Your Directors have pleasure in presenting herewith the 32ndAnnual Report on the business of your Company together with the
Audited Standalone and Consolidated Accounts for the financial yearended 31
| || || || ||(र in Lakhs) |
| ||Financial Year 2018-19 ||Financial Year 2017-18 |
|Particulars ||Standalone ||Consolidated ||Standalone ||Consolidated |
|Operating revenue ||66387.88 ||73338.77 ||74394.60 ||79153.39 |
|Other Income ||1578.98 ||1373.74 ||2331.53 ||2167.76 |
|Profit before Interest Depreciation and Tax ||19566.78 ||18943.22 ||20238.43 ||18384.11 |
|after exceptional Items || || || || |
|Interest ||289.32 ||367.56 ||212.69 ||266.12 |
|Depreciation ||3716.91 ||4206.15 ||3277.70 ||3722.21 |
|Net profit before tax ||15559.95 ||14369.51 ||16748.51 ||14395.78 |
|Provision for taxes || || || || |
|a. Current tax ||3664.82 ||3789.51 ||3494.19 ||3495.73 |
|b. Less: MAT Credit entitlement ||(910.47) ||(1043.40) ||(757.51) ||(757.51) |
|c. Deferred Tax( Net of MAT) ||394.98 ||(128.48) ||687.95 ||652.34 |
|Profit after tax ||12410.63 ||11751.87 ||13323.90 ||11005.22 |
|Share of profit/(loss) in Associates/ Joint ||- ||(801.70) ||- ||(719.03) |
|Ventures || || || || |
|Share of profit/(loss) in Non-Controlling ||- ||276.00 ||- ||238.08 |
|interest || || || || |
|Other comprehensive incomes/(expenses) ||45.97 ||43.07 ||108.29 ||109.55 |
|Total Comprehensive Income ||12456.60 ||11269.25 ||13432.19 ||10633.74 |
REVIEW OF OPERATIONS:
STANdALONE ANd CONSOLIdATEd FINANCIAL STATEMENTS
The Standalone and Consolidated Financial Statements of your Companyhave been prepared in accordance with Indian
Accounting Standards (Ind AS') notified under the Companies(Indian Accounting Standards) Rules 2015 as amended. Further a statement containing thesalient features of the Financial Statements of our subsidiaries pursuant to subsection 3of Section 129 of the Companies Act 2013 in the prescribed form AOC-1 is appended asAnnexure 5 to the Board's Report. The Statement also provides the details ofperformance and financial position of each of the subsidiaries.
During the year under review the Company reported standalone operatingrevenues of र 66387.88 Lakhs as against र 74394.60 Lakhs and Net Profit after tax of र12410.63 Lakhs as againstर 13323.90 Lakhs in the previous year whereasconsolidated gross revenues of र 74712.51 Lakhs as against र 81321.15 Lakhs and NetProfit after tax ofर 10950.17 Lakhs as against र 10286.18 Lakhs in the previousyear.
The Company continued to focus on the new line of products R&D andstrategic expansion of production/ development facilities. Apart from this the Companystarted focusing in marketing the products particularly in the EU and other regulatedmarkets. Registrations and filings for the products in-pipe-line is progressing as perschedule. Expansion programme is as per the schedule.
During the F.Y. 2018-19 your company has invested in commercial papersof IL&FS Limited to an extent of र 1437.28 Lakhs which were due to be redeemed on 2January 2019. However owing to recent financial crisis of IL&FS Limited the boardhas completely provided for the loss.
SHILPA FOOT HOLd:
SHILPA MEdICARE API FACILITIES
Shilpa Medicare has two world class State of the Art API manufacturingfacilities at Raichur Karnataka India supported by strong & efficient team ofR&D IPM Production Engineering Quality Control Quality Assurance & Regulatoryfunctions with other supportive functions and well administered Human Resource management.The facilities are cGMP Compliant and approved by many national & internationalregulatory bodies like USFDA EU COFEPRIS-Mexico PMDA-Japan Korean FDA TPD Canada& TGA-Australia.
The Company is having API's and intermediate manufacturing blockswith segregation of non-oncology and oncology manufacturing facilities. Oncology productsare manufactured & handled with highly precised isolators & taken care from people& environment. Blocks are designed to handle small scale medium scale and High scalevolume ranging batch sized from 500 Gms to 350 Kgs.
The manufacturing facilities are certified by different bodies formanagement systems of quality Safety Environment & Health like ISO 9001-2015 forQuality System ISO 14001-2015 for Environment Management System OSHAS 18001-2007 forOccupational Health & Safety System & R&Dcertifiedby is DSIR Govt. of India.
The Company has invested in containment technologies for themanufacturing of oncology drug substances in contained environment and also has latesttechnologies like Bipolar system from Japan to ensure that the manufacturing processes aresustainable with less consumption of natural resources and safe operations. These types ofinnovative Technologies provide us the sustainable process which are validated &commercialized. This strength provides us the tremendous opportunities to enhancecompetitiveness to improve our positions in the market place & also to find the newmarkets.
The Company being environmentally conscious all the waste is treatedin its ZERO discharge handling facility with all down line supported systems likeStripper MEE ATFD FICCO FACCO followed by Biological & RO systems to treat thewaste & make it re-usable in applicable places.
The Company has given importance to high level safety & designedits training program to ensure that all employees involved are well aware of the risksinvolved its consequences
& mitigations required. All safety requirements of the facility aretaken care in design where safety is built in system like Air handling units rapture discand safety vents interlocks alarms & firefighting systems.
The facility is designed to provide complete utility services &purified water systems. All utilities are designed to provide support required tomanufacture without any interruption. Well designed coolers are used to support thesystems like process cooling and HVAC and also compressed air & nitrogen facility. TheFacility is having quality control unit with a capability of method development methodvalidation & testing of RM IM & Finished products with all 21 CFR Part11compliance sophisticated instruments like LCMS GCMS ICPMS XRPD PSD analyzer HPLC GCand all other supportive instruments for testing products with well trained and qualifiedstaff.
SHILPA MEdICARE R&d (API)
Shilpa Medicare views its R&D capabilities as a vital component ofits business strategy that will provide a sustainable long-term competitive advantage.Shilpa Medicare is among a few Indian pharmaceutical companies to have started itsresearch program in support of its global ambitions. The R&D environment reflects itscommitment to be a leader in the Oncology generics space. Our generics business helps toreduce drug costs for individuals and governments by bringing generic drugs to market asearly as possible and making them available to as many patients as possible. We supplypharmaceutical ingredients to pharmaceutical companies which contributes to our goal ofproviding affordable medicines.
