amount represents 25% of total amountof Rs.1280 million proposed to be raised upon issuance of equity shares against warrantsas per SEBI (Issue of Capital and Disclosure Requirements) Regulations 2018 ("SEBIICDR Regulations").
Your Company's Oncology Parenteral Formulation Facility at Baddi Himachal PradeshIndia has received United States Food & Drug Administration (USFDA) approval formanufacture and supply of Azacitidine Injection 100 mg/vial for the US market. PanaceaBiotec's state-of-the-art pharmaceutical formulation facility at Baddi is already approvedby National Regulatory Authority (NRA) of India and USFDA for other oral solids andinjectable products.
A detailed discussion on operations for the year ended March 31 2019 is given in theManagement Discussion and Analysis Report forming part of the Annual Report.
During the year the Credit Analysis & Research Ltd. (CARE) has reafirmed thecredit rating of CARE D (Single D) for Long Term Bank Facilities and for Short Term BankFacilities of the Company due to delays in repayment of the debt obligations of theCompany. With the improvements in the financial position and operational performance ofthe Company during the current year the rating agency will review the rating in duecourse of time.
Dividend and Transfer to Reserves
Though the Company has earned profits after tax and exceptional items of Rs.265.70million during the year but keeping in view the fact that the Company has incurred lossesbefore tax & exceptional items of Rs.2808.01 million and also with a view to conservecash flows for the Company's operations the Board of Directors has decided to invest theamount towards the growth of the Company and not recommended any dividend on the Equity aswell as Preference Shares of the Company. Accordingly there has been no transfer togeneral reserves.
The issued subscribed and paid up Share Capital of the Company as on March 31 2019remains unchanged at Rs.224.25 million comprising of Rs.61.25 million equity share capitaldivided into 61250746 Equity Shares of Re.1 each and Rs.163.00 million preference sharecapital divided into 16300000 0.5% Non-Convertible Cumulative Non-ParticipatingRedeemable Preference Shares ("NCCRPS") of Rs.10 each.
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.
Subsequent to the year under review the Company has amended the terms of NCCRPSwherein the tenure of NCCRPS has been increased to 15 years with an option with theCompany as well as the Preference Shareholders for early redemption of NCCRPS subject tocertain conditions stipulated in the amendment agreement.
Significant Events during current year a) Issue of Warrants:
As approved by the shareholders in their Extra-ordinary General Meeting held on March25 2019 the Company has on April 8 2019 issued and allotted 7111111 convertiblewarrants ("Warrants") at a price of Rs.180 each ("Warrant IssuePrice") on a preferential basis to India Resurgence Fund Scheme 1 IndiaResurgence Fund Scheme 2 and
Piramal Enterprises Limited (collectively "IndiaRF") with a right to converteach warrant into one equity share of face value of Re.1 each at a price of Rs.180including premium of Rs.179 per equity share within a period of 18 months from the date ofallotment of Warrants. The Company has received an amount of Rs.320 million as upfrontpayment which is equivalent to 25% of the total amount of Rs.1280 million proposed to beraised upon issuance of equity shares against warrants as per SEBI ICDR Regulations.Subject to exercise of warrants IndiaRF (along with its affiliates) will collectively endup owning around 10.4% stake in the Company on a fully diluted basis. b) Issue ofNon-Convertible Debentures: Subsequent to the year under review the Company has raisedfunds by way of issue and allotment of 74300 secured unrated unlisted redeemableNon-Convertible Debentures ("NCDs") having the face value of Rs.100000 eachaggregating to Rs.7430 million under Series 1A Series 1B and Series 2 NCDs throughprivate placement to IndiaRF. c) One time settlement with the existing lenders: During thequarter ended March 31 2019 in order to resolve the debt position of the Company theCompany reached bilateral settlements of its debts with each consortium lenderindividually. Subsequent to the year under review the Company has paid all its debts tothe said lenders including ECB from Bank of India pursuant to the said bilateralsettlements on April 9 2019 and obtained no dues' certificates from such lenders.d) Proposed Transfer of Pharmaceutical Formulations business: On March 25 2019 as partof business reorganization the Company approved the transfer of pharmaceuticalformulations business including pharmaceutical formulations facility at Baddi HimachalPradesh and related research & development activities and natural products extractionactivities of the Company to Panacea Biotec Pharma Limited ("PBPL") with anobjective to segregate the different businesses of the Company to ensure smoothfunctioning of each business in the future. Subsequent to the year under review toimplement the above divesture the Company has executed a Business Transfer Agreement("BTA") with PBPL to transfer Pharma business to PBPL together with alltangible assets (except R&D center and natural products extraction facility at Lalru)intangible assets and related liabilities as specified in the BTA in relation to thepharmaceutical formulations business including pharmaceutical formulations facility atBaddi Himachal Pradesh as a going concern through slump sale. e) Proposed Scheme ofArrangement for demerger of real estate business: The Board of Directors of "theCompany" had at its meetings held on May 30 2019 approved the Scheme of Arrangement(the Scheme') between the Company and Ravinder Heights Limited ("RVHL")and their respective shareholders and creditors for demerger of real estate business ofthe Company comprising of Radhika Heights Limited alongwith its step down subsidiaries andtwo real estate properties into RVHL subject to applicable approvals.
