Unichem Laboratories Ltd.
|BSE: 506690||Sector: Health care|
|NSE: UNICHEMLAB||ISIN Code: INE351A01035|
|BSE 00:00 | 26 Mar||195.05||
|NSE 00:00 | 26 Mar||195.35||
|Mkt Cap.(Rs cr)||1,373|
|Mkt Cap.(Rs cr)||1373.15|
Unichem Laboratories Ltd. (UNICHEMLAB) - Director Report
Company director report
Your Directors take pleasure in presenting the 54th Annual Report on the business andoperations of your Company for the financial year ended March 312017.
The table below gives the financial highlights of the Company for the year ended March312017 on Standalone basis as compared to the previous financial year.
For the year ended (Rs. in lacs)
Note: Previous year's figures have been re-grouped/re-classified wherever necessary.
Review of Operations
During the year under review Standalone Sales/Income from operations (Gross) increasedto Rs. 141385.22 lacs from Rs. 123614.52 lacs in 2015-2016 registering a growth of14.40%. Consolidated Sales/Income from Operations (Gross) stood at Rs. 153549.61 lacs in2016-2017 as compared to Rs. 134828.00 lacs in 2015-2016 registering an increase of13.90%.
An amount of Rs. 84336.37 lacs is proposed to be carried forward in the Profit &Loss Account. During the year under review no amount was transferred to General Reserve.
The Board has recommended a dividend of Rs. 3/- (150 %) per equity share of Rs. 2/-each for the year ended March 31 2017 for the approval of the Shareholders at the ensuingAnnual General Meeting (AGM). The Register of Members and Share Transfer Books shallremain closed from Monday July 17 2017 to Saturday July 22 2017 (both days inclusive)for the purpose of AGM and dividend if approved by the Shareholders. The AGM of theCompany is scheduled for Saturday July 22 2017.
Employees Stock Option Scheme
During the year under review 707776 options having a face value of Rs. 2/- each wereexercised and the same were allotted (on pari passu basis) under the Employees StockOption Scheme - 2008. Details of the Employees Stock Option Scheme - 2008 are set out asAnnexure A to this Report.
Research and Development (R&D)
Kindly refer to the write up in the section Management Discussion and Analysis.
Management Discussion and Analysis
A detailed review on the operations and performance of the Company is given in theManagement Discussion and Analysis which forms part of this Annual Report.
A detailed report on Corporate Governance as required under Regulation 34 of theSecurities and Exchange Board of India (Listing Obligations and Disclosure Requirements)Regulations 2015 ("Listing Regulations") forms part of this Annual Report. TheAuditors' Certificate on compliance with the conditions of Corporate Governancerequirements 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 theAuditors' thereon forms part of this Annual Report.
Review of Subsidiaries and Associates
Your Company has 5 (five) Subsidiaries and one Associate Company. Financials of theSubsidiaries and Associate Company are disclosed in the Consolidated Financial Statementswhich form part of this Annual Report.
A statement containing salient features of the Financial Statements of the Subsidiariesand Associate Company pursuant to Section 129 of the Companies Act 2013 (the Act) andRules made thereunder is annexed to this Report as Annexure B in the prescribed Form AOC-1 and hence not repeated here for the sake of brevity.
Synchron Research Services Private Limited (Synchron) is an Associate Company in termsof Section 2 (6) of the Act. Synchron is a leading contract research organization in Indiawhich offers competitive and high quality clinical trial services to domestic andinternational pharmaceutical and bio-pharmaceutical companies. Your Company avails suchservices from Synchron from time to time.
On internal assessment of long term strategic investments made by the Company in itsWholly Owned Subsidiary Unichem Farmaceutica Do Brazil Ltda. considering its pastperformance results assets expected cash flows projections and having confidence inthe business model and strategy of the said Subsidiary achieving its goals givenfavourable business opportunities the management has determined an amount of Rs. 2690.78lacs as diminution for the year (previous year Rs. 2277.63 lacs). This has resulted in anaggregate impairment loss of Rs. 6272.19 lacs (previous year Rs. 3581.41lacs) on totalinvestment of Rs. 6272.19 lacs made therein.
Particulars of Loans Guarantees and Investments
Details of Loans Guarantees and Investments covered under the provisions of Section186 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 Actread with the Companies (Acceptance of Deposits) Rules 2014.
