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Panacea Biotec Ltd.

BSE: 531349 Sector: Health care
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OPEN 209.45
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52-Week high 364.00
52-Week low 131.40
Mkt Cap.(Rs cr) 1,285
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Panacea Biotec Ltd. (PANACEABIO) - Director Report

Company director report

Dear Members

Your Directors are pleased to present the 33rd Annual Report on the businessand operations of the Company together with the Audited Standalone and ConsolidatedFinancial Statements and the Auditors'Reports thereon for the financial year ended March31 2017.

Financial Results

The highlights of financial results for the financial year 2016-17 are as under:

Particulars Standalone
2016-17 2015-16#
Revenue from operations (net) 5300.9 6469.0
Other Income 523.3 255.6
Total Income 5824.2 6724.6
Earnings Before Interest Tax Depreciation &
Amortisation (EBITDA) 1209.1 1380.7
Profit/ (Loss) before tax and exceptional items (462.4) (482.5)
Exceptional items (375.4) 496.5
Profit/(Loss) before Tax (PBT) (837.8) 14.0
Profit/(Loss) after Tax (PAT) (862.5) 8.7

# Previous year's figures have been re-grouped/re-classified wherever necessary

Performance Highlights

During the year ended March 31 2017 your Company has registered net revenue fromoperations of Rs.5300.9 million as against Rs.6469.0 million during the previousfinancial year. The net revenues from operations have mainly decreased due to lower saleof pentavalent vaccine Easyfive-TT to UNICEF/ PAHO non-availability of IPV bulk leadingto no sales of IPV vaccine reduction in prices of products due to price control by NPPAbanning of the irrational FDCs by DCGI and expiry of excise duty holiday period at Baddifacilities.

The pharmaceutical formulations segment registered a turnover of Rs.3575.5 million asagainst Rs.3806.5 million during the previous financial year. The vaccines segmentregistered a revenue of Rs.1634.2 million as against Rs.2531.8 million during theprevious financial year. The Research & Development segment earned revenue of Rs.91.2million as against Rs.130.7 million during the previous financial year. The Company'stotal export revenue was Rs.2000.3 million (including R&D income of Rs.83.8 million)as compared to Rs.2695.0 million (including R&D income of Rs.127.6 million) in theprevious financial year.

The Company's loss before tax and exceptional items has reduced to Rs.462.4 million asagainst Rs.482.5 million in the previous financial year. During the year the Company hascreated impairment provision of Rs.450.9 million which is included in the ExceptionalItems in respect of investment in NewRise Healthcare Private Limited on the basis of thenet realized value upon sale thereof in April 2017. In March 2017 your Company haslaunched world's first fully liquid whole cell pertussis (wP) based HexavalentCombination vaccine EasySixTM for protecting children against six commonpreventable diseases viz. Diphtheria

Tetanus Whooping Cough Hepatitis B Hib-meningitis & Polio. Earlier in December2016 the Company launched world's first fully liquid tetravalent vaccine Easyfour-TTfor active primary immunization and booster dose against Diphtheria Tetanus Pertussis(DTwP) and Haemophilus In_uenza Type B (Hib).

During the year your Company has entered into long term agreement (LTA) with UNICEFfor supply of pentavalent vaccine Easyfive-TT during calendar year 2017 and also receivednotification from PAHO for purchase of pentavalent vaccine Easyfive-TT in the event PAHOshould have any requirements through December 31 2019. Total value of this expectedbusiness from UN agencies is worth US$ 20.475 million. During the year your Company hasalso received USFDA approval for the Company's Oncology Parenteral and Oral Solids Dosageformulation facilities at Baddi Himachal Pradesh. With this the Company can now exportits oncology products to USA after receiving product approval from USFDA. The Company hasalso received USFDA approval for its ANDA to market a generic version of RizatriptanBenzoate Tablet orally disintegrating 5 mg and 10 mg. The Company plans to launch theproduct in current financial year. The current annual sale for Rizatriptan BenzoateTablet orally disintegrating 5 mg and 10 mg in the US market is estimated to be aroundUS$ 60 million.

During the year your Company has introduced indigenously developed high qualityantidiabetic drug TENEPAN (Teneligliptin) for treatment of Type 2 Diabetes Mellitus(T2DM). This will add to the Company's existing anti-diabetic portfolio. The Company'sflagship brand Glizid-M was awarded with the prestigious SILVER BRAND in Chronic CareTherapy by AWACS AIOCD in FY 2015-16. It is also ranked at 160th positionamongst the top 200 brands in the Indian Pharma Industry. The Company has been selectedamongst top _fty Innovators for the second consecutive year and received the Prestigious‘Clarivate Analytics India Innovation Award 2016'from Thomson Reuters. ClarivateAnalytics India Innovation Awards honors the most innovative academic institutions andcommercial enterprises headquartered in India for their spirit of innovation in R&D asit relates to Indian Patent Publications. A detailed discussion on operations for the yearended March 31 2017 is given in the Management Discussion and Analysis Report formingpart of the Annual Report.