We will continue to promote affordability in significant ways and workto expand our product offering of generics focusing on increasing access to products inmarket with significant barriers to entry. We will continue to look for new opportunitiesto take generics to more patients in collaboration with other companies.
Our R&D centre offers space for the development of genericsmeeting international development standards including difficult to make complex APIprocesses such as those for Oncology/ non Oncology molecule.
The Shilpa Medicare R&D centre in Raichur Karnataka India hasshown good progress in terms of new projects taken up for development and the projectswhich were successfully transferred to plant. The Raichur API team has delivered 6projects successfully and taken trial at plant scale and taken up 20 new projects forprocess development.
As per the current regulatory requirements we are isolating theprocess/degradation impurities in-house through combiflash purificationtechnique /PrepHPLC and producing from mg to gram level.
For further strength to our business strategy we depend less onexternal vendor for supply of starting material and make them in-house to further reducethe cost of existing API to make more cost effective technology. For important projectsthe starting material is synthesized in-house and taken up for trial at plant/ lab scale.
SHILPA MEdICARE- FINISHEd dOSAgE FORMULATION FACILITY
Shilpa Medicare Limited Finished Dosage Formulation Facility is a WorldClass GMP compliant Facility engaged in manufacturing of potent drugs- which includesliquid and lyophilized injectables in vials sterile dry powder injectables in vials oralsolid dosage form (Tablets and hard gelatine capsules). The facility is designed forhandling of potent Drug Products (including Oncology products and adjunct therapies) forvarious regulatory markets in a highly contained manner. Facility is designed to handlepotent molecules upto OEL 4 level of containment.
The facility is approved by various regulatory agencies includingUSFDA EUGMP ANVISA COFEPRIS INAME TFDA and SAHPRA. This facility consists of OralSolid Block with two commercial scale tablet manufacturing and one commercial scalecapsule manufacturing line approved by regulatory agencies. Three Separate Injectableblocks consists of two liquid-lyophilisation commercial scale manufacturing lines approvedby regulatory agencies and 3rd Injectable combi-line for handling of liquid lyophilizedand Dry Powder Injectable under qualification.
Labelling and Packaging lines are fully automated and equipped withglobal track and trace system for serialization and aggregation meeting DSCSA EU FMD andother country specific requirements. Packaging lines are capable of handling ONCOSAFEpackaging for regulatory market having base cap and full body sleeve.
Shilpa Medicare Limited manufactures many oncology and adjunct productsin several types of dosage forms such as tablets capsules liquid injection (Asepticallyand terminally sterilized) Lyophilized Injectable Sterile Dry powder injectables.
All products are manufactured under the same stringent qualitystandards for export to USA EU and ROW market.
Facility Regulatory Status:
|Authority / Agency ||Status ||Scope |
|USFDA ||Approved ||OSD & INJECTION |
|EUGMP (Austria) ||Approved ||OSD & INJECTION |
|ANVISA (Brazil) ||Approved ||INJECTION |
|COFEPRIS (Mexico) ||Approved ||INJECTION |
|TFDA (Tanzania) ||Approved ||OSD & INJECTION |
|INMAT (Argentina) ||Approved ||INJECTION |
|SAHPRA (South Africa) ||Approved ||INJECTION |
|DIGEMID (Peru) ||Approved ||INJECTION |
|CETHS (Belarus) ||Approved ||OSD |
Shilpa Medicare Limited Formulation Research and Development Centre islocated in Vizianagaram District of Andhra Pradesh India. R&D Centre was audited byUSFDA in Feb 2019 and EIR for the facility was received. R&D Centre is involved inFormulation & Analytical development and also method validations for analytical tools.Formulation research Centre is concentrated in developing generic equivalents and supergenerics to Reference listed Drugs for Global Markets like USA Europe and Row forinjectable and oral formulations used for the treatment of cancer and other indications.Like Multiple sclerosis CNS disorders myasthenia gravis Ogilvie syndrome Ulcerativecolitis urinary retention liver diseases smoking cessation Alopecia and Eye disordersetc.
R&D Centre is state of the art facility wherein the scientistsworking with an approach of reducing the toxicity / adverse events of the drugs withenhanced stability patient compliance and with effective cost. Also the R&D works onconverting the existing Lyophilized products to Ready To Use (RTU's) liquid productsfurther concentrates on development of ready to fill powders for injectableadministrations.
The oral department of R&D is concentrated in developing thegeneric equivalents for Global Markets. The R&D team is concentrated in developing theproducts as Para IV First to File Hybrid and 505(b)(2) to Globally market the same.R&D is concentrated in working on products to reduce drug product administrations alsoon reducing the drug wastage. Clinical department of R&D is involved in regularmonitoring and surveillance of safe use of the drugs manufactured by
Shilpa Medicare. Performing audits of CROs wherein pre-clinical andClinical studies are carried out. Evaluating the patient requirements and proposing thedevelopment strategy to product development. Regulatory Department of Shilpa MedicareLimited is involved in filing of Generic Equivalent generic products with USFDA activelyinvolved in product development activities to comply Regulatory agency requirements.Shilpa R&D Centre is in adherence to quality systems that has been audited by USFDAfor compliance. R&D Centre has established the quality management systems by DesignQuality Assurance Department which is involved in reviewing and updating the qualityaspects as per current regulatory norms.
BANgALORE R&d SITE
Shilpa Medicare is coming up with State of the Art Centralized R&DCentre at Dobaspet near Bangalore for Formulation Development. The R&D Centre isinvolved in development of Onco and Non-Onco Injectable Onco and Non-Onco ODFTransdermal or topical applications Ophthalmic and Orally Disintegrating Filmsformulation. Commissioning of the New R&D site will be in December 2019.
R&D Centre is well equipped for development of Generics ComplexGenerics and also new dosage forms involving nano and micro technologies like liposomesNano particles and specialty products.
On Analytical front the R&D is equipped with state of the artinstruments to evaluate all kinds of dosage forms. We have also established facility toevaluate the in-house extractable & leachable for all our products and havecapabilities of characterization of API impurities excipients and packing components.