The management believes that the proposed Scheme will lead to simpli_cation andrationalization of business undertakings holding structure of the Companies bettermanagement focus optimum utilization of various resources of the Companies and willenable the Companies to focus on their core businesses. It will create and enhancestakeholders' value by unlocking the intrinsic value of Companies core businesses andlisting of shares of RVHL. The Company has filed the application with the BSE Limited("BSE") and National Stock Exchange of India Limited ("NSE") for itsin-principle approval under Regulation 37 of the SEBI (Listing Obligations and DisclosureRequirements) Regulations 2015 ("SEBI LODR Regulations") and the same ispending as on the date of this Report. f) Alteration in Memorandum and Articles ofAssociation: Subsequent to the year under review the existing Memorandum of Association("MOA") of the Company has been replaced in its entirety by new set of MOA witha 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 has beenreplaced in its entirety by new set of AOA with a view: to align the same with therequirements of the Act; and to suitably incorporate the relevant provisions of theWarrant Subscription and Shareholders Agreement and Debenture Trust Deed both dated April06 2019 executed by the Company in connection with the issue of Share Warrants andNon-Convertible Debentures (NCDs) to India Resurgence Fund-Scheme
1 India Resurgence Fund-Scheme 2 and Piramal Enterprises Limited.
Apart from the updates mentioned above there were no significant events after the endof the financial year ended March 31 2019.
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 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 aseparate section and forms an integral part of this Report.
Subsidiaries Associates and Joint Ventures A. Subsidiaries
As on March 31 2019 your Company has 4 wholly owned subsidiary ("WOS")companies viz. Radhika Heights Limited ("RHL") Panacea Biotec Pharma Limited("PBPL") (w.e.f. March 22 2019) Panacea Biotec (International) S.A.Switzerland ("PBS") Rees Investments Limited Islands of Guernsey("Rees") (dissolved w.e.f. May 23 2019) and 7 indirect WOS companies as under:
Cabana Construction Private Limited Cabana Structures Limited NirmalaBuildwell Private Limited Nirmala Organic Farms Resorts Private Limited Radicura InfraLimited and Sunanda Infra Limited; all being WOS of RHL; and
Panacea Biotec Germany GmbH ("PBGG") the WOS of PBS.
Subsequent to the year end the Company has formed 2 WOS viz. Meyten Realtech PrivateLimited ("Meyten") (w.e.f. April 12 2019) and Ravinder Heights Limited("RVHL") (w.e.f. April 15 2019). RHL inter-alia owns a prime immovableproperty which is being used by the Company as its Corporate Office at New Delhi and landat Pataudi Road Gurugram (along with its 4 WOSs). It has diversified its activities inconstruction and development of township as part of its growth plans. Accordingly RHLalong with its 4 WOS companies signed a term sheet with a developer for development of theintegrated township on its land at Pataudi Road Gurugram during the earlier yearhowever a dispute had emerged among the parties and the matter is under arbitration. TheCompany holds 4776319 equity shares of Re.1 each in RHL with an investment ofRs.3385.65 million as on March 31 2019. The real estate business including RHL alongwithits step down subsidiaries and two real estate properties is being demerged into theCompany's wholly owned subsidiary namely Ravinder Heights Limited subject to applicableapprovals.