Credit Rating

During the year the Credit Analysis & Research Ltd. (CARE) has upgraded creditrating with respect to the Company's Bank Facilities and the same has improved from CAREB- (Single B Minus) to CARE B+ (Single B Plus) for Long Term Bank Facilities and for ShortTerm Bank Facilities the rating has been reafirmed as CARE A4 (A Four). Earlier in March2016 the Credit rating for Long Term Bank Facilities was improved from CARE D (Single D)to CARE B- (Single B-) and for Short Term Bank Facilities the same was improved from CARED (Single D) to CARE A4 (A Four).


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.

Share Capital and Net Worth

The issued subscribed and paid up Share Capital of the Company as on March 31 2017remains unchanged at Rs.224.3 million comprising of Rs.61.3 million equity share capitaldivided into 61250746 Equity Shares of Re.1 each and Rs.163.0 million preference sharecapital divided into 16300000 0.5% Cumulative Non-Convertible Non-ParticipatingRedeemable Preference Shares of Rs.10 each. During the year under review the Company hasnot issued any equity shares with differential rights/sweat equity shares under Rule 4& Rule 8 of the Companies (Share Capital and Debentures) Rules 2014.

As at the end of the year under review the net worth of the Company calculated as persection 2(57) of the Companies Act 2013 (“the Act”) has decreased to Rs.644.58million from Rs.1507.1 million as at the end of the previous financial year in view oflosses during the year.

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.

Further during the financial year 2014-15 Serum Institute of India Pvt. Ltd. (alongwith its 3 associates) collectively holding around 4.12% of total issued share capital ofthe Company had filed a petition u/s 397 and 398 of the Companies Act 1956 before theHon'ble Company Law Board New Delhi which was dismissed by Hon'ble Company Law Boardvide its order dated January 21 2016. The petitioners have filed an appeal before Hon'blePunjab and Haryana High Court Chandigarh and the same is pending adjudication.

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 SEBI (Listing Obligations &Disclosure Requirements) Regulations 2015(“SEBI Listing 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 Listing Regulations is presentedin a separate section and forms an integral part of this Report.

Information about the Subsidiaries/Associates/Joint Ventures A. Subsidiaries

Your Company has 3 wholly owned subsidiary (“WOS”) companies viz. RadhikaHeights Limited (“RHL”) Panacea Biotec (International) S.A. Switzerland(“PBS”) and Rees Investments Limited Islands of Guernsey (“Rees”) andone subsidiary viz. NewRise Healthcare Private Limited (“NewRise”). YourCompany also has 7 indirect WOS 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.

RHL inter-alia owns a prime immovable property which is being used by the Company asits 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 is under arbitration. The Company holds 4776319 equity shares of Re.1each in RHL with an investment of Rs.3385.6 million as on March 31 2017. PBS is engagedin the business of trading of pharmaceutical products. The Company holds 6000 equityshares of CHF 100 each with an investment of Rs.34.4 million as on March 31 2017. 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 in other entities. Ithad earlier established its WOS Kelisia Holdings Ltd. (“KHL”) at Cyprus. Sinceno further activity was envisaged in KHL it has been liquidated during the year w.e.f.January 4 2017.

NewRise has set-up a 224 bedded state-of-the-art multi super-specialty hospital atGurugram Haryana. The hospital project could not be completed and commercialised due tonon-availability of capital investment and was on hold. Your Company was holding 88.8%stake in NewRise with an investment of Rs.507.6 million therein as on March 31 2017. InApril 2017 the Company acquired the remaining equity shares from the minorityshareholders therein and subsequently sold the entire 100% equity stake to NarayanaHrudayalaya Ltd. for an enterprise value of Rs.1800.0 million.

The Company has considered the net consideration realised in relation to the saidtransaction as recoverable amount of investment as at March 31 2017 and consequentlyrecorded an impairment provision of Rs.450.9 million which has been included in theExceptional Items.

B. Joint Ventures and Associates

PanEraBiotecPrivateLimited(“PanEra”):PanEratheCompany's associate companyis continuing to meet requirement of bulk antigens for the manufacture of Hib andpentavalent vaccine by your Company. During the year under review PanEra has achieved anet turnover of Rs.302.1 million as against Rs.465.7 million in previous financial year.As a result PanEra has incurred a net loss of Rs.121.1 million as compared to a netprofit of Rs.4.5 million in previous financial year. During the year PanEra has beengranted in-principle approval by Govt. of Himachal Pradesh for allotment of a hydro-powerproject of 4 MW in Himachal Pradesh. PanEra will be taking necessary steps in connectionwith the implementation of the project in due course of time. However no major investmentis envisaged in this regard during the current financial year. With a view to streamlineand consolidate the Company's business operations avoid multiple taxes avoid duplicityof efforts reduce administrative costs etc. your Company has in-principally decided toconsolidate the entire vaccine manufacturing activities including the activity ofmanufacturing of bulk vaccines and antigens of PanEra in the Company.

