The Directors have the pleasure of presenting the Forty Fifth Annual Report of yourCompany together with the Audited Financial Statement for the year ended 31st March 2018.
- Torrent becomes the 8th largest Company in the Indian Pharmaceutical Market with the acquisition of branded business of Unichem Laboratories Limited ("Unichem") for India and Nepal including its Sikkim manufacturing facility. The acquisition included portfolio of more than 120 brands including one brand of ' 200 crores (Losar) & three brands of more than ' 50 crores (Ampoxin Unienzyme & Telsar).
- India Business registered 9% growth as compared to 6% growth ofthe market.
- Continued to experience sharp price reductions in US - partially compensated with higher market shares and volumes. 13 (thirteen) ANDAs filed during the year.
- Acquired Bio Pharm Inc. ("Biopharm") a US based liquids and suppositories company along with a manufacturing facility.
- Torrent becomes 4th largest generic Company in Germany with continued good performance.
- Brazil registered value growth of 14% in covered market and having unit market share of 25% of covered market without generics.
- All plants fully compliant with the respective regulatory requirements. Current USFDA Establishment Inspection Report for Indrad Dahej Pithampur and Vizag plants.
- Sikkim capacity expansion including from new facility completed - increasing the capacity to 700 crores units. The Unichem manufacturing facility adds another 100 crores units to the capacity.
The summary of Standalone (Company) and Consolidated (Company and its subsidiaries)operating results for the year and
appropriation of divisible profit is given below:
(' in crores except per share data)
| ||Standalone ||Consolidated |
| ||2017-18 ||2016-17 ||2017-18 ||2016-17 |
|Sales & Operating Income ||4248 ||4593 ||6002 ||5857 |
|Profit Before Depreciation Finance Cost Exceptional Items & Tax ||1240 ||1426 ||1648 ||1601 |
|Less Depreciation ||384 ||269 ||409 ||307 |
|Less Finance Cost ||294 ||202 ||308 ||206 |
|Profit Before Exceptional Items & Tax ||562 ||955 ||931 ||1088 |
|Less Exceptional Items ||-- ||-- ||-- ||-- |
|Less Tax Expense ||80 ||101 ||253 ||154 |
|Less Minority Interest ||-- ||-- ||-- ||-- |
|Net Profit for the Year ||482 ||854 ||678 ||934 |
|Balance brought forward ||1613 ||1620 ||1514 ||1442 |
|Other Comprehensive income and other adjustments ||(2) ||(7) ||2 ||(8) |
|Balance available for appropriation ||2093 ||2467 ||2194 ||2368 |
|Appropriated as under: || || || || |
|Transfer to General Reserve ||-- ||400 ||-- ||400 |
|Transfer to Debenture Redemption Reserve ||375 ||250 ||375 ||250 |
|Dividend ||220* ||169 ||220* ||169 |
|Tax on Distributed Profits for Dividend ||45* ||35 ||45* ||35 |
|Balance Carried Forward ||1453 ||1613 ||1554 ||1514 |
|Earnings Per Share (Rs per share) ||28.48 ||50.48 ||40.07 ||55.17 |
*Includes final dividend of Rs 68 crores and dividend distribution tax of Rs 14 crorespertaining to FY 2016-17.
Consolidated Operating Results
The consolidated sales and operating income increased to Rs 6002 crores from Rs 5857crores in the previous year showing a growth of 2.48%. The consolidated operating Profitfor the year was Rs 1648 crores as against Rs 1601 crores in the previous year registeringgrowth of 2.94%. The consolidated net Profit decreased to Rs 678 crores from Rs 934 croresin the previous year registering a degrowth of 27.41%. Current year's Profits have beenimpacted by the acquisition related interest and amortization of Unichem and Biopharmwhile the previous year included exceptional sales and Profits on account of launch of newproduct in US which had limited competition.
Management Discussion and Analysis (MDA)
The details of operating performance of the Company for the year the state of affairsand the key changes in the operating environment have been analysed in the ManagementDiscussion and Analysis section which forms a part of the Annual Report.
The Company endeavours to distribute 30% of its annual consolidated net Profit aftertax without taking into account non-cash charges relating to the business acquisitions asdividend in accordance with the revised dividend policy copy of which is attached as Annexure-A.
Pursuant to this Interim dividend of Rs 9/- per equity share of face value of Rs 5/-amounting to Rs 152 crores was paid to the shareholders during the year under review.Further the Board has recommended a final dividend of Rs 5/- per equity share amountingto Rs 85 crores for approval to shareholders at the 45th Annual General Meeting (AGM) ofthe Company. The aggregate distribution amount including tax on distributed Profits worksout to be Rs 286 crores (previous year Rs 286 crores).
Innovation in Human Resource practices is one of the key integral facet of anorganization's growth for it to be ahead of the curve. At Torrent it is derived from adiverse workforce an inclusive culture and people-3rst approach that encourages newperspectives and novel ideas.
The Human Resource department through its various initiatives and advance programs haskept pace with the 3uctuating economic dynamics and the environmental changes.
