Your Directors have pleasure in presenting before you the 29th Annual Report of theCompany together with Audited Statement of Accounts for the year ended 31st March 2017.
FINANCIAL SUMMERY: (INR In lakh)
| || |
|Particulars || || |
| ||2016-17 ||2015-16 |
|Gross Sales ||41455.68 ||58246.88 |
|Net Sales ||39830.15 ||55607.10 |
|Other Operating Income ||3952.80 ||4712.24 |
|Net Revenue from ||43782.95 ||60319.34 |
|Operations || || |
|Other Income ||142.71 ||360.79 |
|EBIDTA ||7612.12 ||9280.35 |
|Finance Charges ||1538.66 ||1709.81 |
|Depreciation ||1917.72 ||1943.30 |
|Profit Before Tax ||4155.73 ||5627.24 |
|Taxation ||603.31 ||1463.32 |
|Profit After Tax ||3552.42 ||4163.92 |
|Appropriations: || || |
|Proposed Dividend ||169.30 ||169.30 |
|Dividend Tax ||34.47 ||34.47 |
|General Reserve ||1000.00 ||1000.00 |
|Earnings per share - Basic/ ||4.20 ||4.92 |
|Diluted || || |
STATE OF COMPANY AFFAIR'S
In Financial & Production terms
During the year 2016-17 the Company had achieved production of 594 M.T. of APIs andtheir Intermediates in comparison with 2375 M.T for the FY 2015-16 .The net sales of theCompany for the FY 2016-17 has reached 39830.15 lakhs as against 55607.10 lakhs for theFY 2015-16. EPS has reached to Rs. 4.20 in the FY 2016-17 as against Rs. 4.92 in the FY2015-16. The main reason for decline in production and turnover is on account of transferof demerged units to M/s. SMS Lifesciences India Limited in pursuance of Scheme ofArrangement vide NCLT Order dated 15th May 2017.
Subsidiaries and Associates:
Your company is having one associate company i.e. "VKT Pharma PrivateLimited" and is under the same management. Your Company is holding 40.26% equityshares in the said associate company and the share of loss for your company forthefinancial year 2016-17 was Rs.7471033/-. SMS Lifesciences India Limited is the whollyowned subsidiary of your Company during the Financial Year 2016-17. During thefinancialyear a scheme of arrangement between SMS Pharmaceuticals Limited and SMS LifesciencesIndia Limited and their respective shareholders and creditors. The scheme was approved bythe National Company Law Tribunal Hyderabad as on 15th May 2017 whereas the appointeddate for the scheme is 01st April 2016.
The consolidated financial statements had been prepared as per Accounting Standard (AS)23
"Accounting for Investment in Associates in Consolidated FinancialStatements" specified under Section 133 of Companies Act 2013 for considering thefinancials of Associate Company. The required form as per the provisions of the Sec.129(3) read with rule 5 of Companies (Accounts) Rules 2014 viz. AOC-1' is form partof this report as Annexure 1'.
Change in Nature of Business
During the year under review there is no change in Nature of Business. A detailedreport on the same viz. Management Analysis and Discussion Report' is form part ofthis report as Annexure 2'
During the year under review the company had neither issued fresh equity/sweat equityshares nor any debentures Employees Stock Option Scheme or any share based employeebenefits. A report on the same viz. Equity Buildup Report' forms part of this reportas Annexure 3'
TRANSFER TO RESERVES:
Your Company has transferred an amount Rs. 1000 Lakhs (previous year Rs. 1000 Lakhs)to General Reserve out of the amount available for appropriations.
Your Directors have pleasure in recommending the dividend of Re. 0.20/- (i.e. 20%) perequity share of Re. 1/- face value aggregating to Rs. 16930406/- which shall be paidwithin 30 days after the conclusion of the Annual General meeting subject to the approvalof the shareholders of the Company.
DE-MERGER OF SEMI REGULATED UNITS:
The Scheme of arrangement between SMS Pharmaceuticals Limited (Demerged Company) withSMS Lifesciences India Limited (Resulting Company) and their respective Shareholders andCreditors. The Scheme of Arrangement ("Demerger") provides for the demerger ofthe Semi Regulated Units No. I IV and V along with premises situated at IndustrialEstate Santhnagar Hyderabad; Industrial Development Area Jeedimetla Hyderabad ;Premises bearing Flat No.417 Nilgiri Aditya Enclave Ameerpet Hyderabad; vacant landadmeasuring Ac 19.00 cents situated at Pharma City Parawada Visakhapatnam andInvestments relating to Semi Regulated Units ("Demerged Undertaking") of SMSPharmaceuticals Limited the "Demerged Company" into SMS Lifesciences IndiaLimited the "Resulting Company as specified in the scheme.
