Your Directors have pleasure in presenting the Second Annual Report of Solara ActivePharma Sciences Limited (the Company) together with the audited financial statements forthe year ended March 312019.
1. FINANCIAL SUMMARY
Rs in Million
|Financial Results || |
| || ||2017-18 || ||2017-18 |
|Revenue ||13740.49 ||5232.49 ||13990.61 ||5234.31 |
|Profit before interest Depreciation and Tax ||2312.08 ||662.14 ||2315.98 ||646.16 |
|Profit before tax ||717.06 ||75.80 ||676.93 ||58.27 |
|Profit after tax ||696.85 ||75.80 ||671.03 ||59.67 |
|EPS (basic) on the basis of Rs 10/- per share ||25.88 ||6.77 ||24.88 ||5.36 |
|EPS (diluted) on the basis of Rs 10/- per share ||25.84 ||6.77 ||24.84 ||5.36 |
The above financial results pertains to continuing operations of the Company
A detailed analysis of the operations of the company is provided in the managementdiscussion and analysis report which forms a part of this annual report.
2. BUSINESS OVERVIEW
We are a global R&D focused pureplay API company engaged in the manufacturing anddevelopment of APIs and offering Contract Manufacturing and Development Services forglobal companies. We have a highly compliant manufacturing footprint spread over fivelarge scale multi-product facilities supported by a team of 2000+ employees. Our businessis spread across 75 countries with extensive operations in the key markets of NorthAmerica Europe Japan South Korea and the Middle East and North Africa. We are poised tocreate strategic value in the B2B space with a basket of high-value products compliantmanufacturing base long term supply assurance and strong customer advocacy.
The Board of Directors of the company are pleased to recommend a maiden dividend of Rs5/- per equity share of face value of Rs 10/- each for the financial year ended March312019 subject to the approval of the shareholders of the company at the ensuing annualgeneral meeting scheduled to be held on August 14 2019.
The Register of Members and Share Transfer Books will remain closed from August 8 2019to August 14 2019 (both days inclusive) for the purpose of payment of dividend for thefinancial year ended March 312019. Dividend if approved by shareholders will be paidwithin 30 days from the date of declaration of dividend.
In terms of Regulation 43A of the SEBI (Listing Obligations and DisclosureRequirements) Regulations 2015 ("Listing Regulations") the Company has adopteda Dividend Distribution Policy. The said Policy is available on the Company's website andcan be accessed at investor page of our company's website www.solara.co.in .
4. PREFERENTIAL ALLOTMENT
The company in accordance with the provisions as contained in the Securities andExchange Board of India (Issue of Capital and Disclosure Requirements) Regulations 2018(hereinafter referred to as "SEBI (ICDR) Regulations") and pursuant to approvalby the shareholders of the company at the extraordinary general meeting held on February27 2019 allotted 6500000 warrants to Promoters at Rs 400/- each and 4000000 warrantsto Non Promoter investor at Rs 500/- each. The said warrants are convertible intoequivalent number of equity shares within 18 months from date of issue of the warrants.The Company received 25% of the upfront amount of Rs 1150 Mn. towards allotment ofconvertible warrants from the allottees.
The company after obtaining in principle approvals from the National Stock Exchange ofIndia Limited and BSE Limited has allotted 10500000 warrants on March 8 2019 to thePromoters and NonPromoter investor of the company.
5. SHARE CAPITAL
The Authorized Share Capital of the Company has been increased from Rs 300 Mn to Rs 400Mn vide a resolution passed by the shareholders of the company at the extraordinarygeneral meeting of the company held on February 27 2019.
The Board of Directors of the company vide a resolution dated March 26 2019 has issuedand allotted 1100000 equity shares of face value of Rs 10/- each to Promoter / Promotergroup of the company on preferential issue upon first tranche of conversion warrants intoequity shares in accordance with the provisions as contained in the "SEBI (ICDR)Regulations". The Company received balance 75% of the amount of Rs 330 Mn. towardsallotment of 1100000 equity shares pursuant to conversion of warrants.
