Your Directors have pleasure in presenting the 29th Annual Report of yourCompany for the financial year ended 31st March 2017.
The financial performance of your Company for the year ended 31st March2017 is summarized below:
(H in millions)
| ||Standalone ||consolidated |
| ||Year ended ||Year ended ||Year ended ||Year ended |
| ||31.03.2017 ||31.03.2016 ||31.03.2017 ||31.03.2016 |
|Revenue from Operations (Net) ||5721.79 ||3203.77 ||14699.62 ||13564.40 |
|EBITDA ||2618.25 ||861.82 ||4197.54 ||2428.92 |
|Less : Finance Costs ||535.50 ||560.59 ||655.18 ||815.66 |
|Less : Depreciation ||268.32 ||187.92 ||582.77 ||613.93 |
|Profit Before Exceptional Items & Tax ||1814.43 ||113.31 ||2959.59 ||999.32 |
|Exceptional Items ||0.00 ||0.00 ||0.00 ||0.00 |
|Profit Before Tax ||1814.43 ||113.40 ||2959.59 ||999.32 |
|Less : Tax Expense ||487.63 ||32.12 ||742.22 ||162.59 |
|Profit After Tax ||1326.80 ||81.28 ||2217.37 ||836.73 |
|Less: Minority Interest ||Nil ||Nil ||Nil ||Nil |
|Profit attributable to shareholders of the Company ||1326.80 ||81.28 ||2217.37 ||836.73 |
|Opening balance in Statement of Profit and Loss ||2013.72 ||1932.48 ||4571.47 ||3785.01 |
|Amount Available for Appropriation ||3546.09 ||2013.76 ||4571.47 ||4621.74 |
|That the Directors recommends for appropriation as under: || || || || |
|Transfer to General Reserve ||- ||- ||- ||- |
|Closing Balance in Statement of Profit and Loss ||3546.09 ||2013.76 ||4571.47 ||4621.74 |
OVERVIEW OF COMPANY'S FINANCIAL PERFORMANCE
On a consolidated basis your Company reported net revenue of C14699.62 million asagainst C13564.40 million. EBITDA for FY2017 was C4197.54 million compared to C2428.92million in the previous year. Net profit after minority interest for the group for thecurrent year is C2217.37 million as against C836.73 million in the previous year.
Net revenue from operations on standalone basis increased to C5721.79 million asagainst C3203.77 million in the previous year. FY2017 EBITDA was C2618.25 millioncompared to C861.82 million in the previous year. The Profit after Tax for the currentyear is C1326.80 million.
There are no material changes and commitments affecting the financial position of yourCompany which have occurred between the end of the financial year FY2017 and the date ofthis report.
The Authorised Share Capital of the Company is C1110000000/- (Rupees One HundredEleven Crores only)
comprising 200000000 (Twenty crores) Equity Shares of C2/- (Rupees Two Only) eachand 710000 (Seven Lakh Ten Thousand only) Preference Shares of the Company with a parvalue of C1000/- (Rupees One Thousand only) each. The Paid Up Share Capital of theCompany is C162037830 (rupees sixteen crores twenty lakhs thirty-seven thousand eighthundred and thirty only) divided into 16203783 equity shares of C2/- each as on March31 2017.
TRANSFER TO GENERAL RESERVE
The Company proposes not to transfer funds to general reserves for the FY2017. Thetotal Reserves & Surplus (including Capital Reserve Securities Premium ReserveCentral Subsidy General Reserve and Surplus) as on March 31 2017 is C5329.12 million.
Your directors are pleased to recommend a dividend of C0.40/- on every equity share offace value C2/- each (20%) for FY2017. The dividend if approved at the 29thAnnual General Meeting
(AGM) will be paid to those shareholders whose names appear on the register of membersof the company as of the end of day on Friday September 22 2017 (Record date/cut offdate).
During the year under review your Company has not accepted any deposit within themeaning of Sections 73 and 74 of the Companies Act 2013 read with the Companies(Acceptance of Deposits) Rules 2014 (including any statutory modification(s) orre-enactment(s) for the time being in force).
