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Updated:09 Apr, 2021, 16:00 PM IST

DIRECTORS' REPORT

Your Directors are pleased to present the 37th Annual Report together with the Audited Financial Statements of the Company for the financial year ended March 31, 2016.

Dividend

Though the Company made significant progress during the year in terms of its business performance, considering its overall financial position, the Directors are unable to recommend any dividend for the year 2015–16.

The Company registered sales of Rs. 5167.6 Million with a growth of 11% achieving a Net Profit of Rs. 53 Million, during the year. The Company's key growth brands – Brilinta, Forxiga, Onglyza, Kombiglyze and Symbicort, witnessed robust growth of 76% over last year, providing strong momentum to the Company's performance throughout the year.

Diabetes portfolio of the Company grew by 74% post acquisition from Bristol Myers–Squibb and launch of Forxiga. Forxiga is part of a newer class of medicines known as SGLT2 (Sodium Glucose Cotransporter 2) inhibitors that act to block reabsorption of sugar in the kidneys.

The drug, Brilinta (Ticagrelor) which provides cardiologists with a new and effective treatment to help reduce the rate of heart attack and cardiovascular deaths in adult patients with Acute Coronary Syndrome (ACS), is being received well by the market and continues to register rapid growth. During the year, the brand continued to grow its market share, as per IMS Health, from 9.43% (MAT March 2015) to 14.3% (MAT March 2016) and continued to be the #1 Oral Antiplatelet brand". During the year, Brilinta won the most prestigious OPPI Marketing Excellence Awards in the category of "Best New Pharma Product Launch". Brilinta also won the prestigious "Brand of The Year" AWACS – AIOCD Award for Chronic category under " Best New Pharma Product Launch".

Meronem, became the Company's first brand to cross the Rs. 100 Crores milestone and also won the prestigious AWACS – AIOCD Award for "Brand of The Year" in Acute catergory.

Distribution Services Agreements

During the year, the Company has entered into three Distribution Services Agreement. With Dr. Reddy's Laboratories for Saxagliptin and its fixed dose combination with metformin, our patented therapy for the treatment of type 2 Diabetes. The second Distribution Services Agreement is with Sun Pharma for Ticagrelor, our treatment for acute coronary syndrome (ACS) and the third Distribution Services Agreement for the treatment of type 2 Diabetes with Sun Pharma to promote and distribute Dapagliflozin and its fixed dose combination with metformin.

Pursuant to the above agreements, the Company, Dr. Reddy's Laboratories and Sun Pharma will co–promote, market & distribute Saxagliptin, Dapagliflozin and Ticagrelor under different brand name in Indian market.

These partnerships are in line with our commitment to transform patient care in Diabetes and ACS. It will enable us to increase the share of voice for the molecules through a wider reach to physicians, thereby benefitting more number of patients.

Manufacturing

Your Directors are pleased to inform that the manufacturing operations at the Company's factory situated at Bangalore have improved significantly. The factory has been able to manufacture and supply products as per the demand. The factory has now streamlined production of Formulations & Packaging of oral solids with a strong focus on key performing parameters. The factory management has spearheaded many quality and compliance driven initiatives to bring about a quality culture change at the site. Several employee engagement, quality and compliance improvement programs were launched during the year.

In view of low demand for Terbutaline Sulphate (TBS), which was manufactured predominantly for export markets and TBS being the only Active Pharmaceutical Ingredient (API) which was manufactured at the Company's factory in Bangalore and no other API manufacturing activity was planned to be carried out in the future, the Board of Directors of your Company decided to close the Active Pharmaceuticals Ingredient Unit (API Unit) situated at Yelahanka, Bangalore.

Material changes and commitment, if any, affecting financial position of the Company from the end of the Financial Year and till the date of this Report

There has been no material change and commitment, affecting the financial performance of the Company which occurred between the end of the financial year of the Company to which the financial statements relate and the date of this Report.

Deposits

During the year under review, your Company has neither accepted nor renewed any deposits from public within the meaning of Section 73 of the Companies Act, 2013 and The Companies (Acceptance of Deposits) Rules, 2014.