Chiron Panacea Vaccines Private Limited (Under Liquidation) (“CPV”): Thevoluntary winding up process of CPV is currently in progress. Adveta Power Private Limited(“Adveta”): Adveta the Company's 50:50 joint venture with PanEra was grantedin-principle approval by Govt. of Arunachal Pradesh for allotment of two Power Projects of80 MW and 75 MW in Arunachal Pradesh in financial year 2012-13. Adveta is in the processof taking preliminary steps in connection with the implementation of projects. However nomajor investment is envisaged in this regard during the current financial year. A separatestatement containing the salient features of financial statements of subsidiaries jointventures and associates in Form AOC-1 forms part of the Annual Report and hence notrepeated 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:

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 and Regulation 33 ofSEBI

Listing Regulations and in accordance with Accounting Standard AS-21 on‘Consolidated Financial Statements'read with Accounting Standard AS-27 on‘Financial Reporting of Interest in Joint Ventures'and Accounting Standard AS-23 on‘Accounting for Investments in Associates' as issued by the Institute of CharteredAccountants of India and in accordance with the provisions of Schedule III to the Act areattached herewith and the same together with Auditors'Report thereon forms part of theAnnual Report.

Listing of Equity Shares

The Equity Shares of the Company continue to be listed on National Stock Exchange ofIndia Limited (“NSE”) and BSE Limited (“BSE”). The requisite annuallisting fees for the financial year 2017-18 have been paid to these Exchanges.

Public Deposits

During the year under review your Company has not invited or accepted any depositsfrom the public/ members pursuant to the provisions of Section 73 and 76 of the Act readwith Companies (Acceptance of Deposits) Rules 2014.

Directors and Key Managerial Personnel

Effective from April 01 2016 Mr. Ankesh Jain (DIN: 03556647) has been appointed asWhole-time Director designated as Director Sales & Marketing and Mr. Mukul Gupta (DIN:00254597) has been appointed as Non-Executive Independent Director of the Company. YourCompany has received declarations from all the Independent Directors of the Companyconfirming that they meet with the criteria of independence provided in Section 149(6) ofthe Act and Regulation 16 of the SEBI Listing Regulations and there has been no change inthe circumstances which may affect their status as Independent Director during the yearunder review.

Further in accordance with Section 152 of the Act and Article 112 of the Articles ofAssociation of the Company Mr. Sandeep Jain (DIN: 00012973) and Mr. Sumit Jain (DIN:00014236) directors of the Company are liable to retire by rotation. Being eligible theyhave offered themselves for re-appointment as director at the ensuing AGM.

The brief resume of the Directors seeking re-appointment along with other details asstipulated under Regulation 36(3) of the SEBI Listing Regulations and SecretarialStandards issued by ICSI are provided in the Notice convening the AGM of the Company.

The Board recommends re-appointment of the above said directors in the ensuing AGM.There was no other change in the non-executive directors and other Key ManagerialPersonnel (KMP) during the year under review.

Board Meetings

During the year under review four (4) Board Meetings were held on May 27 2016 August12 2016 November 11 2016 and February 14 2017. The intervening gap between two BoardMeetings was within the maximum period prescribed under the Act.

Audit Committee

The Audit Committee of the Board of Directors consists entirely of IndependentDirectors. The details of the composition and number of meetings of the Audit Committeeare furnished in the Corporate Governance Report. During the year all recommendationsmade by the Audit Committee were accepted by the Board.

Policy on Directors'appointment & remuneration

Pursuant to the provisions of Section 178(3) of the Act and Regulation 19(4) of SEBIListing Regulations and as per the recommendations of the Nomination and RemunerationCommittee the Board has adopted a policy for selection & appointment of Directors andKey Managerial Personnel of the Company and their remuneration. The components ofremuneration policy are brie_y stated in the Corporate Governance Report forming part ofthe Annual Report.

Board Evaluation

In terms of the provisions of the Act and Regulation 19(4) of SEBI Listing 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.

Energy Conservation Technology Absorption & Foreign Exchange

As required under Section 134 of the Act read with Rule 8 of the Companies (Accounts)Rules 2014 the particulars regarding conservation of energy technology absorption andforeign exchange earnings & outgo are given in Annexure A hereto and formspart of this Report.

Extract of Annual Return

An extract of Annual Return in Form MGT-9 as on financial year ended on March 31 2017is attached as Annexure B hereto and forms part of this Report.

Related Party Transactions

As per the provisions of the Act and SEBI Listing Regulations your Company hasformulated a policy on Related Party Transactions which is also available on Company'swebsite at: The policy intends to ensure that proper reportingapproval and disclosure processes are in place for all transactions between the Companyand 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 review and approval. Wherever applicable prior approval isobtained for related party transactions on a quarterly basis for transactions which are ofrepetitive nature and / or entered in the ordinary course of business and are at arm'slength basis. During the year all related party transactions entered into were in theordinary course of business and on an arm's length basis. The Company has not entered intoany material related party transactions i.e. transactions exceeding 10% of the annualconsolidated turnover as per the last audited

financial statements. Suitable disclosures as required under Accounting Standard AS-18have been made in the notes to the Financial Statements forming part of the Annual Report.Information on transactions with related parties pursuant to Section 134(3)(h) of the Actread with Rule 8(2) of the Companies (Accounts) Rules 2014 are given in the prescribedForm AOC-2 attached as Annexure C and 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 are provided in Annexure D and the same formspart 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 Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014 astatement showing the names and other particulars of the employees drawing remuneration inexcess of the limits set out in the said Rules is provided in Annexure E and thesame forms part of this Report.

