TO THE MEMBERS OF THE COMPANY
Your Directors have pleasure in presenting the Audited Accounts of your Company for thefinancial year ended 31st December 2019.
|FINANCIAL RESULTS ||Rs. in million |
| ||2019 ||2018 |
|Revenue from operations ||30706 ||27708 |
|Other income ||941 ||897 |
|Total income ||31647 ||28605 |
|Profit before exceptional items and tax ||6592 ||6098 |
|Profit before tax ||5999 ||6098 |
|Tax expense ||1857 ||2292 |
|Profit for the year ||4142 ||3806 |
|Other comprehensive income (Net of tax) ||(165) ||13 |
|Total comprehensive income for the year ||3977 ||3819 |
Your Company does not propose to transfer any amount in the general reserves of theCompany.
Your Directors recommend payment of dividend of Rs. 106 per equity share of Rs. 10 forthe year ended 31st December 2019. In addition after reviewing the cash requirements forthe Company's operations a one-time special dividend of Rs. 243 per equity share of Rs.10is being recommended. The total dividend of Rs. 349 per equity share of Rs. 10 will bepaid after approval of shareholders at the ensuing Annual General Meeting of the Company.The total dividend if approved by the members at the Annual 1 General Meeting (AGM)scheduled on [28th April 2020] will result in cash outflow of Rs. 8038 million.
The dividend payment is in accordance with the Dividend Distribution Policy of theCompany which is available on the Company's website www.sanofiindialtd.com.
MANAGEMENT DISCUSSION AND ANALYSIS
As required by Regulation 34(2) of the SEBI (Listing Obligations and DisclosureRequirements) Regulations 2015 (Listing Regulations) a Management Discussion andAnalysis Report is part of this Report.
The state of the affairs of the business along with the financial and operationaldevelopments has been discussed in detail in the Management Discussion and AnalysisReport.
SLUMP SALE AND TRANSFER OF THE COMPANY'S MANUFACTURING FACILITY AT ANKLESHWAR
The Board of Directors at its meeting held on 10th September 2019 approved atransaction for the slump sale and transfer of the manufacturing facility of the Companyat Ankleshwar Gujarat to Zentiva Private Limited (Zentiva) for a consideration of Rs.2617 million subject to customary working capital adjustments. This transaction wassubject to the approval of the members and few other conditions / approvals of regulatoryauthorities as defined under the Business Transfer Agreement. The members of the Companyapproved the transaction on 30th October 2019 by passing a Special Resolution which wasconducted through postal ballot process. Your Company and Zentiva are working on theconditions / approvals of regulatory authorities on this transaction. The closing of thistransaction is expected by 31st March 2020.
Note added for explanation. Not part of the Directors' Report approved by Board on 25thFebruary 2020.
1 Due to COVID-19 pandemic Government of India announced National lockdown inMarch 2020. In compliance with the National lockdown on 23rd March 2020 the Companyannounced postponement of its AGM till further clarity was obtained on the COVID-19situation. Considering that the printers courier companies and Company's share transferagents had stopped their operations due to the National lockdown the Annual Reportpublication was also kept on hold by the Company. On 5th May 2020 Government of Indiavide its General Circular No. 20/2020 allowed companies to organize Annual General Meetingby using video-conferencing facility. In view of the General Circular the AGM is nowscheduled on - Tuesday 7th July 2020 at 3.00 pm through video-conferencing facility asper the AGM Notice which forms part of this Annual Report.
The said change has no impact on the financial statements of the Company for thefinancial year ended 31st December 2019.
DIRECTORS AND KEY MANAGERIAL PERSONNEL (KMP)
Mr. Ashwani Sood vide his letter dated 7th May 2019 informed the Board that due to hisnew role within Sanofi he is required to spend most of his time outside Mumbai and hencehe would like to step down as Director and Whole Time Director of the Company. The Boardaccepted this resignation with effect from end of day on 31st May 2019.
