Your Directors have pleasure in presenting the annual report and audited statement ofaccounts of the Company for the year ended on March 31 2018.
1. FINANCIAL RESULTS
The summary of financial performance of the Company for the year under review is givenbelow:
(Rs in Crores)
| ||2017-18 ||2016-17 |
|A Continued Operations || || |
|Total Income ||348.12 ||307.42 |
|Profit before depreciation interest and tax ||38.50 ||28.38 |
|Less: Interest ||3.80 ||2.53 |
|Less: Depreciation ||14.34 ||11.31 |
|Profit for the year before tax ||20.36 ||14.54 |
|Tax (including deferred tax) ||6.91 ||2.45 |
|Profit after tax ||13.45 ||12.09 |
|B Profit from Discontinued operation ||- ||8.92 |
|C Profit for the year after tax ||13.45 ||21.01 |
|D Other Comprehensive income net of tax ||(0.14) ||(0.63) |
|E Total comprehensive income ||13.31 ||20.38 |
|F Appropriations: || || |
|Dividend Proposed ||3.97 ||4.63* |
|Tax on proposed dividend ||0.81 ||0.94* |
*Paid in 2017-18
The Directors recommend a dividend of ' 2.40 (30%) per equity shares of ' 8/- each forthe financial year ended March 31 2018.
The Company earned a total income of ' 348.12 crores for the year as compared to '307.42 crores during the previous year and a profit after tax from existing operations of' 13.45 crores as against ' 12.09 crores during the previous year. The profit after taxincluding discontinued business shows a decline of 36% when compared to the net profit ofthe previous year. Though the profitability of the Company improved due to better
performance of Formulations and API divisions the overall Profit after Tax includingdiscontinued business has declined due to sale of biotech business in the previous year ata profit of ' 8.92 crores. Further the provision for taxation has risen significantlyfrom 17% to 34% of profit before tax as a result of changes in tax laws resulting inhigher tax provisions in the current year and consequently lower net profit.
The Company continues to hold EU GMP WHO GMP and TGA Australia certifications for itsAPI facility at Navi Mumbai plant and EUGMP UKMHRA Health Canada and TGA Australiacertifications for its Formulation facility (F2) at Ankleshwar plant.
During the year under review the Formulations business achieved sales revenue of '217.67 crores with a growth of 18.20% over the previous year. As per the data compiled byPharmatrac a market researcher the Company achieved 64th rank in sales value terms overthe previous year.
The Company's strategy of focusing on brand building has shown promising results withMinmin tonic becoming a leading brand in the liquid hematinic market. Lomotil and Azoranscaled ' 30 crores mark in sales.
The Company's Nephrocare Division continues to feature among the top 5 Indian companiesoperating in the renal care therapy segment. In FY 18 Nephrocare business clocked salesof ' 49.90 Crores registering a growth of 14%.
The Company launched brands Darbepoetin (Darba) and Rituximab (XMAB) in thepost-transplant care space. Both the brands displayed robust performances in the firstyear of launch with Darba at third slot among competing Darbepoetin brands. Among theexisting products Immunotac and Arpimune range showed strong growth.
In the current year the Company will continue its emphasis on Focus brands like Minmintonic Tricaine MPS and leverage the strength of its key brands to fuel growth.Gastrointestinal Pain Management and Nutritionals will drive growth in the acutetherapies segment. The chronic segment consisting of Oncology and Nephrocare is expectedto grow through greater market penetration. Brand extensions and new product launches intherapies where Company's core competencies exist would also be growth drivers.
Training of field force will continue to remain the cornerstone for improvingproductivity by strengthening product knowledge and selling skills.
Global Generics Business:
The Global Generics business performed well in FY 18 by achieving sales revenue of '51.26 crores and witnessed a robust growth of 53.20% over the previous year. The Companyfocused on enhancement of product basket in European Union (EU) and increasing customerbase across geographies.
The Global Generics business is likely to grow well during the current financial yeardespite challenges of product pricing in the EU markets. The Company has not only beenable to sustain but also grow sales with most of its customers and expects tocommercialize a new product in the second quarter of FY 19.
The Company intends to enter the United States of America (USA) market throughstrategic alliances and partnerships and is already working on commercializationstrategies. Addition of new customers and new products in EU Australia as well as othermarkets shall be the key growth drivers in the Generics business. The Company is activelyscouting for license partnerships for its products in various International Markets.
Rest of World (RoW) Business:
Africa & South-East Asia (SEA) constitute the RoW geographical space for theCompany.