PBPL has been formed with the objective of transferring the Company's pharmaceuticalformulations business to PBPL on a going concern basis. Post completion of transfer ofbusiness PBPL will carry on the said business. The Company holds 1000000 equity sharesof Re.1 each with an investment of Rs.1.00 million as on March 31 2019.
PBS was earlier engaged in the business of trading of pharmaceutical products and iscurrently 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 as on March 31 2019. PBGGWOS of PBS is engaged in marketing of pharmaceutical products including the Company'sproducts in Germany. Rees had its objects of inter-alia making strategic investments inother entities. Since no further activities were envisaged in Rees it was decided toliquidate the same. Subsequent to the year under review Rees has been dissolved on May23 2019. Meyten has been incorporated on April 12 2019 for the purpose of proposeddemerger of specified Leasing Business of RHL into Meyten. The Company holds 100000equity shares of Re.1 each with an investment of Rs.0.10 million in Meyten.
RVHL has been incorporated on April 15 2019 for the purpose of proposed demerger ofreal estate undertaking of the Company including its investment in RHL into RVHL. TheCompany holds 100000 equity shares of Re.1 each with an investment of Rs.0.10 million inRVHL.
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: With a view to inter-alia streamline and consolidate the Company's businessoperations your Company has consolidated the entire vaccine manufacturing activitiesincluding the activity of manufacturing of bulk vaccines and antigens of PanEra in theCompany at its bulk vaccines manufacturing facility at Lalru Punjab effective from May25 2018 and now the entire activities of manufacturing of bulk vaccine and antigens arebeing undertaken by the Company. During the year under review PanEra has achieved a netturnover of Rs.221.42 million as against Rs.211.18 million in previous financial year.PanEra has incurred a net loss of Rs.0.97 million as compared to a net loss of Rs.40.35million in previous financial year. Further during earlier year PanEra has been grantedin principle approval by Govt. of Himachal Pradesh for allotment of a hydro-power projectof 4 MW in Himachal Pradesh. PanEra will be taking necessary steps in connection with theimplementation of the project in due course of time. However no major investment has beenmade in this regard nor is envisaged during the current financial year. Further as perthe terms agreed with IndiaRF the Company has initiated the preliminary steps fordisposal of its investments in PanEra in due 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.
The annual financial statements and related detailed information of the subsidiarycompanies shall be made available to the shareholders of the holding and subsidiarycompanies seeking such information on all working days during business hours. Thefinancial statements of the subsidiary companies shall also be kept open for inspection byany shareholder during working hours at the Company's registered/corporate office and thatof the respective subsidiary companies concerned.
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. Presently Radhika Height Limited is a material subsidiary of theCompany pursuant 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 Act Regulation 33 ofSEBI LODR Regulations and in accordance with Ind AS 110 read with Ind AS 28 and 31 asspecified in the Companies (Indian Accounting Standards) Rules 2015 and provisions ofSchedule III to the Act are attached herewith and the same together with Auditors' Reportthereon forms part of 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 Companies Act 2013("the Act") Companies (Indian Accounting Standards) Rules 2015 and otherrelevant 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 2019-20 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: During the yearMr. O.P. Kelkar (DIN:00943362) an independent director of the Company departed for hisheavenly abode on July 21 2018. Your Directors place their sincere appreciation towardsthe invaluable contributions guidance and support received from him during his tenure asDirector of the Company towards the progress of the Company and pray the almighty that thedeparted soul rest in peace. ii) Re-appointment of Executive Directors: During the yearMr. Soshil Kumar Jain (DIN:00012812) Dr. Rajesh Jain (DIN:00013053) Mr. Sandeep Jain(DIN:00012973) and Mr. Ankesh Jain (DIN:03556647) have been re-appointed as ChairmanManaging Director Joint Managing Director and Whole time Director respectively for aperiod of three (3) years w.e.f. April 01 2019. Further Mr. Sumit Jain