LOANS AND INVESTMENTS
Details of loans guarantees and investments under the provisions of Section 186 of theCompanies Act 2013 read with the Companies (Meetings of Board and its Powers) Rules2014 as on 31st March 2017 are set out in the Standalone FinancialStatements forming part of this report.
The Consolidated Financial Statements of your Company for the financial year FY2017 areprepared in compliance with applicable provisions of the Companies Act 2013 read with theRules issued thereunder applicable Accounting Standards and the provisions of SEBI(Listing Obligations and Disclosure Requirements) Regulations 2015 (hereinafter referredto as the "Listing Regulations").The consolidated financial statements have beenprepared on the basis of audited financial statements of your Company its subsidiariesand associate companies as approved by the respective Board of Directors.
A separate statement containing the salient features of financial statements of allsubsidiaries of your Company forms part of consolidated financial statements in compliancewith Section 129 and other applicable provisions if any of the Companies Act 2013. Thefinancial statements of the subsidiary companies and related information are available forinspection by the members at the Registered Office of your Company during business hourson all days except Saturdays Sundays and public holidays upto the date of the AnnualGeneral Meeting (AGM') as required under Section 136 of the Companies Act 2013. Anymember desirous of obtaining a copy of the said financial statements may write to theCompany Secretary at the Corporate Office of your Company. The financial statementsincluding the consolidated financial statements financial statements of subsidiaries andall other documents required to be attached to this report have been uploaded on thewebsite of your Company www.vivimedlabs. com.
The financial performance of each of the subsidiaries and joint venture companiesincluded in the consolidated financial statements of your Company is set out in theAnnexure -1 to this
Report. Additional details of the performance and operations of the subsidiaries alongwith details of the investments made by your Company are set out in the ManagementDiscussion and Analysis which also forms part of this report
MANAGEMENT DISCUSSION AND ANALYSIS
The Management Discussion and Analysis forms an integral part of this report and givesdetails of the overall industry structure economic developments performance and state ofaffairs of your Company's various businesses viz. the pharmaceuticals Specialtychemicals API's business internal controls and their adequacy risk management systemsand other material developments during the financial year FY2017.
CORPORATE GOVERNANCE REPORT
In compliance with Regulation 34 of the Listing Regulations a separate report onCorporate Governance along with a certificate from the Auditors on its compliance forms anintegral part of this report.
Your Company has always considered its workforce as its valuable asset and continues toinvest in their excellence and development programs. Your Company has taken severalinitiatives for enhancing employee engagement and satisfaction.
The industrial relations in respect of all manufacturing facilities and divisions ofyour Company are normal.
DIRECTORS AND KEY MANAGERIAL PERSONNEL RETIREMENT BY ROTATION AND SUBSEQUENTREAPPOINTMENT:
Shri. Sandeep Varalwar and Shri. Srirambatla Raghunandhan Directors are liable toretire by rotation at the ensuing AGM pursuant to the provisions of Section 152 of theCompanies Act 2013 read with the Companies (Appointment and Qualification of Directors)Rules 2014 and the Articles of Association of your Company and being eligible haveoffered themselves for re- appointment. Appropriate resolutions for their re-appointmentare being placed for your approval at the ensuing AGM. The brief resume of the Directorsand other related information has been detailed in the Notice convening the 29thAGM of your Company. Your Directors recommend their re-appointment as Directors of yourCompany.
The Independent Directors of your Company are not liable to retire by rotation.
Shri. Santosh Varalwar Managing Director Shri. Pavan Kumar M Chief ExecutiveOfficer Shri. Ramesh Challa Chief Financial Officer and Shri. K. Yugandhar CompanySecretary are the Key Managerial Personnel of your Company in accordance with theprovisions of Sections 2(51) 203 of the Companies Act 2013 read with Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 (including anystatutory modification(s) or re-enactment(s) for the time being in force).