Training is an integral part of the skill development program initiated for theemployees.
The Human Resource department has organized training and development programs which hashelped to nurture talent. Managers from 3eld and corporate offices are trained to sharpenand understand new management skills.
The Company also has taken several other initiatives to help employees maintain a worklife balance thereby enabling them to excel in every phase of life. Women friendlyfacilities like crche and 3exi-work timings at workplace has provided much needed careto them. Also continuous efforts were taken to implement Gender Diversity initiatives invarious areas to ensure enhanced representation of women employees.
On the Statutory front during the year under review there was no case receivedpursuant to the Sexual Harassment of Women at Workplace (Prevention Prohibition andRedressal) Act 2013. The year also saw reinforcement of the already existing"Whistle Blower Policy" in order to emphasize and encourage reporting of anywrongdoing or any unethical practice.
The Human Resource department is in the process of integrating the Human Resourcesacquired from Unichem. This includes not only the manpower integration but also thecultural integration of both the entities. Impactful bridge building activity betweenTorrentians and the erstwhile Unichemites was organized for them to gain knowledge aboutthe values and the good practices adopted by Torrent in various functionalities.
On the Industrial front the Company continued to foster cordial Industrial Relationswith its workforce during the year.
The Company has a diverse workforce of 14700 employees as on 31st March 2018vis--vis 11781 employees as on 31st March 2017. Going forward the Company willcontinue to focus on nurturing the right talent to achieve the business goal.
The Company believes in the conduct of its affairs in a fair and transparent manner tofoster professionalism honesty integrity and ethical behavior in its employees &stakeholders. The Company has adopted a Whistle Blower Policy as a part of vigilmechanism details of the same is explained in the Report of Corporate Governance.
Also the Code of Business Conduct ("Code") lays down important corporateethical practices that shape the Company's value system and business functions andrepresents cherished values of the Company.
The Code provides guidance to employees in recognizing and dealing with importantethical and legal issues and fosters a culture of honesty and accountability. The code ofconducts includes Integrity Gifts Con3ict of Interest Legal compliance Respect forpeople Environmental commitment Safety Con3dential & Proprietary InformationFinancial Information Company assets Computer Network use & Security Recordsmaintenance and Management.
CORPORATE SOCIAL RESPONSIBILITY
Following the path shown by its founder Shri U N Mehta Torrent Group believes in thewell being of the society at large and understands its responsibilities as a CorporateCitizen. The Company as a part of its Corporate Social Responsibility made focusedefforts in the 3elds of Community Healthcare Sanitation & Hygiene Education &Knowledge Enhancement and Social Care & Concern. These efforts are all driven by theFounder's philosophy of "Think of others also when you think about yourself".
In line with the provisions of the Companies Act 2013 and Rules made thereunder aCorporate Social Responsibility (CSR) Committee has been formed by the Board of Directors.The Composition of the CSR Committee is as under:
|Name of Director ||Category of Directorship |
|Shri Pradeep Bhargava Chairperson ||Independent Director |
|Dr. Chaitanya Dutt ||Whole time Director |
|Smt. Renu Challu ||Independent Director |
During FY 2017-18 the key CSR programs and activities undertaken at Group level aredescribed hereunder:
Children are the future of our nation and this future must be well preserved'.Echoing this philosophy in January 2016 Torrent Pharmaceuticals Limited and TorrentPower Limited jointly initiated a Child Centric Health Care Program - REACH ReachEAch CHild under the aegis of Tornascent Care Institute (Section 8 company of TorrentGroup). The program encompasses three major pillars: (a) SHAISHAV for Grass rootintervention; (b) JATAN for green3eld action; and (c) MUSKAN for other allied initiatives.This Paediatric Health Care program has progressed signi3cantly in the current year at allthe four centres viz. Sugen (near Surat) Dahej Indrad and Nadiad / Balasinor and acrossall the three pillars with increase in the reach and scope.
_ Under the 3rst pillar of the program SHAISHAV so far 266 paediatric camps covering341 villages and 51000+ underserved children (in the age group of 6 months to 6 years)were conducted; to obtain their base line health status identify and treat anaemia andmalnutrition and provide specialised treatment to those identi3ed with cardiacneurological respiratory and the like disorders. Periodic assessments and follow upactions for all such cases are being undertaken under the supervision of quali3edPaediatricians. As a result of thorough follow up activities more than 83% of childrenare cured of their anaemic condition and around 73% of children pulled out of severemalnourishment. Of all the children provided specialised treatment for speci3c ailmentsmentioned above 670 cases have been successfully treated. SHAISHAV expanded the coverageof children to include those beyond the age group of 6 years through mobile OPDs. TillMarch 2018 39000+ children were provided free of cost treatment including the operativeand consultation costs at referral hospitals under this expanded coverage.