(DIN:00014236) has been re-appointed as Whole-time Director for a period of three (3)years w.e.f. July 22 2018. iii) Appointment of Independent Directors: During the yearthe Board of Directors on the recommendation of Nomination and Remuneration Committee ofthe Board ("NRC") has appointed Mr. Ashwini Luthra (DIN: 05103137) as anadditional director and Non-Executive Independent Director for a period of five (5) yearsw.e.f. October 18 2018. Further subsequent to the year end the Board of Directors onthe recommendation of NRC has appointed Mr. Bhupinder Singh (DIN:00062754) as anadditional director and Non-Executive Independent Director for a period of five (5) yearsw.e.f. April 08 2019. iv) Appointment of Non-Executive Director: Subsequent to the yearend the Board of Directors on the recommendation of NRC has appointed Mr. Nithin KrishnaKaimal (DIN:05253046) as an additional director and Non-Executive Director of the Companyw.e.f. April 08 2019 not liable to retire by rotation. v) Re-appointment of IndependentDirectors: During the year Mr. R.L. Narasimhan (DIN:00073873) Mr. N.N. Khamitkar(DIN:00017154) and Mr. K. M. Lal (DIN:00016166) have been re-appointed as IndependentDirectors w.e.f. April 1 2019 for a second term of five (5) consecutive years up to March31 2024. Further the first term of office of Mrs. Manjula Upadhyay (DIN:07137968) asIndependent Director will expire on March 29 2020. The Board of Directors has aftertaking into account the report of performance evaluation and the recommendation of NRC inits meeting held on August 12 2019 recommended her re-appointment as IndependentDirector for a second term of five (5) consecutive years upto March 29 2025 subject toapproval of shareholders. The terms and conditions for her re-appointment are contained inthe Explanatory Statement forming part of the Notice of the ensuing Annual General Meeting("AGM") of the Company. vi) Retirement by Rotation: In accordance with theprovisions of Section 152 of the Act and Article 124 of the Articles of Association of theCompany Mrs. Sunanda Jain (DIN:03592692) and Mr. Sumit Jain (DIN: 00014236) directors ofthe Company are liable to retire by rotation. Being eligible they have offered themselvesfor reappointment as director at the ensuing AGM. vii) Profile of Directors seekingappointment/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 AGM of the Company. viii) Declarationof independence: Your Company has received declarations from all the Independent Directorsof the 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.
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.
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 ofDirectors excluding the director being evaluated on the criteria such as ethics andvalues knowledge and pro_ciency behavioral traits etc.
During the year under review five (5) Board Meetings were held on May 30 2018 August14 2018 November 14 2018 February 14 2019 and February 26 2019. The intervening gapbetween two Board Meetings was within the maximum period prescribed under the Act. Thedetailed information is furnished in the Corporate Governance Report forming part of theAnnual Report.
During the year under review the Audit Committee of the Board of Directors consistedentirely of Independent Directors. The details of the composition and number of meetingsof the Audit Committee are furnished in the Corporate Governance Report forming part ofthe Annual Report. During the year all the recommendations made by the Audit Committeewere accepted by the Board. Subsequent to the year end Mr. Nithin Krishna KaimalNon-Executive Director has been appointed as a Member of the Audit Committee.
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 forselection & appointment of Directors and Key Managerial Personnel of the Company andtheir remuneration. The components of remuneration policy are brie_y stated in theCorporate 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 2019 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 properreporting approval and disclosure processes are in place for all transactions between theCompany 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 werein the ordinary course of business and on an arm's length basis. The Company has notentered into any material related party transactions i.e. transactions exceeding 10% ofthe annual consolidated turnover as per the last audited financial statements. Suitabledisclosures as required under Accounting Standard AS-18 have been made in the notes to theFinancial Statements forming part of the Annual Report. Information on transactions withrelated parties pursuant to Section 134(3)(h) of the Act read with Rule 8(2) of theAccounts Rules are given in the prescribed Form AOC-2 annexed as Annexure C heretoand the same forms part of this 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 D 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 E hereto and the same forms part of this Report.
Auditors and Audit Reports i) Statutory Auditors and Audit Report:
Pursuant to the provisions of Section 139 of the Act and the rules framed thereunderM/s. Walker Chandiok & Co. LLP Chartered Accountants (Regn. No. 001076N/N500013)were appointed as statutory auditors of the Company for a period of five (5) years to holdoffice from the conclusion of the 30th AGM of the Company held on September 252014 till the conclusion of the ensuing AGM.
