Your Directors take pleasure in presenting the 56th Annual Report on the business and operations of your Company for the financial year ended March 312019.
The table below gives the financial highlights of the Company for the year ended March 31 2019 on Standalone basis as compared to the previous financial year.
(Rs. in lakhs)
For the year ended
|March 31 2019||March 312018|
|Revenue from operations (inclusive of excise duty upto June 2017)||96773.89||66646.97|
|Profit/(Loss) before tax||(2158.02)||(12155.04)|
|Short/(Excess) provision for tax (earlier years)||(124.45)||(1271.99)|
|Profit/(Loss) for the year from continuing operations||704.20||(12140.95)|
|Profit/(Loss) from discontinued operations|
|A. Profit/(Loss) from discontinued operations||246.96||15358.12|
|B. Gain on sale of identified business (net)||-||321731.05|
|Profit/(Loss) for the year from discontinued operations (A+B)||246.96||337089.17|
|Tax on discontinued operations||71.24||69288.37|
|Profit/(Loss) from discontinued operations (after tax)||175.72||267800.80|
|Profit/(Loss) for the year||879.92||255659.85|
|Total Comprehensive Income||851.43||255479.77|
Management Discussion and Analysis
As required by Regulation 34 (2) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 (Listing Regulations) a Management Discussion and Analysis Report forms part of this Report. The detailed state of the affairs of the business along with the financial and operational developments have been discussed in the Management Discussion and Analysis Report.
An amount of ? 879.92 lakhs is proposed to be carried forward in the Profit & Loss Account. No amount has been transferred to General Reserve.
The Board has recommended a dividend of ? 4/- (200%) per equity share of ? 2/- each for the year ended March 312019 for the approval of the Members at the ensuing Annual General Meeting (AGM). An amount of ? 3394.16 lakhs would be paid as dividend (including dividend distribution tax). The Register of Members and Share Transfer Books shall remain closed from Monday July 22 2019 to Saturday July 27 2019 (both days inclusive) for the purpose of AGM and dividend if approved by the Shareholders. The AGM of the Company is scheduled for Saturday July 27 2019. The Company has a dividend distribution policy in place and the same is available on the website of the Company at https://unichemlabs.com/policies- code-of-conduct/dividend-distribution-policy/.
Employees Stock Option Schemes Scheme 2008
During the year under review 46250 options were exercised and 46250 equity shares of ? 2/- each were allotted (on pari passu basis) under the Employees Stock Option Scheme - 2008. As per the requirements of the SEBI (Share Based Employee Benefits) Regulations 2014 details of stock optio ns exerc ised d u ri n g th e year u n der revi ew fo rm part of the Directors' Report and are available on the Company's website at https://unichemlabs.com/investor- information/annual-report/.
The Shareholders vide Special Resolutions dated May 15 2018 approved the Unichem Employee Stock Option Scheme 2018 (Scheme) for the employees of the Company and its subsidiary company (ies) and setting up of Unichem Employee Welfare Trust (s) for implementing the Scheme. The maximum number of Employee Stock Options that can be granted under the Scheme shall not exceed 5275275 (Fifty- Two lakh Seventy Five thousand Two hundred and Seventy Five) i.e. 7.50% of the issued subscribed and paid-up equity share capital of the Company as on March 312018 (as adjusted for any corporate action and/or change in the capital structure) at such price or prices and such other terms and conditions as may be determined by the Board or the Nomination and Remuneration Committee from time to time. The Company has received in principle approval from the Stock Exchanges where the Company's shares are listed.
During the year under review 1688064 Stock Options were granted to the Senior Management under the Employee Stock Option Scheme 2018. In terms of the requirements specified under the SEBI (Share Based Employee Benefits) Regulations 2014 details of the Employee Stock Option Scheme 2018 form part of the Directors' Report and are available on the Company's website at https://unichemlabs.com/investor-information/annual- report/ .
Research and Development (R&D)
Kindly refer to the write up in the section Management Discussion and Analysis.
A detailed report on Corporate Governance as required under Regulation 34 of the Listing Regulations forms part of this Annual Report. The Auditors' Certificate on compliance with the conditions of Corporate Governance requirements by the Company is attached to the Report on Corporate Governance.
Consolidated Financial Statements
The Annual Audited Consolidated Financial Statements together with the Report of the Auditors' thereon forms part of this Annual Report.