JATAN the second pillar of the program focuses on providing the care needed toalleviate the problem identi3ed in SHAISHAV through Paediatric centres. 4 Paediatriccentres at Sugen Dahej Balasinor and Indrad are operational and are additionallysupporting the basic medical needs of the villages close to these four areas. Treatment byPaediatricians / doctors medicines & basic laboratory tests are provided free of costto children in the age group of 0-18 years. 54500+ children have bene3tted so far till31st March 2018.
Under MUSKAAN counselling and support is being provided to the adolescent girls at theSugen centre for menstrual hygiene and sanitation by giving them free health and hygienekits which include sanitary pads soap shampoo etc. 4000+ adolescent girls of 70villages between 11-18 years of age are provided kits on monthly basis. This activity hasalso been replicated at Pakhajan & Indrad Centres. As an impact of these activitiesthere has been gradual eradication of physiological and social taboos and increasedcon3dence and self-esteem amongst them.
2. SHIKSHA SETU
The Teaching and Learning Program being conducted through UNM Foundation completedsecond year of Phase II of the program. This program covers 13 schools located at SugenChhatral Chappi Memadpur and Ahmedabad locations and about 4300 students and 150teachers in such schools. In the 3rst year i.e FY 2016-17 focus was on setting the newtechnology based infrastructure and software in the schools and training the students andteachers on the same. During FY 2017-18 3370 (84%) students from standard 3-8 havestarted working regularly on Tablets while above 90% teachers are confidently teachingtheir subjects through smart boards. This year for the first time 5281 students from3-8 standards participated in technology based assessment on Tablets. For Teachers 496subject workshops were organized at all locations and more than 2000 students wereprovided academic & behavioral inputs during school visits. About 1000 parentsattended parents' sensitization meetings at schools and were elated to see their childrenstudying through tablets and smart boards in classrooms. School Principals expressed theirviews that technology based classrooms have immensely helped teachers in making teachinginteresting while tablets provided to students is helpful in bringing irregular studentsto school.
3. PUBLIC PARK DEVELOPMENT:
A city that has good public parks and gardens expresses the level of social andcultural health of a city. The Company along with M/s. Prabhakar B. Bhagwat which is oneof India's best known landscape design 3rm developed a detailed process that is anexemplar on how public projects should be undertaken and embarked upon. Six other 3rms inthe city namely Arya Architects Earthscapes Arianee Landscapes Design Module SharedGround and Studio 603 have joined hands under LEAF (Landscape Environment and AdvancementFoundation) to undertake this work that focuses on transparency communicating andworking on design and ideas with local communities and keeping them informed at all times.
Over a period of 12 months many parks in the city have been visited and studied fortheir usage patterns. 15 parks with differing sizes which were equally distributed in thecity were chosen for development. Many studies were carried out to better express theidea of the park from its relation to mental health to bio diversity to safeplaygrounds to water harvesting to art in parks to appropriate lighting to using thisinitiative to develop new ways of designing parks. This rigorous exercise culminated inthe finalization of 6 parks measuring 32000 Sqmt under Phase I. The development of such 6parks / gardens is under progress. The Design of the Other Parks of Phase II is underdevelopment.
The Annual Report on CSR Activities (Annexure C to this Report) indicates thatthe Company has spent Rs 27.70 crores in this regard.
Other CSR initiatives undertaken by the Company during FY 2017-18 include:
- The Company has contributed ' 0.12 crores during FY 2017-18 towards reparing and maintenance of Sharda Mandir Primary School at Indrad along with the donation towards Medical OPD at Village - Indrad.
- The Company has contributed an amount of ' 0.34 crores towards the Community Development Park and other community development work in Baddi. Further the Company has been supporting the School situated near Company's plant at Baddi to ensure personality development of the students by conducting various programmes through involvement of employees and provides other support with respect to extra curricular activities and academics.
The Company also made donations to various organisations involved in activities relatedto education health socio-economic development culture integrated development oftribes relief to disaster victims promotion of social welfare etc.
ENVIRONMENT HEALTH & SAFETY
The Company is committed in cultivating a proactive safety culture across the group. Weare in pursuit of a safe & secure workplace for our employees as well as allstakeholders engaged in our business operations.
We strive proactively to prevent or minimize all possible causes of injury and illhealth of our employees as well as our stakeholders prevent environmental pollutionreduction in waste generation and utilization of waste as an alternative fuel conserveenergy enhance safety awareness prepare for emergencies and to reduce environmentalimpact arising from the workplace.
We have adopted a well-de3ned strategy for waste management that focusses on reductionin waste generation and alternative utilization of waste as energy. We have disposed off50% high calori3c value hazardous waste for co-processing in cement industry (alternatefuel) instead of incineration. We have targeted to dispose off 90% of total such wastegeneration for co-processing in the coming year.
Most of our facilities have achieved various recognitions / certi3cations such asISO-14001:2015 & OHSAS-18001:2007. Regular audits of our operational units by ourcross functional teams global customers and regulators help in achieving benchmark /highest levels of compliance. Further to these Company has initiated drive to implementupgraded standard of OHSAS-18001:2007 to ISO-45001:2015.