The New Research and Development Centre is one point stop to customersthat can cater the product development along with analytical method development forfinished product analytical method validation stability studies characterization ofimpurities evaluating extractable & leachable for packing components. ProcessDevelopment Lab meeting the cGMP requirement for manufacture scale up batches to optimizethe process variables and to manufacture of clinical batches.
Manufacturing Facility - Transdermal Patches and Oral films
A transdermal patch is medicated adhesive patch that is placed on theskin to deliver a specific dose of medication through the skin and into the bloodstream.Transdermal patches have made their place in global market in past few decades as analternative to conventional therapeutic for various disease indications. Transdermalpatches are widely accepted among physicians and patients due to their non-invasive painfree and easy administration. In recent years the growth of transdermal patch market hasincreased and expected to increase significantly in coming years. Higher investments inresearch and development could be attributed to the success of transdermal patch market.
Similarly the thin film drugs were recorded with high marketacceptance due to its ease of application and high effectiveness. Moreover developedeconomies such as the U.S. and countries in Europe recorded significant sale of thin filmdrugs. Thin film drugs achieve the desired therapeutic results. Therefore they havegained attention in the market as a potential treatment option. Looking to the marketpotential Dobaspet Bangalore Karnataka India facility is designed and build as a stateof the art Manufacturing facility of Transdermal Patch and Oral Films. This facility shallcater to global market.
Lay outs confirming to cGMP requirements is finalized along withUtility Administration and canteen building. They are designed to cater both TransdermalPatch and Oral Film Products. space for future expansion is allocated for capacityincrement. Site will be ready for qualification by December 2019.
SHILPA MEdICARE LIMITEd INTELLECTUAL PROPERTY MANAgEMENT (IPM) TEAM
Shilpa's success depends on the Company's ability to securepatents protect the proprietary information and operate without infringing on theothers' intellectual property rights.
Shilpa Medicare Limited Intellectual Property Management (IPM) team isresponsible for building Shilpa's global generic product pipeline and 505(b)(2) NDApipeline as well as creating managing and protecting its high value patent estate. Shilpahas a dedicated IPM Team which provides stage wise IP-clearances during product/processdevelopment activities and also provides frequent updates and alerts on relevant IP(patent trademark etc) to R&D scientists for products/process and suggests remedialmeasures to deal with IP issues. Shilpa IPM team is involved in product selection activityto ensure that right products are selected for development.
Shilpa's IPM team continues to build its future pipeline ofcomplex products with an established robust portfolio selection process providing earlylaunch opportunities with intellectual property advantages.
Shilpa's strengths across various molecules including OralInjectable and complex differentiated products biologics lie in developing intellectualproperty in non-infringing processes and resolving complex chemistry challenges. The APIProcess development is focused in developing and transferring commercially viablenon-infringing and patentable novel API technologies. The development grid selection forAPI's is based on difficult-to-make API molecules and novel polymorphic forms ofcertain API's for creating value addition.
Shilpa's IPM Team is involved in patenting of new productsprocesses methods of use drug delivery systems and medical devices in India US &EU.
Highlights FY 2018-19:
In FY 18-19 Shilpa filed two ANDAs as First to File (FTF).
Shilpa's number of first to file products filings now stands at 5.
In FY 18-19 Shilpa and its group companies have filed 21 patentapplications taking the cumulative total to 268 patent applications in India and othercountries. Shilpa received grants for 2 patents during FY 18-19.
Future plan FY 2019-20:
Shilpa has plans for filing one more first-to-file ANDA.
Shilpa & it's Partners has plans for filing of two 505(b)(2)NDAs.
Shilpa plans to initiate Phase III trials of one biologic molecule.
REGULATORY FILINGS SUMMARY
|Particulars ||Filed in 2018-19 ||Cumulative Filed ||Status ||Planning to file in FY 2019-20 ||Remarks |
|API || || || || || |
|US DMF ||4 ||34 ||All DMFs available for reference to Generic Applications ||6 ||Scientific assessment completed for 18 DMFs |
|EDQM ||- ||12 ||All CEPs are available ||4 ||Current year 3 applications are already filed. |
|Formulation || || || || || |
|US ANDA ||3 ||17 ||8 Final approval ||13 ||Cummulative 5 ANDAs are filed as |
|(On Shilpa name) || || ||2 Tentative approval || ||"First to File" submission. |
| || || ||7 Under assessment || ||during FY 2018 following products are filed. |
| || || || || ||Erlotinib Tablets 25 mg 100 mg & 150 mg Pirfenidone Tablets Lenvatinib Capsules 4 mg and 10 mg 1 NDA is filed as 505(b)(2) and 1 ANDA is filed submission during Q1-FY19. |
|EU Filing ||2 ||16 ||7 Approved ||6 products ||Azacitidine for injection 25 mg/vial |
| || || ||9 Under Assessment || ||Erlotinib Tablets 25 mg 100 mg & 150 mg |
Regulatory Inspections and approvals.
In January 2018 two API facilities located at Raichur KarnatakaIndia were inspected by USFDA for PAI. EIR received on 29 June 2018.
Shilpa Medicare Ltd Biologics SBU
The past year witnessed the impact of biosimilars in the EU led bysignificant uptake in markets dominated by tendering systems led by biosimilar Anti-TNFsInfliximab Adalimumab and Etanercept. First impact of MAbs in the oncology markets isalso being noticed in the EU. The US market for biosimilars still remains under-catered toby biosimilars mainly on account of non-availability of automatic substitution andregulatory hurdles currently in place.
Opportunity and drivers - a) Your company has nearly completedsetting up of a world class biologics manufacturing facility for Monoclonal antibodies andbiologics in Dharwad Karnataka India. This facility is expected to start commercialoperations in March 2020. The cost of setup of this facility is probably the lowestanywhere. The incorporation of best-in-class technologies lowers the foot print of thefacility thereby reducing the operational expenses and is also environmentally friendly.b) Opportunity in regulated markets - This manufacturing facility coupled with verystrong R&D backing in the area will help the company integrate vertically inbiopharmaceuticals. Your company expects strong international partnerships in biosimilarsover the next 2-3 years to drive the business in regulated markets with the developmentand manufacturing from our site in Dharwad and Bangalore Karnataka India.
c) Opportunity in ROW markets - During the course of the year TheDepartment of Biotechnology (GoI) through its arm BIRAC and the World bank hasparticipated in the setting up of a GMP pilot facility in the same premises through agrant that partly funds the pilot facility. The strategic nature of this grant is expectedto help the company in being recognized in the international markets especially the Rowmarkets where WHO tenders are expected to play a important role in widening the impact ofthe biosimilars.
d) Your company is also expected to progress one of its biologics intoHuman Clinical Trials designated as a New Biological Entity (NBE) during the course of thecoming financial year. This is expected to be major revenue driver from 2022 onwards boththrough direct sales and licensing opportunities for the company.