The Board of Directors at its meeting held on 29th July 2019 subject to approval ofmembers approved appointment of Mr. Cherian Mathew as Additional Director and Whole TimeDirector of the Company. The necessary resolutions for appointment of Mr. Cherian Mathewas Director and Whole Time Director of the Company has been included in the Notice of theforthcoming AGM for the approval of the members.
As on 31st December 2019 Mr. Rajaram Narayanan Managing Director; Mr. CharlesBillard Whole Time Director and Chief Financial Officer; Mr. Cherian Mathew Whole TimeDirector and Mr. Girish Tekchandani Company Secretary were designated as Key ManagerialPersonnel (KMP).
The Company has received declarations from all Independent Directors that they meet thecriteria of independence as laid down under Section 149(6) of the Companies Act 2013 (theAct) and the Listing Regulations. In the opinion of the Board the Independent Directorsfulfill the conditions specified in these regulations and are independent of themanagement.
Mr. Rajaram Narayanan retires by rotation at the forthcoming Annual General Meeting andis eligible for re-appointment.
After conclusion of the financial year two more changes took place in the Board. Dr.Shailesh Ayyangar informed the Company vide his letter dated 25th February 2020 that dueto his retirement as an employee of Sanofi group he would step down as Director of theCompany with effect from end of the day on 25th February 2020. Mr. Thomas Rouckoutinformed the Company vide his letter dated 25th February 2020 that he has taken up a newrole within Sanofi group and would not be able to spend time on Sanofi business in India.Therefore he would step down as Director of the Company with immediate effect. The Boardnoted these resignations at its meeting held on 25th February 2020.
The Board placed on record its deep appreciation for exceptional contribution made byMr. Ashwani Sood Dr. Shailesh Ayyangar and Mr. Thomas Rouckout during their tenure asDirector.
CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO
Information on conservation of energy technology absorption and foreign exchangeearnings and outgo pursuant to Section 134(3)(m) of the Act read with Rule 8(3) of theCompanies (Accounts) Rules 2014 is given in Annexure - A to this Report.
CASH FLOW AND CONSOLIDATED FINANCIAL STATEMENTS
As required under Regulation 34 of the Listing Regulations a Cash Flow Statement ispart of the Annual Report.
The Company does not have any subsidiaries and hence not required to publishConsolidated Financial Statements.
As required under Regulation 34 of the Listing Regulations a Report on CorporateGovernance along with a Certificate of Compliance from the Auditors is part of thisReport.
BUSINESS RESPONSIBILITY REPORT
The Business Responsibility Report for the year ended 31st December 2019 as stipulatedunder Regulation 34 of the Listing Regulations is given in Annexure B to thisReport.
MEETINGS OF THE BOARD OF DIRECTORS
Six meetings of the Board of Directors were held during the year. Dates of the meetingsare given in the Report on Corporate Governance.
Details pertaining to composition of the Audit Committee are included in the Report onCorporate Governance. All the recommendations made by the Audit Committee were accepted bythe Board.
FAMILIARIZATION PROGRAM FOR INDEPENDENT DIRECTORS
The Directors are regularly informed during meetings of the Board and Committees on thebusiness strategy business activities manufacturing operations and issues faced by thepharmaceutical industry.
The details of familiarization programs provided to the Directors of the Company areavailable on the Company's website www.sanofiindialtd.com.
SUBSIDIARIES ASSOCIATE COMPANIES AND JOINT VENTURES
Your Company does not have any subsidiaries joint ventures or associate companies.
CORPORATE SOCIAL RESPONSIBILITY
The Board of Directors has constituted a Corporate Social Responsibility (CSR)Committee to monitor implementation of CSR activities of your Company.
The details of the composition of the CSR Committee CSR policy CSR initiatives andactivities undertaken during the year are given in the Annual Report on CSR activities inAnnexure - C to this Report.
RELATED PARTY TRANSACTIONS
All related party transactions which were entered into during the year under reviewwere on arm's length basis and in the ordinary course of business. There were nomaterially significant related party transactions made by the Company with the PromotersDirectors and Key Managerial Personnel which may have a potential conflict with theinterests of the Company at large.
