You are here » Home » Companies » Company Overview » Unichem Laboratories Ltd

Unichem Laboratories Ltd.

BSE: 506690 Sector: Health care
NSE: UNICHEMLAB ISIN Code: INE351A01035
BSE 00:00 | 24 Jun 316.00 -2.80
(-0.88%)
OPEN

324.95

HIGH

324.95

LOW

315.00

NSE 00:00 | 24 Jun 316.50 -2.00
(-0.63%)
OPEN

318.85

HIGH

319.95

LOW

315.00

OPEN 324.95
PREVIOUS CLOSE 318.80
VOLUME 5693
52-Week high 374.90
52-Week low 153.20
P/E 41.15
Mkt Cap.(Rs cr) 2,225
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00
OPEN 324.95
CLOSE 318.80
VOLUME 5693
52-Week high 374.90
52-Week low 153.20
P/E 41.15
Mkt Cap.(Rs cr) 2,225
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

Unichem Laboratories Ltd. (UNICHEMLAB) - Director Report

Company director report

Dear Members

Your Directors have the pleasure in presenting the audited accounts of your Company forthe financial year ended March 31 2020.

Financial Highlights

The table below gives the financial highlights of the Company for the year ended March31 2020 on standalone basis as compared to the previous financial year.

(Rs in Lakhs)

Particulars

For the year ended

March 31 2020 March 312019
Revenue from operations 90488.53 96773.89
Other Income 9917.01 10154.23
Total Income 100405.54 106928.12
Profit/(Loss) before tax (6381.18) (2158.02)
Current tax - -
Deferred tax (749.56) (2737.77)
Short / (excess) provision for tax (earlier years) - (124.45)
Profit (Loss) for the year from continuing operations (5631.62) 704.20
Profit/(Loss) from discontinued operations
A. Profit / (Loss) from discontinued operations - 246.96
B. Gain on sale of identified business (net) - -
Profit/(Loss) for the year from discontinued operations (A+B) - 246.96
Tax on discontinued operations - 71.24
Profit/(Loss) from discontinued operations (after tax)

-

175.72
Profit/(Loss) for the year (5631.62) 879.92
Total Comprehensive Income (5332.12) 851.43

Management Discussion and Analysis

As required by Regulation 34 (2) of the SEBI (Listing Obligations and DisclosureRequirements) Regulations 2015 (Listing Regulations) a Management Discussion andAnalysis Report is a part of this Annual Report.

The state of the affairs of the business along with the financial and operationaldevelopments has been discussed in detail in the Management Discussion and AnalysisReport.

Appropriations

An amount of Rs (5631.62) Lakhs is proposed to be carried forward in the Profit &Loss Account. No amount has been transferred to General Reserve.

Dividend

The Board has recommended a Dividend of Rs 4/- (200%) per equity share of Rs 2/- eachfor the year ended March 312020 for the approval of the Members at the ensuing AnnualGeneral Meeting (AGM). The Register of Members and Share Transfer Books shall remainclosed from Monday August 24 2020 to Saturday August 29 2020 (both days inclusive) forthe purpose of AGM and if approved by the Members. The AGM of the Company is scheduledfor Saturday August 29 2020.

The Company has a Dividend Distribution Policy in place and the same is available onthe website of the Company at https://unichemlabs.com/policies-code-of-conduct/dividend-distribution-policy/.

Pursuant to Finance Act 2020 Dividend income will be taxable in the hands ofShareholders w.e.f. April 12020 and the Company shall deduct tax at source from Dividendpaid to the Shareholders at the prescribed rates.

Employees Stock Options Schemes Scheme 2008

During the year under review 22500 options having a face value of Rs 2/- each wereexercised and the same were allotted (on pari passu basis) under the EmployeesStock Option Scheme - 2008. As per the requirements of the SEBI (Share Based EmployeeBenefits) Regulations 2014 details of this scheme form part of the Directors' Report andshall be available on the Company's website at https://unichemlabs.com/investor-information/annual-report/.

Scheme 2018

During the year under review no employee stock options were granted to the SeniorManagement under the Employees Stock Option Scheme 2018. In terms of the requirementsspecified under the SEBI (Share Based Employee Benefits) Regulations 2014 details ofthis scheme form part of the Directors Report and is available on the Company's website athttps://unichemlabs.com/investor- information/annual-report/ .

Research and Development (R&D)

Kindly refer to the write up in the Section Management Discussion and Analysis Report.

Corporate Governance

As required under Regulation 34 of the Listing Regulations a Report on CorporateGovernance along with a Certificate of Compliance from the Auditors is part of thisReport.