Where we are
The company now has 6 biosimilars and one New Biological
Entity in its pipeline and is dominated by drugs catering to the autoimmune disorders and oncology segments with 4 of the top 10 biologics in its pipeline.The remaining are niche high margin opportunities catering to high unmet clinical needs.Your company is forging ahead with clinical trials on 1 nos MAb 1 nos fusion protein and1 nos NBE during the course of the coming nancial year. The combined market size of thesethree drugs today fi is about $30 billion. 3 more are expected to be added in the nextfinancial year to the Clinical trial pipeline with market size of about $13 billion. Therevenues from sales of the first commercialized biosimilar is expected to accrue from FY2021-22 onwards. The company has also filed 3 platform patents and is pursuing these inglobal markets. Your company will pursue an aggressive IP strategy to ring fence itsbiosimilar and NBE assets.
Shilpa's US Business Plan
Shilpa Pharma Inc (SPI) the US Operating company of Shilpa MedicareLimited was formed in May 2018 in order to take forward the company's plans in theUS. Under the direction of Adam Levitt its CEO. The US office was opened in October 2018with its first employees actively managing all aspects related to building and growing itsbusiness in the US. Both SPI and Shilpa Medicare Limited will be working closely inramping up commercial activities in the US for existing products by maintaining continuoussupply through our partners optimizing share through strategic customer programs andmaintaining proper
US customer exposure through optimized mix of partnerships. The nextwave of product approvals will consist of a mix of traditional oncology generic drugs andthose that are differentiated through smart manufacturing and formulation technology. SPIwill focus on making sure these new products are efficiently managed through the FDAregulatory process and that there is adequate sales and marketing of these products intohospitals and retail segments.
CHANGE IN NATURE OF BUSINESS:
During the year under review there was no change in the nature ofbusiness carried out by your Company.
Your Directors recommended a dividend of 100% i.e. र 1/- per equityshare of र 1/- each for the F.Y. 2018-19 absorbing an amount of र 987.86 Lakhs inclusiveof dividend distribution tax from the profits of FY 2018-19. The Dividend DistributionPolicy of the Company is set out as Annexure-10 and the same is uploaded on theCompany's website at https://www.vbshilpa.com/pdf/Dividend-Distribution-Policy.pdf.
The paid up share capital of your Company is र 81526898/- (RupeesEight Crore Fifteen Lakh Twenty Six Thousand Eight hundred and Ninety Eight) divided into81526898 equity shares of र 1/- each. There is no change in the share capital structureduring the period under review.
Pursuant to the provisions of section 124 (5) of the Companies Act2013 read with IEPF Rules the Company has transferred 18154 shares belonging to theshareholders who did not continuously claim dividend for seven years from the thefinancial year 2010-11 to IEPF Account the details of which are placed on the website ofthe Company
TRANSFER TO RESERVES:
During the financial year under review your Company has nottransferred any amount to the general reserve. dIRECTORS OR KEY MANAgERIAL PERSONNEL:
Mr. Naresh Patwari (DIN No. 03319397) Non-Executive Director willretire by rotation at the ensuing Annual General Meeting and being eligible offershimself for re-appointment. Further Ms. Sirisha Chintapalli (DIN: 08407008) and Mr. AmitChander (DIN: 02406965) have been co-opted onto the Board as Additional Directors (underIndependent category) w.e.f 01 April 2019 are proposed for appointment as Directors(Independent Category) at the ensuing Annual General Meeting. Mr. Ajeet Singh Karan (DIN:00183622) who was an Independent Director has resigned w.e.f 15 April 2019. Ms. NamrataBhutada (DIN: 05133614) Non-Executive Director has resigned w.e.f 27 May 2019.
Further Mr. Carlton Gerard Pereira (DIN: 00106962) and Mr.Narinder Pal Singh Shinh (DIN: 00023160) will cease to be the directors of the Companyw.e.f. 28 September 2019 as per terms of their appointment and provisions of section149(10) of the Companies Act 2013.
Mr. Kalakota Sharath Reddy (DIN: 03603460) who is now Vice-PresidentTechnical of the company is being proposed to be appointed as director as well as wholetime director for a period of 3 years w.e.f. 01 October 2019 with approval ofshareholders at the ensuing Annual General Meeting.
Mr. Vishnukanth Chaturbhuj Bhutada (DIN: 01243391) Managing Director isbeing proposed to be reappointed for a period of 5 years w.e.f. 01 October 2019 with theapproval of shareholder at the ensuing Annual General Meeting. Further Mr. MadhusudhanReddy Company Secretary has resigned and ceased to be as such w.e.f 4 April 2019.
STATEMENT OF dECLARATION gIVEN BY INdEPENdENT dIRECTORS UNdER SUB-SECTION (6) OF SECTION 149:
The Independent Directors have submitted their declaration ofIndependence as required under Section 149(7) of the Companies Act 2013 stating thatthey meet the criteria of independence as provided in Section 149(6) and Regulation 25 ofSEBI (Listing Obligations and Disclosure Requirements) Regulations 2015.
AUdITORS Statutory Auditors:
M/s. Brahmayya & Co. Chartered Accountants (Firm Registration No.000513S) were appointed at the 30th Annual General Meeting as the Statutory Auditors ofthe Company for a term of five years to hold office till the conclusion of the 35th AnnualGeneral Meeting of the Company. They have confirmed their eligibility for the F.Y. 2019-20under Section 141 of the Companies Act 2013 and the Rules framed thereunder.
The Board on the recommendation of the Audit Committee has appointedM/s. V.J. Talati & Co. Cost Accountants for conducting the audit of cost records ofvarious segments of the Company for the financial year 2019-20. As required under Section148 of the Companies Act 2013 and Rule 14 of the Companies (Audit and Auditors) Rules2014 a resolution is being placed at the ensuing AGM for ratification of remunerationpayable to said Cost Auditors.