Safety Health and Environment

Safety as well as health & wellbeing of employees is a core focus area of the Company. During the year under review, the Company's field force was trained in defensive driving techniques to enhance their on–road safety. There was a significant reduction in the number of road accidents in the field. Health awareness activities were carried out, during the year.

Human Resources and Employee Relations

The Company is committed to provide career opportunities for its employees and enable their growth and development. During the year, the India Development Week was conducted to enable employees to understand how to build careers and gain experiences across functions and businesses. Further, there is a focus on hiring science and pharmacy graduates to strengthen the scientific orientation in the workforce. There continues to be a focus on building gender diversity in the workforce. Training programs to strengthen scientific and technical knowledge of the employees were extensively implemented across all businesses.

Number of Employees

The total number of employees of the Company as on March 31, 2016 was 1587 as against 1654 as on March 31, 2015.

Factory Land

In the last Directors' Report, the Members were informed that the Company had received compensation amount of (a) Rs. 13.7 million in respect of the first acquisition of land made by National Highways Authority of India (NHAI) in 2004 and (b) Rs. 102.8 million in respect of second acquisition of land made by NHAI in 2011.

The arbitration proceedings initiated by NHAI before the Arbitrator at Bangalore, in relation to the first acquisition of land made by NHAI in 2004, are still pending.

Further, the arbitration invoked by the Company seeking, inter–alia, enhancement of compensation from NHAI in respect of second acquisition of land made by NHAI in 2011, is also pending.

Other Matters

In November 2012, the Company had received a notice from Bruhat Bangalore Mahanagara Palike (BBMP) demanding from the Company, improvement charges amounting to Rs. 15,58,04,930/–. The Company had filed a Writ Petition before the Karnataka High Court challenging the said demand notice from BBMP. The Court had granted interim stay against the notice issued by BBMP and the stay continues to be in force.

Further, the Company had received a notice dated August 7, 2014 from BBMP demanding improvement charges amounting to Rs. 7,08,20,430/–. The Company had filed a Writ Petition before the Karnataka High Court challenging the said demand notice from BBMP. The Court has granted interim stay against the notice issued by BBMP and the stay is in force till the next date of hearing. There is no further development in the matter since the last hearing held on 26th April 2016.

Voluntary Delisting Offer

In last year's Directors' Report, the Members were informed that an appeal has been filed by two shareholders of the Company ('Appellants') before the Securities Appellate Tribunal (SAT), against part of the Order of Securities and Exchange Board of India (SEBI) dated June 24, 2014, in relation to delisting proposal of AstraZeneca Pharmaceuticals AB, Sweden (AZPAB).

The SAT which heard the appeal on September 11, 2015, had disposed of the same and passed the following order:

a) Statement made by the Counsel for Respondent No.2 (i.e., AstraZeneca Pharma India Limited) and Respondent No.5 (AZPAB) that they shall not proceed with the delisting of equity shares of Respondent No.2 Company till completion of investigation and passing order by SEBI on merits, is accepted.

b) SEBI shall complete the investigation within a period of six months from September 11, 2015 and pass appropriate order on merits after hearing the parties including the Appellants, as expeditiously as possible.

c) If the order to be passed by SEBI on merits is adverse to the Appellants, then the said order shall not be given effect to from the date of passing the said order till it is communicated to the Appellants and four weeks thereafter.

There is no further development in the matter.

Transfer to Investor Education and Protection Fund

As required under Section 205C of the Companies Act, 1956, the unclaimed dividend amount aggregating Rs. 19.96 Lacs lying with the Company for a period of seven years pertaining to the financial year ended December 2007 was transferred during June 2015, to the Investor Education and Protection Fund, established by the Central Government.

Further, the unclaimed debenture amount including the interest payable thereon aggregating Rs. 27.62 Lacs lying with the Company for a period of seven years since January 2009 was transferred during February 2016, to the Investor Education and Protection Fund, established by the Central Government.