The scheme was approved by the Hon'ble National Company Law Tribunal Hyderabad Benchvide its Order No. C.P(CAA) No.7/230/232/HDB/2017 dated 15th May 2017. The effective dateof the Scheme is 17th May 2017. SMS Lifesciences India Limited (Resulting Company) inaccordance with the approved Scheme of Arrangement has allotted 3023287 equity shares ofRs.10/- each to the shareholders of your company by fixing Record Date as on 23rd June2017. Pursuant to the approved Scheme the Resulting Company shares will be listed onStock Exchanges viz. BSE & NSE where the equity shares of SMS Pharmaceuticals Limitedare listed.
DIRECTORS' RESPONSIBILITY STATEMENT:
Pursuant to the provisions of Section 134(3)(c) of the Companies Act 2013 as amendedthe Board of Directors confirm that:
1. In preparation of the Financial Statements for the year ended 31st March 2017 theapplicable accounting standards had been followed along with proper explanation relatingto material departures if any.
2. They had selected such accounting policies as notified & modified by ICAI andapplied them consistently and made judgments and estimates that are reasonable and prudentso as to give a true and fair view of the state of affairs of the company at the end ofthefinancial year and of the profit and loss of the company for that period;
3. They had taken proper and sufficient care for the maintenance of adequate accountingrecords in accordance with the provisions of the Companies Act 2013 as amended form timeto time for safeguarding the assets of the company and for preventing and detecting fraudand other irregularities;
4. The Annual Accounts had been prepared on going concern basis.
5. The company has developed an effective mechanism for internalfinancial controls ithas been followed by the Company consistently; such internal fi nancial controls areadequate and operating effectively.
6. They had devised proper systems to ensure compliance with the provisions of allapplicable laws and that such systems were adequate and operating effectively.
LOANS GUARANTEES AND INVESTMENTS:
Your Company had made investment in its associate company viz. M/s. VKT Pharma PrivateLimited for its business purpose. During the year under review your Company had acquired784100 equity shares of face value of Rs.10/- each in the said associate at an averageprice of Rs.200.81 The Particulars of loans/advances given are provided in the StandaloneFinancial Statements. Please refer (Note no. 12.1and 16.1 of the Standalone FinancialStatements. The company is maintaining the details of investments made during the year inStatutory Form MBP 2. The details of loans / advances given and investments madeduring thefinancial year ended on 31st March 2017 are furnished as Annexure4'.
RELATED PARTY TRANSACTIONS:
All contracts/arrangements/transactions entered by the Company during thefinancial year2016-17 with related parties were in the ordinary course of business and on an arm'slength basis and are in compliance with the provisions of the Companies Act and the SEBI(Listing Obligation & Disclosure Requirement) Regulation 2015. There are nomaterially significant related party transactions made by the company with PromotersDirectors and Key Managerial Personnel etc. which may have potential confl ict with theinterest of the Company. All related party transactions are presented to the AuditCommittee on quarterly basis and also placed before the aboard. A statement of all RelatedParty Transactions is being presented before the Audit Committee on Quarterly basisspecifying the nature value and terms and conditions of the transactions. The Company'sPolicy on Related Party Transactions is uploaded on the Company's website at the web linkhttp://www. smspharma.com/investors/downloads/policy-on-related-party-transactions.pdf .
The particulars of contracts or arrangements entered into by the Company with relatedparties referred to in Section 188(1) are kept by the Company in Statutory Form AOC-2.Further details required to disclose as per Accounting Standard18 (as issued &modified by ICAI) form part of the notes to thefinancial statements provided in the annualreport. The required form viz. AOC-2' is form part of this report as Annexure5'.
STATE OF BOARD AFFAIRS
Board of Directors and Key Managerial Personnel:
Your company is maintaining an optimum combination of Independent and Executivedirectors in the Board who have vast experience in pharma and other relevant fields. Mr.TVVSN Murthy has resigned on 30th May 2017 as Whole Time Director designated as ViceChairman and Joint Managing Director. However he will continue as a Non-ExecutiveDirector of the Company.
