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Sanofi India Ltd.

BSE: 500674 Sector: Health care
NSE: SANOFI ISIN Code: INE058A01010
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OPEN 6376.05
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VOLUME 417
52-Week high 9300.00
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P/E 25.15
Mkt Cap.(Rs cr) 14,665
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OPEN 6376.05
CLOSE 6436.40
VOLUME 417
52-Week high 9300.00
52-Week low 6320.70
P/E 25.15
Mkt Cap.(Rs cr) 14,665
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

Sanofi India Ltd. (SANOFI) - Director Report

Company director report

To the Members of the Company

Your Directors have pleasure in presenting the Audited Accounts of yourCompany for the financial year ended 31st December 2021.

Rs in million

Financial Results 2021 2020
Revenue from operations 29566 29019
Other income 744 898
Total income 30310 29917
Profit before exceptional items and tax 7684 7189
Profit before tax 12576 6772
Tax expense 3132 1996
Profit for the year 9444 4776
Other comprehensive income (Net of tax) (33) (88)
Total comprehensive income for the year 9411 4688

The financial results for the year ended 31st December 2021 are notcomparable with that of year ended 31st December 2020 due to completion of the slump saletransaction on 29th May 2020 which resulted in transfer of Ankleshwar manufacturingfacility and few products to Zentiva Private Limited.

During the previous year on 29th May 2020 the Company closed thetransaction of slump sale and transfer of its Ankleshwar manufacturing facility to ZentivaPrivate Limited. The final consideration after working capital adjustments was fixed at Rs3001 million out of which an amount of Rs 2728 million was received during the year2020 and the balance Rs 273 million has been received during the current year 2021 afterfull transfer of the products.

During the year the Board of Directors of the Company at its meetingheld on 27th July 2021 approved a transaction for the slump sale and transfer of theCompany's Nutraceuticals business on a going concern basis to Universal NutrisciencePrivate Limited for a consideration of Rs 5870 million including debt like obligationssubject to customary working capital adjustments. The transaction was closed on September30 2021. Subsequent to the closing the final consideration of Rs 5860 million (afterworking capital adjustments) has been received in full and during the year ended December31 2021 the Company has accounted for gain of Rs 4892 million (comprising debt likeobligation taken over by the purchaser Rs 196 million intangible assets adjusted Rs 827million and transaction costs Rs 337 million) which has been disclosed as an exceptionalitem.

The Nutraceuticals business of the Company comprised 16 brands and 30SKUs. These along with related business assets and liabilities including contractsintellectual property rights inventory and all employees associated with this businesswere transitioned to Universal Nutriscience Private Limited.

Transfer to Reserves

Your Company does not propose to transfer any amount in the generalreserves of the Company.

Dividend

Your Directors at their meeting held on 23rd February 2022 hasrecommended payment of final dividend of Rs 181 per equity share of Rs 10 for the yearended 31st December 2021 and one-time special dividend of Rs 309 per equity share of Rs 10for the year ended 31st December 2021 considering the sale of Nutraceutical business ofthe Company and the cash requirements of the Company. The dividend will be paid afterapproval of members at the ensuing Annual General Meeting (AGM) of the Company. Thedividend if approved by the members at the AGM scheduled on 26th April 2022 will resultin cash outflow of Rs 11285 million.

Pursuant to the requirements of Regulation 43A of the Securities andExchange Board of India (Listing Obligations and Disclosure Requirements) Regulations2015 ('Listing Regulations') the Dividend Distribution Policy of the Company is availableon the Company's website linkhttps://www.sanofiindialtd.com/en/investors/corporate-policies

Unpaid/Unclaimed Dividend

In terms of the provisions of Investor Education and Protection Fund(Accounting Audit Transfer and Refund) Rules 2016/Investor Education and ProtectionFund (Awareness and Protection of Investors) Rules 2001 (including amendments andmodifications thereof) Rs 3.23 million of unpaid/ unclaimed dividends were transferredduring the year 2021 to the Investor Education and Protection Fund.

Divestment of Soframycin? and

Sofradex? Businesses

During the year under review the Sanofi Group decided to sell some ofits old brands along with their trademarks. These included brands Soframycin? andSofradex? which were manufactured (through a third-party manufacturing arrangement) anddistributed by your Company in India.