Statutory Auditors

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 years to holdoffice from the conclusion of the 30th AGM of the Company held on September 252014 till the conclusion of the 35th AGM subject to ratification of theirappointment by shareholders at every AGM. The Company has received a certificate from theauditors to the effect that if the appointment is ratified it would be in accordance withthe provisions of Section 141 of the Act. Accordingly based on the recommendations of theAudit Committee the Board of Directors of the Company recommends the rati_cation ofappointment of M/s. Walker Chandiok & Co. LLP Chartered Accountants as StatutoryAuditors of the Company from the conclusion of the forthcoming AGM till the conclusion ofthe next AGM.


The Auditors have not given any qualified opinion or made any reservation adverseremark or disclaimer in their Audit Report.

The management response to the matters of emphasis 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.

Cost Auditors

Pursuant to the provisions of Section 148 of the Act M/s. G.T.

& Co. Cost Accountants (Firm's Registration Number: 000253) were appointed as theCost Auditors to conduct the audit of the Company's Cost Records for the year ended March31 2017 and the remuneration has been rati_ed by the shareholders in the 32ndAGM of the Company held on September 28 2016. 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 2015-16 was filedon September 15 2016.

Based on the recommendations of the Audit Committee the Board of Directors hasappointed M/s. G.T. & Co. Cost Accountants as cost auditors of the Company for thefinancial year 2017-18 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.

Secretarial Audit

Pursuant to the provisions of Section 204 of the Act read with Rule 9 of the Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 M/s. R&D CompanySecretaries Practicing Company Secretaries conducted the Secretarial Audit of the Companyfor the financial year ended March 31 2017. The Secretarial Audit Report for the saidperiod is attached as Annexure F to this Report.

The management response to the observations contained in the Secretarial Audit Reportare given below: a) Delays in _ling of ECB-2 (monthly return) as required to be filed interms of Master Circular on External Commercial Borrowings and Trade Credits governedunder the provisions of Foreign Exchange Management Act 1999: The Company is regular in_ling ECB-2 (monthly return) within the stipulated time. However 3 returns wereinadvertently delayed by one or two days only. b) The Company has made application toCentral Government in connection with Managerial remuneration paid to the ManagingDirector Joint Managing Directors and Whole Time Directors exceeding the ceilingprescribed under the erstwhile Schedule XIII of the Companies Act 1956 during the year2012-13 and 2013-14. The Company has also filed application in connection withnon-compliance to one of the condition of Part II of Section II of Schedule V to theCompanies Act 2013 in relation to Managerial remuneration paid during the financial year2015-16. The Company has also filed application for Managerial remuneration paid duringthe financial year 2016-17. The Company's applications for approval of the aforesaidremuneration have not been approved by the Central Government and in terms of the order ofthe Central Government the Company is required to recover the excess amount thus paid forthe said years unless the recovery thereof is waived by the Central Government: In view ofabsence of profits during financial years 2012-13 and 2013-14 total remuneration paid tothe Managing/Joint Managing and Whole time Directors had exceeded the ceiling prescribedin Section II of Part II of Schedule XIII to the Companies Act 1956. Further because ofnon-compliance to one of the conditions of

Section II of Part II of Schedule V to the Companies Act 2013 the remuneration paidto a whole time director during financial year 2015-16 and remuneration paid toManaging/Joint Managing and Whole time Directors during financial year 2016-17 requiredapproval of the Central Government and the Company had filed the necessary applications inthis regard. However the Company's applications for approval of the aforesaid excessremuneration have not been approved by the Central Government and consequently the Companyis required to recover the excess amount thus paid for the said years unless the recoverythereof is waived by the Central Government. For a thorough reconsideration of the matterthe Company has filed/is in the process of filing applications with the Central Governmentfor waiver of recovery of excess remuneration paid in respect of aforesaid financialyears.

Material changes and commitments affecting the financial position which have occurredbetween March 31 2017 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

in the classes of business in which the Company has an interest.

Directors'Responsibility Statement

The Directors hereby confirm that: a) in the preparation of the annual financialstatements for the financial year ended March 31 2017 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 2017 andof the loss of the Company for the year ended March 31 2017; 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.

Particulars of loans guarantees or investments

The details of loans guarantees and investments covered under the provisions ofSection 186 of the Act have been disclosed in the notes to the Financial Statementsforming part of the Annual Report.

Risk Management

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 computerequipments office equipments 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.

Vigil Mechanism

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 and Regulation 22 of SEBIListing Regulations your Company has adopted a Vigil Mechanism (Whistle Blower Policy)with a view to provide its employees an avenue to raise any sensitive concerns regardingany unethical behavior or wrongful conduct and to provide adequate safeguard forprotection from any victimization. This policy is available on the website of the Companyand can be accessed at: 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 complaints were received during the year.

Corporate Social Responsibility

The provisions of Section 135 of the Act regarding Corporate Social Responsibility arenot attracted to the Company as the Company does not fall under the threshold limit of networth of Rs.500 Crore or turnover of Rs.1000 Crore or net profit of Rs.5 Crore during thefinancial year. However the Company has been over the years pursuing Corporate SocialResponsibility by putting continuous efforts in the areas of health education and patientawareness/assistance programs towards the development of happier 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. As per the requirements of The Sexual Harassment of Women atWorkplace (Prevention Prohibition & Redressal) Act 2013 your Company hasconstituted Internal Complaints Committee (ICC) for dealing with the complaint if anyrelating to sexual harassment of women at workplace. No case has been reported during theyear under review.