M/s. P.S. Rao & Associates Practicing Company Secretaries wereappointed to conduct the Secretarial Audit of the Company for the financial year 2018-19as required under Section 204 of the Companies Act 2013 and Rule 9 framed thereunder. TheSecretarial Audit Report in form MR-3 for the financial year 2018-19 forms part of thisReport as Annexure - 9. The Board has appointed M/s P.S. Rao & Associates PracticingCompany Secretaries as Secretarial Auditors of the Company for the financial year2019-20.
Pursuant to the recommendation of the Audit Committee the Board hasappointed PKF Sridhar & Santhanam LLP as the Internal Auditors for the financial year2019-20.
COMMENTS BY THE BOARd ON EVERY QUALIFICATION RESERVATION OR AdVERSEREMARK OR dISCLAIMERS: Statutory Auditors:
As there is no qualification reservation or adverse remark in thereports given by the Statutory Auditors your directors need not provide any clarificationon the same.
As there is no qualification reservation or adverse remark in thereports given by the Secretarial Auditors your directors need not provide anyclarification on the same.
CONSERVATION OF ENERgY TECHNOLOgY ABSORPTION FOREIgN EXCHANgE OUTgO:
Information required under section 134(3)(m) of the Companies Act 2013read with Rule 8 of the Companies (Accounts) Rules 2014 is enclosed herewith as Annexure8.
RISK MANAgEMENT POLICY:
Pursuant to Regulation 21(4) of SEBI (LODR) Regulations 2015 theBoard of Directors has formulated and implemented a Risk Management Policy whichidentifies various elements of risks which in its opinion may threaten the existence ofthe Company and contains measures to mitigate the same. The Risk Management Policy of theCompany is posted on the Company's website: www.vbshilpa.com.
In compliance with the amendments made to SEBI (LODR) Regulations2015 the Board of Directors at its meeting held on 07 February 2019 constituted a RiskManagement Committee. The details of the said Committee are disclosed in the CorporateGovernance Report in Point No. 3(E).
In accordance with the provisions of Section 129 (3) of the CompaniesAct 2013 the Standalone and Consolidated Financial Statements drawn up in accordancewith the applicable Accounting Standards forms part of this Annual Report.
In accordance with Rule 8 (1) of Companies (Accounts) Rules 2014 aseparate statement containing the salient features of the financial statements ofSubsidiaries Associates and Joint Ventures in Form AOC-1 is annexed herewith asAnnexure - 5.
Further the annual accounts of all the subsidiary companies areavailable on the Company's website www.vbshilpa.com.
Annual accounts of the Subsidiary Companies and related detailedinformation will be available for inspection by the members at the registered office ofthe Company and will also be made available to the members upon request.
AdEQUACY OF INTERNAL FINANCIAL CONTROLS WITH REFERENCE TO THE FINANCIALSTATEMENTS:
The Company has an Internal Control System commensurate with the sizescale and complexity of its operations.
Various Audit Systems in the Company monitor and evaluate the efficacyand adequacy of the internal control system of the Company its compliance with operatingsystems accounting procedures and policies at all locations of the Company. Based on theaudit reports the units undertake corrective action in their respective areas andstrengthen the controls. Significant audit observations and corrective actions thereon arepresented to the
Audit Committee of the Board periodically.
The Board of Directors of the Company have adopted various policieslike Related Party Transactions policy Whistle Blower Policy Policy to determineMaterial Subsidiaries Code of Conduct for Regulating Monitoring and Reporting Insider
Trading and such other procedures for ensuring orderly and efficientconduct of its business for safeguarding its assets prevention and detection of fraudsand errors accuracy and completeness of the accounting records and timely preparation ofreliable financial information.
INFORMATION ABOUT SUBSIdIARIES ASSOCIATES & JOINT VENTURES
RAICHEM MEdICARE PRIVATE LIMITEd (RMPL) ASSOCIATE
During the year under review the Company has entered into a
Share Purchase Agreement (SPA) dated 12 July 2018 with Joint VenturePartner ICE S.p.A to disinvest entire shareholding held in the (RMPL). Accordinglyshares to the extent of 24% were transferred to ICE S.p.A. RMPL has applied to CentralGovernment through Foreign Investment Facilitation Portal to obtain approval as per theprovisions of Foreign Direct Investment Policy and the same is awaited. Since the Companyproposed to disinvest entire shareholding and entered into a firm arrangement RMPL hasbeen considered as a Joint Venture in Q1 F.Y. 2018-19 for consolidation purposes.Furthermore RMPL has been recognized as an Associate for the remaining three quartersduring F.Y. 2018-19 only for purpose of Companies Act 2013 and as assets held for salefor consolidation purpose.
SHILPA THERAPEUTICS PRIVATE LIMITEd (STPL) (WHOLLY OWNEd SUBSIdIARY)
During the year under review an amount of र 22.71 Cr was invested intoSTPL by way Loan and the amount was majorly to meet the project cost which is being set-upat Cherlapally Hyderabad Telangana India. Shilpa Therapeutics Pvt. Ltd. (formerly NUTherapeutics Pvt. Ltd.) situated at Cherlapally IDA Phase-III Hyderabad India aprogressive novel drug delivery company with an international outlook and is dedicated tothe development and commercialization of innovative and patient compliant novel drugdelivery systems such as fast disintegrating oral strips. Shilpa Therapeutics Pvt. Ltd.(formerly NU Therapeutics Pvt. Ltd.) is the first company to commercialize prescriptionproducts as oral thin strips/films in India.
Management team with proven leadership and experience in pharmaceuticalbusiness
Shilpa Therapeutics is being lead and promoted by highly motivatedprofessionals with extensive experience both in domestic and international pharmaceuticalarena and highly qualified management professionals with a vision to develop and marketinnovative and patient compliant novel drug delivery systems.