M/s. Gulf Pharmaceutical Industries has withdrawn their Nominee Director Mr. AymanSahli form the Board of Directors of the Company w.e.f 30th May 2017 The board hadappointed Mr. Thirumalesh Tumma in place of Mr. Saurav Roy on 17th October 2016 anddesignated him as Company Secretary and Compliance Officer of the Company pursuant toprovisions of Section 203 of the Companies Act 2013 and SEBI (LODR) Regulations 2015.Mr. Saurav Roy resigned as Company Secretary and Compliance Officer w.e.f 15th October2017. Mr. N.Rajendra Prasad Chief Financial Officer (CFO) of the Company has resignedfrom the Company w.e.f. 30th May 2017. Further the Board has affirmed the Compliance ofthe Code of Conduct as applicable on the Directors and Senior Management Personnel.
As per the Articles of Association of the Company all the Executive Directors arecompulsorily liable to retire by rotation. Accordingly Mr. Ramesh Babu Potluri whole timedirector designated as Chairman and Managing Director is liable to retire by rotation atthe ensuing Annual General Meeting scheduled on 27th September 2017 and being eligibleseeks reappointment. A brief profile of directors seeking re-appointment are given alongwith the AGM Notice for the reference of the shareholders.
Persuant to Section 149 (7) of the Companies Act 2013 each independent director hadconfirmed to the Company that he/she meets the criteria of Independence laid down inSection 149 (6) of the Companies Act 2013 and Regulation 25(1) of SEBI (ListingObligations and Disclosure Requirements) Regulations 2015.
All the independent Directors of the Company have given declarations under sub-section(6) of Section 149 of the Act and the same had been considered and taken on record by theBoard.
Your company had conducted a separate Meeting of Independent Directors on 25thFebruary 2017 in which they had evaluated the performance of
Executive directors and Non- Executive/Nominee Director's. Further in the BoardMeeting held on 30th May 2017 the Board had evaluated the performance of IndependentDirectors and their contribution in the Board. The evaluation had been made on specifiedstandards.
Risk Management Policy
In accordance with the provisions of the Regulation 21 of SEBI (Listing Obligations andDisclosure Requirements) Regulations 2015 your Company is not required to form theseparate Risk Management Committee and accordingly Risk Management Policy is also notapplicable to the Company.
The Company has adequate internal control systems and procedures to mitigatethefinancial risk (if any) arise in near future. The Risk Management procedure will bereviewed by the Audit Committee and the Board of Directors on a Quarterly basis.
KMP Appointment & Remuneration Policy
The Company has a Nomination and Remuneration Committee Charter ' the Nominationand Remuneration Committee abide by the said Charter for appointing any Key ManagerialPersons (KMP). During the year under review the Committee had recommended for appointmentof Company Secretary. Appointment of any KMP is made by the Nomination and RemunerationCommittee in commensuration of the requirement of the position and experience of thecandidate.
Composition & Number of Meetings of the Board and Audit Committee:
During the year under review the Board of Directors met Five times. The dates on whichthe Board Meetings were held on 14th May 2016 10th August 2016 13th August 2016(Adjourned Meeting) 5th November 2016 11th February 2017. A detailed report on the abovementioned along with reporting required under Sec. 177(8) and 177(10) of the CompaniesAct 2013 and composition of various committees formed part of the report viz.Corporate Governance Report' is form part of this report as Annexure 6'
Extract of Annual Return:
In accordance with the provisions of the Companies Act 2013 and Rule 12 of Companies(Management and Administration) Rules 2014 the extract of Annual Return is prepared inprescribed form i.e. Form MGT-9'. The said form part of this report asAnnexure 7'
Your Company had not accepted/invited any deposits from the public during the yearunder review. As such no amount of principal or interest was outstanding on the date ofthe Balance Sheet.
CORPORATE SOCIAL RESPONSIBILITY
Persuant to Section 135 and ScheduleVII of the Companies Act 2013 and Companies(Corporate Social Responsibility Policy) Rules 2014 your company had formulated aCorporate Social Responsibility Policy (CSR Policy). The said policy contains the scope ofCSR Expenditure and provides guidance for way forward for expending the same. Thecomposition of CSR committee and other details mentioned under Corporate GovernanceReport' forms part of this report as Annexure 6' As per the provisions of theSection 135 of the Act the average net profits of the company during the preceding threeyears stands as Rs. 5221.15 lakhs hence the company is required to spend a sum of Rs.104.22 lakhs towards CSR Expenditure in FY 2016-17. The details of it are mentioned underCSR Expenditure' in statutory format is form part of this report asAnnexure-8'.
PARTICULARS OF EMPLOYEES:
The information required under Section 197 (12) of the Companies Act 2013 read withRule 5 (1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules2014 is mentioned under Employees Remuneration Report' is form part of this reportas Annexure 9'. None of the employees is receiving salary of more than Rs. 5Lakh per month.
CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO:
The information required under Section 134(3)(m) of the Companies Act 2013 read withthe applicable Rules is form part of this report as Annexure- 10'.
AUDITORS: Statutory Auditors
The shareholders at their 28th Annual General Meeting (AGM) held on 30-09-2016approved the reappointment of M/s. Rambabu& Co. Chartered Accountants (ICAI FirmRegistration No. 002976S) as Statutory Auditors of the Company to hold the office tillthe conclusion of the 29th Annual General Meeting. The Audit Committee of the Board ofDirectors recommended and the Board has appointed M/s. Suryanarayana & SureshChartered Accountants as Statutory Auditors of the Company in place of M/s. Rambabu&Co. for a period of five years i.e. to hold office from the conclusion of 29th AnnualGeneral Meeting (AGM) till the conclusion of the 34th Annual General Meeting of theCompany to be held in the year 2022 (subject to ratification of the appointment by themembers at every Annual General Meeting held after this Annual General Meeting if requiredas per the provisions of Companies Act 2013).
M/s. Suryanarayana & Suresh Chartered Accountants are eligible for appointment andhave confirmed their eligibility under Section 141 of the Companies Act 2013 read withRule 4 of the Companies (Audit & Auditors) Rules 2014. They have consented to thesaid appointment. They have further confirmed that they are not disqualified to beappointed as statutory auditor.
Pursuant to Section 204 of the Companies Act 2013 and the Companies (Appointment andRemuneration of Managerial Personnel) Rules 2014 M/s. SVVS & Associates CompanySecretaries LLP were appointed to conduct Secretarial Audit of the Company for theFinancial Year ended on 31st March 2017. Secretarial Audit Report for thefinancial year2016-17 forms part of this report as Annexure-11'
Pursuant to Section 148 of the Companies Act 2013 read with the Companies (Audit andAuditors) Rules 2014 and the Companies (Cost Records & Audit) Amendment Rules 2014the Company maintains Cost Records Your Board has on the recommendations of the AuditCommittee appointed Sri K.S.N. Sarma having Registration No.102145 and Membership
No.6875 as Cost Auditor of the Company for thefinancial year 2017-18. The provisionsalso require that the remuneration of the Cost Auditor is to be approved by theshareholders as mentioned under AGM Notice under item no. 6. As a matter of record theCost Audit Report for the year 2015-16 was filed with the Central Government within theprescribed time limit and for the year 2016-17 will be fi led within the stipulated time.
INTERNAL FINANCIAL CONTROL SYSTEMS AND THEIR ADEQUACY:
Your Company has laid down set of standards which enables to implement internalfinancial control across the organization and ensure that the same are adequate andoperating effectively (1) To provide reasonable assurance that: transactions are executedin conformity with generally accepted accounting principles/standards or any othercriteria applicable to such statements (2) to maintain accountability for assets; accessto assets is permitted only in accordance with management's general or specificauthorization and the maintenance of the records that in reasonable detail accurately andfairly refl ect the transactions and dispositions of the assets of the company (3)provide reasonable assurance regarding prevention or timely detection of unauthorizedacquisition use or disposition of the assets that could have a material effect on theFinancial Statements.
WHISTEL BLOWER POLICY/VIGIL MECHANISM
The Company has established a mechanism trough which all the stakeholders can reportthe suspected frauds and genuine grievances to the appropriate authority. The whistleBlower Policy which has been approved by the Board of Directors of the Company has beenuploaded on the Company's website of the company (http://www.smspharma.com/investors/downloads/whistle-blower-protection-policy.pdf). During the year under review the Companyhas not received any complaint(s) under this policy.
BOARD'S RESPONSE ON AUDITORS QUALIFICATION RESERVATION OR ADVERSE REMARK OR DISCLAIMERMADE: Qualifications by the Secretarial Auditors:
During the period under review the Company has complied with the provisions of the ActRules
Regulations Guidelines Standards etc. as mentioned above except the provisions inrelation to Section 135 of the Companies Act 2013 relating to the Corporate SocialResponsibility (CSR). The Company has failed to spend at least 2% of the average netprofits of the Company made during the three immediately precedingfinancial years inpursuance of its Corporate Social Responsibility Policy.
The Company's CSR liability for the FY 2016-17 is Rs. 104.20 Lakhs. During the year theCompany has spent an amount of Rs.29.00 Lakhs on various activities covered under CSRRules. The company could not able to spend the total liability amount with in thefinancialyear. However the company has initiated for construction of a school building health anddrinking water facilities and the balance amount will spent in due course.