DISCLOSURE RELATING TO REMUNERATION OF DIRECTORS KEY MANAGERIAL PERSONNEL ANDPARTICULARS OF EMPLOYEES:
The remuneration paid to the Directors is in accordance with the Nomination andRemuneration Policy formulated in accordance with Section 178 of the Companies Act 2013and Regulation 19 of the Listing Regulations (including any statutory modification(s) orre-enactment(s) for the time being in force). The salient aspects covered in theNomination and Remuneration Policy have been outlined in the Corporate Governance Reportwhich forms part of this report.
The Managing Director of your Company does not receive remuneration from any of thesubsidiaries of your Company. The information required under Section 197 of the CompaniesAct 2013 read with Companies (Appointment and Remuneration of Managerial Personnel)Rules 2014 in respect of Directors/ employees of your Company is set out in Annexure-2 tothis report and is also available on the website of your Company (www.vivimedlabs.com).
DECLARATION OF INDEPENDENCE:
Your Company has received declarations from all the Independent Directors confirmingthat they meet the criteria of independence as prescribed under the provisions of theCompanies Act 2013 read with the Schedules and Rules issued thereunder as well asRegulation 16(1)(b) of Listing Regulations (including any statutory modification(s) orre-enactment(s) for the time being in force).
EVALUATION OF BOARD'S PERFORMANCE:
Pursuant to the provisions of the Companies Act 2013 read with the Rules issuedthereunder and the Listing Regulations (including any statutory modification(s) orre-enactment(s) for the time being in force) the process for evaluation of the annualperformance of the Directors/ Board/ Committees was carried out. The criteria applied inthe evaluation process are detailed in the Corporate Governance Report which forms part ofthis report.
NUMBER OF MEETINGS OF THE BOARD AND ITS COMMITTEES
The details of the meetings of the Board of Directors and its Committees convenedduring FY2017 are given in the Corporate Governance Report which forms a part of thisreport.
EMPLOYEE STOCK OPTION PLAN (ESOP 2010)
The Nomination and Remuneration Committee of the Board of Directors of the Companyinter alia administers and monitors the Employees' Stock Option Plan of the Company inaccordance with the applicable SEBI Guidelines.
The applicable disclosures as stipulated under the SEBI Guidelines as on March 31 2015(cumulative position) with regard to the Employees' Stock Option Scheme (ESOS) are hereinunder provided.
The details of the stock options granted / vested / exercised under the Vivimed LabsEmployee Stock Option Plan 2010 approved by the members in 22nd AGM are givenbelow:
|Sl. no. Description ||Details |
|(a) Options granted till date under the scheme ||2500000 # |
|(b) Pricing formula ||More than 50% price calculated as per SEBI guidelines. |
| ||On National Stock Exchange (where there was highest |
| ||trading volume).(As per the resolution the Company can |
| ||give upto 50% discount on market price calculated as |
| ||per SEBI Guidelines) |
|(c) Options vested during the year ||2500000 |
|(d) Options exercised during the year ||Nil |
|(e) Total number of shares arising as a result of exercise of options ||Nil |
|(f) Options lapsed during the year ||Nil |
|(g) Options lapsed till date under the scheme ||Nil |
|(h) Variation in terms of options ||Nil |
|(i) Money realized by exercise of options during the year ||Nil |
|(j) Total number of options in force ||2500000 |
|(k) Employee wise details of options granted to: || |
(k) (i) Senior managerial personnel
|Name ||No. of options |
|1. Suresh Mishra ||125000 |
|2. Ramesh Challa ||125000 |
|3. Sumatiprakash Madanlal Jain ||250000 |
|4. Paaritosh Kumar. V. ||125000 |
|5. Vivekananda A M ||125000 |
|6. Phanindernath Petasonti ||425000 |
|7. Dayasagar Vaidya ||125000 |
|8. Kalyan Chakraworty ||150000 |
|9. Ravi Kiran Vaidya ||250000 |
|10. Satish Chandra Deshpande ||125000 |
|11. Satish Chandra Mudgade ||125000 |
|12. Ram Caesar ||100000 |
|13. Tatikonda Sreekanth ||100000 |
|14. Girish Gotimukul ||100000 |
|15. Sheshi Reddy ||50000 |
|16. Govardhan ||50000 |
|17. A. Raghu Ramulu ||50000 |
|18. A. S. Lahari ||100000 |