The Issued Subscribed and Paid-up Share Capital of the Company as at the date of thisreport is Rs 257.74 Mn divided into 25774267 equity shares of Rs 10/- each.
During the current year the Company entered into a share purchase agreement withStrides Pharma Science Limited (formerly known as Strides Shasun Limited) and acquired100% of the Investments in Strides Chemicals Private Limited for a consideration of Rs1310 Mn with effect from September 12018 (acquisition date). Strides Chemicals PrivateLimited is engaged in developing and manufacturing of API products and has an USFDAapproved facility at Ambernath.
7. PROPOSED AMALGAMATION OF STRIDES CHEMICALS PRIVATE LIMITED
The Board of Directors of the Company at its meeting held on September 28 2018 haveapproved the Scheme of Amalgamation for merger of Strides Chemicals Private Limited(Transferor) a wholly owned subsidiary of the Company into the Company (TransfereeCompany) in terms of Section 230 to 232 of the Companies Act 2013. The Scheme is subjectto necessary statutory and regulatory approvals including the approvals of NationalCompany Law Tribunal the shareholders and creditors of each of the companies.
The appointed date for the said amalgamation is September 1 2018 or such other date asmay be agreed between the Transferor Company and the Transferee Company and approved bythe National Company Law Tribunal.
Pursuant to the proposed scheme coming into effect the equity shares held by theCompany in Strides Chemicals Private Limited shall stand cancelled. The Scheme ofAmalgamation will enable the Company to consolidate and effectively manage the TransferorCompany and the Company in a single entity eliminate duplication of operating andadministrative expenses and simplify the group structure.
During the year the Company disposed off its business operations at Mahad facilitywhich was originally part of the Human API business demerged from Sequent ScientificLimited. The disposal was completed on July 312018.
9. SOLARA EMPLOYEES STOCK OPTION PLAN 2018
The company has introduced ESOP Scheme viz. Solara Employees Stock Option Plan 2018.
During the year under review Nomination and Remuneration Committee of the Board (NRCCommittee) has granted 845000 options convertible into equal number of equity shares offace value of Rs 10/- each to the senior management personnel of the Company. Statementgiving detailed information on stock options granted to Employees as required under theSEBI Regulation is enclosed as Annexure 9 to this Report.
10. MATERIAL CHANGES AFFECTING FINANCIAL POSITION OF THE COMPANY
There are no material changes and commitments occurred affecting the financialposition of the Company between the end of the financial year and the date of thisreport.
The details of Subsidiary Companies and their financial position as required under thefirst proviso to Section 129(3) is given in Form AOC-1 as Annexure-1 as part of thisreport.
12. CORPORATE GOVERNANCE
Your Company is committed to maintain the highest standard of Corporate Governance andadhere to Corporate Governance guidelines as laid out in the Listing Regulations.
M/s. Mohan Kumar and Associates Practicing Company Secretaries have examined therequirements of Corporate Governance with reference to Listing Regulations and havecertified the compliance as required under Listing Regulations. The Certificate in thisregard is attached as Annexure 8 to this report.
13. MANAGEMENT DISCUSSION AND ANALYSIS
Pursuant to Schedule V of Listing Regulations "Management Discussion andAnalysis" is given separately and forms part of this Report.
14. NUMBER OF MEETINGS OF THE BOARD
During the financial year 2018-19 the Directors met six times i.e. on April 112018;May 19 2018; August 3 2018; September 28 2018; October 30 2018 and January 312019.
15. DIRECTORS & KEY MANAGERIAL PERSONNEL
As on date of this report the Board comprised of 8 directors comprising of 2 ExecutiveDirectors 2 Non-Executive Directors and 4 Independent Directors. Chairman of the Board isNon-Executive Director. The details of each member of the Board as on the date of thisreport forms part of Corporate Governance Report.