Directors' Responsibility Statement

To the best of our knowledge and belief and according to the information and explanations obtained by us, your Directors state in terms of Section 134 (5) of the Companies Act, 2013 ('the Act'):

(a) that in the preparation of the annual financial statements for the year ended March 31, 2016, the applicable accounting standards have been followed along with proper explanation relating to material departures, if any.

(b) that they had 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 as at March 31, 2016 and of the profit of the Company for the year ended on that date.

(c) that they had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities.

(d) that they had prepared the annual financial statements on a going concern basis.

(e) that they had laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively.

(f) that they had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

The details in respect of internal financial controls and their adequacy are included in the Management Discussion & Analysis Report, which forms part of this Report.

Disclosure as required under Section 22 of Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013

AstraZeneca is committed to provide a healthy environment to all its employees. Hence, it does not tolerate any discrimination and/or harassment in any form. The Company has in place a Prevention of Sexual Harassment Policy and an Internal Complaints Committee as per the requirements of Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013.

During the year under review, the Internal Complaints Committee received one complaint which was investigated. Post the investigation, a report was submitted to management indicating that the facts of the complaint could not be substantiated. However, to ensure comfortable working conditions, there was a management decision to separate the reporting line of the complainant with her consent.

Board Meetings

During the year, 6 meetings of the Board were held. For details of the meetings of the Board, please refer to the Corporate Governance Report, which forms part of this Report.

Board Evaluation

The Board of Directors has carried out an annual evaluation of its performance, Board Committees and individual Directors pursuant to the requirements of the Companies Act, 2013 and the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 ('the Listing Regulations').

The performance of the Board was evaluated by the Board after seeking inputs from all the Directors on the basis of the criteria such as the Board composition and structure, effectiveness of Board processes, information and functioning etc.

The performance of the Committees was evaluated by the Board after seeking inputs from each of the committee members on the basis of the criteria such as the composition of committees, effectiveness of the functioning of committee meetings etc.

The Board and the Nomination & Remuneration Committee also reviewed the performance of the individual directors on the basis of the criteria such as the contribution of the individual director to the Board and Committee meetings like preparedness on the issues to be discussed, meaningful and constructive contribution and inputs in meetings, etc. In addition, the Chairman was also evaluated on the key aspects of his role.

In a separate meeting of Independent Directors, the performance of Non–Independent Directors and the performance of the Board as a whole were evaluated taking into account the views of executive directors and non–executive directors. The same was discussed in the Board meeting, at which the performance of the Board, its Committees and individual directors were also discussed.

Remuneration Policy of the Company

The Remuneration Policy of the Company for appointment and payment of remuneration to the Directors, Key Managerial Personnel and Senior Executives of the Company along with other related matters have been provided in the Corporate Governance Report, which forms part of this Report.

Vigil Mechanism / Whistle Blower Policy

The Company has a vigil mechanism for Directors and Employees to report their concerns about unethical behavior, actual or suspected fraud or violation of the Company's code of conduct. The mechanism provides for adequate safeguards for victimization of Director(s) / Employee(s) who avail of the mechanism. In exceptional cases, Directors and Employees have direct access to the Chairman of the Audit Committee. The Whistle Blowing Policy is available on the Company's website at www.astrazeneca.com/india .

Conservation of Energy, Technology Absorption, Foreign Exchange Earnings and Outflow

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 – I.

Related Party Transactions

There are no materially significant related party transactions made by the Company with Promoters, Directors, Key Managerial Personnel and Senior Management which may have a potential conflict with the interest of the Company at large.

All related party transactions are placed before the Audit Committee for its prior approval. Omnibus approval of the Audit Committee is obtained for the transactions which are repetitive in nature or when the need for them cannot be foreseen in advance.

The Company has adopted a Policy for dealing with Related Party Transactions. The Policy as approved by the Board is uploaded on the Company's website and can be accessed at www.astrazeneca.com/india .

The related party transactions which are of material nature, as defined in the Listing Regulations, require to be approved by the Members by way of an Ordinary Resolution. In this connection, the material related party transactions requiring Members' approval, are dealt with at Item No. 5 of the Notice, read with the relative Explanatory Statement.