|(ii) Any other employee who receives 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 option during any one year equal to or exceeding 1% of the issued capital (excluding outstanding warrants and conversions) of the company at the time of grant. ||Nil |
|(l) Diluted Earnings per share (EPS) pursuant to issue of shares on exercise of options calculated in accordance with Accounting Standard (AS)20 Earning per share. ||Not Applicable |
|(m) Where the company has calculated the employee compensation cost using the intrinsic value of the stock options the difference between the employee compensation cost that shall have been recognized if it had used the fair value of the options. ||Not Applicable |
|(n) Weighted-average exercise prices and weighted-average fair values of options whose exercise price either equals or exceeds or is less than the market price of the stock ||Not Applicable |
|(o) Description of the method and significant assumptions used during the year to estimate the fair values of options. ||Not Applicable |
# Sub-Division of 1 (One) Equity Share of face value of C10/- each into 5 (Five) EquityShares of C2/- Each on 08.04.2016
AUDITORS AND AUDITORS' REPORT Statutory Auditors:
M/s. P. Murali& Co. Chartered Accountants the existing Statutory Auditors havebeen in the office for a period of more than 10 years at the commencement of the CompaniesAct 2013 which provides a transition period of 3 years for appointing new StatutoryAuditors.
Further as per the Companies (Removal of Difficulties) Third Order 2016 dated June30 2016 of Ministry of Corporate Affairs the Company is required to appoint newStatutory Auditors at the ensuing Annual General Meeting (AGM). Based on therecommendation of the Audit Committee the Board of Directors have approved theappointment of M/s. Chandra Babu Naidu & Co. Chartered Accountants as StatutoryAuditors of the Company for a period of one year from the conclusion of ensuing 29thAGM till the conclusion of 30th AGM subject to approval of the members at theensuing AGM.
M/s. Chandra Babu Naidu & Co. Chartered Accountants have informed to the Companythat their appointment if made would be within the limits prescribed under section 141of the Act. They have also furnished a declaration confirming that their independence aswell as their arm's length relationship with the Company and that they have not taken upany prohibited non-audit assignments for the Company.
The Board has duly reviewed the Statutory Auditor's Report of M/s. P. Murali & Co.Chartered Accountants and the observations and comments appearing in the report areself-explanatory and do not call for any further explanation / clarification by the Boardof Directors as provided under section 134 of the Act.
The Board of Directors of your Company on the recommendations made by the AuditCommittee at its meeting held on 31.08.2017 has approved the re-appointment of M/s. A.S.Rao & Co Cost Accountants (Firm Registration No.000326) as the Cost Auditor of yourCompany to conduct the audit of cost records for the financial year FY2017. Theremuneration proposed to be paid to the Cost Auditor subject to your ratification at theensuing 29th AGM would not exceed C1.1 lacs (Rupees One lac Ten thousand only)excluding taxes and out of pocket expenses if any.
Your Company has received consent from M/s. A.S. Rao & Co Cost Accountants to actas the Cost Auditor for conducting audit of the cost records for the financial year 2018along with a certificate confirming their independence and arm's length relationship.
In terms of Section 204 of the Companies Act 2013 the Board of Directors of yourCompany at its meeting held on 31.08.2017 has appointed Mr .N.V.S.S. Suryanarayana RaoPracticing Company Secretary (Certificate of Practice No.2886) as the Secretarial Auditorto conduct an audit of the secretarial records for the financial year 2018.
Your Company has received consent from Mr. N.V.S.S. Suryanarayana Rao to act as theauditor for conducting audit of the Secretarial records for the financial year ending 31stMarch 2018.
The Secretarial Audit Report for the financial year ended 31st March 2017is annexed herewith as Annexure -3 to this report. The Secretarial Audit Report does notcontain any qualification reservation or adverse remark.