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 your Company's employees at all levels which hascontinued to be our major strength.

For and on behalf of the Board
Place : New Delhi Soshil Kumar Jain
Dated : May 30 2017 Chairman

Annexure A

Particulars of Conservation of Energy Technology Absorption and Foreign ExchangeEarnings and Outgo required under the Companies (Accounts) Rules 2014

I. Conservation of Energy

The Company believes that energy conservation is the most economical solution to energyshortages that our country is facing. The Company strives to be energy efficient by beingconservative in its approach of energy utilization and also utilizing energy efficientdevices. The Company regularly reviews energy consumption and maintains effective controlon utilization of energy by adopting measures to reduce wastage and optimize consumption.The Company has undertaken several measures to minimize energy losses and ensuresustainable energy utilization.

1. Energy Conservation measures taken

The Company had devised its production lines and other facilities keeping in view theobjective of minimum energy losses.

The following are the major energy conservation measures implemented during the yearunder review and recent past:

Installation of LED tube lights at Baddi.

Installation of Eurovent certified energy efficient

AHUs for HVAC system at Vaccine Facility Baddi.

Use of sunlight at Service Floor by providing transparent sheets in Roof Shed at Baddi.

Vacuum Pump Water recirculation arrangement installed at Unit 1 Pharma Baddi.

100% use of treated ETP water for irrigation purposes.

Replacement of CFL lights with LED lights.

Used 37KW pump in place of 50KW pump during winter season at Lalru Plant.

Used RO rejected water for cooling tower at Lalru


2. Additional Investments/ Proposals if any for reduction of

Energy Consumption:

The Company's initiatives in energy consumption extend beyond the needs of the presentto ensure sustainable growth for years ahead. Continuous efforts are being made to furtherreduce the expenditure on power & fuel in the time to come. A few measures underconsideration are listed below:

The Company intends to continue replacement of

CFL lights with LED lights across the organization over a period of time.

The Company intends to interconnect air compressors of various blocks at Lalru with aview to create redundancy in the compressed air system and also to reduce energyconsumption as unload hours of compressors will get reduced resulting in energy saving tothe tune of 1.28 lakh energy units per annum.

The Company has also identified a prospective potential for energy saving bycontrolling feed water characteristics of Boiler to reduce blow down from boiler or torecover energy from blow down at Lalru.

The Company also intends to replace Oil fired boiler with fire briquette boiler.

The Company has the possibility to use e_uent treated water in cooling towers bypassing effluent treated water thru softener vessel.

3. Impact of measures taken and impact on cost of production of goods: The energyconservation measures indicated above have helped the Company to reduce the energyconsumption & restrict the impact of increase in the cost of energy thereby reducingthe cost of production of goods to that extent.

Form A

Particulars of Consumption of Energy

Particulars Current Year Previous Year
A. Power and Fuel Consumption
1. Electricity
(a) Purchased
Units (Nos. in thousand) 22317.2 20602.1
Total Amount (Rs. in million) 148.8 137.1
Rate/Unit (Rs.) 6.7 6.6
(b) Own generation
(i) Through Diesel Generator
Units (Nos. in thousand) 968.4 825.3
Unit per litre of Diesel/Oil 3.4 3.4
Cost/Unit (Rs.) 15.4 14.5
(ii) Through Steam Turbine/Generator
Units (Nos.) Nil Nil
Unit per litre of Diesel/Oil
Cost/Unit (Rs.)
2. Coal
Quantity (tonnes) Nil Nil
Total Cost
Average Rate
3. Furnace Oil
Quantity (Kilolitres) 1320.9 590.7
Total Cost (Rs. in million) 36.1 15.2
Rate/Unit (Rs.) 27.4 25.7
4. Others/Internal generation
Quantity Nil Nil
Total Cost
B. Consumption per unit of production
Production (no. in million) 632.5 759.3
Electricity Consumption (Units per thousand) 4.4 4.6
Production (no. in million) 142.3 140.1
Electricity Consumption (Units per thousand) 21.6 16.4
Production (in liters) 204631 246498
Electricity Consumption (Units per kiloliter) 0.3 0.3
Production (in kilograms) 33625 28851
Electricity Consumption (Units per kilogram) 5.8 5.2
Production (no. of vials in thousand) 11675 15920
Electricity Consumption (Units per thousand) 102 92
Pre-filled Syringes (PFS)
Production (no. of PFS in thousand) 594 1380
Electricity Consumption (Units per thousand) 245.8 216.8
Production (in kilograms) 10916 10930
Electricity Consumption (Units per kilogram) 1.0 1.0
Production (no. of injection in thousand) 101 72
Electricity Consumption (Units per thousand) 532.0 784.4

II. Technology Absorption

Form B

Form for disclosure of particulars with respect to Technology Absorption

Research & Development (R&D)

1. Specific areas in which R&D is carried out by the Company The Company has 4R&D Centres manned with around 90 scientists working on several key projects invaccines pharmaceutical formulations and biopharmaceuticals. The areas of research beingpursued by the Company include:

Platform Technology - SPORTS Technology;

NDDS based pharmaceutical formulations development;

Development of Vaccines;

Development of biosimilar therapeutic products & monoclonal antibodies; and

Small Molecule Drug Discovery (NCE Research) in 3 therapeutic areas viz. metabolicdisorders (Diabetes & Obesity) infectious diseases and CNS disorders.