During the year all our manufacturing units remained compliant with applicableregulatory and other Environment Health & Safety requirements to which we subscribe.
We strive to build a strong Health Safety and Environment culture at each of ourunits. Environment Health & Safety is not just something we do as part of our regularjobs but is something different in which we believe we value & act upon.
Moreover the Company has in place the "Conviction of Safety Policy" whichprovides for substantial compensation to the personnel (Employees as well as Contractors)and their families who are adversely affected by accidents.
(a) Share Capital
During the year the Authorised Capital of the Company was increased from Rs 125crores divided into 20 crores Equity Shares of Rs 5/- each and 25 lacs Preference Sharesof Rs 100/- each to Rs 150 crores divided into 25 crores Equity Shares of Rs 5/- eachand 25 lacs Preference Shares of Rs 100/- each by creation of 5 crores Equity Shares ofRs 5/- each ranking pari passu with the existing Equity Shares.
The Company has neither accepted nor renewed any deposits. None of the deposits earlieraccepted by the Company remained outstanding unpaid or unclaimed as on 31st March 2018.
(c) Loans Guarantees and Investments
Details of Loans Guarantees and Investments by Company under the provisions of Section186 of the Companies Act 2013 during the year are provided in Note 9 and 10 to theFinancial Statements.
(d) Debentures and other debt instruments
The Company has raised an amount of Rs 1500 crores by way of issue of Non-ConvertibleDebentures on private placement basis during the year. The said Non-Convertible Debenturesare listed on the National Stock Exchange of India Ltd. The outstanding amount ofNon-Convertible Debentures issued by the Company is Rs 2898.80 crores as on 31st March2018.
During the year the Company issued Commercial Papers (CPs) aggregating to Rs 300 croreson private placement basis.
(e) Contracts or Arrangements with Related Parties
All Related Party transactions during the year were in ordinary course of business andwere on arm's length basis and were entered with the approval of Audit and Risk ManagementCommittee Board and Shareholders if and as applicable. The particulars of materialcontracts and arrangements entered into with the related parties in accordance with theRelated Party Policy of the Company and pursuant to the provisions of Section 188(1) ofthe Companies Act 2013 and Rule 8(2) of the Companies (Accounts) Rules 2014 are annexedherewith as Annexure - B.
(f) Internal Financial Control System
The Companies Act 2013 has mandated the Company to have a formal framework of InternalFinancial Controls (IFC) and has also laid down speci3c responsibilities on the BoardAudit Committee Independent Directors and Statutory Auditors with regard to IFC.
The financial control system and framework is required to ensure:
- The orderly and efficient conduct of its business
- Safeguarding of its assets
- The prevention and detection of frauds and errors
- The accuracy and completeness of the accounting records and
The timely preparation of reliable financial information.
The Board reviews the effectiveness of controls documented as part of IFC frameworkand take necessary corrective actions where weaknesses are identi3ed as a result of suchreviews. This review covers entity level controls process level controls fraud riskcontrols and Information Technology environment.
Based on this evaluation no signi3cant events had come to notice during the year thathave materially affected or are reasonably likely to materially affect our IFC. Themanagement has also come to a conclusion that the IFC and other financial reporting waseffective during the year and is adequate considering the business operations of theCompany.
The Statutory Auditors of the Company has audited the IFC over Financial Reporting andtheir Audit Report is annexed as Annexure A to the Independent Auditors' Report underStandalone Financial Statements and Consolidated Financial Statements.
The Company's plants properties equipment and stocks are adequately insured againstmajor risks. The Company also has appropriate liability insurance covers particularly forproduct liability and clinical trials. The Company has also taken Directors' and Officers'Liability Policy to provide coverage against the liabilities arising on them.
BUSINESS RISK MANAGEMENT
The Company has in place a Risk Management Framework for a systematic approach tocontrol risks. The Risk Management process is reviewed and monitored by functional heads /business process owners. The Audit and Risk Management Committee (ARMC) dischargesfunctions of Risk Management and Risk minimization and has designated Chief FinancialOfficer as the Chief Risk Officer (CRO) to assist the committee by presenting the detailsof the risk pro3le of the Company coordinate with the functional heads who are the riskowners and monitor the status of the risk mitigation plan for the identi3ed risks. TheARMC is periodically updated on key business risks including strategic and acquisitionrelated risks along with their mitigation plan / strategy.
The Company in the Management and Discussion Analysis section of the Annual Reportidenti3es the key risks which can affect the Profitability of the Company. As on datethere is no risk envisaged which could threaten the existence of the Company.
SUBSIDIARIES & JOINT VENTURES
As of 31st March 2018 the Company has 17 subsidiaries out of which 5 are step downsubsidiaries.
Torrent Pharma Inc. USA a wholly owned subsidiary of the Company has acquired 100%stake in Bio Pharm Inc. a generic pharmaceuticals and OTC Company based in USA.