Review of Subsidiaries and Associates
Your Company has five Subsidiaries and one Associate Company. A statement containing salient features of the Financial Statements of the Subsidiaries and Associate Company pursuant to Section 129 of the Companies Act 2013 (the Act) and Rules made thereunder is annexed to this Report as Annexure A in the prescribed Form AOC -1 and hence not repeated here for the sake of brevity.
Synchron Research Services Pvt. Ltd. (Synchron) is an Associate Company in terms of Section 2 (6) of the Act. Synchron is a leading contract research organization in India which offers competitive and high-quality clinical trial services to domestic and international pharmaceutical and bio-pharmaceutical companies. Your Company avails such services from Synchron from time to time.
On internal assessment of long term strategic investments made by the Company in its Wholly Owned Subsidiary Unichem Farmaceutica Do Brasil Ltda. considering its past performance results assets expected cash flows projections and having confidence in the business model and strategy of the said Subsidiary achieving its goals given favourable business opportunities the management has determined an amount of ? 302.83 lakhs as diminution for the year (previous year ? 511.71 lakhs). This has resulted in an aggregate impairment loss of ? 7086.72 lakhs (previous year ? 6783.89 lakhs) on total investment of ? 7086.72 lakhs (previous year ? 6783.89 lakhs) made therein.
Particulars of Loans Guarantees and Investments
Details of Loans Guarantees and Investments covered under the provisions of Section 186 of the Act are given in the notes to the Financial Statements.
The Company has not accepted any deposits within the meaning of Section 73 of the Act read with the Companies (Acceptance of Deposits) Rules 2014.
The Company has formulated a policy on Risk Management. Risks are classified in different categories such as Financial Operational Legal and Strategic risks. A risk register is prepared for identification of risk and formulating mitigation plans.
Directors and Key Managerial Personnel
During the year under review Dr. Prakash A. Mody (DIN 00001285) was re-appointed Chairman & Managing Director for a period of three years w.e.f. July 12018 to June 30 2021. Mr. Dilip Kunkolienkar (DIN 02666678) was appointed whole time Director designated as Director Technical for a period of three years w.e.f. April 12018 to March 312021. Mr. Prafull Anubhai (DIN 00040837) Mr. Prafull Sheth (DIN 00184581) and Mr. Anand Mahajan (DIN 00066320) were appointed as Independent Directors for a second term of five consecutive years w.e.f. April 12019 up to March 312024.
Mr. Ramdas Gandhi (DIN 00029437) Independent Director resigned w.e.f. May 29 2018 due to advanced age. The Board places on record its deep appreciation for the services rendered by Mr. Ramdas Gandhi during his tenure with the Company.
Mr. Dilip Kunkolienkar Director Technical retires by rotation and being eligible has offered himself for re-appointment. The Board has recommended his re-appointment for consideration of the shareholders at the 56th AGM.
All Independent Directors have declared that they meet the criteria of independence as laid down under Section 149 (6) of the Companies Act 2013 and Regulation 16 (b) of the Listing Regulations. All Independent Directors have given declarations stating compliance with the Company's Code of Ethics and Business Conduct.
Mr. Rakesh Parikh Chief Financial Officer of the Company superannuated from the services of the Company on August 312018. Mr. Sandip Ghume was appointed as Deputy Chief Financial Officer w.e.f. October 30 2018.
In terms of Section 203 of the Companies Act 2013 Dr. Prakash A. Mody Chairman & Managing Director Mr. Dilip Kunkolienkar Director Technical Ms. Neema Thakore Head-Legal & Company Secretary and Mr. Sandip Ghume Deputy Chief Financial Officer are the Key Managerial Personnel of the Company.
Directors' Responsibility Statement
To the best of their knowledge and belief and according to the information and explanations obtained by them your Directors make the following statements in terms of Section 134 (3) (c) of the Act:
1. that in preparation of annual accounts for the year ended March 31 2019 the applicable accounting standards have been followed and no material departures have been made from the same;
2. that such accounting policies have been selected and applied consistently and made judgements and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at March 312019 and profit / loss for the year ended on that date;
3. that proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;
4. that the annual accounts have been prepared on a going concern basis;
5. that internal financial controls were in place and that they were adequate and operating effectively; and
6. that systems to ensure compliance with the provisions of all applicable laws were devised and such systems were adequate and operating effectively.
Pursuant to the provisions of the Act and the Listing Regulations performance evaluation of the Board its Committees the Chairman & Managing Director and the Independent Directors was carried out. The manner in which the evaluation is carried out has been explained in the Corporate Governance Report.