Sanofi Group entered into a transaction with Encube Ethicals PrivateLimited which involved transfer of the Soframycin? and Sofradex? brands trademarks andassociated technical know-how/ manufacturing dossiers (registered IP) to Encube EthicalsPrivate Limited. As part of this transaction the Company also sold certain assets namelymarketing intangibles customer lists/database trade channel knowledge/wholesaler listsvendor/supplier database pharmacovigilance/medical database that are related to thisdistribution business conducted by the Company (collectively called unregistered IP) andproduct inventory to Encube Ethicals Private Limited through an Asset Purchase Agreementfor a consideration of Rs 1368.5 million. The Audit Committee of your Company approved thevaluation and the Board approved the said transaction at their meetings held on 25thNovember 2021. The transaction was completed on 31st January 2022 and your Company hasreceived the entire consideration.

Directors and Key Managerial Personnel (KMP)

During the year under review Mr. Vaibhav Karandikar (DIN: 09049375)was appointed as Whole Time Director of the Company w.e.f. 23rd February 2021.

Further Mr. Cyril Grandchamp-Desraux (DIN: 07719763) informed theBoard vide his letter dated 24th November 2021 that he would like to resign as theNon-Executive Director of the Company due to personal reasons with immediate effect.

The Board noted and accepted this resignation at its meeting held on25th November 2021. The Board places on record its deep appreciation of his contributionin the development of the Company.

Mr. Rajaram Narayanan (DIN: 02977405) informed the Board vide hisletter dated 12th January 2022 that he would like to step down as Managing Director ofthe Company effective close of business hours on 10th April 2022 to pursue an externalopportunity.

The Nomination and Remuneration Committee and the Board noted andaccepted the resignation at the meeting(s) held on 13th January 2022. Mr. RajaramNarayanan joined the Company in 2014 as General Manager and was later elevated as CountryLead & Managing Director. In these roles he led the strategic reorientation of theCompany sharpening its focus on core areas developing new business models buildingfuture talent and driving digital transformation across all areas of the business. Duringhis tenure as Managing Director the Company has been recognised as a Top Employer forfour consecutive years and has received several recognitions for its initiatives in HRpractices Communications CSR (Corporate Social Responsibility) and Public health. TheBoard places on record immense appreciation for his contribution towards the growth of theCompany.

Mr. Girish Tekchandani resigned as Company Secretary and ComplianceOfficer of the Company w.e.f. close of business hours on 31st August 2021. Based on therecommendations of the Nomination and Remuneration Committee the Board of Directors attheir meeting held on 26th October 2021 appointed Ms. Radhika K. Shah as the CompanySecretary and Compliance Officer w.e.f. 1st November 2021.

As on the date of this Report Mr. Rajaram Narayanan ManagingDirector; Mr. Vaibhav Karandikar Whole Time Director & Chief Financial Officer; Mr.Cherian Mathew Whole Time Director and Ms. Radhika K. Shah Company Secretary &Compliance Officer are designated as the Key Managerial Persons of the Company.

Mr. Aditya Narayan Chairman and Mrs. Usha Thorat Chairperson of theAudit Committee and Nomination and Remuneration Committee were re-appointed for theirsecond term of five consecutive years commencing from 30th April 2021 at the AnnualGeneral Meeting held on 27th April 2021.

The Company has received declarations from all Independent Directorsthat they meet the criteria of independence as laid down under Section 149(6) of theCompanies Act 2013 (the Act) and the Listing Regulations and they have registeredthemselves with the Independent Director's Database maintained by the IICA (The IndianInstitute of Corporate Affairs). In the opinion of the Board the Independent Directorsfulfill the conditions specified in these regulations and are independent of themanagement.

Mr. Cherian Mathew (DIN: 08522813) is liable to retire by rotation atthe ensuing Annual General Meeting and being eligible offers himself for re-appointment.The Board of Directors recommend his re-appointment to the members.

Management Discussion and Analysis

As required by Regulation 34(2) of the Listing Regulations aManagement Discussion and Analysis Report forms part of this Report.