Details of the related party transactions as required under Section 134(3)(h) read with Rule 8 of the Companies (Accounts) Rules, 2014, are attached as Annexure – II.

Risk Management

The Company has in place a mechanism to inform the Board about the risk assessment and minimization procedures and periodical review is carried out to ensure that executive management controls risks by means of a properly defined frame work.

Corporate Social Responsibility (CSR)

The Company had introduced AstraZeneca's signature global initiative 'the Young Health Programme' (YHP) in the year 2010–11, designed to help marginalized young people deal with health problems they face , enabling them to live a better life. The programme has made significant progress since then.

YHP India has directly been able to reach out to 199,387 young people (84,848 boys and 114,539 girls) and has influenced 119,770 wider community members, including health professionals , educators and policy makers.

Since the average net profit of the Company during the three immediately preceding financial years being negative, the Company was not required to spend on CSR activities during the financial year 2015–16.

The Annual Report on CSR activities in terms of the requirements of Companies (Corporate Social Responsibility Policy) Rules, 2014 is annexed herewith as Annexure – III, which forms part of this Report.

Extract of Annual Return

In terms of the requirements of Section 92(3) of the Act and Rule 12 of the Companies (Management and Administration) Rules, 2014, the extract of the Annual Return in the prescribed form i.e., MGT – 9 is annexed herewith as Annexure – IV, which forms part of this Report.

Details of remuneration of Directors / Key Managerial Personnel

The information relating to remuneration of Directors/ Key Managerial Personnel as required under Section 197(12) read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 of the Act, is given in Annexure – V, which forms part of this Report.

Particulars of Employees

The statement under Rule 5(2) and 5(3) of The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, are set out in Annexure – VI which forms part of this Report.

However, the said Annexure shall be provided to Members on a specific request made in writing to the Company. The said information is available for inspection by the Members at the Registered Office of the Company on any working day of the Company up to the date of the 37th Annual General Meeting.

Management Discussion and Analysis Report

Management Discussion and Analysis Report as required under the Listing Regulations is annexed as Annexure – VII, which forms part of this Report.

Corporate Governance

Your Company has been practicing the principles of good corporate governance. A detailed report on corporate governance as required under the Listing Regulations is annexed as Annexure – VIII. Certificate of the Practicing Company Secretary regarding compliance with the conditions stipulated in the Listing Regulations forms part of the Report on Corporate Governance, which forms part of this Report.

Reporting of frauds

There was no instance of fraud during the year under review, which required the Statutory Auditors to report to the Audit Committee and / or the Board, as required under Section 143(12) of the Act and Rules framed thereunder.

Particulars of Loans, Guarantees or Investments

During the year under review, your Company has not granted any Loan, Guarantees or made Investments within the meaning of Section 186 of the Companies Act, 2013.

Significant and material orders passed by the Regulators or Courts or Tribunals

During the year under review, there was no significant and material orders passed by the Regulators or Courts or Tribunals impacting the going concern status of the Company and its future operations.

Committees

Pursuant to Section 178 of the Companies Act, 2013 and the rules made thereunder, the Board of Directors at its meeting held on May 30, 2014, had constituted the Nomination & Remuneration Committee and the Stakeholders' Relationship Committee. Further, pursuant to Section 135 of the Companies Act, 2013 and the rules made thereunder, the Board of Directors at its meeting held on August 12, 2014 had constituted the Corporate Social Responsibility Committee. Details of these Committees are given in the Corporate Governance Report, which forms part of this Report.

Audit Committee

The details pertaining to composition of the Audit Committee are included in the Corporate Governance Report, which forms part of this Report.

Directors and Key Managerial Personnel

The Companies Act, 2013 provides for appointment of Independent Directors, who shall hold office for a term of upto five consecutive years on the Board of the Company and shall be eligible for re–appointment on passing of a special resolution by the Company. Further, the provisions of retirement by rotation as envisaged under Section 152 of the Companies Act, 2013, shall not apply to such Independent Directors. The Independent Directors of your

Company viz., Mr. D. E. Udwadia, Mr. K. S. Shah and Mr. Narayan K Seshadri have furnished the required declaration under Section 149 of the Companies Act, 2013, affirming that they meet the criteria of independence.