2. Benefits derived as a result of the above R&D

Development of novel drug delivery products;

Bringing innovative products to market;

Fulfilling unmet therapeutic needs and customer satisfaction;

Improved product quality and safety aspects;

Availability of products at affordable prices;

Yield improvement;

Grant of new product/process patents;

Entry into newer markets and export of quality products; and

Solving public health problems with the availability of vaccines for immunization ofpublic at large and affordable life-saving drugs for critical diseases like cancer etc.

3. Future Plan of Action

The Company intends to continue to focus on Research

& Development activities for growing its revenues and profitability inter-alia inthe following areas:

Oral immediate and modified release formulation;

Technology based injectable dosage form;

Nano-emulsion technology based dosage form;

Polymeric nano-particulate system;

Nano-crystal technology;

Solid-Solid dispersion of critical dose drugs;

Biodegradable polymer based long acting injection;

Liposomal drug delivery technology;

Recombinant polysaccharide conjugate and cell culture based vaccines; and

Development of biosimilar therapeutic products and

Monoclonal antibodies.

4. Expenditure on R&D

(Rs. in million)

Particulars 2016-17 2015-16
a) Revenue (excluding Depreciation 427.1 452.8
on R&D assets)
b) Capital 219.0 10.2
c) Total 646.1 463.0
d) Total R&D expenditure 12.2% 7.1%
as a percentage of net sales

Technology absorption adaptation and innovation

1. E_orts in brief made towards technology absorption adaptation and innovation:Research & Development plays a vital role in developing and adopting new technologiesto enhance our operational efficiencies. The Company is actively involved in research& development of vaccines biopharmaceuticals proteins peptides novel drug deliverysystems advanced drug delivery systems and drug discovery (small molecules) incompliance with international regulatory standards. The Company is working on severalcritical projects (including ANDA and 505 b(2) products) for global markets. It is alsoengaged in research of new generation vaccines. It is also working on PneumococcalConjugate Vaccine Tetravalent Dengue Vaccine Sabin-Inactivated Polio Vaccine (s-IPV)etc.

2. Benefits derived as a result of the above

Benefits derived as a result of the above efforts include product improvement costreduction product development import substitution competitive products and productquality improvement.

The Company has successfully completed development of 5 key projects enabling theCompany to file the ANDAs with USFDA. A portfolio of oncological products has also beendeveloped enabling the Company to shift their production in-house at its oncology facilityat Baddi. Key products already commercialized in India include PacliALL (Paclitaxel)Bemustin (Bendamustine Hydrochloride) DoceTrust (Docetaxel Trihydrate) GemTrust(Gemcitabine hydrochloride) BorteTrust (Bortezomib) and CABAPAN (Cabazitaxel) injections.

During the financial year 2016-17 the Company has launched world's first wP basedfully-liquid hexavalent vaccine EasySixTM and tetravalent vaccine Easyfour-TT.The Company has in-licensed technology for development of sabin IPV vaccine fromNetherlands Vaccine Institute (NVI) the Netherlands (now Intravaac). With the completionof research projects and in-licensing arrangements the Company will be able tocommercialize the products in the domestic and international markets.

3. Information in respect of imported technology (imported during the last 5 yearsreckoned from the beginning of the financial year):

Technology imported Year of import Has technology been fully absorbed If not fully absorbed areas where this has not taken place reasons thereof and future plan(s) of action
(a) (b) (c) (d)
1. Technology for development of sabin IPV Vaccine 2011-12 No Technology transfer is in progress. Optimization in original process at Netherland facility to improve the process in terms of yield has been completed. Demonstration of optimized process and establishment of process at Lab scale is under progress.
The process optimization at the Company has been performed in 3 stages. Progress was made in each stage both in process and analytical testing. In the first batch using tray cell factory all 3 serotypes were produced. Subsequently owing to the GAP III guidelines biocontainment of type 2 serotype and requirement for Polio Essential Facility batches were taken with serotype 1 and 3. R&D efforts have been successfully completed up to 5L bioreactor batches.
Optimization and manufacture of batches for initiating clinical trials is planned for current financial year.

III. Foreign Exchange Earnings and Outgo

1. Activities relating to exports

The Company is currently exporting its products to around 30 countries and has achievedexports turnover of Rs.2000.3 million during financial year 2016-17. The exportscontributed around 38% of the net revenue from operations of the Company. The majorcountries where the Company's products are exported include US Russian FederationPhilippines Serbia Sri Lanka Tanzania Turkey Mongolia Ethiopia Myanmar ThailandUganda etc. During the financial year 2016-17 the Company has entered into new marketsin Croatia Ecuador and Ethiopia.

2. Initiatives taken to increase export

During the year the Company has continued to focus on development registration andmarketing of product portfolio catering to chronic therapies in private market in thelarge and emerging markets. During the year the Company has expanded its existingcollaboration with Bionpharma Inc. USA for marketing of the Company's recently approved 2ndAbbreviated New Drug Application (ANDA) viz. Rizatriptan oral dispersible tablets and hasrecently launched the same in US markets through such strategic collaboration withBionpharma Inc. USA.

