The Members of
SMS Pharmaceuticals Limited.
Your Directors are please to present the 31st Annual Report of SMS PharmaceuticalsLimited ("The Company") along with the audited financial statements for thefinancial year ended 31st March 2019. The Consolidated performance of the Company hasbeen referred to wherever required.
|Particulars || |
| ||2018-19 ||2017-18 |
|Gross Sales ||44813.56 ||43659.61 |
|Net Sales ||41076.28 ||40080.29 |
|Other Operating Income ||308.73 ||216.06 |
|Net Revenue from Operations ||46491.08 ||46486.33 |
|Other Income ||340.31 ||238.79 |
|EBIDTA ||9350.05 ||9572.76 |
|Finance Charges ||1187.34 ||1547.95 |
|Depreciation ||1927.28 ||1989.98 |
|Profit Before Tax ||6235.43 ||6034.82 |
|Taxation ||2090.08 ||1989.39 |
|Profit After Tax ||4145.35 ||4045.43 |
|Earnings per share - Basic/Diluted ||4.90 ||4.78 |
STATE OF COMPANY AFFAIRS
In Financial & Production terms
During the year 2018-19 the Company had achieved production of 501 M.T of APIs andtheir Intermediates in comparison with 551 M.T for the Ysar 2017-18.The net sales of theCompany for the Year 2018-19 have reached 40076.29 lakhs as against 40080 lakhs for theYsar 201718. The Company has achieved an EPS of Rs. 4.90 in the Year 2018-19 as againstRs. 4.78 in the Year 2017-18.
Subsidiaries and Associates:
Your company is having one associate company i.e. "VKT Pharma PrivateLimited". Your Company is holding 42.62% equity shares in the said associate companyand the share of Profit / loss for your company for the financial year 2018-19 was '1042.52.
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 ofCompanies (Accounts) Rules 2014 i.e. AOC-I forms part of the Report as Annexure - 1.
Change in Nature of Business
There is no change in Nature of Business.
Management Discussion & Analysis
A detailed report on the same viz. Management Analysis and Discussion Report' isform part of this 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 ' 1000 Lakhs (previous year ' 1000 Lakhs) toGeneral Reserve out of the amount available for appropriations.
Your Directors have pleasure in recommending the dividend of Re. 0.25/ (i.e. 25%) perequity share of Re. 1/- face value aggregating to ' 21163007.50/- which shall be paidwithin 30 days after the conclusion of the Annual General meeting subject to the approvalof the shareholders of the Company.
STRUCTURE OF THE BOARD
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. Asper the Articles of Association of the Company all the Executive Directors arecompulsorily liable to retire by rotation. Accordingly Sri. Ramesh Babu Potluri is liableto retire by rotation at the ensuing Annual General Meeting scheduled on 30thSeptember 2019 and being eligible seeks reappointment. A brief profile of directorsand managers seeking re-appointment are given along with the AGM Notice for the referenceof the shareholders.
In accordance with the provisions of the Section 149 (7) of the Companies Act 2013each independent director had confirmed to the Company that he/she meets the criteria ofIndependence laid down in the Section 149 (6) of the Companies Act 2013 and Regulation25(1) of SEBI (Listing Obligations 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 26th May2018 in which they had evaluated the performance of Executive directors and Non-Executive/Nominee Director's. Further in the Board Meeting held on 28th July 2018 theBoard had evaluated the performance of Independent Directors and their contribution in theBoard. The evaluation had been made on specified standards.
The Board of Directors has carried out an annual evaluation of its own performanceboard committees and individual Directors pursuant to applicable provisions of the Act andthe corporate governance requirements as prescribed by applicable regulations of ListingRegulations 2015.
The performance of the board was evaluated by the board after seeking inputs from allthe Directors present in the meeting on the basis of criteria such as the boardcomposition and structure effectiveness of board processes information and functioningetc. The Nomination and Remuneration Committee had evaluated the performance of individualDirectors on the basis of criteria such as the contribution of the individual Director tothe board and committee meetings like preparedness on the issues to be discussedmeaningful and constructive contribution and inputs in meetings etc.
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 mitigate thefinancial 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 Nomination and Remuneration Committee has the criteria for appointing any KeyManagerial Person (KMP) and nominating directors on the Board. During the year underreview the Committee had recommended the appointment of Sri. Sarvepalli Srinivas as anAdditional Director on 12thAugust 2019 in the category of Independent Director subject tothe approval of the members at the ensuingAnnual General Meeting of the Company. Theappointment of any KMP is made by the Nomination and Remuneration Committee based on therequirement of the position and experience and skill sets of the candidate.
