DIRECTORS' REPORT Dear Members, Your Directors are pleased to present the Sixty-Ninth Annual Report on the business operations together with the Audited Accounts for the Financial Year ended March 31, 2016 and on the state of affairs of the Company Results from Operations During the Year the Company achieved Turnover of Rs. 1000 crore. Contribution of International Business has gone up to 43% of the Total Turnover. On the domestic front, a spate of price controls and products listed in the National List of Essential Medicines (NLEM) and Government Notification which banned 344 fixed dose combinations adversely affected the Pharma Industry. The ban will affect some of the company's products but will not have a substantial impact on the overall Turnover. Your company has filed a writ petition in the Delhi High court seeking a stay over the ban. During the year 2015-16, the total income of the Company amounted to Rs. 1,001.63 crore as compared to Rs. 855.38 crores in the previous year. This represents a 17.1% growth. The Profit before tax (PBT) at Rs. 100.93 crores as compared to Rs. 109.48 crores in the previous year represents a decline of 7.8%. After providing for Tax and MAT, the Net Profit (PAT) amounted to Rs. 83.32 crores as against Rs. 82.81 crores in the previous year. The decrease in PBT and marginal increase in PAT is mainly due to increase in input and other costs. In December, 2015, the Company incorporated Indoco Remedies Singapore Pte Limited, a 100% subsidiary. The subsidiary will be used for the expansion of the company's ambitious plans to extend its activities in the European and US markets. A detailed discussion on the business performance and future outlook is included in Management Discussion & Analysis which forms part of the Directors' Report. Dividend & Reserves The Board has recommended a Final Dividend of 10% 0.20 per share) i.e. Rs. 1.84 crores for the year 2015-16. An interim dividend of 70% 1.40 per share) i.e. Rs. 12.90 crores has already been paid for the year 2015-16. Thus, the total dividend for the year 2015-16 is 80% 1.60 per share) i.e. Rs. 14.74 crores as against 80% 1.60 per share) i.e. Rs. 14.74 crores paid in the previous year. Provision of Rs. 0.37 crores has been made for corporate dividend tax on the final dividend proposed. Corporate dividend tax of Rs. 2.63 crores has already been paid on the interim dividend paid for the year 2015-16. The total Tax on distributed profits payable by the Company would amount to Rs. 3.00 crores as against Rs. 3.00 crores paid in the previous year. The Directors have recommended transfer of an amount of Rs. 15.00 crores to General Reserves (Previous year Rs. 15.00 crores). Energy Conservation/Technology Absorption and Foreign Exchange Earnings and Outgo The information on conservation of energy, technology absorption and foreign exchange earnings and outgo stipulated under Section 134(3)(m) of the Companies Act, 2013 read with Rule, 8 of The Companies (Accounts) Rules, 2014, is annexed herewith as "Annexure A". Share Capital The paid up Equity Share Capital as on March 31, 2016 was Rs. 18.43 crore. During the year under review, the Company has not issued shares with differential voting rights nor granted stock options nor sweat equity. As on March 31, 2016 other than Mr. Suresh G. Kare - Chairman Ms. Aditi Panandikar - Managing Director Mr. Sundeep V. Bambolkar - Jt. Managing Director none of the other Directors of the Company held shares of the Company Finance Cash and cash equivalent as at March 31, 2016 was Rs. 13.89 crore. The Company continues to focus on judicious management of its working capital. Receivables, inventories and other working capital parameters were kept under strict check through continuous monitoring. Deposits The Company has not accepted any Deposit covered under Section 73 of the Companies Act, 2013 and The Companies (Acceptance of Deposit) Rules, 2014. Particulars of Loans, Guarantees and Investments Details of Loans, Guarantees and Investments covered under the provisions of Section 186 of the Companies Act, 2013 are given in the notes to the Financial Statements. Credit Rating ICRA has reaffirmed Company's long term borrowings rating as AA- and the short term borrowing rating as A1+. These ratings are considered to have high degree of safety regarding timely servicing of financial obligations and carry very low credit risk. Corporate Social Responsibility (CSR) As required u/s 135 of the Companies Act, 2013, during the year, the Company undertook a number of CSR initiatives which is mainly focused on promoting education, health and public hygiene. In this connection the Company during the year under consideration spent an amount of Rs. 0.89 crore as against an amount of Rs. 1.53 crores required to be spent. A detailed list of the CSR expenditure made is annexed herewith as "Annexure B". The shortfall of Rs. 0.64 crores is mainly due to the fact that some of the projects sanctioned are taking time for completion and hence entire amount on those Projects has not been spent. The balance amount on those projects will be spent in the FY 2016-2017 In addition to fulfilling its CSR obligations, the Company during the year made substantial donations of free medicines to charitable bodies for distribution among the needy. Internal Control Systems and their Adequacy The Company has an Internal Control System, commensurate with the size of its operations. The Internal Audit Department monitors and evaluates the efficacy and adequacy of internal control system in the Company, its compliance with operating systems, accounting procedures and policies at all locations of the Company and its subsidiaries. Based on the report, significant audit observations and corrective actions thereon are presented to the Audit Committee of the Board. The Company's Internal Auditor also monitors and evaluates the internal control system and submits Quarterly Reports which are also placed before the Audit Committee of the Board. The Risk Management Policy of the Company is available on the Company Website at: <http://www.indoco.com/policies/the_risk_management_policy.pdf> Whistle Blower Policy The Company has a Whistle Blower Policy to deal with instance of fraud and mismanagement, if any. The details of the Policy is explained in the Corporate Governance Report and also posted on the website of the Company at: <http://www.indoco.com/policies/whistle_blowers_policy.pdf>. Disclosure under the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 The Company has in place an Anti Sexual Harassment Policy in line with the requirements of The Sexual Harassment of Women at the Workplace (Prevention, Prohibition & Redressal) Act, 2013. Internal Complaints Committee (ICC) has been set up to redress complaints received regarding sexual harassment. All employees (permanent, contractual, temporary, trainees) are covered under this policy. The following is a summary of sexual harassment complaints received and disposed off during the year 2015-16: - No of complaints received: Nil - No of complaints disposed off: Nil Subsidiaries: The Company has three subsidiary companies: 1. Xtend Industrial Designers and Engineers Private Limited 2. Indoco Pharmchem Limited 3. Indoco Remedies Singapore Pte. Ltd. The audited financial statements, the Auditors Report thereon and the Board's Report for the year ended March 31, 2016 for each of the Company's subsidiaries and Financial Statement of the Company's associate LLP are available on the Company website. Indoco Remedies Singapore Pte. Ltd., became a subsidiary Company of Indoco Remedies Ltd., during the year under consideration. No other Company has become or ceased to be a Joint Venture or Associate company of Indoco Remedies Limited during the year under consideration. Consolidated Financial Statements The Consolidated Financial Statements of the Company prepared in accordance with relevant Accounting Standards (AS) viz. AS 21, AS 23 and AS 2 7 issued by the Institute of Chartered Accountants of India forms part of this Annual Report. Directors In terms of provisions of the Section 152(6) of the Companies Act, 2013, Ms. Aditi Panandikar retires by rotation at the forthcoming Annual General Meeting, and being eligible offers herself for re-appointment. The profile of director seeking reappointment pursuant to Regulation 36 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 is included in the Annual Report. No Director or Key Managerial Personnel was appointed or has resigned during the year under consideration. Mr. Sharad P Upasani was appointed to the Audit committee in the meeting held on May 27, 201 5. All Independent Directors have given declarations that they meet the criteria of independence as laid down under Section 149(6) of the Companies Act, 2013 and Regulation 16 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. During the year, 5 (Five) Board Meetings were held and the gap between two Board Meetings did not exceed 120 days. Details of the Board Meeting are given in the Report on Corporate Governance. Board evaluation Pursuant to the provisions of the Companies Act, 2013 and Regulation 19 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Board has carried out an annual performance evaluation of its own performance, the directors individually as well as the evaluation of the working of its Audit Committee, CSR Committee, Nomination & Remuneration Committee and Stakeholder Relationship Committee. The manner in which the evaluation has been carried out has been explained in the Corporate Governance Report. Remuneration Policy The Board has, on the recommendation of the Nomination & Remuneration Committee framed a policy for selection and appointment of Directors, KMP and their remuneration. The Remuneration Policy is stated in the Corporate Governance Report. 1. The Board Affirms that the remuneration paid is as per the Remuneration Policy of the Company. 2. The percentage increase in the remuneration of Company Secretary in the financial year was 16.4%. 3. The percentage increase in the median remuneration of employees in the financial year was 8.9%. 4. Average percentage increase in salaries of non-managerial employees was 13.4% as compared to average percentage increase in managerial remuneration which was 14.8%. 5. Number of Permanent employees on the rolls of the company as on March 31, 2016 was 5720 Nos. 6. The Ratio of the remuneration paid to each Director to the median remuneration of the employees of the Company during the year under consideration: 7. There has been an increase in the remuneration paid to the Executive Directors. There has been no increase in the sitting fees paid to the Independent Directors and Non Executive Director. During the year there has been an increase in Sales by 17.10% and an increase of 0.62% in PAT. 8. Comparison of remuneration of the Key Managerial Personnel against the performance of the Company": i) Change in sales of the Company : 17.10% increase ii) Change in the PAT of the Company: 0.62% increase iii) Change in the remuneration of Mr. Sunil D. Joshi (KMP) 16.4% 9. Variation in Market capitalization 2016 : Rs. 2677 crore 2015 : Rs. 3352 crore Price earning Ratio as on March 31, 2016: 32.03 Price earning Ratio as on March 31, 2015: 40.47 % Increase in market quotation in the shares of the company in comparison to the rate at which the company came out with the last public issue: 785.22% 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 statement in terms of Section 134(3)(c) of the Companies Act, 2013: i. that in the preparation of annual accounts, the applicable accounting standards have been followed and no material departures have been made from the same; ii. that they have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profits of the Company for that year; iii. that proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; iv. that the annual accounts have been prepared on a 'going concern' basis; v. that the company has laid down internal financial controls and such internal financial controls are adequate and operating effectively; vi. that proper systems have been devised to ensure compliance with the provisions of