During the year the Company has also entered into strategic collaborations with twoleading Indian pharmaceutical companies for manufacturing and supply of the Company'soncology and nephrology products for selected countries in north-Africa and Asia region.

3. Development of new export markets for Products and Export Plans The Companycontinues to focus on exports as a major thrust area and has taken necessary steps tostrengthen and grow its exports in the coming years.

The approval process for ANDAs filed earlier with the USFDA is in progress. Thedevelopment of products under the strategic alliances with Canada's largest pharmacompany Apotex Inc. continue to progress as per agreed milestones and the Companyexpects to file one of the ANDA during the current financial year and the second duringthe next financial year. The Company is now working on more than 10 ANDAs which areexpected to be filed over the next 2 years. The Company plans to launch these products inUS Europe etc. through strategic collaborations with leading pharma companies.

The Company is building a robust pipeline of around 25 products for several otheremerging markets which it will be _ling in the next 12-15 months. These products will becommercialized through Company's existing / new distribution partners.

4. Total foreign exchange earned and used

(Rs. in million)

Particulars 2016-17 2015-16
Foreign Exchange Earned
F.O.B. value of Exports 1831.6 2348.1
Deemed exports - 154.1
Income from distribution rights 16.7 2.3
Research & License Fees 83.8 137.2
Interest Income from subsidiary company 66.0 56.0
Total 1998.1 2697.7
Foreign Exchange Used
Raw Materials & Packing Materials 490.6 590.7
Components & Spare Parts 130.7 28.0
Capital Goods 57.9 -
Know-how Fees - 1.1
Interest 101.1 90.5
Legal & Professional Fees 21.2 44.1
Royalty 1.9 5.8
Other Expenses
- Patents Trade Marks & Product Registration 2.7 3.3
- Advertising and Sales Promotion 13.1 25.2
- Commission on Sales 3.1 23.2
- Rates & Taxes 17.4 15.4
- Testing charges 6.0 10.5
- General expenses 9.1 16.7
- Bank charges 0.9 7.4
- Travelling expenses 5.0 4.2
- Others 36.9 58.5
Total 897.6 924.6


For and on behalf of the Board

Place: New Delhi

Soshil Kumar Jain

Dated: May 30 2017




[Pursuant to clause (h) of sub section (3) of section 134 of the Companies Act 2013and Rule 8 (2) of the Companies (Accounts) Rules 2014]

Form for disclosure of particulars of contracts/arrangements entered into by theCompany with the related parties referred to in sub section (1) of Section 188 of theCompanies Act 2013 including certain arms-length transactions under third proviso thereto

1. Details of contracts or arrangements or transactions not at arm's length basis :

S. No. Name of the related party and nature of relationship (a) Nature of contracts / arrangements / transactions (b) Duration of contracts/ arrangements / transactions (c) Salient features of contracts/arrangements / transactions including value if any (d) NIL Date(s) of approval by the Board (e) Amount paid as advances if any (f) Date on which special resolution was passed in General Meeting u/s 188 (1) (g)

2. Details of material contracts or arrangements or transactions at arm's length basis.

S. No. Name of the related party and nature of relationship Nature of contracts / arrangements / transactions Duration of contracts/ arrangements / transactions Salient features of contracts/arrangements / transactions including value if any Date(s) of approval by the Board Amount (Rs. In million) Date on which special resolution was passed in General Meeting u/s 188 (1)
(a) (b) (c) (d) (e) (f) (g)


For and on behalf of the Board
Place : New Delhi Soshil Kumar Jain
Dated : May 30 2017 Chairman


Statement pursuant to Section 197(12) of the Companies Act 2013 read with Rule 5(1) ofthe Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014 andforming part of the Directors'Report for the year ended March 31 2017 a. The ratio ofthe remuneration of each Director to the median remuneration of the employees of theCompany for the financial year 2016-17:

Name of the Director Designation Ratio to median remuneration of employees
Mr. Soshil Kumar Jain Chairman 43.88
Mr. Ravinder Jain Managing Director 48.75
Dr. Rajesh Jain Joint Managing Director 30.08
Mr. Sandeep Jain Joint Managing Director 27.21
Mr. Sumit Jain Director Operations & Projects 18.50
Mr. Ankesh Jain Director Sales & Marketing 10.79

b. The percentage increase in remuneration of each Director Chief Financial OfficerChief Executive Officer Company Secretary or Manager if any in the financial year2016-17:

Name of the Director & KMP Designation % increase in remuneration
Mr. Soshil Kumar Jain Chairman 25.66%
Mr. Ravinder Jain Managing Director 2.63%
Dr. Rajesh Jain Joint Managing Director -4.37%
Mr. Sandeep Jain Joint Managing Director -2.54%
Mr. Sumit Jain Director Operations & Projects 17.77%
Mr. Ankesh Jain Director Sales & Marketing N.A.*
Mr. Devender Gupta C.F.O. and Head IT 46.93%
Mr. Vinod Goel Group C.F.O. and Head Legal & Company Secretary 22.04%

*Mr. Ankesh Jain has been appointed as Director w.e.f. April 01 2016.

c. The percentage increase in the median remuneration of employees in the financialyear 2016-17: 9.09% d. The number of permanent employees on the rolls of the Company :2261 as at March 31 2017. e. Average percentile increase already made in the salaries ofemployees other than the managerial personnel in the last financial year and itscomparison with the percentile increase in the managerial remuneration and justificationthereof and point out if there are any exceptional circumstances for increase in themanagerial remuneration : The average percentile increase in remuneration of employeesother than managerial remuneration was 6.45%. Increase in the managerial remuneration forthe year was 4.88%. f. It is hereby afirmed that the remuneration is as per theremuneration policy of the Company.