Nomination and Remuneration Policy
The Board on the recommendation of the Nomination and Remuneration Committee has adopted a policy for selection appointment and remuneration of Directors Key Managerial Personnel and Senior Management. The details of this Policy are given hereunder. The policy is available on the Company's website at https://unichemlabs.com/nomination-and- remunerationpolicy/.
The Company considers human resources as its invaluable assets. The Nomination and Remuneration Policy aims to pay equitable remuneration to all Directors Key Managerial Personnel and employees of the Company to harmonize the aspirations of human resources consistent with the goals of the Company. The Remuneration Policy for all employees is designed to attract talented personnel and remunerate them fairly and responsibly this being a continuous ongoing exercise at each level in the organization.
Whole Time/ Managing Director
The Company pays remuneration by way of salary perquisites and allowances (fixed component) and commission (variable component) to its Managing Director. A proper balance between fixed and variable component is aimed at. Salary is paid based on the recommendation of the Nomination and Remuneration Committee and as approved by the Board of Directors subject to the approval of the Shareholders within the limits stipulated by the Act and the Rules made thereunder. The remuneration paid to the Whole Time Director is determined keeping in view the industry benchmark and the relative performance of the Company compared to the industry performance. The Company pays remuneration by way of salary perquisites and allowances to its Whole Time Director.
Non-Executive Directors receive sitting fees for attending Meetings of the Board and its Committees as per the provisions of the Act and the Rules made thereunder. Besides payment of sitting fees and dividend on equity shares if any held by the Directors no other remuneration is paid to the Non-Executive Directors. The Nomination and Remuneration Committee may recommend to the Board the payment of commission taking into account the evaluation of the performance of the Directors.
Key Managerial Personnel (KMP) and other Employees
The remuneration of KMP other than the Whole Time Director and other Senior Managerial Employees largely consists of basic salary perquisites allowances and performance incentives (wherever paid). Perquisites and retirement benefits are paid according to the Company's policy. The components of the total remuneration vary for different grades and are governed by the industry pattern qualification and experience merits and performance of each employee. The Company while deciding the remuneration package takes into consideration the current employment scenario and remuneration package prevalent in the industry and peer group companies.
During the year seven Board Meetings were held the details of which are given in the Corporate Governance Report.
The constitution of the Board Committees their scope role and terms of reference are as per the provisions of the Act the Rules made thereunder and the Listing Regulations. All the recommendations made by the Audit Committee were accepted by the Board of Directors. The constitution of the Board Committees is provided in the Corporate Governance Report.
Whistle Blower Policy
The Company has in place a Whistle Blower/Vigil Mechanism through which its Stakeholders Directors and Employees can report genuine concerns about unethical behaviour and actual or suspected fraud or violation of the Company's `Code of Business Conduct and Ethics'. The said Policy provides for adequate safeguards against victimization and also direct access to the Audit Committee. The e-mail id for reporting genuine concerns is firstname.lastname@example.org.
Significant and Material orders passed by the Regulators/ Courts / Tribunals
No significant or material orders were passed by the Regulators or Courts or Tribunals which impact the Company's going concern status and its operations in the future.
However the Board of Directors would like to inform that on July 9 2014 the European Commission decided to impose an unjustified fine of Euro 13.96 million jointly and severally on the Company and its subsidiary Niche Generics Ltd. (Niche) contending that they have acted in breach of EU competition law as Niche had in early 2005 (when the Company was only a part owner and financial investor in Niche) agreed to settle a financially crippling patent litigation with Laboratories Servier. The Company vehemently denies any wrongdoing on the part of either itself or Niche. Both the Company and Niche had submitted appeals in September 2014 to the EU General Court seeking appropriate relief in the matter.
The General Court of the European Union has on December 12 2018 rejected the appeal and confirmed the fine of Euro 13.96 million imposed by the European Commission jointly and severally on the Company and its subsidiary Niche. The Company has filed an appeal against the decision of the General Court before the Court of Justice of the European Union. The Company awaits the outcome of the appeal.
Material changes and commitment if any affecting the financial position of the Company from the end of the financial year till the date of this Report
There have been no material changes and commitments affecting the financial position of the Company between the end of the financial year to which the Financial Statements relate and the date of this Report.
Related Party Transactions
During the year under review approval of the Audit Committee and Board of Directors was sought for Related Party Transactions wherever required.
The Audit Committee has given prior approval for all Related Party Transactions. The Policy on Related Party Transactions as approved by the Board is uploaded on the Company's website and the weblink is provided in the Corporate Governance Report.
The particulars of contracts or arrangements with Related Parties referred to in Section 188 (1) of the Act are provided in the prescribed Form AOC - 2 annexed as Annexure B to this Report.