all applicable laws and such systems are adequate and operating effectively; Related Party Transactions All related party transactions that were entered into during the financial year were on an arm's length basis and were in the ordinary course of business. There are no materially significant related party transactions made by the Company with Promoters, Directors or Key Managerial Personnel which may have a potential conflict with the interest of the Company at large. All Related Party Transactions are placed before the Audit Committee as also the Board for approval. Prior approval of the Audit Committee is obtained on a yearly basis specifying the upper ceiling as to amount for the transactions which are of a foreseen and repetitive nature. The transactions entered into pursuant to the prior approval so granted are audited and a statement giving details of all related party transactions is placed before the Audit Committee and the Board of Directors for their approval on a quarterly basis. The particulars as required under the Companies Act, 2013 is furnished in Annexure C to this report. Significant and Material Orders passed by the Regulators or Courts There are no significant material orders passed by the Regulators / Courts which would impact the going concern status of the Company and its future operations. Statutory Auditors The Members at the Sixty Seventh Annual General Meeting approved the appointment of M/s. Patkar & Pendse, Chartered Accountants, (Firm Registration No. 107824W), as Statutory Auditors of the Company under Section 139 of the Companies Act, 2013 to hold office for a period of 3 years till the conclusion of the Seventieth Annual General Meeting to be held in 2017. M/S Patkar and Pendse have confirmed that they continue to be eligible under Section 141 of the Companies Act, 2013 and the Rules framed thereunder for continuing as Auditors of the Company. As required by the Companies Act, 2013, the Members are requested to ratify their appointment as Auditors for the FY 2016-2017. Cost Auditors In terms of the Order issued by the Central Government under Section 148 of the Companies Act, 2013 the Company was required to appoint Cost Auditors to get the audit of the cost records of the Company done by a member of the Institute of Cost & Works Accountants of India (ICAI). For FY 2015-2016, the Company had appointed M/s Sevekari Khare & Associates (Firm Registration No. 000084) to get the audit of the cost records done. They would be required to submit the reports by September 29, 2016. As required under the Companies Act, 2013, the remuneration payable to the Cost Auditor is required to be placed before the Members in a general meeting for their ratification. Accordingly, a Resolution seeking Member's ratification for the remuneration payable to M/s Sevekari Khare & Associates, Cost Auditors is included at Item No. 5 of the Notice convening the Annual General Meeting. Secretarial Audit The Secretarial Audit was carried out by M/s A. Y. Sathe & Co., Company Secretaries in Practice (Registration No.:FCS2899/COP738) for the financial year 2015-2016. The Report given by the Secretarial Auditors is annexed as "Annexure D" and forms integral part of this Report. There has been no qualification, reservation or adverse remark or disclaimer in their Report. During the year under review, the Secretarial Auditors had not reported any matter under Section 143 (12) of the Act, therefore no detail is required to be disclosed under Section 134 (3)(ca) of the Act In terms of Section 204 of the Companies Act, 2013, on the recommendation of the Audit Committee, the Board of Directors has appointed CS Ajit Sathe - Proprietor of M/s A. Y. Sathe & Co. Company Secretaries in Practice (Registration No.:FCS2899/COP738) to undertake the Secretarial Audit of the Company for FY 2016-2017. Corporate Governance We comply with the Securities and Exchange Board of India (SEBI)'s guidelines on corporate governance. We have documented our internal policies on corporate governance. Several aspects of the Act, such as the Whistleblower Policy and Code of Conduct and Ethics, have been incorporated into our policies. Our Corporate Governance report for the year 2015-2016 forms part of this Annual Report. The Report is duly certified by the Statutory Auditors of the Company whose certificate is also annexed. Extract of the Annual Return The details forming part of the extract of the Annual Return in form MGT 9 is annexed herewith as "Annexure E". Particulars of Employees The information required pursuant to Section 197 read with Rule, 5 of The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 in respect of employees of the Company, is provided in the Corporate Governance Report. Employees Relations The employees' relation at all levels and at all units continued to be cordial during the year. Acknowledgement Your Company has been able to operate efficiently through continuous improvement in all functions and areas by efficiently utilizing the Company's resources. The Directors wish to place on record their appreciation of the services rendered by each and every employee, without whose whole-hearted efforts, the overall satisfactory performance would not have been possible. The Directors also wish to place on record their word of sincere appreciation to the bankers and financial institutions, the investors, the vendors, the customers, the medical profession and all other business associates for their continued support. Your Directors look forward to the long term future with confidence. Cautionary Statement Statements in this Report, particularly those which relate to Management Discussion and Analysis describing the Company's objectives, projections, estimates and expectations may constitute 'forward looking statements' within the meaning of applicable laws and regulations. Actual results might differ materially from those either expressed or implied in the statement depending on the circumstances. For and on behalf of the Board of Directors SURESH G. KARE Chairman DIN:00179220 Place : Mumbai, date : May 27, 2016 |