There are no other qualifications reservations or adverse remarks made by theStatutory Auditor Cost Auditor in their report.
REPORTING ON SEXUAL HARRASEMENT:
The Company has zero tolerance for sexual harassment at workplace and has adopted a"Policy on Prevention Prohibition and Redressal of Sexual Harassment of Women atWorkplace" in line with the provisions of the Sexual Harassment of Women at Workplace(Prevention Prohibition and Redressal) Act 2013 and the Rules thereunder for preventionand redressal of complaints of sexual harassment at workplace. The Company is committedfor providing equal opportunities without regard to their race caste sex religioncolour nationality disability etc. All women associates (permanent temporarycontractual and trainees) as well as any women visiting the Company's office premises orwomen service providers are covered under this policy. All employees are treated withdignity with a view to maintain a work environment free of sexual harassment whetherphysical verbal or psychological. During the year under review the Company has notreceived any complaints on sexual harassments. No workshops were carried out againstsexual harassment but awareness program carried out at each manufacturing unit andcorporate office for women employees' regarding this policy and the said policy is alsodisplayed on the website of the Company.
DETAILS OF SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS ORTRIBUNALS IMPACTING THE GOING CONCERN STATUS AND COMPANY'S OPERATIONS IN FUTURE:
No significant and material orders passed by the regulators or courts or tribunalsimpacting the going concern status and Company's operations in future. Further Nomaterial Changes and commitments which affecting thefinancial position of the Company.
Your Directors place on record sincere appreciation for the significant contributionmade by the employees through their dedication hard work and commitments. Your Directorsgratefully acknowledge and appreciate the support extended by the Banks FinancialInstitutions various government authorities customers and also shareholders of theCompany for their continued support and confidence reposed in the Company.
By the order of the Board
Ramesh Babu Potluri
Chairman and Managing Director (DIN:00166381)
Place: Hyderabad Date: 11-08-2017
(Pursuant to first proviso to sub-section (3) of section 129 read with rule 5 ofCompanies (Accounts) Rules 2014)
Statement containing salient features of thefinancial statement of subsidiaries/associate companies/joint ventures
Part "A": Subsidiaries
(Information in respect of each subsidiary to be presented with amounts in Rs. inLakhs)
|Particulars ||Details |
|1. * Name of the subsidiary ||SMS Lifesciences India Limited |
|2. Reporting period for the subsidiary concerned if different from the holding company's reporting period ||No |
|Reporting currency and Exchange rate as on the last date of the || |
|3. relevant Financial year in the case of foreign subsidiaries ||Not Applicable |
|4. Share capital ||1.00 |
|5. Reserves & surplus ||8082.36 |
|6. Total assets ||17681.61 |
|7. Total Liabilities ||17681.61 |
|8. Investments ||4.11 |
|9. Turnover ||21430.28 |
|10. Profit before taxation ||1813.40 |
|11. Provision for taxation ||548.66 |
|12. Profit after taxation ||1264.74 |
|13. Proposed Dividend ||0.00 |
|14. Extend of Holding % ||100.00 |
*SMS Lifesciences India Limited ceased to be wholly owned subsidiary of the companypursuant to the Scheme of Arrangement.
Part "B": Associates and Joint Ventures
Statement pursuant to Section 129 (3) of the Companies Act 2013 related to AssociateCompanies and Joint Ventures
|Name of associates/Joint Ventures ||VKT Pharma Private Limited |
|1 Latest audited Balance Sheet Date ||31.03.2017 |
|Shares of Associate/Joint Ventures held by the || |
|2 company on the year end || |
|No. ||34935 00 Equity Shares of Rs.10/- each. |
|Amount of Investment in Associates/Joint || |
| ||Rs.3697.38 Lakhs |
|Venture || |
|Extend of Holding% ||40.26 |
|3 Description of how there is significant infl uence ||Based on the percentage of holding over these |
| ||investees. |
|4 The associate is consolidated ||Financial Statement Consolidated for FY 2016-17 |
|5 Net worth attributable to shareholding as per latest audited Balance Sheet ||2081.02 Lakhs |
|6 Profit/Loss for the year || |
|i. Considered in Consolidation ||(713.18) Lakhs |
|ii. Not Considered in Consolidation || |
By the order of the Board
Ramesh Babu Potluri
Chairman and Managing Director (DIN:00166381)
Place: Hyderabad Date: 11-08-2017