During the year the RoW business achieved sales of ' 21.68 Crores.
In the SEA region Myanmar remained as key market where Siloxogene continued tomaintain its leadership position with a market share of 35% in the antacid segment. Theother SEA markets of Cambodia Vietnam and Philippines registered significant growth overthe previous year.
In the Africa region the Company expanded its business in new market with its firstcommercial supply in FY 18. The Company retained its leadership position in Mauritiusthrough its anti-diabetic range while in Egypt its immunosuppressant range remained thebest alternative to the innovator brands in the post organ transplant care space.
Nephrology Oncology and Critical care will be the core therapies in RoW markets.However the business will continue to tap opportunistic tenders in Anti-diabetic andCardiovascular therapies across RoW tender markets.
In FY 18 the focus areas for the business will be product portfolio enhancementgeographic expansion and sustaining new markets. Strategic out-sourcing will be the keypillar for growth in the existing and new markets.
Active Pharmaceutical Ingredients (APl/Bulk Drugs) Business:
The API business registered the highest ever sales of ' 53.51 crores and a growth of24% over the previous year. Latin America the key market for the API business contributedto this performance. In FY 18 the flagship product sold in the Latin American market hada growth of 57% over the previous year. Mexico and Brazil contributed 58% to the APIbusiness in FY 18.
API business continues to be of strategic importance in the overall growth of theCompany. Backward integration in products ensures lesser dependency on procuring APIs fromexternal sources and increased reliability of supplies thus playing a crucial role in thecurrent competitive scenario. This has enabled the company to move towards goodimprovement in our key export products. The Company is also working on growing itsbusiness in Russia and USA which are key focus markets for API.
4. INDIAN ACCOUNTING STANDARDS (IND AS)
As notified by the Ministry of Corporate Affairs the Company adopted Indian AccountingStandards ('Ind AS') with effect from April 01 2017. Accordingly financial statements ofthe Company are prepared with comparative data for the year ended March 31 2017 incompliance with 'Ind AS'.
5. EXTRACT OF ANNUAL RETURN
As required under Section 92 of the Companies Act 2013 details forming part of theextract of the Annual Return in form MGT-9 is annexed herewith as Annexure A.
6. MEETINGS OF THE BOARD
The details of Board Meetings held during the year are given in the CorporateGovernance Report.
7. MEETINGS OF AUDIT COMMITTEE
The details of Audit Committee meetings and composition of the Committee are given inthe Corporate Governance Report.
8. DIRECTOR'S RESPONSIBILITY STATEMENT
The Directors confirm that -
a) in the preparation of the annual accounts for the financial year ended March 312018 the applicable accounting standards had been followed and there were no materialdepartures;
b) the Directors had selected such accounting policies and applied them consistentlyand made judgments and estimates that are reasonable and prudent so as to give a true andfair view of the state of affairs of the Company at the end of the financial year as atMarch 31 2018 and of the profit and loss of the Company for that period;
c) the Directors had taken proper and sufficient care for the maintenance of adequateaccounting records in accordance with the provisions of this Act for safeguarding theassets of the Company and for preventing and detecting fraud and other irregularities;
d) the Directors had prepared the annual accounts on a going concern basis;
e) the Directors had laid down internal financial controls to be followed by theCompany and that such internal financial controls are adequate and were operatingeffectively;
f) the Directors had devised proper systems to ensure compliance with the provisions ofall applicable laws and that such systems were adequate and operating effectively.
9. STATEMENT ON DECLARATION OF INDEPENDENT DIRECTORS
The Company has received declaration from each of the Independent Directors underSection 149 (6) and (7) of the Companies Act 2013 and Regulation 16 of SEBI (ListingObligations and Disclosure Requirements) Regulations 2015.
10. PECUNIARY RELATIONSHIP OR TRANSACTIONS OF THE NON-EXECUTIVE DIRECTORS ANDDISCLOSURES ON THE REMUNERATION OF THE DIRECTORS
All pecuniary relationship or transactions of the
Non-Executive Directors vis-a-vis the Company along with criteria for such paymentsand disclosures on the remuneration of the Directors along with their shareholding aredisclosed in Corporate Governance Report and Form MGT-9 which forms a part of this report.
11. NOMINATION AND REMUNERATION POLICY
The Company's policy on Directors' appointment and remuneration including criteria fordetermining qualifications positive attributes independence of a Director and othermatters provided under Section 178 (3) is annexed with this Report as Annexure B.