The state of the affairs of the business along with the financial andoperational developments has been discussed in detail in the Management Discussion andAnalysis Report.

Conservation of Energy Technology Absorption and Foreign Exchange

Earnings and Outgo

Information on conservation of energy technology absorption andforeign exchange earnings and outgo pursuant to Section 134(3)(m) of the Act read withRule 8(3) of the Companies (Accounts) Rules 2014 is given in Annexure - A to thisReport.

Cash Flow and Consolidated Financial Statements

As required under Regulation 34 of the Listing Regulations a Cash FlowStatement is part of the Annual Report.

The Company does not have any subsidiaries and hence not required topublish Consolidated Financial Statements.

Subsidiaries Associate Companies And Joint Ventures

Your Company does not have any subsidiaries joint ventures orassociate companies.

Corporate Governance Report

As required under Regulation 34 of the Listing Regulations a Report onCorporate Governance along with a Certificate of Compliance from the Statutory Auditors ispart of this Report.

Business Responsibility Report The Business Responsibility Reportfor the year ended 31st December 2021 as stipulated under Regulation 34 of the ListingRegulations is given in Annexure - B to this Report.

Meetings of the Board

Eight meetings of the Board were held during the year. Dates of themeetings are given in the Report on Corporate Governance. The maximum interval between anytwo meetings did not exceed 120 days as prescribed by the Act and Listing Regulations.

Familiarisation Programme for

Independent Directors

The Directors are regularly informed during meetings of the Board andCommittees on the business strategy business activities manufacturing operations andissues faced by the pharmaceutical industry. The Directors when they are appointed aregiven a detailed orientation on the Company pharmaceuticals industry regulatory mattersbusiness financial matters human resource matters and corporate social responsibility.The details of Familiarisation programmes provided to the Directors of the Company arementioned in the Corporate Governance Report and on the Company's website linkhttps://www.sanofiindialtd.com/en/investors/corporate-policies .

Performance Evaluation of the Board

During the year under review the performance evaluation of the BoardCommittees and Directors was conducted based on the criteria framework and questionnairesapproved by the Nomination and Remuneration Committee and the Board. The details of theperformance evaluation exercise conducted by the Company are set out in the CorporateGovernance Report.

Nomination and Remuneration Policy & Remuneration of Directors KeyManagerial Personnel and Senior Management

The Nomination and Remuneration Policy of the Company is performancedriven and is designed to motivate employees recognise their achievements and promoteexcellence in performance. The Policy provides guidance on selection and nomination ofDirectors to the Board of the Company; appointment of the Senior Management Personnel ofthe Company; and remuneration of Directors Key Management Personnel and other employees.The remuneration paid to the Directors Key Managerial Personnel and Senior Management isin accordance with the Nomination and Remuneration Policy formulated in accordance withSection 178 of the Act and the Listing Regulations. Further details form part of theCorporate Governance Report and a Statement of Disclosure of Remuneration pursuant toSection 197 of the Act read with Rule 5(1) of the Companies (Appointment and Remunerationof Managerial Personnel) Rules 2014 is provided as Annexure - C to this Report.

The statement showing particulars of employees pursuant to Section 197of the Companies Act

2013 (the 'Act') read with Rule 5(2) and 5(3) of the Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 forms part of thisreport. However the above-mentioned statement is not being sent to the Members along withthis Annual Report in accordance with the provisions of Section 136 of the Act. Any personinterested in receiving the said information may write to the Company Secretary statingtheir Folio No./ DPID.

Audit Committee

Details pertaining to composition of the Audit Committee are includedin the Report on Corporate Governance. All the recommendations made by the Audit Committeewere accepted by the Board.

Vigil Mechanism

As per the provisions of Section 177(9) of the Act and Regulation 22 ofthe Listing Regulations the Company is required to establish a Vigil Mechanism. TheCompany's Code of Conduct Whistle-blower and other Governance Policies lays out thedefining principles of highest ethical standards. The details of the Whistleblower Policyare provided in the Report on Corporate Governance forming part of this Report.

Related Party Transactions

All related party transactions which were entered into during the yearunder review were on arm's length basis and in the ordinary course of business. There wereno materially significant related party transactions made by the Company with thePromoters Directors and KMP which may have a potential conflict with the interests of theCompany at large.