For and on behalf of the Board
Place : New Delhi Soshil Kumar Jain
Dated : May 30 2017 Chairman


Statement pursuant to Section 197(12) of the Companies Act 2013 read with Rules 5(2)& (3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules2014 and forming part of the Directors'Report for the year ended March 31 2017

Name Designation Remune- ration (Rs. in million) Nature of employment Qualification Experience (in years) Date of Commencement of Employment Age (in Yrs.) Particulars of Last Employment: Name of Employer Designation Period of Service (Years)
Top 10 employees as on March 31 2017 in terms of remuneration drawn during the year:
1 Mr. Soshil Kumar Jain Chairman 10.5 Contractual Pharmacist 62 02.02.1984 84 Nil
2 Mr. Ravinder Jain Managing Director 11.7 Contractual Matriculate 37 15.11.1984 60 Nil
3 Dr. Rajesh Jain Joint Managing Director 7.2 Contractual Ph.D 33 15.11.1984 53 Nil
4 Mr. Sandeep Jain Joint Managing Director 6.5 Contractual Senior Secondary 32 15.11.1984 51 Nil
5 Dr. Sanjay Trehan Head- Global Drug Discovery & Development 9.0 Permanent employee Ph.D 29 01.07.2004 58 Dr. Reddy Laboratories Ltd. Research Director 3.9 years
6 Mr. Kulvinder Sarao Sr. V.P.-Audit & Compliances (HR) 6.4 Permanent employee PGD in Personal Management 31 14.01.2005 56 Hero Honda Motors Limited Head HRM 3 months
7 Dr. Sukhjeet Singh Sr. V.P.- Pharmaceutical Research 6.3 Permanent employee Ph.D 25 17.08.2006 48 Strides Arcolab Limited VP- Formulation & Development 1 year
8 Dr. Sudhir Kumar Sharma V.P.- Drug Development & Research (Biologicals) 5.5 Permanent employee Ph.D 15 17.08.2005 48 Dr. Reddy Laboratories Ltd. Principle Scientist 20 years
9 Mr. Gurinder Pal Singh Sr. V.P.-Diacar. Alpha & Procare & Growcare 5.3 Permanent employee B.Sc 23 09.03.2010 50 Cadila Pharma V.P- Sales & Marketing 2 years
10 Mr. Jagattaran Das V.P.- Chemistry Research 4.8 Permanent employee Ph.D 23 01.07.2005 54 Dr. Reddy Laboratories Ltd. Principle Scientist 6 years


1. Remuneration includes salary commission on profits house rent allowance bonusCompany's contribution to Provident Fund Leave Travel Allowance Medical Assistance andall allowances paid in cash and monetary value of taxable perquisites wherever applicableand does not include provision for Gratuity/ Retirement Benefit.

2. There was no employee who was employed either throughout the financial year or partthereof who was holding either by himself or along with the spouse and dependent children2% or more of the Shares of the Company and drawing remuneration in excess of theremuneration drawn by Managing Director / Joint Managing Director / Whole-time Director ofthe Company.

3. Mr. Soshil Kumar Jain and Mr. Ravinder Jain were the only persons who were employedthroughout the Financial Year ended March 31 2017 and were in receipt of remuneration forthe year which is more than Rs.10.2 million. The relevant details are given at Sr. No. 1and 2 above.

4. There was no employee who was employed for a part of the Financial Year ended March31 2017 and was in receipt of remuneration for any part of the year at the rate which inthe aggregate was not less than Rs.0.85 million per month.

5. The terms and conditions of employees at Sl. No. 1 to 4 are as approved by the Boardof Directors and Shareholders on the recommendation of Nomination & RemunerationCommittee. The employees at Sl. No. 5 to 10 are paid remuneration as per the policy/rulesof the Company.

6. None of the above employees is related to any of the Directors except that Mr.Soshil Kumar Jain Mr. Ravinder Jain Dr. Rajesh Jain and Mr. Sandeep Jain are related toeach other.

7. The nature of duties of Chairman Managing Director and Joint Managing Directors areas under: Mr. Soshil Kumar Jain Chairman - Strategic planning vision and formulation ofstrategies; Mr. Ravinder Jain Managing Director - Overall supervision of day-to-dayoperations with emphasis on strategic planning and business development; Dr. Rajesh JainJoint Managing Director - Overall supervision of day-to-day operations with emphasis onR&D business development and marketing and Mr. Sandeep Jain Joint Managing Director- Overall supervision of day-to-day operations with emphasis on finance internationalmarketing regulatory affairs and taxation.

For and on behalf of the Board
Dated : May 30 2017 Soshil Kumar Jain
Place : New Delhi Chairman