Except to the extent of the shares held in the Company and the remuneration if any drawn from the Company none of the Directors and Key Managerial Personnel have any pecuniary relationships or transactions ws-a-wsthe Company.
Disclosure under The Sexual Harassment of Women at Workplace (Prevention Prohibition and Redressal) Act 2013
The Company has in place a policy on Prevention Prohibition and Redressal of Sexual Harassment at the Workplace in line with the requirements of The Sexual Harassment of Women at Workplace (Prevention Prohibition and Redressal) Act 2013. An Internal Complaints Committee (ICC) has been set up to redress complaints received regarding sexual harassment. The policy has set guidelines on the redressal and enquiry process that is to be followed by complainants and the ICC whilst dealing with issues related to sexual harassment at the workplace. All women employees (permanent temporary contractual and trainees) are covered under this Policy. The ICC received one complaint during the year under review. As on date the same has been redressed in terms of the Policy.
Pursuant to the provisions of Section 139 of the Companies Act 2013 (the Act) read with the Companies (Audit and Auditors) Rules 2014 N.A. Shah Associates LLP (Firm Registration No. 116560W/W100149) Chartered Accountants were appointed as Statutory Auditors of the Company to hold office from the conclusion of 54th Annual General Meeting (AGM) until the conclusion of 59th AGM subject to ratification by Shareholders at every subsequent AGM.
The provisions of Section 139 of the Act were amended and notified with effect from May 7 2018. In terms of the said amendment appointment of the Auditors is no longer required to be ratified by the Members at every subsequent AGM. In view of this no resolution is proposed for ratification of the appointment of the Auditors at the ensuing AGM.
N.A. Shah Associates LLP (Firm Registration No. 116560W/W100149) Chartered Accountants have confirmed that they are not disqualified from continuing as Statutory Auditors of the Company.
During the year under review the Auditors have not reported any matter under Section 143 (12) of the Act and therefore no details are disclosed under Section 134 (3) (ca) of the Act.
The Board of Directors at its Meeting held on May 24 2019 based on the recommendation of the Audit Committeeappointed Kishore Bhatia & Associates Cost Accountants (Firm Registration No. 00294); as Cost Auditors for undertaking Cost Audit of the Cost Accounting Records maintained by the Company for the financial year 2019-2020 at a remuneration not exceeding ? 7.50 lakhs (Rupees Seven Lakhs Fifty Thousand Only) plus applicable taxes and out of pocket expenses at actuals. The said Auditors have confirmed their eligibility for appointment as Cost Auditors. The remuneration payable to the said Cost Auditors is required to be placed before the Members at the ensuing AGM for ratification and a suitable Resolution has been set out in the Notice of the 56th AGM. The Cost Audit Report for the year ended March 312018 was filed with the Ministry of Corporate Affairs on August 24 2018.
Pursuant to the provisions of Section 204 of the Act and the Rules made thereunder the Company has appointed Alwyn Jay & Co. Company Secretaries in Practice to undertake Secretarial Audit of the Company. The Secretarial Audit Report is annexed as Annexure C to this Report. There is no qualification reservation adverse remark or disclaimer in the said Report.
During the year under review the Secretarial Auditors have not reported any matter under Section 143 (12) of the Act and therefore no details are disclosed under Section 134 (3) (ca) of the Act.
Compliance with Secretarial Standards
The Company has complied with the applicable Secretarial Standards issued by The Institute of Company Secretaries of India.
Internal control systems and their adequacy
Kindly refer to the write up in the section Management Discussion and Analysis.
Energy Conservation Technology Absorption and Foreign Exchange Earnings and Outgo
The particulars as prescribed under Section 134 (3) (m) of the Act and Rules made thereunder are set out in Annexure D to this Report.
Dividend Distribution Policy
Pursuant to SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 the Company has formulated a Dividend Distribution Policy which is available on the Company's website https://unichemlabs.com/ policies-code-of-conduct/dividend-distribution-policy/.
Extract of Annual Return
Form MGT-9 providing an extract of the Annual Return in terms of Section 92 of the Act and the Rules made thereunder forms part of this Report as Annexure E and the same isavailable on the website of the Company at https://unichem labs.com/investor-information/annual report.
Particulars of Employees and related disclosures
Disclosures pertaining to remuneration and other details as required under Section 197 (12) of the Act and Rule 5 (1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014 as amended are annexed as Annexure F to this Report.