12. EXPLANATION AND COMMENTS ON AUDITOR'S AND SECRETARIAL AUDIT REPORT
There is no qualification disclaimer reservation or adverse remark made by theStatutory Auditors in Auditor's Report.
Further there is no qualification disclaimer reservation or adverse remark made bythe Company Secretary in practice in Secretarial Audit Report.
13. PARTICULARS OF LOANS GUARANTEES OR INVESTMENTS
The Loans Guarantees and Investments made by the Company are within the limitsprescribed under the provisions of Section 186 of the Companies Act 2013 and the detailsare given in the notes to the Financial Statements.
14. RELATED PARTY TRANSACTIONS
There were no contracts or arrangements or transactions entered into by the Companywith related parties referred to in sub-section (1) of Section 188 of the Companies Act2013 during the course of business which were not at arm's length basis.
Suitable disclosure as required by the Indian Accounting Standards (IND AS 24) has beenmade in the notes to the Financial Statements. The policy on Related Party Transactions asapproved by the Board is uploaded on the Company's website www.rpglifesciences.com.
15. TRANSFER TO RESERVES
The Company has not transferred any sum to the General Reserve during the financialyear ended March 31 2018.
16. MATERIAL CHANGES AND COMMITMENTS IF ANY AFFECTING THE FINANCIAL POSITION OF THECOMPANY
There are no material changes and commitments
affecting the financial position of the Company which have occurred between the end ofthe financial year on March 31 2018 to which the financial statements relate and the dateof this report.
17. CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION FOREIGN EXCHANGE EARNINGS AND OUTGO
The particulars as required under Section 134(3) (m) of the Companies Act 2013 readwith Rule 8 (3) of Companies (Accounts) Rules 2014 are given in Annexure C to thisreport.
18. RISK MANAGEMENT
The details of Risk Management Committee (RMC) and its terms of reference are set outin the Corporate Governance Report.
The Company has a robust Risk Management framework to identify evaluate business risksand opportunities. This framework seeks to create transparency minimize adverse impact onthe business objectives and enhance the Company's competitive advantage.
The business risk framework defines the risk identification and its management approachacross the enterprise at various levels including documentation and reporting. Theframework help in identifying risks trend exposure and potential impact analysis atCompany's business.
19. CORPORATE SOCIAL REPONSIBILITY (CSR)
In accordance with the provisions of Section 135 read with Schedule VII of the Act theCompany as a part of its Corporate Social Responsibility ("CSR") initiativehas adopted a CSR Policy outlining various CSR activities to be undertaken by the Companyin the area of health water sanitation promoting education skill development etc. TheCSR policy of the Company is available on the Company's website i.e.www.rpglifesciences.com under 'Investors' tab.
During the year under review the Company has contributed the entire amount of ' 17.15lakhs to RPG Foundation the implementing agency towards CSR activities during the FY2017-18. The Board has constituted a CSR Committee inter alia to recommend on the CSRprojects/programs recommend the amount on each CSR activity and to monitor such CSRactivities being undertaken by the Company. The report on CSR activities as requiredunder the Companies (Corporate Social Responsibility Policy) Rules 2014 is set out asAnnexure D.
20. DIRECTORS AND KEY MANAGERIAL PERSONNEL
Mr. Sachin Nandgaonkar retires by rotation and being eligible offers himself forre-appointment at the ensuing Annual General Meeting.
At the Board Meeting held on November 10 2017 Mr. CT. Renganathan was re-appointed asthe Managing Director of the Company with effect from January 2 2018 for a term of 3years subject to approval of shareholders.
None of the Directors and Key Managerial Personnel (KMP) is related to any otherDirector of the Company.
Mr. CT. Renganathan Managing Director Mr. Mahesh Narayanaswamy Vice President -Finance and Mr. Rajesh Shirambekar Head - Legal and Company Secretary are Key ManagerialPersonnel of the Company within the meaning of Section 203 of the Companies Act 2013.
21. SUBSIDIARY COMPANIES
There were no Companies which have become or ceased to be our subsidiaries jointventures or associate companies during the year.
22. FIXED DEPOSITS
The Company has not accepted any fixed deposit from public during the year under reviewunder Chapter V of the Companies Act 2013. As on March 31 2018 no deposit was overdueand deposit aggregating to ' 5.40 Lakhs was lying unclaimed with the Company.
23. SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS OR TRIBUNALSIMPACTING THE GOING CONCERN STATUS
There are no significant and material orders passed by the Regulators or Courts orTribunals impacting the going concern status and company's operations in future.
24. CHANGE IN THE NATURE OF BUSINESS
During the year under review there was no change in the nature of business.
25. INTERNAL FINANCIAL CONTROL
Details in respect of adequacy of internal financial controls with reference to theFinancial Statements are stated in Management Discussion and Analysis which forms part ofthis annual report.
26. INFORMATION PURSUANT TO SECTION 197 (12) OF THE COMPANIES ACT 2013 AND RULE 5 OFTHE COMPANIES (APPOINTMENT AND REMUNERATION OF MANAGERIAL PERSONNEL) RULES 2014
|1 The ratio of the remuneration of each Director to the median remuneration of the employees of the company for the financial year; ||Mr. H. V. Goenka (Chairman) - 0.63 |
| ||Mr. C. L. Jain - 0.99 |
| ||Dr. Lalit S. Kanodia - 0.65 |
| ||Mr. Mahesh Gupta - 0.95 |
| ||Mr. Manoj Maheshwari - 0.50 |
| ||Mr. Narendra Ambwani - 0.66 |
| ||Ms. Zahabiya Khorakiwala - 0.39 |
| ||Mr. Sachin Nandgaonkar - 0.78 |
| ||Mr. Yugal Sikri - 0.94 |
| ||Mr. CT. Renganathan (Managing Director) - 62.07 |
|2 The percentage increase in remuneration of each Director Chief Financial Officer Chief Executive Officer Company Secretary or Manager if any in the financial year; ||Mr. H. V. Goenka (Chairman)- Nil |
| ||Mr. C. L. Jain - Nil |
| ||Dr. Lalit S. Kanodia - Nil |
| ||Mr. Mahesh Gupta - Nil |
| ||Mr. Manoj Maheshwari - Nil |
| ||Mr. Narendra Ambwani - Nil |
| ||Ms. Zahabiya Khorakiwala- Nil |
| ||Mr. Sachin Nandgaonkar - Nil |
| ||Mr. Yugal Sikri - Nil |
| ||Mr. CT. Renganathan - 10% |
| ||Mr. Mahesh Narayanaswamy - 12% |
| ||Mr. Rajesh Shirambekar - 8% |
|3 The percentage increase in the median remuneration of employees in the financial year; ||10.80%* |
|4 The number of permanent employees on the rolls of Company; ||1245 employees as on March 31 2018. |
|5 Average percentile increase already made in the salaries of employees other than the || Average Salary increase of non-managerial employees is around 11%. |
|managerial personnel in the last financial year and its comparison with the percentile increase in the managerial remuneration and justification || Average Salary increase of managerial employees is around 10.60%. |
|thereof and point out if there are any exceptional circumstances for increase in the managerial remuneration; || There are no exceptional circumstances for increase in managerial remuneration. |
|6 Affirmation that the remuneration is as per the remuneration policy of the Company. ||Remuneration Paid during the year ended March 31 2018 is as per the Remuneration Policy of the Company. |
*The percentage increase in the median remuneration of employee has been calculatedafter excluding Managing Director's remuneration.
27. WHISTLE BLOWER POLICY
The Audit Committee's terms of reference inter-alia include vigil mechanism which alsoincorporates a Whistle Blower Policy in terms of Section 177(10) of the Companies Act2013. The Company has adopted Whistle Blower Policy. The Whistle Blower mechanism providesfor Directors and employees to report concerns about unethical behavior actual orsuspected fraud or violation of Company's Code of Corporate Governance and Ethics. TheWhistle Blower Policy is uploaded on the Company's website www.rpglifesciences.com.
28. FAMILIARISATION PROGRAMMES FOR INDEPENDENT DIRECTORS
The Company conducts familiarisation programme for Independent Directors and thedetails are uploaded on the website of the Company on the below mentioned link:
http: / / www.rpglifesciences.com/Policyon Familiarisationanddetailprogram.pdf
29. FORMAL ANNUAL EVALUATION OF BOARD AND ITS COMMITTEES
Pursuant to provisions of Section 134 of the Companies Act 2013 and the SEBI (ListingObligations and Disclosure Requirements) Regulations 2015 the Nomination andRemuneration Committee laid down a criteria for evaluating Board effectiveness byassessing performance of the Board as a whole performance of individual Director andCommittees of the Board namely Audit Committee Nomination and Remuneration CommitteeStakeholders Relationship Committee Corporate Social Responsibility Committee and RiskManagement Committee. The Board approved the criteria laid down by Nomination andRemuneration Committee for evaluating Board effectiveness and engaged a third party agencyto conduct Board effectiveness survey during the year under review.