The highlights of performance of major subsidiaries of the Company have been discussedand disclosed under the Management Discussion and Analysis section of the Annual Report.The contribution of each of the subsidiries in terms of the revenue and Profit is providedin Form AOC-1 which forms part of Annual Report.
The details of two Joint Ventures of the Company is also shown in the AOC -1. TheseJoint Ventures are Section 8 companies and primarily 3oated with another company of theTorrent group to carry out the CSR activities.
The annual accounts of the subsidiary companies will be made available to any Member ofthe Company seeking such information at any point of time and are also available forinspection by any Member of the Company at the Registered Office of the Company on anyworking day during business hours up to the date of the AGM. The annual accounts of thesubsidiary companies are also available on the website of the Company atwww.torrentpharma.com.
DIRECTORS AND KEY MANAGERIAL PERSONNEL
(a) Board of Directors
The Board of Directors of the Company is led by the Executive Chairman and comprisesseven other Directors as on 31st March 2018 including one Whole Time Director fourIndependent Directors which includes one Woman Director and two Non-Executive Directors(other than Independent Directors).
All the Independent Directors of the Company have furnished declarations that they meetthe criteria of independence as prescribed under the Companies Act 2013 and under ListingRegulations.
At the AGM of the Company held on 31st July 2017 the members approved there-appointment of Dr. Chaitanya Dutt Director (Research and Development) as the Wholetime Director of the Company for a period of three years effective from 1st January 2018.He also retired by rotation and being eligible was re-appointed as director in the saidAGM.
Shri Ashish Nanda had resigned from the Board of Directors of the Company w.e.f. 21stJuly 2017. The Board placed on record its deep appreciation for the guidance &support provided by him for the overall growth of the Company during his association withthe Company.
Shri Markand Bhatt Director has expressed his unwillingness to be re-appointed at theensuing AGM.
Shri Bhatt has been on the Board of the Company since October 2000. A post graduate ofIIM Ahmedabad he has over 50 years of professional and managerial experience inmulti-disciplinary areas across various businesses dominated by more than three decadesof involvement with Torrent group.
The Board and the Company has always been bene3tting from his counsel and advice on keybusiness and strategic matters emanating from his considerable wisdom and vast experienceand places on record their profound appreciation for the same.
Smt. Renu Challu will be completing her tenure as an Independent Director of theCompany on 26th July 2018. The Board places on record its deep appreciation for theguidance and support provided by Smt. Challu for the overall growth of the Company duringher tenure as a member of the Board and its Committees.
The Board has recommended:
- the appointment of Ms. Ameera Shah as an Independent Director to hold office for a term of 3 (three) consecutive years effective from the date of AGM;
the re-appointment of Shri Shailesh Haribhakfi and Shri Haigreve Khaifan as IndependentDirectors of the Company for a second term of 5 (five) consecutive years effective from1st April 2019;
for the approval of shareholders at the ensuing AGM. The brief resume and otherrelevant details of Ms. Shah Shri Haribhakti and Shri Khaitan are given in theExplanatory Statement to the Notice convening the AGM for your perusal.
(b) Meetings of Board of Directors
Regular meetings of the Board are held to review performance of the Company to discussand decide on various business strategies policies and other issues. A calendar of Board/ Committee meetings for the year is prepared and circulated to the Directors well inadvance to enable them to plan their schedule for effective participation in the meetings.During the year six meetings of the Board of Directors were convened and held on 26thMay 2017 31st July 2017 3rd November 2017 18th January 2018 25th January 2018and 8th February 2018. The intervening gap between two consecutive meetings was not morethan one hundred and twenty days. Detailed information on the meetings of the Board isincluded in the Corporate Governance Report which forms part of the Annual Report.
(c) Committees of the Board of Directors
In compliance with the requirement of applicable laws and as part of best governancepractices the Company has following Committees of the Board as on 31st March 2018:
i. Audit and Risk Management Committee ii. Securities Transfer and StakeholdersRelationship Committee iii. Nomination and Remuneration Committee iv. Corporate SocialResponsibility Committee
The details with respect to the aforesaid Committees forms part of the CorporateGovernance Report.
(d) Appointment of Directors
(i) Criteria for Appointment of Directors
The Board of Directors of the Company has identi3ed following criteria for determiningquali3cation positive attributes and independence of Directors:
1) Proposed Director ("Person") shall meet all statutory requirements andshould:
(d) Appointment of Directors
(i) Criteria for Appointment of Directors
The Board of Directors of the Company has identified following criteria for determiningqualification positive attributes and independence of Directors:
1) Proposed Director ("Person") shall meet all statutory requirements andshould:
possess the highest ethics integrity and values;
not have direct / indirect conflict with present or potential business /operations of the Company;
have the balance and maturity of judgment;
be willing to devote sufficient time and energy;
have demonstrated high level of leadership and vision and the ability toarticulate a clear direction for an organization;
have relevant experience (In exceptional circumstances specialization /expertise in unrelated areas may also be considered);
have appropriate comprehension to understand or be able to acquire thatunderstanding o Relating to Corporate Functioning
o Involved in scale complexity of business and specific market and environment factorsaffecting the functioning of the company.