The Company has formulated a policy on Risk Management. Risks are classified indifferent categories such as Financial Operational Legal and Strategic risks. A riskregister is prepared for identification of risk and formulating mitigation plans.
ICRA has re-affirmed your Company's A1+ rating for short-term debt (includingCommercial Paper) Programme of Rs. 1500 lacs. The rating indicates strong degree ofsafety regarding timely payment of financial obligations.
Directors and Key Managerial Personnel
All the Independent Directors have furnished declarations that they meet the criteriaof independence as laid down under Section 149 (6) of the Act and the Listing Regulations.
Dr. Prakash A. Mody retires by rotation at the ensuing AGM in terms of the provisionsof Section 152 of the Act. The Act provides that Independent Directors are not subject toretirement by rotation and two thirds of the remaining Directors shall be subject toretirement by rotation. Since all the Directors except Dr. Mody are Independent DirectorsDr. Mody will retire by rotation and being eligible offers himself for re-appointment.
Dr. Mody is the Chairman & Managing Director of the Company. Upon hisre-appointment as a Director he shall continue to hold office as the Chairman &Managing Director of the Company.
Attention of the Members is invited to the relevant item in the Notice of the AGMseeking your approval to the aforesaid re-appointment. The information required underRegulation 36 of the Listing Regulations is provided in the Notice of the 54th AGM and thestatement annexed thereto.
Dr. (Mrs.) B. Kinnera Murthy's first term as an Independent Director of the Companywill expire on March 20 2018. Based on the recommendation of the Nomination andRemuneration Committee and the Board of Directors it is proposed to re-appoint Dr. (Mrs.)B. Kinnera Murthy as an Independent Director for a second term of 5 (five) years w.e.f.March 212018. Due notice under Section 160 of the Act has been received from a Member ofthe Company proposing the appointment of Dr. (Mrs.) B. Kinnera Murthy as an IndependentDirector of the Company at this AGM.
Appropriate Resolution(s) seeking your approval to the appointment/ re-appointment ofDirectors forms part of the Notice convening the 54th AGM and the same are recommended foryour consideration and approval.
Dr. Prakash A. Mody Chairman & Managing Director Mr. Rakesh Parikh Chief Finance& Compliance Officer and Ms. Neema Thakore Head - Legal & Company Secretary werethe Key Managerial Personnel during the financial year.
Directors' Responsibility Statement
To the best of their knowledge and belief and according to the information andexplanations obtained by them your Directors make the following statements in terms ofSection 134 (3) (c) of the Act:
1. that in preparation of annual accounts for the year ended March 31 2017 theapplicable accounting standards have been followed and no material departures have beenmade from the same;
2. that such accounting policies have been selected and applied 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 as at March 312017 and profit for the yearended on that date;
3. that proper and sufficient care has been taken 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;
4. that the annual accounts have been prepared on a going concern basis;
5. that the internal financial controls were in place and that they were adequate andoperating effectively; and
6. that systems to ensure compliance with the provisions of all applicable laws weredevised and such systems were adequate and operating effectively.
Pursuant to the provisions of the Act and the Listing Regulations performanceevaluation of the Board it's Committees the Chairman & Managing Director and theIndependent Directors was carried out. The manner in which the evaluation is carried outhas been explained in the Corporate Governance Report.
The Board on the recommendation of the Nomination and Remuneration Committee hasadopted a policy for selection appointment and remuneration of Directors Key ManagerialPersonnel and Senior Management. The details of this Policy are provided in the CorporateGovernance Report.
During the year 5 (five) Board Meetings were held the details of which are given inthe Corporate Governance Report.
The constitution of the Audit Committee its scope role and terms of reference are asper the provisions of the Act the Rules made thereunder and the Listing Regulations. Allthe recommendations made by the Audit Committee were accepted by the Board of Directors.
Whistle Blower Policy
The Company has in place a Whistle Blower/Vigil Mechanism through which itsStakeholders Directors and Employees can report genuine concerns about unethicalbehaviour and actual or suspected fraud or violation of the Company's Code ofBusiness Conduct and Ethics'. The said Policy provides for adequate safeguards againstvictimization and also direct access to the Audit Committee. The e-mail id for reportinggenuine concerns is firstname.lastname@example.org
Significant and Material orders passed by the Regulators/Courts/Tribunals Nosignificant or material orders were passed by the Regulators or Courts or Tribunals whichimpact 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 EuropeanCommission decided to impose an unjustified fine of 13.97 million jointly andseverally on the Company and its subsidiary Niche Generics Ltd. (Niche) contending thatthey have acted in breach of EU competition law as Niche had in early 2005 (when theCompany was only a part owner and financial investor in Niche) agreed to settle afinancially crippling patent litigation with Laboratories Servier. The Company vehementlydenies any wrongdoing on the part of either itself or Niche. Both the Company and Nichehave submitted appeals in September 2014 to the EU General Court seeking appropriaterelief in the matter. Your Company has challenged this order and the proceedings arecurrently ongoing.