Products available in the domestic Market
Shilpa Therapeutics has obtained manufacturing and marketing licensefrom the Drugs Control General (India) New Delhi for the following products and theseproducts have also been launched in
India by well-established national pharmaceutical companies.
|Ondansetron Hydrochloride 2mg 4mg & 8mg Orally |
|Disintegrating Strips |
|Simethicone 62.5mg Orally Disintegrating Strips |
|Sildenafil Citrate 25mg & 50mg Orally |
|Disintegrating Strips |
|Tadalafil 5 mg 10mg & 20mg Orally |
|Disintegrating Strips |
|Methylcobalamin 1500 mcg Orally |
|Disintegrating Strips |
|Montelukast Sodium 4 mg 5 mg & 10 mg Orally |
|Disintegrating Strips |
|Melatonin 3 mg Orally Disintegrating Strips |
|Vitamin D3 2000 IU Orally Disintegrating Strips |
|Menthol Mouth Freshener in different flavour |
Strong IP in oral strips and sublingual films
Shilpa Therapeutics (formerly NU Therapeutics) has a strong IP profile.The company has been granted two patents on orally disintegrating strips. Also STPL hasfiled 10 additional patents.
INM TECHNOLOgIES PRIVATE LIMITEd (INMT) (SUBSIdIARY) Nanotechnologydivision
Innovative Nano & Micro Technologies Private Limited incorporatedwith a vision to serve the humanity using Nano technology products. Company drives withStrategic intent "Innovations for All Generations". INM Technologies mainlycontains: High-tech know-how competencies and expertise to meet industrial needs andstrengthen industrial competitiveness in Asia Europe and USA. INM has expertise in thefield of the Materials Engineering and service in advanced technology and productdevelopment with scale up process for the developed micro / nanomaterials. Based on ourresearch activity and our experience in the chemical technology materials science andengineering we develop and integrate nanostructured materials in the products of ourcustomers of various industrial sectors. INM has state-of-the-art facility for synthesischaracterization and analytical testing of nanotechnology based products trained manpowerfor process design & monitoring. INM Technologies R&D lab has been recognized byDSIR New Delhi.
LOBA FEINCHEMIE gmbH AUSTRIA (LOBA) (STEP dOWN SUBSIdIARY)
Loba is a wholly owned subsidiary held through the Zatortia
Holdings Limited (ZTL). Loba is an Austrian company and haspharmaceutical production facilities in Austria. During the year under review theoperations of Loba are satisfactory.
The main strategy of Loba is to enhance the focus on businessdevelopment and sales & marketing within the next business years to support sales andprofit growth.
Dr. Walter Erber took over the responsibility as CEO/ Managing directorfor LOBA from May 2016 and is leading and guiding and developing the company. With thestrategic vision to achieve sales of 10 million Euro with products of "highest"quality within the next 5 years an euphoric and challenging strategic goal is set forLoba.
Main business strategy of Loba is to enhance the focus in terms ofresources on business development and Sales & Marketing within the next business yearsto support sales and profit growth. The turnover of Loba already improved over the lastyear substantially and achieved in the budget year 2018-2019 7.05 million Euro compared to2017-2018 with 5.89 million Euro. This growth is a result of constant delivering productswith highest quality and focusing on business development.
In the years 2019-2020 and onwards projected sales will further developand will allow Loba to proceed with the expansion strategy in terms of production and interms of human resources.
Main key to success will be keeping the exceptional quality andmomentum for fine chemicals and especially the new orientation of Loba more towards a"Focus on API business" which as compared to the fine chemical business is moreprofitable. Existing API business will be supported and new fiAPIswillbeidentifiedtoexpandinthisparticular
To further support the Loba expansion strategy for the next years Lobahas developed an investment plan to update the facility the technical equipment and thecapacity of the factory and especially to invest more in human resources. Additionallybusiness develop initiatives to identify more customers and business partners will be amomentum for expansion. Last FDA inspection date between 13 August to 17 August 2018 EIRreceived date: 2 October 2018.
SHILPA PHARMA INC. USA (WHOLLY OWNEd SUBSIdIARY)
A wholly owned subsidiary formed in USA for the operations in the NorthAmerican countries particularly to foray into USA and
KOANNA HEALTHCARE LIMITEd UK (KOANNA UK) (WHOLLY OWNEd SUBSIdIARY)
Koanna UK is formed for the purpose of registration and to marketingof the drugs of the Company in European market.
KOANNA HEALTHCARE gmbH AUSTRIA (KOANNA AUSTRIA) (WHOLLY OWNEdSUBSIdIARY)
Koanaa Healthcare GmbH was founded in July 2016 as 100% subsidiary ofShilpa Medicare Limited. During the year 2018 Dr. Walter Erber resigned and Mr. R KSOMANI took over the responsibility as CEO/Managing director.
Koanna Austria has now changed its strategy from direct marketing ofproducts in Europe to out licensing model. This strategy could remain in force for fewyears for now till Koanna Austria does not have a size chunk of products in its basketgoing forward. Koanna Austria therefore decided to surrender its GMP license to GDP as itwill only focus on Out-Licensing of products and thus it is responsible to sell theirproducts through partners and distributor rather than directly marketing the products ontheir own. With the change in the focus Koanna Austria has started focusing onidentifying partners to whom the products could be out licensed. The basic essence ofKoanna Austria to be [positioned as "European Player" in the field of oncologywith the brand "Austrian Quality". The products will prove highest standards andquality and Koanna Austria will stand for Deliverability and Service for Patients andPhysicians through its partners and distributors.
In terms of geographical presence Koanna Austria is based in Austria(Fischamend) near Vienna and is offering products released from Austria for now to all itscustomers going forward.
Koanna Austria has already got the approval from the AGES inspection(Austrian pharmaceutical authority) as a wholesaler with the official right to sellpharmaceutical products. Imatinib was the first product which was launched in the highlycompetitive market in Germany and Austria in April/ May 2017 later it was launched inSweden Finland and UK. New territories such as CZECH and Romania have been alsoidentified for launch. Though we have received the approval for Bortezomib and Pemetrexedthey same is still not launched as there is patent restriction. By December 2019 it isexpected to launch Melphalan Busulfan Clofarabine and Irinotecan. With an appropriateregulatory strategy step by step more oncological products will be part of KoanaaHealthcare GmbHs portfolio.
The vision of Koanna Austria is to develop as a successful andreliable partner within the pharmaceutical domain.
REVA PHARMACHEM PRIVATE LIMITEd (RPPL) (ASSOCIATE)
The Company holds 33.33% shareholding in RPPL a joint venture companyformed with a marketing expert to market the drugs of the company in regulated markets.