The Company has formulated a policy on materiality of related partytransactions and also on dealing with related party transactions. The policy is availableon the Company's website linkhttps://www.sanofiindialtd.com/en/investors/corporate-policies. Pursuant to Clause (h) ofsub-section (3) of Section 134 of the Act and Rule 8(2) of the Companies (Accounts) Rules2014 the particulars of contracts / arrangements entered into by the Company with relatedparties referred to in sub section (1) of Section 188 of the Act including certain arm'slength transactions under third proviso thereto are required to be disclosed in FormAOC-2.

The Form AOC-2 envisages disclosure of material contracts orarrangements or transactions at arm's length basis. The details of the material relatedparty transactions in financial year ended 31st December 2021 as per the Policy ondealing with related parties adopted by the Company are disclosed in Annexure - D tothis Report.

Your Company has entered into material related party transactions withsanofi-aventis Singapore Pte. Ltd. for the purchase and sale of products and services andwith Sanofi Healthcare India Private Limited (SHIPL). These transactions were in theordinary course of business and at arm's length duly certified by the third-party experts.The transactions were within the limits approved by the members.

In view of the prevailing interest rate scenario and overall reductionin bank rates the Board at its meeting held on 23rd February 2021 approved reduction ininterest rate payable by SHIPL from 7.5% to 5.5% per annum with effect from 15th April2021. Further the Board at its meeting held on 26th October 2021 revised the interestrates to 5.55% and also approved extension of tenure of loan to SHIPL till 15th April 2023with all other terms remaining same including the continuation of the corporate guaranteeby Sanofi group.

Your Company had originally entered into Related Party Transaction(s)with Sanofi Synthelabo (India) Private Limited (SASY) and Sanofi Pasteur India PrivateLimited (SPIPL) These existing Related Party Transactions with SASY and SPIPL were in theordinary course of business and were at arm's length as per the provisions of theCompanies Act 2013 and the rules made thereunder and have been approved of by theCompany's Audit committee.

These transactions were not material related party transactions forpurposes of the Listing Regulations.

The National Company Law Tribunal (NCLT) vide its Order dated 20thApril 2021 approved the merger of SASY and SPIPL with SHIPL. The said merger was effectivefrom 1st June 2021 and resulted in the transfer of all of the contracts/ arrangementsoriginally entered into with each of SASY and SPIPL to SHIPL. As a result the contracts/arrangements originally entered into with SASY and SPIPL respectively are now deemed tobe contracts/ arrangements with SHIPL. The Company was not a party to the aforesaidmerger and the contracts / arrangements originally entered into with SASY and SPIPL havenow been assigned to SHIPL due to operation of law (upon effectiveness of the abovemerger).

Individually the value of transactions between Company with SASY andthe Company with SPIPL was within the threshold limit of 10% of the Company's annualconsolidated turnover as prescribed under the Regulation 23(1) of the Listing Regulations.However due to the merger of the aforesaid entities transactions which were originallyentered into with SASY and SPIPL (Transferor Companies) have now been aggregated withtransactions SHIPL (Transferee Company) as a result of operation of law and as a resultthe transactions of the Company with SHIPL for FY 2021 have crossed the threshold limitof 10% of the Company's annual consolidated turnover as prescribed under the Regulation23(1) of the Listing Regulations.

The Company has sought approval of members through Postal Ballot forthe contracts/ arrangements/ transactions entered into for the FY 2021 and for enteringinto contracts/ arrangements/ transactions related to purchase sale transfer or receiptof products goods active pharmaceutical ingredients materials services or otherobligations if any on such terms and conditions as may be mutually agreed upon betweenthe Company and SHIPL a 'Related Party' as defined under Section 2(76) of the Act and

Auditors

M/s. Price Waterhouse & Co. Chartered Accountants LLP (FirmRegistration Number 304026E / E300009) were appointed as Statutory Auditors of yourCompany to hold office from the conclusion of the Sixty-first AGM held in the year 2017until the conclusion of the Sixty-sixth AGM to be held in the year 2022.