Your Company has entered into material related party transactions with sanofi-aventisSingapore Pte. Ltd for the purchase and sale of products and services and with SanofiHealthcare India Private Limited (formerly known as Shantha Biotechnics Private Limited)to provide a loan. These transactions were in the ordinary course of business and at arm'slength duly certified by the third-party experts. The transactions were within the limitsapproved by the members.
The Board of Directors at its meeting held on 12th November 2019 approved extension oftenure of loan to Sanofi Healthcare India Private Limited (formerly known as ShanthaBiotechnics Private Limited) i.e. till 15th April 2021 with all other terms remaining sameincluding the continuation of the corporate guarantee.
The Company has formulated a policy on materiality of Related Party Transactions andalso on dealing with Related Party Transactions. The policy is available on the Company'swebsite www.sanofiindialtd.com. Pursuant to Clause (h) of sub-section (3) of Section 134of the Act and Rule 8(2) of the Companies (Accounts) Rules 2014 the particulars ofcontracts / arrangements entered into by the Company with related parties referred to insub section (1) of Section 188 of the Act including certain arm's length transactionsunder third proviso thereto are required to be disclosed in Form AOC2.
The Form AOC2 envisages disclosure of material contracts or arrangements ortransactions at arm's length basis. The details of the material Related Party Transactionsin financial year ended 31st December 2019 as per the Policy on dealing with RelatedParties adopted by the Company are disclosed in Annexure - D to this Report.
DEPOSITS FROM PUBLIC
Your Company has not accepted any deposits from the public and as such no amount ofprincipal or interest on deposits from the public was outstanding as on the date of theBalance Sheet.
LOANS GUARANTEES OR INVESTMENTS
The particulars of the loan to Sanofi Healthcare India Private Limited (formerly knownas Shantha Biotechnics Private Limited) are disclosed in Form AOC-2 which forms part ofthis Report.
Details of the loans and investments made by your Company are also given in the notesto the financial statements.
Your Company has implemented a mechanism for risk management and formulated a RiskManagement Policy. The policy provides for creation of a risk register identification ofrisks and formulating mitigation plans. Your Company has also constituted a RiskManagement Committee details of which are disclosed in the Corporate Governance Report.As per the governance process described in the Policy the Risk Management Committeereviews the risk identification risk assessment and minimization procedures on quarterlybasis and updates the Audit Committee and the Board on regular basis.
The key risks impacting the Company are discussed in the Management Discussion andAnalysis section of the Annual Report.
DIRECTORS' RESPONSIBILITY STATEMENT
As required by Section 134(3) of the Act your Directors to the best of theirknowledge and belief confirm that:
1. in the preparation of the annexed accounts for the financial year ended 31stDecember 2019 all the applicable accounting standards have been followed along with properexplanation relating to material departures;
2. your Directors have 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 and ofthe profit of the Company for that year;
3. your Directors have taken proper and sufficient care for the maintenance of adequateaccounting records in accordance with the provisions of the Act for safeguarding theassets of the Company and for preventing and detecting fraud and other irregularities;
4. the said accounts have been prepared on a going concern basis;
5. internal financial controls to be followed by the Company have been laid down andthat internal controls are adequate and were operating effectively; and
6. proper systems to ensure compliance with the provisions of all applicable laws havebeen devised and that such systems are adequate and operating effectively.
Pursuant to Section 148 of the Act read with the Companies (Cost Records and Audit)Rules 2014 the Company is required to maintain cost records in respect of bulk drugs andformulations businesses. The accounts and records for these businesses are made andmaintained by the Company and are required to be audited. Your Directors have on therecommendation of the Audit Committee appointed M/s. Kirit Mehta & Co. CostAccountants to audit the cost accounts maintained by the Company for bulk drugs andformulations for the financial year ending 31st December 2020.
As required by the Act the remuneration payable to the Cost Auditor is required to beplaced before the members in General Meeting for their ratification. Accordingly aresolution seeking approval of the remuneration payable to M/s. Kirit Mehta & Co. asfixed by the Board is included in the Notice convening the AGM of the Company.