Continuation / Appointment / Retire by Rotation:
a) Mr. Jitesh Devendra Managing Director retires by rotation at the ensuing AnnualGeneral Meeting and being eligible offers himself for reappointment. Your directorsrecommend his reappointment.
b) Continuation of Mr. Deepak C Vaidya as NonExecutive Director of the Company beyondthe age of 75 years.
Your directors recommend his continuation as a Non-Executive Director of the Companyliable to retire by rotation.
c) Mr. Ronald Tjeerd De Vries was appointed as Independent Director (AdditionalDirector) of the Company effective from October 30 2018 who shall hold office till theconclusion of the ensuing Annual General Meeting of the Company.
Your directors recommend his appointment as Independent Director of the Company for aperiod of five years effective from October 30 2018 not liable to retire by rotation.
d) Mr. Ankur Nand Thadani was appointed as a Non-Executive Director (AdditionalDirector) of the Company effective from May 16 2019 who shall hold office till theconclusion of the ensuing Annual General Meeting of the Company.
Your directors recommend his appointment as a Non-Executive Director of the Companyliable to retire by rotation.
Detailed profile of the Directors is attached as Annexure 6 to this report
The Company has received requisite notices from the member proposing the election ofMr. Ronald Tjeerd De Vries and Mr. Ankur Nand Thadani as Directors of the Company pursuantto Section 160 of the Companies Act 2013.
The following are the Key Managerial Personnel (KMPs) of the Company:
Mr. Jitesh Devendra Managing Director
Mr. S. Hariharan Executive Director-Finance and Chief Financial Officer
Mr. B. Sreenivasa Reddy Chief Operating Officer and
Mr. S. Murali Krishna Company Secretary There were no changes in KMPs during the year.
16. DECLARATION BY INDEPENDENT DIRECTORS
In accordance with Section 149(7) of the Companies Act 2013 each Independent Directorhas confirmed to the Company that he / she meets the criteria of independence as laid downin Section 149(6) of the Companies Act 2013 and Regulation 25 of the Listing Regulations.
17. BOARD EVALUATION
The Companies Act and Listing Regulations relating to Corporate Governance containprovisions on evaluation of the performance of the Board and its Committees as a whole andDirectors including Independent Directors Non-Independent Directors and Chairpersonindividually. In pursuant thereof annual evaluation of performance of the Board workingof its Committees contribution and impact of individual directors has been carried outthrough a questionnaire for peer evaluation on various parameters.
18. PARTICULARS OF EMPLOYEES
The statement containing particulars in terms of Section 197(12) of the Companies Act2013 read with rule 5(1) of the Companies (Appointment and Remuneration of ManagerialPersonnel) Rules 2014 forms part of this report and is appended herewith as Annexure 7 tothe Boards' report
The statement containing particulars in terms of Section 197(12) ofthe Companies Act2013 read with rule 5(2) and 5(3) of the Companies (Appointment and Remuneration ofManagerial Personnel) Rules 2014 forms part of this report. Considering the first provisoto Section 136(1) of the Companies Act 2013 the Annual Report excluding the aforesaidinformation is being sent to the members of the Company and others entitled thereto. Thesaid information is available for inspection at the registered office of the Companyduring business hours on working days of the Company up to the date of the ensuing AnnualGeneral Meeting. Any shareholder interested in obtaining a copy thereof may write to theCompany Secretary in this regard.
19. CORPORATE SOCIAL RESPONSIBILITY (CSR)
The Company has undertaken "Corporate Social Responsibility (CSR)"initiatives in areas of Health
Education and Employability which are projects in accordance with Schedule VII of theCompanies Act 2013.
A detailed report on CSR activities undertaken during the financial year 2018-19 isenclosed as Annexure-2 to this Report.