Material changes and commitment if any affecting the financial position of theCompany from the end of the financial year till the date of this Report
There have been no material changes and commitments affecting the financial positionof the Company between the end of the financial year to which the Financial Statementsrelate and the date of this Report.
Related Party Transactions
During the year under review approval of the Audit Committee and Board of Directorswas sought for Related Party Transactions wherever required; including inter alia forincrease in remuneration payable to Ms. Supriya Mody daughter of Dr. Prakash A. ModyChairman & Managing Director of the Company upto a sum not exceeding Rs. 65 lacs(Rupees Sixty Five Lacs Only) in a financial year starting from April 1 2015 inclusiveof perquisites ("Maximum Remuneration").
The said transaction not being an arm's length transaction but a transaction in theordinary course of business was duly approved by the Shareholders at the AGM held on July112015.
The Audit Committee has given prior approval for all Related Party Transactions. ThePolicy on Related Party Transactions (Policy) as approved by the Board is uploaded on theCompany's website and the weblink is provided in the Corporate Governance Report. TheBoard of Directors of the Company has approved the criteria for omnibus approval ofRelated Party Transactions by the Audit Committee within the overall framework of thePolicy.
The particulars of contracts or arrangements with Related Parties referred to inSection 188(1) of the Act are provided in the prescribed Form AOC - 2 annexed as AnnexureC to this Report.
Except to the extent of the shares held in the Company and the remuneration if anydrawn from the Company none of the Directors and Key Managerial Personnel have anypecuniary relationships or transactions vis-a-vis the Company.
Disclosure under The Sexual Harassment of Women at Workplace (Prevention Prohibitionand Redressal) Act 2013
The Company has in place a policy on Prevention Prohibition and Redressal of SexualHarassment at the Workplace in line with the requirements of The Sexual Harassment ofWomen at the Workplace (Prevention Prohibition and Redressal) Act 2013. An InternalComplaints Committee (ICC) has been set up to redress complaints received regarding sexualharassment. The policy has set guidelines on the redressal and enquiry process that is tobe followed by complainants and the ICC whilst dealing with issues related to sexualharassment at the workplace. All women employees (permanent temporary contractual andtrainees) are covered under this Policy. The Company has not received any complaintsduring the year under review.
B. D. Jokhakar & Co. (Firm Registration No. 104345W) were appointed as StatutoryAuditors of the Company to hold office from the conclusion of the 51st AGM to theconclusion of the 54th AGM (subject to ratification of the appointment by the Members atevery AGM held after the 51 st AGM).
As per the provisions of the Act no listed company shall appoint an audit firm(including its affiliate firms) as auditors for more than 2 (two) terms of 5 (five)consecutive years. The Act also provided for an additional transition period of 3 (three)years from the commencement of the Act i.e. April 12014.
B. D. Jokhakar & Co. have completed the period of 10 (ten) years and will also becompleting the additional transition period of 3 (three) years at the conclusion of theforthcoming AGM.
Accordingly the term of the present Auditors B. D. Jokhakar & Co. expires at theconclusion of the forthcoming AGM. The Audit Committee and the Board of Directors place onrecord their appreciation for the professional services rendered by B. D. Jokhakar &Co. during their association with the Company as its Auditors.
Pursuant to Section 139 of the Act and on the recommendation of the Audit Committeeit is now proposed to appoint N. A. Shah Associates LLP Chartered Accountants (FirmRegistration No. 116560W/W100149) as Statutory Auditors of the Company for a term of 5(five) years from the conclusion of the 54th AGM (subject to ratification of suchappointment by the Members at every AGM) till the conclusion of the 59th AGM at suchremuneration as may be determined by the Board of Directors and the said Auditors fromtime to time.
The said Auditors have confirmed their eligibility for appointment in terms of Section139 of the Act.