Ms. Rebekah Martin and Mr. Justin Ooi resigned as Director(s) of the Company, effective November 6, 2015 and January 11, 2016, respectively.

The Board of Directors at its meeting held on November 6, 2015 appointed Ms. Claire–Marie O'Grady as Director of the Company in the vacancy caused by the resignation of Ms. Rebekah Martin, to hold office as such upto the date Ms. Rebekah Martin would have held the office of Director.

Pursuant to Section 152 of the Companies Act, 2013, Mr. Sanjay Murdeshwar, Managing Director, will retire by rotation at the ensuing Annual General Meeting and being eligible, offer himself for re–appointment. A resolution in this behalf is set out at Item No.2 of the Notice of the Annual General Meeting.

The details of familiarization programme and Annual Board Evaluation process for Directors have been provided in the Corporate Governance Report.

As on date, Mr. Sanjay Murdeshwar, Managing Director, Mr. Rajesh Marwaha, Chief Financial Officer and Mr. Anantha Murthy N, Legal Counsel & Company Secretary, are the Key Managerial Personnel of the Company.

Auditors

a) Statutory Auditors:

The present Auditors – M/s. BSR & Co. LLP, Chartered Accountants, Bangalore who hold office up to the ensuing Annual General Meeting have conveyed that they do not wish to be re–appointed as Statutory Auditors of the Company for the financial year 2016–17. As such, the Board of Directors of your Company based on the recommendation of the Audit Committee, have approved the proposal for appointment of M/s. Price Waterhouse & Co Chartered Accountants LLP (Firm Registration No. 304026E/E–300009), as Statutory Auditors of the Company to hold office for a period of 5 years from the conclusion of the 37th Annual General Meeting, subject to the approval of the Members of the Company at the ensuing Annual General Meeting. The Notice of AGM contains a business to this effect for your approval.

The Board of Directors wishes to place on record its appreciation of the guidance and support ably provided by M/s. BSR & Co. LLP during their tenure as the Statutory Auditors of the Company.

b) Secretarial Auditors:

Pursuant to the provisions of Section 204 of the Companies Act, 2013 and Rule 9 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 and amendments made thereto, your Company engaged the services of Mr. Vijayakrishna KT, Practicing Company Secretary, to conduct the Secretarial Audit of the Company for the financial year ended March 31, 2016. The Secretarial Audit Report in Form MR–3 is annexed as Annexure – IX, which forms part of this Report.

c) Cost Auditors:

The Board of Directors of the Company, based on recommendation of the Audit Committee, has appointed M/s. Rao, Murthy & Associates, Cost Accountants, Bangalore, (holding Registration No.000065), as Cost Auditor of the Company, for conducting the Cost Audit for the financial year 2016–17, on a remuneration as mentioned in the Notice convening the 37th Annual General Meeting.

A Certificate from M/s. Rao, Murthy & Associates, Cost Accountants, has been received to the effect that their appointment as Cost Auditor of the Company, if made, would be in accordance with the limits specified under Section 141 of the Act and Rules framed thereunder.

Cost Audit Report for the year 2014–15 was filed with the Ministry of Corporate Affairs on September 29, 2015.

Acknowledgements

Your Directors take this opportunity to thank AstraZeneca Pharmaceuticals AB, Sweden and AstraZeneca PLC, for their valuable guidance and strong support to the Company's operations during the year.

Your Directors would also like to thank the Central and the State Governments, other Statutory and Regulatory Authorities, the Company's Bankers, the Medical Profession and Trade, Vendors & Business Associates and the Members for their continued valuable support to the Company's operations.

Your Directors place on record their sincere appreciation of the significant contribution and continued support of the employees at all levels to the Company's operations during the year.

On behalf of the Board of Directors

D E UDWADIA

CHAIRMAN

Place: Bangalore

Date: May 25, 2016

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