20. RISK MANAGEMENT
The Company has a risk management framework for identification and managing risks.Please refer the 'Management Discussion and Analysis' report forming part of the AnnualReport for additional details.
21. LOANS GUARANTEES OR INVESTMENTS
Particulars of investments made loans given and guarantees covered under theprovisions of Section 186 of the Companies Act 2013 are provided in Note Nos 42 and 48 tothe Standalone Financial Statements in the Annual Report.
22. CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES
All the transactions with related parties are in the ordinary course of business and atarm's length basis. The transactions with related parties are disclosed in Note No. 42 tothe Standalone Financial Statements in the Annual Report. The disclosure of contracts orarrangements with related parties for material transactions is furnished in Form AOC-2 asAnnexure 10 as part of this report.
The Company has formulated a policy for transacting with Related Parties which isuploaded on the website of the Company. Further there are no materially significantrelated party transactions with its promoters the directors or the management theirsubsidiaries or relatives etc. that may have potential conflict with the interests of theCompany at large.
23. SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS
There are no significant and material orders passed by the Regulators / Courts thatwould impact the going concern status of the Company and its future operations.
24. AUDITORS AND AUDIT REPORTS
Secretarial Audit Report
M/s. Mohan Kumar & Associates Practicing Company Secretaries Chennai is theSecretarial Auditor for the Company.
The Secretarial Audit for the financial year 201819 inter-alia included auditof compliance with the Companies Act 2013 and the Rules made under the Act ListingRegulations and applicable Regulations prescribed by SEBI amongst others.
The Secretarial Audit Report is enclosed as Annexure 5 to the Board's Report. TheSecretarial Audit Report does not contain any qualifications reservations or adverseremarks.
M/s. Deloitte Haskins & Sells LLP Chartered Accountants (Firm RegistrationNo.117366W/W-100018) was appointed as Statutory Auditors of the Company at the firstAnnual general meeting of the company for a period of 5 years and will hold the officetill the conclusion of the 6th AGM of the Company to be held in the Financial Year2022-23. The Auditor's report to the shareholders on the standalone and consolidatedfinancial statement for the year ended March 312019 does not contain any qualificationobservation or adverse comment.
M/s. Price Waterhouse Coopers Chartered Accountants are the Internal Auditors of theCompany. The Internal Auditors carry out audit as per the audit plan defined by the AuditCommittee and regularly updates the committee on their internal audit findings at theCommittee's meetings.
The Internal Auditors were satisfied with the management response on the observationand recommendations made by them during the course of their audit and have expressedsatisfaction with the internal systems controls and process followed by the Company.
Cost Auditors and Cost Records
Mr. K. Suryanarayanan Cost Accountant (Membership No.24946) has carried out the CostAudit for the applicable business for the year under review.
Pursuant to the provisions of Section 148(3) of the Companies Act 2013 the Board ofDirectors had appointed Mr. K. Suryanarayanan Cost Accountant (Membership No.24946) asCost Auditor of the Company for the financial year 2018-19. Proposal for ratification ofremuneration of the Cost Auditor is placed before the shareholders.
The company is maintaining cost records as specified under sub-section (1) of section148 of the Companies Act 2013
Reporting of Frauds by Auditor
During the year under review neither the Statutory Auditors nor the Internal Auditorshas reported to the Audit committee under Section 143(12) of the Companies Act 2013 anyinstances or fraud committed against the company by its officers or employees the detailsof which need to be mentioned in the Board's report.
25. INTERNAL FINANCIAL CONTROLS
The Company has in place well defined and adequate framework for Internal FinancialControls ("IFC") as required under Section 134 (5) (e) of the Companies Act2013.
During the year under review such controls were tested and no material weaknesses intheir design or operations were observed.
26. OTHER DISCLOSURES
Nature of Business of the Company
There has been no change in the nature of business of the Company during the year underreview.
The Company did not accept any deposits within the meaning of provisions of Chapter V -Acceptance of Deposits by Companies of the Companies Act 2013 read with the Companies(Acceptance of Deposits) Rules 2014.