Subject to the approval of members at the AGM the Audit Committee atits meeting held on 22nd February 2022 and the Board at its meeting held on 23rd February2022 recommended re-appointment of M/s. Price Waterhouse & Co. Chartered AccountantsLLP for a further period of 5 years until the conclusion of the Seventy-first AGM to beheld in 2027.

The Company has received written consent and certificate of eligibilityin accordance with Sections 139 141 and other applicable provisions of the Act and Rulesissued thereunder from of M/s. Price Waterhouse & Co. Chartered Accountants LLP. Theyhave confirmed to hold a valid certificate issued by the Peer Review Board of theInstitute of Chartered Accountants of India (ICAI) as required under the ListingRegulations.

The Audit Committee and the Board is of the opinion that continuationof M/s. Price Waterhouse & Co. Chartered Accountants LLP as Statutory Auditors will bein the best interests of the Company and therefore the members are requested to considertheir re-appointment as Statutory Auditors of the Company for a term of five years fromthe conclusion of the ensuing Annual General Meeting till the Annual General Meeting tobe held in the financial year 2027 at such remuneration mutually agreed and approved bythe Board.

The resolution seeking re-appointment of M/s. Price Waterhouse &Co. Chartered Accountants LLP as Statutory Auditors for a period of 5 years until theconclusion of the Seventy-first AGM to be held in 2027 has been included in the Notice ofthe Sixty-sixth Annual General Meeting for approval of the members.

The Statutory Auditors have issued an unqualified audit report on theannual accounts of the Company for the year ended 31st December 2021.

Reporting of Fraud by Auditors

During the year under review the Statutory Auditors Cost Auditors andSecretarial Auditors have not reported any instances of frauds committed in the Company byits Officers or Employees to the Audit Committee under Section 143(12) of the Act detailsof which needs to be mentioned in this Report.

Prevention of Sexual Harassment Policy

The Company has in place a Prevention of Sexual Harassment Policy inline with the requirements of the Sexual Harassment of Women at Workplace (PreventionProhibition and Redressal) Act 2013.

An Internal Committee has been set up to redress complaints receivedregarding sexual harassment.

All employees (permanent contractual temporary trainees) are coveredunder this policy.

During the year 2021 the Company did not receive any complaint ofalleged sexual harassment. As on 31st December 2021 no complaints related to sexualharassment are pending for disposal.

Secretarial Audit

Pursuant to the provisions of Section 204 of the Act and the Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 your Directors hadappointed M/s. Makarand M. Joshi & Co. a firm of Company Secretaries in Practice toundertake the Secretarial Audit of your Company for the year ended 31st December 2021.

The Secretarial Auditors have issued an unqualified audit report forthe year ended 31st December 2021.

Their report is annexed herewith as Annexure - F to this Report.

The Annual Secretarial Compliance Report has been submitted to thestock exchanges within 60 days of the end of the financial year.

Secretarial Standards

The Company has complied with Secretarial Standards on Meetings of theBoard of Directors (SS-1) and General Meetings (SS-2) issued by the Institute of CompanySecretaries of India.

Annual Return

As required under Section 92(3) of the Act Annual Return is hosted onthe website of the Company www.sanofiindialtd.com.

Material Changes and Commitments after the Financial Year

No material changes and commitments have occurred after the closure ofthe financial year ended 31st December 2021 till the date of this Report which wouldaffect the financial position of your Company.

There has been no change in the nature of business of your Company.

Significant and Material Orders Passed by the Regulators / Courts /Tribunals

No significant or material orders were passed by the Regulators orCourts or Tribunals which impacts the going concern status and Company's operations infuture.

Acknowledgements

Your Directors place on record their deep appreciation to employees atall levels for their hard work dedication and commitment. In the period of extremeuncertainty due to the public-health and economic disruption created by the COVID-19 theemployees and associates of your Company have extended splendid support and madesignificant contribution to ensure uninterrupted supply of medicines to needy patients.

The Board also places on record its appreciation for the support andco-operation that your Company has been receiving from the medical fraternity suppliersdistributors retailers business partners government departments both at central &state level and all other stakeholders.

By Authority of the Board
Aditya Narayan
Chairman
DIN: 00012084
23rd February 2022

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