During the year under review the retiring Auditors have not reported any matter underSection 143 (12) of the Act and therefore no details are disclosed under Section 134(3)(ca) of the Act.
A Resolution seeking the appointment of N. A. Shah Associates LLP forms part of theNotice convening the 54th AGM and the same is recommended for your consideration andapproval.
The Board of Directors at its Meeting held on May 30 2017 based on the recommendationof the Audit Committee appointed Y. R. Doshi & Co. (Firm Registration No. 000003)Cost Accountants Mumbai as Cost Auditors for undertaking Cost Audit of the CostAccounting Records maintained by the Company for the financial year 2017-2018 at aremuneration not exceeding Rs. 7.50 lacs (Rupees Seven Lacs Fifty Thousand Only) plusapplicable taxes and out of pocket expenses at actuals. The said Auditors have confirmedtheir eligibility for appointment as Cost Auditors. The remuneration payable to the saidCost Auditors is required to be placed before the Members at the ensuing AGM forratification and a suitable Resolution has been set out in the Notice of the 54th AGM. TheCost Audit Report for the year ended March 312016 was filed with the Ministry ofCorporate Affairs on August 17 2016.
Pursuant to the provisions of Section 204 of the Act and the Rules made thereunder theCompany has appointed Alwyn Jay & Co. Company Secretaries in Practice to undertakethe Secretarial Audit of the Company. The Secretarial Audit Report is annexed as AnnexureD to this Report. There is no other qualification reservation adverse remark ordisclaimer in the said Report except that National Stock Exchange of India Limited (NSE)had sought a clarification from the Company on delayed reporting of the proceedings of the53rd AGM of the Company held on July 23 2016. The Company had clarified to NSE that theproceedings filed with the Exchange on July 26 2016 did not contain any material newinformation and was a mere reiteration of the facts already stated in the voting resultsof the 53rd AGM given within the stipulated time as required under Regulation 44 of theListing Regulations. No action has been initiated by NSE against the Company.
During the year under review the Secretarial Auditors have not reported any matterunder Section 143 (12) of the Act and therefore no details are disclosed under Section134 (3)(ca) of the Act.
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 madethereunder are set out in Annexure E to this Report.
Dividend Distribution Policy
Pursuant to SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015the Company has formulated a Dividend Distribution Policy which forms part of this AnnualReport as Annexure F and is also available on the Company's website
Extract of Annual Return
Form MGT-9 providing an extract of the Annual Return in terms of Section 92 of the Actand the Rules made thereunder is annexed as Annexure G to this Report.
Particulars of Employees and related disclosures
Disclosures pertaining to remuneration and other details as required under Section197(12) of the Act and Rule 5(1) of the Companies (Appointment and Remuneration ofManagerial Personnel) Rules 2014 as amended are annexed as Annexure H to this Report.
In terms of the provisions of Section 197(12) of the Act and Rules 5(2) and 5(3) of theCompanies (Appointment and Remuneration of Managerial Personnel) Rules 2014 as amendedcontaining details of employees remuneration forms part of this Report as Annexure K.However as per the provisions of Sections 134 and 136 of the Act the Report andFinancial Statements are being sent to the Members and others entitled thereto excludingthe information on employees particulars which is available for inspection at theRegistered Office of the Company as per details mentioned in the Notice of the 54th AGM.Any Member interested in obtaining a copy of the same may write to the Company Secretaryat 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 caringpharmaceutical company which will continuously strive to enhance health through qualityproducts. Your Company aims at consistently providing products that meet customer needs aswell as national and international regulatory requirements as may be applicable. YourCompany has been steadily raising the bar setting higher goals for incrementalperformance and enlarging the scope of its initiatives. The environmental policy of yourCompany emphasizes at being a caring Company which shall protect and promote theenvironment by complying with applicable environmental regulations and preventingpollution in all its operations.
Various initiatives are taken at your Company's manufacturing locations to reduce wasteacross the plants and reduce usage of paper by recycling waste paper. Training programsare organised from time to time to create environmental awareness amongst the employees.To conserve water your Company has devised various water saving methods which aremonitored on a day to day basis.
Your Company continues to strive for energy saving and conservation of naturalresources. In all its Active Pharmaceutical Ingredient (API) Plants your Company hasinstalled online effluent monitoring equipment which is connected to the system of theCentral Pollution Control Board.