M/s. Price Waterhouse & Co. Chartered Accountants LLP (Firm Registration Number304026E / E300009) were appointed as Statutory Auditors of your Company to hold officefrom the conclusion of the Sixty-first AGM held in the year 2017 until the conclusion ofthe Sixty-sixth AGM to be held in the year 2022.
The Statutory Auditors have issued an unqualified audit report on the annual accountsof the Company for the year ended 31st December 2019.
REPORTING OF FRAUD BY AUDITORS
During the year under review the Statutory Auditors Cost Auditors and SecretarialAuditors have not reported any instances of frauds committed in the Company by itsOfficers or Employees to the Audit Committee under section 143(12) of the Act details ofwhich needs to be mentioned in this Report.
Disclosures with respect to the remuneration of Directors KMPs and employees asrequired under Section 197(12) of the Act read with Rule 5(1) of the Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 are given in Annexure -E to this Report.
Details of employee remuneration as required under provisions of section 197(12) of theAct read with Rule 5(2) and 5(3) of Companies (Appointment and Remuneration of ManagerialPersonnel) Rules 2014 form part of this Report. However the reports and accounts arebeing sent to the shareholders excluding the aforesaid remuneration. Any shareholderinterested in inspection of the documents pertaining to the above information or desiringa copy thereof may write to the Company Secretary.
PREVENTION OF SEXUAL HARASSMENT POLICY
The Company has in place a Prevention of Sexual Harassment Policy in line with therequirements of the Sexual Harassment of Women at Workplace (Prevention Prohibition andRedressal) Act 2013. An Internal Committee has been set up to redress complaints receivedregarding sexual harassment. All employees (permanent contractual temporary trainees)are covered under this policy.
During the year the Company made additional efforts to create awareness on this topicamongst all employees. An awareness campaign was launch which included communicationstrainings and talks by external experts.
During the year 2019 the Company received one complaint of alleged sexual harassmentwhich was thoroughly investigated by the Internal Committee. In such matters on therecommendations of Internal Committee appropriate disciplinary and corrective actions aretaken by the Company.
As on 31st December 2019 no complaints related to sexual harassment are pending fordisposal.
Pursuant to the provisions of Section 204 of the Act and the Companies (Appointment andRemuneration of Managerial Personnel) Rules 2014 your Directors had appointed M/s.Makarand M. Joshi & Co. a firm of Company Secretaries in Practice to undertake theSecretarial Audit of your Company for the year ended 31st December 2019.
The Secretarial Auditors have issued an unqualified audit report for the year ended31st December 2019.
Their report is annexed herewith as Annexure - F to this Report.
The Annual Secretarial Compliance Report has been submitted to the stock exchangeswithin 60 days of the end of the financial year.
The Company has complied with Secretarial Standard on Meetings of the Board ofDirectors (SS-1) and General Meetings (SS-2) issued by the Institute of CompanySecretaries of India.
EXTRACT OF ANNUAL RETURN
As required by Section 92(3) of the Act read with Rule 12(1) of the Companies(Management and Administration) Rules 2014 extract of the Annual Return in Form MGT-9 isannexed herewith as Annexure - G to this Report.
MATERIAL CHANGES AND COMMITMENTS AFTER THE FINANCIAL YEAR
No material changes and commitments have occurred after the closure of the financialyear ended 31st December 2019 till the date of this Report which would affect thefinancial 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 or Courts or Tribunalswhich impacts the going concern status and Company's operations in future.
Your Directors place on record their deep appreciation to employees at all levels fortheir hard work dedication and commitment.
The Board also places on record its appreciation for the support and co-operation yourCompany has been receiving from the medical fraternity suppliers distributorsretailers business partners government departments both at central & state level andall other stakeholders.
| ||By Authority of the Board |
| ||ADITYA NARAYAN |
| ||CHAIRMAN |
|25th February 2020 ||DIN: 00012084 |