EXTRACT OF ANNUAL RETURN
The details forming part of the extract of the Annual Return as on 31stMarch 2017 in Form MGT-9 in accordance with Section 92(3) of the Companies Act 2013 readwith Companies (Management and Administration) Rules 2014 are set out herewith asAnnexure-4 to this report.
RELATED PARTY TRANSACTIONS
During the financial year FY2017 your Company has entered into transactions withrelated parties as defined under Section 2(76) of the Companies Act 2013 read withCompanies (Specification of Definitions Details) Rules 2014 all of which were in theordinary course of business and on arm's length basis and in accordance with theprovisions of the Companies Act 2013 read with the Rules issued thereunder and theListing Regulations.
All transactions with related parties were reviewed and approved by the AuditCommittee. Prior omnibus approvals are granted by the Audit Committee for related partytransactions which are of repetitive nature entered in the ordinary course of businessand are on arm's length basis in accordance with the provisions of Companies Act 2013read with the Rules issued thereunder and the Listing Regulations.
The details of the related party transactions as per Accounting Standard 18 are set outin the Standalone Financial Statements forming part of this report.
The Form AOC-2 pursuant to Section 134(3)(h) of the Companies Act 2013 read with Rule8(2) of the Companies (Accounts) Rules 2014 is set out as Annexure-5
Your Company is committed to highest standards of ethical moral and legal businessconduct. Accordingly the Board of Directors have formulated a Whistle Blower Policy whichis in compliance with the provisions of Section 177(10) of the Companies Act 2013 andRegulation 22 of the Listing Regulations. employees can raise concerns regarding anydiscrimination harassment victimization any other unfair practice being adopted againstthem or any instances of fraud by or against your Company. Any incidents that are reportedare investigated and suitable action taken in line with the whistle blower policy. TheWhistle Blower Policy is also available on your Company's website www. vivimedlabs.com.
CORPORATE SOCIAL RESPONSIBILITY (CSR)
The CSR expenditure incurred by your Company during the financial year 2017 was C32lakhs.
The CSR initiatives of your Company were under the thrust areas of water management.
Your Company's CSR Policy statement and annual report on the CSR activities undertakenduring the financial year ended 31st March 2017 in accordance with Section135 of the Companies Act 2013 and Companies (Corporate Social Responsibility Policy)Rules 2014 is annexed to this report as Annexure-6.
CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO
The information on conservation of energy technology absorption and foreign exchangeearnings and outgo as stipulated under Section 134 of the Companies Act 2013 read withthe Companies (Accounts) Rules 2014 is set out herewith as Annexure -7 to this report.
DETAILS ON INTERNAL FINANCIAL CONTROLS RELATED TO FINANCIAL STATEMENTS
Your Company has put in place adequate internal financial controls with reference tothe financial statements some of which are outlined below.
Your Company has adopted accounting policies which are in line with the AccountingStandards prescribed in the Companies (Accounting Standards) Rules 2006 that continue toapply under Section 133 and other applicable provisions if any of the Companies Act2013 read with Rule 7 of the Companies (Accounts) Rules 2014 and relevant provisions ofthe Companies Act 1956 to the extent applicable. These are in accordance with generallyaccepted accounting principles in India. Changes in policies if any are approved by theAudit Committee in consultation with the Statutory Auditors.
The policies to ensure uniform accounting treatment are prescribed to the subsidiariesof your Company. The accounts of the subsidiary companies are audited and certified bytheir respective Statutory Auditors for consolidation.
Your Company operates in SAP an ERP system and has many of its accounting recordsstored in an electronic form and backed up periodically. The ERP system is configured toensure that all transactions are integrated seamlessly with the underlying books ofaccount. Your Company has automated processes to ensure accurate and timely updation ofvarious master data in the underlying ERP system.
Your Company has a robust financial closure self-certification mechanism wherein theline managers certify adherence to various accounting policies accounting hygiene andaccuracy of provisions and other estimates.