Composition & Number of Meetings of the Board and Audit Committee:
During the year under review the Board of Directors met four times. The dates on whichthe Board Meetings were held on 26th May 2018 28th July 2018 10th November 2018 and14th February 2019. The Audit Committee members met 4 times. The dates on which the AuditCommittee meetings were held on 26th May 2018 28th July 2018 10th November 2018 and14th February 2019. A detailed report on the above mentioned along with reportingrequired under Sec. 177(8) and 177(10) of the Companies Act 2013 and composition ofvarious committees formed part of the report viz. Corporate Governance Report' formspart of this report.
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' as Annexure - 7.
A separate section on Corporate Governance practices followed by your Company asstipulated under Schedule V of the SEBI (LODR) Regulations 2015 is enclosed forming partof this report. The certificate of M/s. CSB Associates Company Secretaries with regardto compliance of conditions of corporate governance as stipulated under the SEBI (LODR)Regulations 2015 is annexed to the Report on Corporate Governance.
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.
LOANS GUARANTEES AND INVESTMENTS:
Your Company had made investment in its associate company viz. M/s. VKT Pharma PrivateLimited for its business purpose. The Company holds 3850165 Equity shares of Rs 10/-each in VKT Pharma Private Limited as on 31st March 2019 as investments.
The Particulars of loans/advances given are provided in the Standalone FinancialStatements.
The company is maintaining the details of investments made during the year in StatutoryForm MBP - 2. The details of loans / advances given and investments made during thefinancial year ended on 31st March 2019 are provided as Annexure - 4.
RELATED PARTY TRANSACTIONS:
All contracts/arrangements/transactions entered by the Company during the financialyear 2018-19 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 conflict with theinterest of the Company. All related party transactions are presented to the AuditCommittee on quarterly basis and also placed before the board.
A statement of all Related Party Transactions is being presented before the AuditCommittee on Quarterly basis specifying the nature value and terms and conditions of thetransactions. A Policy on Related Party Transactions approved by the Board is uploaded onthe Company's website at the web link http://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 Standard-18 (as issued andmodified by ICAI) form part of the notes to the financial statements provided in theannual report. The Form AOC-2 is attached to the Report as Annexure - 5.
CORPORATE SOCIAL RESPONSIBILITY
Your Company believes in giving back to the society in some measure that isproportionate to its success in business. Corporate Social Responsibility (CSR) aims atbalancing the needs of all stakeholders. The Company's CSR initiative goes beyond charityand believes that as a responsible company it should take into account its impact onsociety as much as creating business impact.
As per the provisions of Section 135 and Schedule-VII of the Companies Act 2013 andCompanies (Corporate Social Responsibility Policy) Rules 2014 your company had formulateda Corporate Social Responsibility Policy (CSR Policy). The said policy contains the scopeof CSR 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 - 8.
As per the provisions of the Section 135 of the Act the average net profits of thecompany during the preceding three years stands as ' 5274.77 lakhs hence the company isrequired to spend a sum of ' 105.50 lakhs towards CSR Expenditure in FY 2018-19. Thedetails of it are mentioned under CSR Expenditure' in statutory format which formspart of this report as Annexure - 8.
PARTICULARS OF EMPLOYEES:
Disclosures pertaining to remuneration and other details as required under Section 197(12) of the Companies Act 2013 read with Rule 5 (1) of the Companies (Appointment andRemuneration of Managerial Personnel) Rules 2014 is mentioned under EmployeesRemuneration Report' which forms part of this report as Annexure - 9
None of the employees is receiving salary of more than ' 8.5 lakhs per month.
CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION
The information required under Section I34(3)(m) of the Companies Act 2013 read withthe applicable Rules is form part of this report as Annexure - 10
FOREIGN EXCHANGE EARNINGS AND OUTGO:
|Particulars ||2018-19 ||2017-18 |
|Earnings || || |
|FOB Value of Exports ||6028.82 ||6445.05 |
|Outgo || || |
|Sales Commission ||17.34 ||54.40 |
|Travelling Expenses ||0.18 ||3.54 |
|CIF Value of Imports || || |
|Raw Materials ||651.82 ||350.97 |
|Capital Goods ||713.06 ||248.22 |
Pursuant to Section 139 of the Companies Act 2013 read with the Companies (Audit andAuditors) Rules 2014 the members of the Company at its AGM held on 27th September 2017had approved the appointment of M/s Suranarayana & Suresh Chartered Accountants(Firm Registration No. 00663IS) as the Statutory Auditor for a period of 5 years for theauditing of accounts of the Company from the conclusion of 29th Annual General Meeting(AGM) till the Conclusion of the 34th Annual General Meeting of the Company to be held inthe year 2022. Pursuant to amendments in Section 139 of the Companies Act 2013 therequirements to place the matter relating to such appointment for ratification by membersat every AGM has been omitted with effect from 7th May 2018. The Board of Directors isempowered to fix the remuneration of the Statutory Auditor on yearly basis.