2) The appointment shall be in compliance with the Board Diversity Policy of theCompany.
(ii) Process for Identification / Appointment of Directors
Board members may (formally or informally) suggest any potential person to theChairman of the Company meeting the above criteria. If the Chairman deems fit necessaryrecommendation shall be made by him to the Nomination and Remuneration Committee (NRC).
Chairman of the Company can himself also refer any potential person meeting theabove criteria to the NRC.
NRC delibrafes the matter and recommends such proposal to the Board.
Board considers such proposal on merit and decide suitably.
(e) Familiarisation Programme of Independent Directors
The Independent Directors have been updated with their roles rights andresponsibilities in the Company by specifying them in their appointment letter alongwithnecessary documents reports and internal policies to enable them to familiarise with theCompany's procedures and practices. The Company endeavours through presentations atregular intervals to familiarise the Independent Directors with the strategy operationsand functioning of the Company and also with changes in the regulatory environment havinga significant impact on the operations of the Company and the pharmaceutical industry as awhole. Site visits to various plant locations and CSR sites are organized for theDirectors to enable them to understand the operations of and CSR activities carried out bythe Company. The Independent Directors also meet with senior management team of theCompany in informal gatherings. During the FY 2017-18 the Company has conducted 9programs for familiarising the Directors for a total duration of 9 hours and 25 minutes.
On cumulative basis since 1st April 2015 the Company has conducted 37 programs forfamiliarising the Directors for a total duration of 36 hours and 55 minutes.
The details of such familiarisation programs for Independent Directors are posted onthe website of the Company and can be accessed athttp://www.torrentpharma.com/pdf/cms/Familiarisation_Programme_2017-18.pdf
(f) Board Evaluation
The Evaluation of Board its Committees Individual Directors (Independent and NonIndependent Directors) and Chairperson was carried out as per the process and criterialaid down by the Board of Directors based on the recommendation of the NRC:
The obtaining and consolidation of feedback from all directors for theevaluation of the Board and its Committees Individual Directors (i.e. Independent and NonIndependent Directors) were co-ordinated by the Chairman of the Board. The feedback onevaluation of the Board and its Committees was discussed in their respective meetings andthe feedback on the evaluation of Individual Directors was discussed individually withthem.
The evaluation of Chairperson was co-ordinated by the Chairman of theIndependent Directors meeting.
The Independent Directors met on 8th February 2018 with respect to the above.
(g) Key Managerial Personnel
There was no change in the Key Managerial Personnel during the year under review.
(h) Directors' Responsibility Statement
In terms of Section134(3)(c) of the Companies Act 2013 in relation to financialstatements of the Company for the year ended 31st March 2018 the Board of Directorsstate that:
i. the applicable Accounting Standards have been followed in preparation of thefinancial statements and there are no material departures from the said standards;
ii. reasonable and prudent accounting policies have been used in preparation of thefinancial statements and that they have been consistently applied and that reasonable andprudent judgments and estimates have been made in respect of items not concluded by theyear end so as to give a true and fair view of the state of affairs of the Company as at31st March 2018 and of the profit for the year ended on that date;
iii. proper and sufficient care has been taken for maintenance of adequate accountingrecords in accordance with the provisions of the Companies Act 2013 for safeguarding theassets of the Company and for preventing and detecting fraud and other irregularities;
iv. the financial statements have been prepared on a going concern basis;
v. proper internal financial controls were in place and were adequate and operatingeffectively; proper systems to ensure compliance with the provisions of applicable lawswere in place and were adequate and operating effectively.
(a) Remuneration Policy
The Company has formulated policy relating to the remuneration for the Directors KeyManagerial Personnel and other employees of the Company. The remuneration policy isavailable on the website of the Company www.torrentpharma.com. The salient features ofthis policy are as under:
1. Components of Remuneration
1.1. Fixed Pay comprising of Basic Salary HRA Car Allowance (applicable to GeneralManager and above employees) Conveyance Allowance / Reimbursement Company's Contributionto Provident Fund Superannuation Fund Gratuity etc.
1.2. Variable Pay which is either in the form of:
(i) Commission to Managing Directors
(ii) Commission to Whole - time Directors
(iii) Performance Based Pay to General Managers and above [upto 20% of Cost to Company(CTC)] based on unit performance grades.
(iv) One time reward given in exceptional cases to identified directors employees whoundertake tasks which go beyond their normal call of duties and play a crucial role insuccess of an event.
1.3. Retention Pay: In case where stability is an issue part of the CTC is kept asretention pay which is being paid after 3 years or more.