Your Company operates a shared service center which handles all payments made by yourCompany. This center ensures adherence to all policies laid down by the management.
Your Company in preparing its financial statements makes judgments and estimates basedon sound policies and uses external agencies to verify/ validate them as and whenappropriate. The basis of such judgments and estimates are also approved by the StatutoryAuditors and Audit Committee.
The Management periodically reviews the financial performance of your Company againstthe approved plans across various parameters and takes necessary action wherevernecessary. Your Company has a code of conduct applicable to all its employees along with aWhistle Blower Policy which requires employees to update accounting information accuratelyand in a timely manner. Any non-compliance noticed is to be reported and actioned upon inline with the Whistle Blower Policy.
Your Company gets its Standalone accounts limited review every quarter by its StatutoryAuditors.
SIGNIFICANT/MATERIAL ORDERS PASSED BY THE REGULATORS
There are no significant material orders passed by the Regulators or Courts orTribunals impacting the going concern status of your Company and its operations in future.
GENERAL a) Your Company has not issued equity shares with differential rights as todividend voting or otherwise; and b) Your Company have ESOP scheme for its employees/Directors.
DIRECTORS RESPONSIBILITY STATEMENT:
Pursuant to Section 134(3)(c) of the Companies Act 2013 (including any statutorymodification(s) or re-enactment(s) for the time being in force) the Directors of yourCompany confirm that:
(a) in the preparation of the annual accounts for the financial year ended 31stMarch 2017 the applicable Accounting Standards and Schedule III of the Companies Act2013 (including any statutory modification(s) or re-enactment(s) for the time being inforce) have been followed and there are no material departures from the same;
(b) the Directors have selected such accounting policies and applied them consistentlyand made judgments and estimates that are reasonable and prudent so as to give a true andfair view of the state of affairs of your Company as at 31st March 2017 and ofthe profit and loss of the Company for the financial year ended 31st March2017;
(c) proper and sufficient care has been taken for the maintenance of adequateaccounting records in accordance with the provisions of the Companies Act 2013 (includingany statutory modification(s) or re-enactment(s) for the time being in force) forsafeguarding the assets of the company and for preventing and detecting fraud and otherirregularities;
(d) the annual accounts have been prepared on a going concern' basis;
(e) proper internal financial controls laid down by the Directors were followed by yourCompany and that such internal financial controls are adequate and operating effectively;and proper systems to ensure compliance with the provisions of all applicable laws were inplace and that such systems were adequate and operating effectively.
The management of Vivimed Labs has prepared and is responsible for the financialstatements that appear in this report. These are in conformity with accounting principlesgenerally accepted in India and therefore may include amounts based on informedjudgments and estimates. The management also accepts responsibility for the preparation ofother financial information that is included in this report. Statements in this ManagementDiscussion and Analysis describing the Company's objectives projections estimates andexpectations may be forward looking statements' within the meaning of applicablelaws and regulations. Management has based these forward looking statements on its currentexpectations and projections about future events. Such statements involve known andunknown risks significant changes in political and economic environment in India or keymarkets abroad tax laws litigation labour relations exchange rate fluctuationsinterest and other costs may cause actual results to differ materially.
POLICY ON SEXUAL HARASSMENT
The Company has adopted policy on Prevention of Sexual Harassment of women at Workplacein accordance with The Sexual Harassment of women at Workplace (Prevention Prohibitionand Redressal) Act 2013.
During the year under review the Company has not received any complaints pertaining toSexual Harassment.
Your Directors wish to convey their gratitude and place on record their appreciationfor all the employees at all levels for their hard work solidarity cooperation anddedication during the year. Your Directors sincerely convey their appreciation tocustomers shareholders vendors bankers business associates regulatory and governmentauthorities for their continued support.
| || |
For and on behalf of the Board
| ||Sd/- ||Sd/- |
| ||Manohar Rao Varalwar ||Santosh Varalwar |
| || |
Whole time Director
|Place: Hyderabad || || |
|Date: 31.08.2017 || || |