REVA MEdICARE PRIVATE LIMITEd (RVMPL) (JOINT VENTURE)
The Company holds 50.01% shareholding in RMPL for the purpose ofdistribution and selling the Company's drugs.
The organization operations have commenced and it has expanded as perits vision set-up.
SRAVATHI AdVANCE PROCESS TECHNOLOgIES PRIVATE LIMITEd (SAPTPL)(SUBSIdIARY)
During the current financial year SAPTPL has been formed as asubsidiary to foray into the R&D activities of specific drug processes by ropingprominent technocrats. Your Company has come to an understanding with some prominenttechnocrats who have been working on specific technologies for quite some time under ajoint venture agreement. According to the joint venture agreement technocrats are entitledto hold to the extent of 35% of shares in the SAPTPL.
dETAILS OF THE COMPANIES WHICH HAVE BECOME OR CEASEd TO BESUBSIdIARIES JOINT VENTURES OR ASSOCIATE COMPANIES dURINg THE YEAR UNdER REVIEW:
The following instances taken place during the year under review needto be reported in accordance with Rule 8(5)(iv) of Companies (Accounts) Rules 2014:
Your Company has decided to make disinvestment in Raichem MedicarePrivate Limited erstwhile Joint venture and in furtherance of this 417962 equating to24% of the equity share capital and 18500000 preference shares of र 10/- each weresold to Joint Venture Partner ICE S.p.A.
Your Company has incorporated Shilpa Pharma Inc. as a wholly ownedsubsidiary in United States of America.
During the current FY 2019-20 your Company has formed Sravathi AdvanceProcess Technologies Private Limited to foray into the R&D activities of specific drugprocesses by roping prominent technocrats.
CORPORATE SOCIAL RESPONSIBILITY (CSR):
In terms with the provisions of Section 135 read with
Schedule VII to the Companies Act 2013 and the Companies (CorporateSocial Responsibility Policy) Rules 2014 a Corporate Social Responsibility Policy (CSRPolicy) indicating the activities to be undertaken by the Company as framed by theCorporate Social Responsibility Committee
(CSR Committee) has been adopted by the Board of Directors.Accordingly the Company has provided the CSR amount to Shilpa Foundation' apublic charitable trust taking up various social public causes of the society in andaround Raichur Karnataka and the activities of the said trust are covered under theSchedule VII of the Companies
Act 2013. A report on the CSR activities as required under Rule 8 ofthe Companies (Corporate Social Responsibility) Rules 2014 is enclosed herewith asAnnexure 4.
The CSR Policy of the Company and other details as required is areplaced on the Company's website at https://www.vbshilpa. com/pdf/CSR_Policy.pdf
NOMINATION ANd REMUNERATION POLICY:
A Committee of the Board named as "Nomination and RemunerationCommittee" has been constituted to comply with the provisions of Section 178Schedule IV of the Companies Act and Regulation 19 of SEBI (LODR) Regulations 2015. Ithas been entrusted with the task to recommend to the Company the prospective directors andKMP who possess the requisite skills and positive attributes as specified in theNomination and remuneration policy.
The Nomination and Remuneration Committee has formulated a Nominationand Remuneration Policy which recommends the guidelines based on which the annualperformance of the
Independent Director Board and individual directors is carried on bythe board.
Nomination and Remuneration Policy of the Company is placed on theCompany's website at https://www.vbshilpa.com/pdf/ NominationRemunerationPolicy.pdf
FORMAL ANNUAL EVALUATION MAdE BY THE BOARd OF ITS OWN PERFORMANCE ANdOF ITS COMMITTEES ANd INdIVIdUAL dIRECTORS:
The Board of Directors have carried out an annual evaluation of its ownperformance as well as that of its Committees and individual directors pursuant to theprovisions of the Sections
134 and 178 read with Schedule IV to the Companies Act 2013. Astructured questionnaire was prepared after taking into consideration inputs received fromthe directors covering various aspects of the Board's functioning such as adequacyof the composition of the Board and its Committees execution and performance of specificduties by the Board of Directors independence governance ethics and values attendanceand contribution at meetings etc.
The performances of the independent Directors were evaluated by theBoard after seeking inputs from all the directors on the effectiveness and contribution ofthe
The performance of the Committees was evaluated by the Board afterseeking inputs from the Committee members based on the criteria such as the composition ofCommittees effectiveness of Committee meetings etc.
The Board reviewed the performance of the individual
Directors on the basis of the criteria such as the contribution of theindividual director to the Board and Committee meetings like preparedness on the issuesto be discussed meaningful and constructive contribution and inputs in meetings etc. Inaddition the Chairman was also evaluated on the key aspects of his role.
In a separate meeting of Independent Directors performance ofNon-Independent Directors performance of the Board as a whole and performance of theChairman was evaluated taking into account the views of executive directors andnon-executive directors. The Independent Directors also assessed the quality quantity andtimeliness of flow of information between the Board and the management that is necessaryfor the Board to perform its functions reasonably and effectively. The same was discussedin the Board meeting that followed the meeting of the Independent Directors.
dIRECTORS' RESPONSIBILITY STATEMENT:
Pursuant to Section 134 (5) of the Companies Act 2013 YourDirectors' confirm that: i. In preparation of annual accounts for the financial yearended 31 March 2019 the applicable Accounting Standards have been followed along withproper explanation relating to material departures; ii. The Directors have selected suchaccounting policies and applied them consistently and made judgments and estimates thatare reasonable and prudent so as to give true and fair view of the state of affairs of theCompany at the end of the financial year ended 31 March 2019 and of the profit and lossof the Company for the year; iii The Directors have taken proper and sufficientcare fortheir maintenance of adequate accounting records in accordance with the provisions of theCompanies Act for safeguarding the assets of the Company and for preventing and detectingfraud and other irregularities; iv. The Directors had prepared the annual accounts on agoing concern' basis; v. The Directors had laid down internal financialcontrols to be followed by the Company and that such internal financial controls areadequate and were operating effectively; and vi. The Directors had devised proper systemsto ensure compliance with the provisions of all applicable laws and that such systems wereadequate and operating effectively.
EXTRACT OF ANNUAL RETURN:
In accordance with the provisions of Section 92 of the Companies Act2013 an extract of the Annual Return for the FY 2018-19 in the format as prescribed isenclosed as Annexure-1. The extract of the Annual Return is also hosted on theCompany's website at www.vbshilpa.com
OTHER dISCLOSURES: Board Meetings:
During the year under review 4 (Four) Board Meetings were For furtherdetails please refer Corporate Governance Report which forms part of this Annual Report.