2. Annual Appraisal Process:
2.1. Annual Appraisals are conducted following which annual increments and promotionsin deserving cases are decided once in a year based on:
(i) Employees Self-Assessment
(ii) Assessment of Immediate Superior and
(iii) Assessment of Head of Department
2.2. The increments as decided for a particular financial year are paid during thesubsequent financial year. e.g. the performance appraisal of an employee for the FY2016-17 is conducted in FY 2017-18 and his / her salary rise in FY 2017-18 reflects hisperformance for FY 2016-17
2.3. Performance Based Pay is also based on annual appraisal process.
2.4. Annual increment consist of -
i. Economic Rise: Based on All India Consumer Price Index published by the Governmentof India or Internal survey wherein inflation on commonly used items is calculated; and
ii. Performance Rise: Based on Industry and overall business scenario and factoring thefollowing aspects:
1) Company's performance vis-a-vis the industry
2) Unit Performance* (Grades ranging from A+ to C-)
3) Individual Performance / track record including care for health / balance betweenquality of work and family life.
*Unit Performance is carried out based on various financial and non-financialparameters (also used for working out overall ceiling at unit level and performance basedpay) such as -
a) Comparison of Company's Revenue and Profit growth with competition
b) Employee Cost
c) Return on Equity
d) Production Quality and Regulatory compliance
Unit: Domestic and International Operations Manufacturing Research & Developmentand Corporate.
2.5. Promotion Rise (Other than Executive Directors and Directors)
(b) Criteria for Remuneration to Non-Executive Directors (NEDs):
1. T he payment of commission to the Directors of the Company who are neither in thewhole time employment nor Managing Director(s) (NEDs) is approved by the shareholders ofthe Company and is subject to the condition that total commission paid to the NEDs shallnot exceed the limit of 1% of net profit in a financial year as per the provisions ofSection 197(1) of the Companies Act 2013 read with Section 198 of the said Act.
2. The Board or its Committee specifically authorised for this purpose determines themanner and extent upto which the commission is paid to the NEDs in accordance with theshareholders' approval. The commission is determined based on the participation of theDirectors in the meetings of Board and / or Committees thereof as well as on industrypractice performance of the Company and contribution by the Directors etc.
3. Payment of Commission is made annually on determination of Profit.
4. Sitting fees of Rs 1 lac is paid for each meeting of the Board or any Committeethereof attended by them.
5. Independent Directors are reimbursed for all the expenses incurred for attending anymeeting of the Board or Committees thereof and which may arise from performance of anyspecial assignments given by the Board.
(c) Information as required pursuant to Section 197 read with Companies (Appointmentand Remuneration of Managerial Personnel) Rules 2014
1. the ratio of the remuneration of each director to the median remuneration of theemployees of the Company for the financial year:
|Name of the Director ||Ratio of the Remuneration of Director to Median Remuneration |
|1. Shri Sudhir Mehta ||107.62 |
|2. Shri Samir Mehta$ ||322.86 |
|3. Shri Markand Bhatt ||# |
|4. Shri Shailesh Haribhakti ||7.75 |
|5. Shri Haigreve Khaitan ||6.03 |
|6. Shri Pradeep Bhargava ||8.18 |
|7. Smt Renu Challu ||7.96 |
|8. Prof. Ashish Nanda ||1.08* |
|9. Dr. Chaitanya Dutt$ ||132.25 |
$ Remuneration does not include premium for group personal accident and group mediclaimpolicy. # No remuneration has been paid during the year 2017-18 and hence ratio has notbeen calculated. * Prof. Ashish Nanda resigned w.e.f. 21st July 2017.
2. the percentage increase in remuneration of each Director Chief Financial Officerand Company Secretary:
|Name of the Director / Key Managerial Personnel ||Designation ||% increase in Remuneration |
|1. Shri Sudhir Mehta ||Chairman Emeritus ||(33.33) |
|2. Shri Samir Mehta# ||Executive Chairman ||Nil |
|3. Shri Shailesh Haribhakti ||Independent Director ||12.50 |
|4. Shri Haigreve Khaitan ||Independent Director ||27.27 |
|5. Shri Pradeep Bhargava ||Independent Director ||26.67 |
|6 Smt Renu Challu ||Independent Director ||12.12 |
|7. Prof. Ashish Nanda ||Independent Director ||(64.29)^ |
|8. Dr. Chaitanya Dutt# ||Whole-time Director ||18.10 |
|9. Shri Ashok Modi# ||Chief Financial Officer ||16.65* |
|10. Shri Mahesh Agrawal# ||Company Secretary ||12.99* |
No remuneration has been paid in 2016-17 and 2017-18 to Shri Markand Bhatt and hence %increase has not been calculated.
^ Prof. Ashish Nanda resigned w.e.f. 21st July 2017.
* The percentage change in remuneration is excluding onetime reward and performancepay.
# Remuneration does not include premium for group personal accident and group mediclaimpolicy.
3. The percentage increase in the median remuneration of employees in the financialyear under review is 8.82%. The employees whose remuneration is determined based onnegotiations and the employees at representative offices of the Company abroad have beenexcluded for this purpose.
4. The Company has 14700 employees on the rolls of Company as on 31st March 2018.
5. The increase made in the salaries of employees other than managerial personnel inthe last financial year based on the performance of the Company for 2016-17 was 11.16%while the increase in managerial remuneration was 4.70%. There was no change in salary ofShri Samir Mehta.