Vigil Mechanism / Whistle Blower Policy
The Company in compliance with Section 177 of the Companies Act 2013 and Regulation 22of Listing Regulations has established a Whistle Blower Policy in place as part of itsvigil mechanism. The policy provides appropriate avenues to the directors employees andstakeholders of the Company to make protected disclosures in relation to the mattersconcerning the Company. Protected disclosures are appropriately dealt with by the WhistleOfficer or the Chairman of the Audit Committee. The policy is also available on theCompany's website at www.solara.co.in
Policy on Directors Appointment and Remuneration
The policy of the Company on Directors' appointment and remuneration including thecriteria for determining qualifications positive attributes independence of a directorand other matters as required under Section 178 of the Companies Act 2013 is availableon the Company's website at www.solara.co.in
The assets/properties of the Company are adequately insured against loss due to fireriots earthquake terrorism etc. and against other perils that are considered necessaryby the management.
Extract of Annual Return
An extract of Annual Return in form MGT-9 as on March 312019 is attached as Annexure -3 forming part of this Report.
Secretarial standards issued by the Institute of Company Secretaries of India (ICSI)
The Directors state that the applicable Secretarial
Standards have been followed during the Financial Year 2018-19
Conservation of Energy Technology Absorption Foreign Exchange Earnings and Outgo
Particulars in respect of conservation of energy technology absorption and foreignexchange earnings and outgo as required under section 134 of the Companies Act 2013 readwith Rule 8(3) of the Companies (Accounts) Rules 2014 is attached as Annexure - 4 to thisReport.
Disclosure under the Sexual harassment of woman at workplace (Prevention Prohibitionand Redressal) Act 2013
The company has put in place an anti-sexual harassment mechanism in line with therequirements of the Sexual Harassment of Women at the Workplace (Prevention Prohibition& Redressal) Act 2013. Internal Complaints Committee have been set up to redresscomplaints received regarding sexual harassment. All employees (permanent contractualtemporary trainees) are covered under this policy. The Company has not received anycomplaint of sexual harassment during the year 2018-19.
27. DIRECTORS' RESPONSIBILITY STATEMENT
Pursuant to the provisions of Section 134(5) of the Companies Act 2013 the Directorsof your Company confirm that:
a) in the preparation of the Annual Accounts the applicable accounting standards hadbeen followed along with proper explanation relating to material departures.
b) they have selected such accounting policies and applied them consistently and madejudgements and estimates that are reasonable and prudent so as to give a true and fairview of the state of affairs of the company at the end of the financial year and of theprofit or loss of the company for that period;
c) they have taken proper and sufficient care for the maintenance of adequateaccounting records in accordance with the provisions of the Act for safeguarding theassets of the company and for preventing and detecting fraud and other irregularities.
d) they have prepared the annual accounts on a going concern basis
e) they have laid down internal financial controls to be followed by the Company andthat such internal financial controls are adequate and operating properly; and
f) they have devised proper systems to ensure compliance with the provisions of allapplicable laws and that such systems were adequate and operating effectively.
28. CAUTIONARY STATEMENT
Statements in the Annual Report particularly those that relate to ManagementDiscussion and Analysis describing the Company's objectives projections estimates andexpectations may constitute 'forward-looking statements' within the meaning of applicablelaws and regulations. Although the expectations are based on reasonable assumptions theactual results might differ.
Your Directors would like to express their grateful appreciation for the assistance andco-operation received from the Banks during the year under review. Your Directors alsoplace on record their deep sense of appreciation for the continued support of customerssuppliers employees and investors of the company.
For and on behalf of Board of Directors
| ||Jitesh Devendra ||S. Hariharan |
| ||Managing ||Executive Director- |
|Place: Bengaluru ||Director ||Finance and |
|Date: 16.05.2019 || ||Chief Financial Officer |