The Board has appointed M/s. Adusumilli and Associates as an Internal Auditors for theFinancial Year 2018-19under Section 138 of the Companies Act 2013 as per the scope asdefined by the Audit Committee.
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 2019. Secretarial Audit Report for the financial year2018-19 forms part of this report as (Annexure - 11)
Annual Secretarial Compliance Report:
Pursuant to SEBI circular no. CIR/CFD/CMD1/27/2019 dated 08thFebruary 2019 theCompany has obtained Annual Secretarial Compliance Report forms part of this Report as Annexure- 12 from Sri. C. Sudhir Babu Practicing Company Secretary(Proprietor CSBAssociates) and the same was also submitted to the Stock Exchanges where the shares of theCompany are listed.
Certificate of Non disqualification of Director' under Regulation 34(3) of SEBI (LODR)2015:
The Company has obtained a certificate forms part of this Report as Annexure - 13 fromSri. C. Sudhir Babu Practicing Company Secretary(Proprietor CSB Associates) confirmingthat none of the Directors of the Board of the Company have been debarred or disqualifiedfrom being appointed or continuing as directors of companies by the Board/Ministry ofCorporate Affairs or any such statutory authority.
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 (Registration No.102145 and Membership No.6875) asCost Auditor of the Company for the financial year 2018-19. The provisions also requirethe remuneration of the Cost Auditor to be approved by the shareholders. As a matter ofrecord the Cost Audit Report for the year 2017-18 was filed with the Central Governmentwithin the prescribed time limit and for the year 2018-19 also it will be filed within thestipulated time.
INTERNAL FINANCIAL CONTROL SYSTEMS AND THEIR ADEQUACY:
Your Company has laid down the 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 are in reasonable detail accurate andfairly reflect the transactions and dispositions of the assets of the company (3) providereasonable assurance regarding prevention or timely detection of unauthorized acquisitionuse or disposition of the assets that could have a material effect on the FinancialStatements.
WHISTEL BLOWER POLICY/VIGIL MECHANISM
The Company has established a mechanism through 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 (http://www.smspharma.com/investors/downloads/whistle-blower-protection-policy. pdf). During the year under reviewthe Company has not received any complaint(s) under this policy.
BOARD'S RESPONSE ON AUDITORS QUALIFICATION RESERVATION OR ADVERSE REMARK OR DISCLAIMERMADE:
There are no qualifications reservations or adverse remarks made by the StatutoryAuditor Secretarial Auditor and Cost Auditor in their reports.
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 committed to providing equal opportunities without regard to their racecaste sex religion colour nationality disability etc. All women associates(permanent temporary contractual and trainees) as well as any women visiting theCompany's office premises or women service providers are covered under this policy. Allemployees are treated with dignity with a view to maintain a work environment free ofsexual harassment whether physical verbal or psychological.
During the year under review the Company has not received any complaints on sexualharassments.
PREVENTION OF INSIDER TRADING CODE
As per the SEBI (Prohibition of Insider Trading) Regulation 2015 the Company hasadopted a Code of Conduct of Insider Trading. The Company has appointed Sri. V S.Venkatish Company Secretary of the Company as Compliance Officer for setting forth theprocedures and implementation of the Code for trading in Company's Equity Shares. Duringthe year under review there has been a due compliance of the said Code.
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 2018 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 ofthe financial 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 internal financial controls ithas been followed by the Company consistently; such internal financial 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.
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.
Your Company has been able to operate efficiently because of the culture ofprofessionalism creativity integrity and continuous improvement in all functions andareas as well as the efficient utilization of the Company's resources for sustainable andprofitable growth.
The Board of Directors would like to express their sincere appreciation for theassistance and co-operation received from the financial institutions banks Governmentauthorities customers vendors and members during the year under review. The Board ofDirectors also wish to place on record its deep sense of appreciation for the dedicatedand committed services by the Company's executives staff and workers.
Last but not least your Directors wish to place on record their warm appreciation toyou for your continuous support and encouragement.
| ||By the order of the Board |
| ||Ramesh Babu Potluri |
| ||Chairman and Managing Director |
| ||(DIN:00166381) |
|Place: Hyderabad || |
|Date: 12-08-2019 || |