During the year under review Profits were impacted by the interest and amortization ofUnichem and Biopharm acquisitions. The Company has been making signi3cant investmentstargeted to maintain a steady growth in future by strengthening its position in itslargest market i.e. India. After the Elder investment in 2014-15 the Unichem acquisitionin India was accomplished in a record time during the year which has helped the Companyto leapfrog to 8th position in the Indian Pharma Market. In addition Bio-pharmacquisition in US was concluded providing a foothold in the niche liquids and suppositorymarket including a manufacturing facility - the first one overseas by the Company.
6. The remuneration paid is as per the Remuneration Policy of the Company.
(d) Remuneration to Managerial Personnel
The details of remuneration paid to the Managerial Personnel forms part of theCorporate Governance Report.
(e) Particulars of Employees
The information required under Section 134(3)(q) and 197(12) of the Companies Act2013 read with Rule 5(2) of the Companies (Appointment and Remuneration of ManagerialPersonnel) Rules 2014 forms part of this Report as Annexure-D.
However as per the provisions of Section 134 and Section 136 of the Companies Act2013 the Reports and Accounts are being sent to the Members excluding the information onemployees' particular which are available for inspection by the Members at the RegisteredOffice of the Company during business hours on working days of the Company up to the dateof ensuing AGM. Any Member interested in obtaining a copy of such statement may write tothe Company Secretary at the Registered Office of the Company.
(a) Statutory Auditors
B S R & Co. LLP Chartered Accountants (Firm Registration No. 101248W/W-100022)were appointed as the Statutory Auditors of the Company to hold office for 3ve years fromthe conclusion of Forty Fourth AGM held in the FY 2016-17 up to the conclusion of theForty Ninth AGM to be held in the FY 2021-22.
(b) Cost Auditors
The Company has appointed M/s. Kirit Mehta & Co. Cost Accountants Mumbai (FirmRegistration No. 000353) as the Cost Auditors of the Company for audit of cost accountingrecords of its activities (Formulation & Bulk Drugs activities) for the financial yearended 31st March 2018. The Cost Audit Report to the Central Government for the financialyear ended 31st March 2017 was 3led on 28th August 2017 within the statutory timeline.Further the Board of Directors has appointed M/s. Kirit Mehta & Co. as the CostAuditor of the Company for the financial year 2018-19 and has also 3xed theirremuneration. The Board has recommended the remuneration approved in its meeting forrati3cation by the shareholders in the ensuing AGM of the Company.
(c) Secretarial Auditor
The Board pursuant to Section 204 of the Companies Act 2013 read with Rule 9 of theCompanies (Appointment and Remuneration of Managerial Personnel) Rules 2014 includingany statutory modi3cation(s) or re-enactment thereof had appointed M/s. M. C. Gupta &Co. Company Secretaries as the Secretarial Auditors of the Company to conduct theSecretarial Audit as per the provisions of the Companies Act 2013 for the year 2017-18(Apr-17 to Mar-18).
M/s. M. C. Gupta & Co. Company Secretaries have carried out the Secretarial Auditof the Company for FY 2017-18 and the Report of Secretarial Auditors in Form MR-3 isannexed with this Report as Annexure-E. There were no quali3cation / observationsin the report.
As required by Regulation 34 read with Schedule V of the Listing Regulations aseparate Report on Corporate Governance forms part of the Annual Report. The report onCorporate Governance also contains certain disclosures required under the Companies Act2013. A certi3cate from the Statutory Auditors of the Company regarding compliance ofconditions of Corporate Governance as stipulated under Clause E of Schedule V of theListing Regulations forms part of this report as Annexure - F.
EXTRACT OF ANNUAL RETURN
As required under the provisions of Section 134(3)(a) and of Section 92(3) of theCompanies Act 2013 read with Rule 12 of the Companies (Management and Administration)Rules 2014 the extracts of annual return in Form No. MGT-9 forms part of this report as Annexure-G.
CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION ETC.
A statement containing the necessary information on Conservation of energy Technologyabsorption and Foreign exchange earnings and outgo stipulated under Section 134(3)(m) ofthe Companies Act 2013 read with Rule 8 of the Companies (Accounts) Rules 2014 isannexed to this report as Annexure-H.
APPRECIATION AND ACKNOWLEDGEMENTS
Your Directors appreciate the trust reposed by the medical fraternity and patients inthe Company and look forward to their continued patronage. The Directors are also gratefuland pleased to place on record their appreciation for the excellent support guidance andcooperation extended by the Government of India Governments of Gujarat Himachal PradeshSikkim Madhya Pradesh and Andhra Pradesh Central and State Government Bodies andAuthorities Financial Institutions and Banks. The Board also expresses its appreciationof the understanding and support extended by the shareholders and the commitment shown bythe employees of the Company.
| ||For and on behalf of the Board |
|Ahmedabad ||Samir Mehta |
|30th May 2018 ||Executive Chairman |