As per the provisions of Section 139 of the Act no listed company shall appoint orre-appoint an audit firm as auditor for more than two terms of five (5) consecutive years.The current auditors i.e. M/s. Walker Chandiok & Co. LLP Chartered Accountants hascompleted one term of five consecutive years. Accordingly it is proposed to re-appointM/s. Walker Chandiok & Co. LLP Chartered Accountants (Regn. No. 001076N/N500013) asstatutory auditors of the Company for a second term of five (5) consecutive years to holdoffice from the conclusion of the ensuing 35th AGM of the Company till theconclusion of the 40th AGM of the Company on a remuneration out-of-pocketexpenses etc. incurred in connection with the audit as may be decided by the Board inconsultation with the auditors from year to year.
The Board of Directors at its meeting held on August 12 2019 based on therecommendation of the Audit Committee has recommended the re-appointment of M/s.Walker Chandiok & Co. LLP Chartered Accountants (Regn. No. 001076N/N500013) as thestatutory auditors of the Company for approval by the members.
M/s. Walker Chandiok & Co. LLP Chartered Accountants have consented to the saidre-appointment and confirmed that their re-appointment if made would be within thelimits specified under Section 141(3)(g) of the Act and that they are not disqualified tobe appointed as statutory auditors in accordance with the provisions of Section 141 of theAct.
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 312019 and their remuneration has been rati_ed by the shareholders in the 34thAGM of the Company held on September 29 2018. The cost audit for the said period has beencompleted and the Cost Auditors Report will be submitted with the Central Governmentwithin the prescribed time. The Cost Audit Report for the financial year 2017-18 was filedon September 12 2018.
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 2019-20 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 theCompany for the financial year ended March 31 2019. The Secretarial Audit Report for thesaid period is annexed as Annexure F to this Report.
The management responses to the observations contained in the Secretarial Audit Reportare given below: a) There are some delays in _ling of ECB-2 (monthly return) as requiredto be filed in terms of Master Circular on External Commercial Borrowings and TradeCredits governed under the provisions of Foreign Exchange Management Act 1999: TheCompany is regular in _ling ECB-2 (monthly return) within the stipulated time. However 2monthly returns were inadvertently delayed due to reasons beyond reasonable control. b)The Company has paid managerial remuneration for the financial years ended 31stMarch 2019 2018 2017 2016 2014 and 2013 which is in excess of the limits specified bythe relevant provisions of the Companies Act 2013 / the Companies Act 1956 by Rs.154million for the said years. The Company's applications to the Central Government seekingapproval for payment of such excess remuneration have not been approved and consequentlythe Company is required to recover the excess amount thus paid for the said years. TheCompany has recorded an amount of Rs.154 million as recoverable from the directors towardssuch excess remuneration paid. The Company had submitted applications to the CentralGovernment for waiver of recovery of excess remuneration paid. Further pursuant to thenotification of the effective date of Section 67 of the Companies (Amendment) Act 2017amending Section 197 - overall maximum managerial remuneration and managerial remunerationin case of absence or inadequacy of profits of the Companies Act 2013 the aforesaidapplications pending with the Central Government stand abated and the Company is in theprocess of seeking requisite approvals required in accordance with the provisions ofSection 197(10) of the Companies Act 2013.
The above observation in the Secretarial Audit Report is self-explanatory andtherefore does not call for 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&DCompany Secretaries for the year ended March 31 2019 has been submitted to stockexchanges.
As per the requirements of the SEBI LODR Regulations the material subsidiary of theCompany viz. Radhika Heights Limited has undertaken secretarial audit for the FinancialYear 2018-19.
Material changes and commitments affecting the financial position which have occurredbetween March 31 2019 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 theCompany's subsidiaries or in the nature of business carried out by them; and in theclasses 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.
Directors' Responsibility Statement
The Directors hereby confirm that: a) in the preparation of the annual financialstatements for the financial year ended March 31 2019 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 2019 andof the profits of the Company for the year ended March 31 2019; c) the directors havetaken proper 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 & 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 2019 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 implemented new and/ or improved controls whenever the effect of such gaps would have a material effect onthe Company'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 the website of the Company and can be accessed at:https://www.panaceabiotec.com/statutory-policies. This Policy inter-alia provides adirect access to the Chairman of 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 : August 122019 Chairman