The members of the Company at its Annual General Meeting held on July 24 2017appointed M/s. BSR & Co. LLP Chartered Accountants (Firm RegistrationNo.101248W/W-100022) as Statutory Auditors of the Company for a period of 5 (five)consecutive years from the conclusion of the tenth AGM till the conclusion of thefifteenth AGM. The auditors confirmed that their appointment shall be in compliance withSection 139 and 141 of the Companies Act 2013 subject to ratification at the ensuing AGMby the shareholders. The Board recommends ratification of appointment of M/s. BSR &Co. LLP.
M/ s. Deloitte Touche Tohmatsu India LLP are the Internal Auditors of the Company.
M/s. Parikh Parekh & Associates Practicing Company Secretaries are theSecretarial Auditors of the Company. The Secretarial Audit Report required pursuant tosubsection (3) of Section 134 and Section 204 (1) of the Companies Act 2013 is given inAnnexure E to this report.
Pursuant to the provisions of Section 148(3) of the Companies Act 2013 M/ s. KiritMehta & Co. (Registration No. 000353) Cost Accountants was appointed to conductaudit of cost records of Pharmaceutical Activities for the year ended March 31 2018. CostAudit reports would be submitted to the Central Government within the prescribed time.Pursuant to Rule 6 of the Companies (Cost Records and Audit) Rules 2014 cost auditreports for Pharmaceutical Activities for the year ended March 31 2017 was filed with theCentral Government on September 2 2017.
31. EMPLOYEES STOCK OPTION PLAN
The Company has no employee stock option scheme on expiry of ESOP 2005.
32. PARTICULARS OF EMPLOYEES AND RELATED DISCLOSURES
The particulars of employees in compliance with the provisions of Section pursuant toSection 134 (3) (q) read with Rule 5 (2) and 5 (3) of the Companies (Appointment andRemuneration of Managerial Personnel) Rules 2014 will be provided to the shareholder uponrequest. The same shall be available for inspection by the shareholder of the Company atthe Registered Office of the Company during business hours on working days of the Companytill the date of Annual General Meeting of the Company.
33. MANAGEMENT DISCUSSION AND ANALYSIS AND CORPORATE GOVERNANCE REPORT
In compliance with Regulation 34(3) read with Schedule V of SEBI (Listing Obligations& Disclosure Requirements) Regulations 2015 Management Discussion and Analysis andCorporate Governance Report as approved by the Board of Directors together with acertificate from a Practicing Company Secretary confirming the compliance with therequirements of Corporate Governance policies are set out in the Annexures forming part ofthis annual report.
34. DISCLOSURE UNDER SEXUAL HARASSMENT OF WOMEN AT THE WORK PLACE (PREVENTIONPROHIBITION AND REDRESSAL) ACT 2013
The Company has in place an Anti-Sexual Harassment Policy in line with the requirementsof the Sexual Harassment of Women at the Workplace (Prevention Prohibition and Redressal)Act 2013.
Internal Complaints Committee has been set up to redress complaints.
The Company has not received any complaint of sexual harassment during the financialyear 2017-18.
35. MATERIAL TRANSACTIONS WITH RELATED PARTIES
The Company has not entered in to any transaction with related parties during the yearunder review which requires reporting in Form AOC-2 in terms of Companies Act 2013 readwith Companies (Accounts) Rules 2014.
The Company conducts regularly Safety audit and Environment audit through competentauthorities for its manufacturing facilities located at Navi Mumbai and Ankleshwar. TheCompany also organised various safety awareness programmes to impart safety training toits employees.
The Company has received an award for "Innovative HR Practices" in HRConvention and HDM Awards 2017 which validates the progressive culture of theorganization.
The Company has won prestigious "IDMA Quality Excellence Award (GOLD AWARD)"in Bulk Drugs category. The Company also received "National Safety Award 2016"for zero accident frequency rate by National Safety Council - Maharashtra Chapter.
Your Directors record their appreciation for the valuable services rendered byemployees of the Company their gratitude to the banks for their assistance and to theCompany's shareholders customers and suppliers for their continued support.
For and on behalf of the Board of Directors
|Place: Mumbai ||H.V. Goenka |
|Date: May 2 2018 ||Chairman |