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 six subsidiaries and one associate Company. A statement containingsalient features of the financial statements of the subsidiaries and associate companypursuant to Section 129 of the Companies Act 2013 (the Act) and rules made thereunderis annexed to this Report as Annexure A in the prescribed Form AOC -1 and hence notrepeated here for the sake of brevity.

Your Company has incorporated a Wholly Owned Subsidiary (WOS) in China on June 27 2019under the name “Younikaimo Pharmaceutical (Shanghai) Private Limited" [Unichem(China) Private Limited]. The regulatory changes had opened the avenue for Indiancompanies to register their products and market them in China. Product registration isquick for products already having United States Food and Drug Administration (USFDA)approval and your Company has a large portfolio of Abbreviated New Drug Applications(ANDAs) approved in the United States. This would help your Company to expand its businessin China for finished formulations. Your China office will also register ActivePharmaceutical Ingredients (APIs) for Chinese market and help the Company's sourcingefforts to secure its supply chain.

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 theseservices from Synchron from time to time.

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.

Deposits

The Company has not accepted any deposits within the meaning of Section 73 of the Actread with the Companies (Acceptance of Deposits) Rules 2014.

Risk Management

Your Company considers risk management as a key element of its business operations andhas put in place effective systems to identify monitor and mitigate risks to ensuresustained operations. A section on Risk Management practices of the Company is included inthe Management Discussion and Analysis Report.

Directors and Key Managerial Personnel

Dr. Prakash A. Mody is the Chairman & Managing Director of the Company. Mr. DilipKunkolienkar Director Technical retires by rotation and being eligible has offeredhimself for reappointment. The Board has recommended Mr. Kunkolienkar's re-appointment asa Director retiring by rotation for consideration of the Members at the 57th AGM.

All Independent Directors have declared that they meet the criteria of Independence aslaid down under Section 149 (6) of the Companies Act 2013 and Regulation 16(b) of theListing Regulations. All Independent Directors have given declarations stating compliancewith the Code of Ethics and Business Conduct. There has been no change in thecircumstances affecting their status as Independent Directors of the Company. In theopinion of the Board the Independent Directors fulfill the conditions specified in theseRegulations and are independent of the management.

During the year under review the Non-Executive Independent Directors of the Companyhad no pecuniary relationship or transactions with the Company other than sitting feesand reimbursement of expenses incurred by them for the purpose of attending Meetings ofthe Board / Committee of the Company and the dividend paid on the equity shares held bythem.

Mrs. Neema Thakore - Head Legal & Company Secretary superannuated on July 312019and Mr. Pradeep Bhandari was appointed as - Head Legal & Company Secretary w.e.f.August 12019.

In terms of Section 203 of the Companies Act 2013 Dr. Prakash A. Mody Chairman &Managing Director Mr. Dilip Kunkolienkar Director Technical Mr. Sandip Ghume DeputyChief Financial Officer and Mr. Pradeep Bhandari Head- Legal & Company Secretary(w.e.f. August 12019) are the Key Managerial Personnel of the Company.

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 Companies Act 2013 (Act):

1. that in preparation of annual accounts for the year ended March 312020 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 312020 and Profit / Loss for theyear ended 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.

Board performance and Evaluation

Pursuant to the provisions of the Act and the Listing Regulations the Board hascarried out an annual performance evaluation of the working of its own performance itsCommittees and the Directors individually. The performance evaluation of IndependentDirectors was done by the entire Board of Directors and in the evaluation the Directorswho were subject to evaluation did not participate. A structured questionnaire wasprepared after taking into consideration inputs received from the Directors coveringvarious aspects of the functioning of the Board and its Committees.

The evaluation of the Directors was done on various parameters such as vision andstrategy Board participation Board disclosures of interests review of risk managementpolicies evaluating plans with reference to risk and return good governance andleadership skills.

Salient features of the Nomination and Remuneration Policy

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 policy is available on the Company's website athttps://unichemlabs.com/ nomination-and-remunerationpolicy/.

The Company considers human resources as its invaluable assets. The Nomination andRemuneration Policy aims to pay equitable remuneration to all Directors Key ManagerialPersonnel (KMP) and employees of the Company to harmonize the aspirations of humanresources consistent with the goals of the Company. The Remuneration Policy for allemployees is designed to attract talented personnel and remunerate them fairly andresponsibly 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 (fixedcomponent) and commission (variable component wherever applicable as per terms ofappointment) to its Whole Time Directors. A proper balance between fixed and variablecomponent is aimed at. Salary is paid based on the recommendation of the Nomination andRemuneration Committee and as approved by the Board of Directors subject to the approvalof the Shareholders within the limits stipulated by the Companies Act 2013 (Act) and therules made thereunder. The remuneration paid to the Whole Time Directors is determinedkeeping in view the industry benchmark and the relative performance of the Companycompared to the industry performance.