Committees of Board:
Your Company has the following committees namely:
1. Audit Committee;
2. Nomination and Remuneration Committee;
3. Stakeholders Relationship Committee and
4. Corporate Social Responsibility Committee
5. Risk Management Committee
The constitutions of all the committees are as per the provisions ofthe Companies Act 2013 and SEBI (LODR) Regulations 2015. The details of the constitutionare mentioned in Corporate Governance Report which forms part of this Annual Report.
Corporate governance Report:
Regulation 15 of SEBI (LODR) Regulations 2015 is applicable to yourCompany and as such the details as specified in Schedule V(C) of SEBI (LODR) Regulations2015 with regard to Corporate Governance Report including Auditor's Certificate oncompliance with the code of Corporate Governance specified in Schedule V(E) of SEBI (LODR)Regulations 2015 and a certificate from Practicing Company Secretary as specified inSchedule V(C)(10)(i) of SEBI (LODR) 2015 forms part of the Annual report.
Management discussion and Analysis:
The Management Discussion and Analysis Report for the year under reviewas stipulated under Regulation 34 read with Schedule V (B) to the SEBI (LODR) Regulations2015 is annexed hereto and forms part of this Annual Report.
In pursuance to the provisions of Section 177(9) & (10) of theCompanies Act 2013 and Regulation 22 of SEBI (LODR) Regulations 2015 a Vigil Mechanismfor Directors and employees to report genuine concerns has been established. The Policy onvigil mechanism i.e. Whistle Blower Policy may be accessed on the Company's websiteat https://www. vbshilpa.com/pdf/Whistle_Blower_Policy.pdf. The policy provides for aframework and process for the employees and directors to report genuine concerns orgrievances about leak of Un-published price sensitive information (UPSI) illegal andunethical behaviour to the Chairman of the Audit
Remuneration ratio of the directors/Key Managerial Personnel/Employees:
Statement showing disclosures significant Related Party Transactionswith pertaining to remuneration and other details as required under Section 197(12) of theCompanies Act 2013 read with Rule 5(1) of the Companies (Appointment and Remuneration ofManagerial Personnel) Rules 2014 is enclosed herewith as Annexure 2.
Particulars of Employees:
Statement of employees as required under Rule 5(2) of the
Companies (Appointment and Remuneration of Managerial Personnel) Rules2014 is enclosed as Annexure 3 to the Board's Report.
dISCLOSURE UNdER SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTIONPROHIBITION ANd REdRESSAL) ACT 2013:
Your Company has always provided a safe and harassment free workplaceto every individual working in its premises through various policies and practices. YourCompany always endeavors to create an environment that is free from discrimination andharassment including sexual harassment. Your Company has been actively involved inensuring that the clients and all the employees are aware of the provisions of the POSHAct 2013 and the rights available to them there under.
Your Company has in place an Anti-Sexual Harassment Policy in line withthe requirements of the Sexual Harassment of Women at workplace (Prevention Prohibitionand Redressal) Act 2013. An Internal Complaints Committee has been set up to redress thecomplaints received regarding sexual harassment.
Your Company did not receive any complaints during the period underreview.
PARTICULARS OF LOANS gUARANTEES OR INVESTMENTS:
Details of the loans granted guarantees given securities provided andinvestments made during the year under review as covered under Section 186 of theCompanies Act 2013 are detailed in the notes to the financial statements which may beread as a part of this report.
During the year under review your Company has not accepted anydeposits within the meaning of Section 73 of the Companies Act 2013 read with theCompanies (Acceptance of Deposits) Rules 2014. position
RELATEd PARTY TRANSACTIONS:
Related Party Transactions entered into during the financial statementsyear under review are disclosed in Note No. 45 of the
Financial Statements. These transactions were at an arm's lengthbasis and in the ordinary course of business. There werenomaterially the Company'spromoters directors management or their relatives which could have had a potentialconflict with the interests of the Company. Form AOC-2 containing a note on the aforesaidRelated Party Transactions is enclosed herewith as Annexure - 6.
Related Party disclosures as per Schedule V of SEBI (LODR)Regulations 2015 are enclosed herewith as Annexure-7.
The policy on Related Party Transactions as approved by the Board maybe accessed on the Company's website- https://www.vbshilpa.com/pdf/related_party_policy.pdf .
BUSINESS RESPONSIBILITY REPORT:
Pursuant to Clause 34(2)(f) of the SEBI (LODR) Regulations 2015Business Responsibility Report being applicable to the Company forms part of the BoardReport as Annexure - 10.
1. Your Directors state that no disclosure or reporting is required inrespect of the following items as there were no transactions on these items during theyear under review:
(i) Issue of equity shares with differential rights as to dividendvoting or otherwise.
(ii) Issue of shares (including sweat equity shares) to employees ofthe Company under any scheme.
(iii) Neither the Managing Director nor the Whole-time
Director of the Company received any remuneration or commissionfrom any of its subsidiaries.
(iv) No significant or material orders were passed by the Regulators orCourts or Tribunals which impact the going concern status and Company's operations infuture.
(v) No frauds were reported by the auditors during the year underreview.
(vi) There are no material changes and commitments of the Companyaffecting the financial year of the occurred between the end of the financial relate andCompany to which the financial the date of the report.
2. In accordance with the provisions of Section 148 (1) of theCompanies Act 2013 read with the Rules framed thereunder the Company has maintained costaccounts and records for the financial year 2018-19.
3. The Company has complied with Secretarial Standards i.e. SS-1 andSS-2 relating to Meetings of the Board of Directors and General Meetings respectivelyissued by the Institute of Company Secretaries of India and notified by the Ministry ofCorporate Affairs.
Your Directors wish to express their gratitude to the Central and StateGovernmentsinvestorsanalystsfinancialinstitutions banks business associates andcustomers the medical profession distributors and suppliers for their whole- heartedsupport. Your
Directors commend all the employees of your Company for their continueddedication significant contributions hard work and commitment.
| ||For and on behalf of the Board of Directors |
| ||Sd/- |
| ||Omprakash Inani |
|Place: Raichur ||Chairman |
|Date: 13 August 2019 ||DIN: 01301385 |