Your Company is in the process of commissioning advanced Effluent Treatment Systems tocontrol the usage of polluted effluent which will improve quality of effluent discharge.Your Company has initiated a study to install a cleaner form of energy namely solarenergy.
At the manufacturing units several green initiatives have been undertaken mostsignificant being soil conservation recycling of treated effluent water and using solarenergy for street lighting.
Corporate Social Responsibility (CSR)
Your Company believes in the philosophy of giving back. Being in the pharmaceuticalindustry your Company's primary focus is healthcare. Education and development of needysections of the Society especially the economically backward sections are the other areasin which your Company concentrates its CSR activities. While the focus of CSR efforts willbe in the areas around the Company's operations your Company may also undertake project'slooking into other societal needs. The CSR policy is available on the website of theCompany and the Annual Report on CSR activities as required under Section 135 of the Actis annexed as Annexure I to this Report. The Company would also undertake other need basedinitiatives in compliance with Schedule VII to the Act.
During the year under review the total amount to be spent on CSR was Rs. 279.32 lacs.The Company spent Rs. 122.20 lacs which is 0.87 % of the average profits for the lastthree financial years. Balance amount of Rs. 157.12 lacs remained unspent.
The Company could not spend the balance amount since it is in the process ofidentifying appropriate CSR programs/projects in line with its CSR policy. Furthercertain funds even though allocated to approved educational and health projects by the CSRCommittee were not disbursed since there was no requirement for these funds from theorganizations/institutions during the year under review.
The Company plans to scale up its CSR activities in areas of education healthenvironment protection sanitation general welfare and development activities in astructured 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 AnnualReport of the top 500 listed entities based on market capitalization (calculated as onMarch 31 of every financial year) shall include a Business Responsibility Report("BRR").
Your Company being one of such 500 listed entities has included BRR as part of theAnnual Report describing initiatives taken by the Company from an environmental socialand governance perspective.
The Business Responsibility Report forms part of this Annual Report and is annexed asAnnexure J.
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 familiesof its employees. Periodic health check-ups are carried out for all employees and regulartraining programs are organised on safety and precautionary measures. Fire fightingtraining programs and first aid training camps are organised regularly to educate workersand employees at the plant locations and corporate office.
Your Directors acknowledge the support and wise counsel extended to the Company byanalysts bankers Government agencies shareholders investors suppliers distributorsstockists employees and others associated with the Company as its business partners. YourDirectors also acknowledge the trust reposed in the Company by the medical fraternity andpatients. We look forward to having the same support in our mission to enhance healththrough quality products.
Statements in this Directors' Report and Management Discussion and Analysis describingthe Company's objectives projections estimates expectations or predictions may be"forward-looking statements" within the meaning of applicable securities lawsand regulations. Actual results could differ materially from those expressed or implied.Important factors that could make a difference to the Company's operations include rawmaterial availability and prices cyclical demand and pricing in the Company's principlemarkets changes in Government regulations tax regimes economic developments withinIndia and the countries in which the Company conducts business and other ancillaryfactors.
Annexure A to Directors' Report
Disclosures in the Directors' Report on Employees Stock Option Scheme- 2008
The details of Stock Options are given herein below:
Particulars ESOP - 2008
a. Options granted 125000 (in 2008-2009)
743750 (in 2009-2010)
225000 (in 2013-2014)
b. The pricing formula @ Rs. 46/- per equity share of face value of Rs. 2/- each
c. Options vested 768251
d. Options exercised 707776
e. The total number of shares arising
as a result of exercise of options 707776
f. Options lapsed* 201749
g. Variation of terms of options Nil
h. Money realised by exercise of options Rs. 32557696
i. Total number of options in force 60475
j. Employee wise details of options granted during the year:
i. Senior Managerial Personnel Nil
ii. Any other employee who received a grant in any one year of options amounting to 5%or more of options granted during the year. Nil
iii. Identified employees who were granted options during one year equal to orexceeding 1% of the issued capital (excluding outstanding warrants and conversions) of theCompany at the time of grant. Nil
k. Diluted Earnings per share (EPS) pursuant Diluted EPS per equity share to issue ofshares on exercise of options (as per Standalone Accounts): Rs. 11.28 calculated inaccordance with Accounting Standard (AS) 20 Earnings per share'.
l. Difference between employee compensation Not Applicable cost calculated as perintrinsic value of stock options and fair value of the options.
Impact of the difference on profits and EPS.
m. Weighted average exercise price and weighted