Non-Executive Directors

Non-Executive Directors receive sitting fees for attending Meetings of the Board andits Committees as per the provisions of the Act and the rules made thereunder. Besidespayment of sitting fees and Dividend on equity shares if any held by the Directors noother remuneration is paid to the Non-Executive Directors. The Nomination and RemunerationCommittee may recommend to the Board the payment of commission taking into account theevaluation of the performance of the Company.

Key Managerial Personnel (KMP) and other Employees

The remuneration of KMP other than the Executive Director and other Senior ManagerialEmployees largely consists of basic salary perquisites allowances ESOPs and performanceincentives (wherever paid). Perquisites and retirement benefits are paid according to theCompany's policy. The components of the total remuneration vary for different grades andare governed by the industry pattern qualification and experience merits and performanceof each employee. The Company while deciding the remuneration package takes intoconsideration the current employment scenario and remuneration package prevalent in theindustry and peer group companies.

Meetings

During the year five Board Meetings were held the details of which are given in theCorporate Governance Report.

Board Committees

The constitution of the Board Committees 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.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 itsStakeholders Directors and Employees can report genuine concerns about the 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 whistleblower@unichemlabs.com.

Significant and Material orders passed by the Regulators/ Courts / Tribunals

No significant or material orders were passed by the regulators courts or tribunalswhich impact the Company's going concern status and its operations in the future.

However your Directors would like to inform that on 9th July 2014 European Commission(“EU”) decided to impose an unjustified fine of Euro 13.96 million jointly andseverally on the Company and its subsidiary Niche Generics Ltd (“Niche”)contending that they had acted in breach of EU competition law as Niche Generics Ltd hadin early 2005 (when the Company was only a part owner and financial investor in Niche) hadagreed to settle a financially crippling patent litigation with Laboratories Servier. TheCompany vehemently denies any wrongdoing on the part of either itself or Niche. Both theCompany and Niche had submitted appeals in September 2014 to the General Court of the EUseeking appropriate relief in the matter. The General Court of the EU has rejected theappeals vide Order dated December 12 2018 and confirmed the fine of Euro 13.96 million.The Company and its subsidiary based on legal advice and merits have filed appealsagainst the decision of General Court before the Court of Justice of the EU and outcome ofthe appeals is awaited. Considering the above in view of the management no provision forthe aforesaid fine is considered necessary. Based on above fine imposed by the EU of Euro13.96 million (equivalent to Rs 11614.72 Lakhs) is disclosed under contingent liability.

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.

The Audit Committee has given prior approval for all Related Party Transactionswherever applicable. The Policy on Related Party Transactions (Policy) as approved by theBoard is uploaded on the Company's website and the weblink ishttps://www.unichemlabs.com/related-party-transactions- policy.php. The particulars ofcontracts or arrangements with Related Parties referred to in Section 188 (1) of the Actare 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 drawn fromthe Company none of the Directors and Key Managerial Personnel have any pecuniaryrelationships 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 ICC did not receive any complaints during theyear under review.

Auditors

Pursuant to provisions of Section 139 of the Act read with the Companies (Audit andAuditors) Rules 2014 N. A. Shah Associates LLP (Firm Registration No. 116560W/W100149)Chartered Accountants were appointed as Statutory Auditors of the Company to hold officefrom the conclusion of 54th AGM until the conclusion of 59th AGM subject to ratificationby Members at every subsequent AGM.

The provisions of Section 139 of the Act were amended and notified with effect from May7 2018. In terms of the said amendment appointment of the Auditors is no longer requiredto be ratified by the Members at every subsequent AGM. In view of this no Resolution isproposed for ratification of the appointment of the Auditors at the ensuing AGM.

N. A. Shah Associates LLP (Firm Registration No. 116560W/W100149) CharteredAccountants have confirmed that they are not disqualified from continuing as StatutoryAuditors of the Company.

During the year under review the Auditors have not reported any matter under Section143 (12) of the Act and therefore no details are disclosed under Section 134 (3) (ca) ofthe Act.

The said auditors have confirmed that their firm has been subjected to the peer reviewprocess of the Institute of Chartered Accountants of India (ICAI) and they hold a validcertificate issued by the Peer Review Board of the ICAI.

Cost Auditors

The Company is required to maintain cost records as specified by the Central Governmentunder sub-section (1) of section 148 of the Act accordingly such accounts and records aremade and maintained by the Company.

The Board of Directors at its Meeting held on June 19 2020 based on therecommendation of the Audit Committee appointed Kishore Bhatia & Associates CostAccountants (Firm Registration No. 00294); as Cost Auditors for undertaking Cost Audit ofthe Cost Accounting Records maintained by the Company for the financial year 2020-2021 ata remuneration not exceeding Rs 7.50 Lakhs (Rupees Seven Lakhs 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 57th AGM. TheCost Audit Report for the year ended March 312019 was filed with the Ministry ofCorporate Affairs on August 22 2019.