In terms of the provisions of Section 197 (12) of the Act and Rules 5 (2) and 5 (3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014 as amended details of employee's remuneration form part of the Director's Report. However as per the provisions of Sections 134 and 136 of the Act the Report and Financial Statements are being sent to the Members and others entitled thereto excluding the information on employees particulars which is available for inspection at the Registered Office of the Company as per details mentioned in the Notice of the 56th AGM. Any Member interested in obtaining a copy of the same may write to the Company Secretary at the Company's Registered Office.
Human Resources and Employee Relations
Kindly refer to the write up in the section Management Discussion and Analysis.
Quality and Environment
Your Company's mission envisages a strong sense of commitment to work by being a caring pharmaceutical company which will continuously strive to enhance health through quality products. Your Company aims at consistently providing products that meet customer needs as well as national and international regulatory requirements as may be applicable. Your Company has been steadily raising the bar setting higher goals for incremental performance and enlarging the scope of its initiatives. The environmental policy of your Company emphasizes being a caring Company which shall protect and promote the environment by complying with applicable environmental regulations and preventing pollution in all its operations.
Various initiatives are taken at your Company's manufacturing locations to reduce waste across the plants and reduce usage of paper by recycling wastepaper. Training programs are organized from time to time to create environmental awareness amongst the employees. To conserve water your Company has devised various water saving methods which are monitored on a day to day basis.
Your Company continues to strive for energy saving and conservation of natural resources. In all its Active Pharmaceutical Ingredient (API) plants your Company has installed online effluent monitoring equipment which is connected to the system of the Central Pollution Control Board.
At the manufacturing units several green initiatives have been undertaken most significant being soil conservation recycling of treated effluent water and using solar energy for street lighting.
Corporate Social Responsibility (CSR)
Your Company believes in the philosophy of giving back. Being in the pharmaceutical industry your Company's primary focus is healthcare. Education sanitation protection of environment general welfare and development are the other areas in which your Company concentrates its CSR activities. While the focus of CSR efforts will be in the areas around the Company's locations the Company may also undertake projects looking into other societal needs in compliance with Schedule VII to the Act. The CSR policy is available on the website of the Company and the Annual Report on CSR activities as required under Section 135 of the Act is annexed as Annexure G to this Report.
During the year under review the total amount to be spent on CSR was ? 226.91 lakhs. The Company spent ? 156.51 lakhs which is 1.37 % of the average profits for the last three financial years. Balance amount of ? 70.40 lakhs remained unspent.
The Company could not spend the balance amount since it is in the process of identifying appropriate CSR programs/projects in line with its CSR policy. Further certain funds even though allocated to approved educational and health projects by the CSR Committee were not disbursed during the year under review since implementation of the projects were delayed or there was no requirement for these funds from the respective organizations/institutions.
The Company plans to scale up its CSR activities in areas of education health environment protection sanitation general welfare and development activities in a structured manner to meet the objectives of its CSR policy in the coming years.
Business Responsibility Report
Regulation 34 (2) of the Listing Regulations inter alia provides that the Annual Report of the Top 500 listed entities based on market capitalization (calculated as on March 31 of every financial year) shall include a Business Responsibility Report (BRR). Since your Company does not feature in the Top 500 listed entities as per market capitalization as on March 31 2019 the Business Responsibility Report for the financial year 2018-2019 does not form a part of this Annual Report.
Health and Safety
Health and Safety issues are addressed systematically effectively and proactively. Your Company takes pride in providing various forms of medical assistance to the families of its employees. Periodic health check-ups are carried out for all employees and regular training programs are organized on safety and precautionary measures. Firefighting training programs and first aid training camps are organized regularly to educate workers and employees at the plant locations and corporate office.
Your Directors acknowledge the support and wise counsel extended to the Company by analysts bankers Government agencies shareholders investors suppliers distributors employees and others associated with the Company as its business partners. Your Directors also acknowledge the trust reposed in the Company by the medical fraternity and patients. We look forward to having the same support in our mission to enhance health through quality products.
Statements in this Directors' Report and Management Discussion and Analysis describing the Company's objectives projections estimates expectations or predictions may be forward-looking statements within the meaning of applicable securities laws and regulations. Actual results could differ materially from those expressed or implied. Important factors that could make a difference to the Company's operations include raw material availability and prices cyclical demand and pricing in the Company's principle markets changes in Government regulations tax regimes economic developments within India and the countries in which the Company conducts business and other ancillary factors.
|For and on behalf of the Board of Directors|
|Dr. Prakash A. Mody|
|Mumbai||Chairman & Managing Director|
|May 24 2019||(DIN 00001285)|