Secretarial Audit

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 AnnexureC to this Report. There is no qualification reservation adverse remark or disclaimer inthe said Report.

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.

Compliance with Secretarial Standards

The Company has compiled with the Secretarial Standards issued by the Institute ofCompany Secretaries of India with regard to Board Meetings (SS-1) and General Meetings(SS-2).

Internal control systems and their adequacy

The Company has in place adequate internal financial controls with reference to itsfinancial statements. These controls ensure the accuracy and completeness of theaccounting records and the preparation of reliable financial statements. The details ofthe same are included in the Management Discussion and Analysis Report.

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 D to this Report.

Dividend Distribution Policy

Pursuant to SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015the Company has formulated a Dividend Distribution Policy and is available on theCompany's website https://unichemlabs.com/policies-code-of-conduct/dividend-distribution-policy/.

Corporate Social Responsibility (CSR)

Your Company believes in the philosophy of giving back. Being in the pharmaceuticalindustry your Company's primary focus is healthcare. Also your Company focusses on variousCSR activities such as education sanitation infrastructure protection of environmentwomen empowerment general welfare and participating in the development of other areas inwhich your Company operates. The CSR activities are undertaken in the areas around theCompany's locations. The CSR policy is available on the website of the Company and theAnnual Report on CSR activities as required under Section 135 of the Act is annexed asAnnexure E to this Report.

During the year under review the total amount to be spent on CSR was Rs 96.16 Lakhs.The Company spent Rs 202.98 Lakhs which is 4.22 % of the average profits for the lastthree financial years. There was no unspent amount during the year.

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 ofManagerial 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) ofthe Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014 asamended details of employee's remuneration form part of this Report. However as per theprovisions of Sections 134 and 136 of the Act the Report and financial statements arebeing sent to the Members and others entitled thereto excluding the information onemployees particulars. Any Member interested in obtaining a copy of the same may write tothe Company Secretary at the Company's Registered Office.

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 forms part of this Report as Annexure G and is also placedon the website of the Company at https://www.unichemlabs. com/annual-report.php.

Business Responsibility Report

Regulation 34 (2) of the Listing Regulations inter alia provides that theAnnual Report of the Top 1000 listed entities

based on market capitalization (calculated as on March 31 of every financial year)shall include a Business Responsibility Report ("BRR"). Since your Companyfalls in the list of Top 1000 listed entities as per market capitalization as on March312020 the Business Responsibility Report for the financial year 2019-2020 forms part ofthe Annual Report.

Human Resources and Employee Relations

The Board of Directors commends the continued dedication of all its employees. Detailsof Human Resources and Employee Relations and matters incidental thereto are provided inthe Management Discussion and Analysis Report.

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 ofinternational regulatory requirements. Your Company has been steadily raising the barsetting higher goals for incremental performance and enlarging the scope of itsinitiatives. The environmental policy of your Company emphasizes being a caring Companywhich shall protect and promote the environment by complying with applicable environmentalregulations and preventing pollution 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 wastepaper. Training programs areorganized from time to time to create environmental awareness amongst the employees. Toconserve water your Company has devised various water saving methods which are monitoredon a day to day basis.

Your Company continues to strive for energy saving and conservation of naturalresources. In all its Active Pharmaceutical Ingredients (APIs) plants your Company hasinstalled online effluent monitoring equipment which is connected to the system of theCentral Pollution Control Board.

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.

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 regular training programs are organized on safety andprecautionary measures. Firefighting training programs and first aid training camps areorganized regularly to educate workers and employees at the plant locations and corporateoffice.

Acknowledgement

Your Directors acknowledge the support and wise counsel extended to the Company byinvestors analysts bankers Government agencies shareholders suppliers employees andothers associated with the Company as its business partners. Your Directors alsoacknowledge the trust reposed in the Company by the medical fraternity and patients. Welook forward to having the same support in our mission to enhance health through qualityproducts.

Cautionary Statement

Statements in this Directors' Report and Management Discussion and Analysis Reportdescribing the Company's objectives projections estimates expectations or predictionsmay be “forward-looking statements” within the meaning of applicable securitieslaws and regulations. Actual results could differ materially from those expressed orimplied. Important factors that could make a difference to the Company's operationsinclude raw material availability and prices cyclical demand and pricing in the Company'sprinciple markets changes in Government regulations tax regimes economic developmentswithin India and the countries in which the Company conducts business and other ancillaryfactors.

For and on behalf of the Board of Directors

Dr. Prakash A. Mody
Mumbai Chairman & Managing Director
June 19 2020 (DIN.: 00001285)