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Your Directors are happy in presenting the Thirty Seventh Annual Report together with the Audited Standalone and Consolidated Financial Statements for the year ended March 31, 2015.
Jubilant Life Sciences Limited ("the Company" or "Jubilant") is an integrated global Pharmaceutical and Life Sciences company engaged in manufacture and supply of Active Pharmaceutical Ingredients, Solid Dosage Formulations, Radiopharmaceuticals, Allergy Therapy Products and Life Science Ingredients. It also provides services in Contract Manufacturing of Sterile Injectables and Drug Discovery Solutions. The Company's strength lies in its unique offerings of Pharmaceutical and Life Sciences products and services across the value chain. With 10 world–class manufacturing facilities in India, US and Canada and a team of about 6,100 multicultural people across the globe, the Company is committed to deliver value to its customers spread across over 100 countries. The Company is well recognized as a "Partner of Choice" by leading pharmaceuticals and life sciences companies globally. For more information, please visit the Company's website www.jubl.com
Results of Operations and the State of Company's Affairs
(i) Standalone Financials Income from Operations
In the Financial Year 2014–15, on standalone basis, the Company recorded income from operations of Rs. 31,763 million.
International business contributed 49% to the Net Revenue from operations at Rs. 15,717 million.
For the year ended March 31, 2015, EBITDA stood at Rs. 3,826 million with EBITDA margins at 12%.
Reported Net Profit/ (Loss) After Tax and EPS
Reported Net Profit After Tax was Rs. 2,051 million in the Financial Year 2014–15. Basic EPS stood at Rs. 12.88. However, Normalised Net Profit After Tax stood at Rs. 69 million after adjusting for exceptional gain of Rs. 1,982 million, mainly on account of profit on sale of business/ investments, write–off of irrecoverable loans and advances. Normalised EPS stood at Rs. 0.43 for the Financial Year 2014–15.
(ii) Consolidated Financials Income from Operations
In the Financial Year 2014–15, income from operations was Rs. 58,262 million, up from Rs. 58,034 million in the previous year.
International business contributed 71% to the Revenue from Operations at Rs. 41,367 million. Sales from key developed markets were at Rs. 33,649 million contributing 58% to the Revenue of the Company. Revenues from domestic market stood at Rs. 16,895 million, contributing 29% to overall revenues.
This segment comprises revenue lines of Active Pharmaceutical Ingredients ("APIs"), Solid Dosage Formulations, Radiopharmaceuticals, Allergy Therapy Products, Contract Manufacturing Operations ("CMO") of Sterile Injectables, Drug Discovery Solutions and Indian Branded Pharmaceuticals. In the Financial Year 2014–15, Income from Operations from this segment was Rs. 26,820 million contributing 46% to the total revenue of the Company. EBITDA margins for the segment were 17% and EBITDA stood at Rs. 4,447 million, down from Rs. 6,102 million in the previous year. During the Financial Year 2014–15, Revenue in the segment was affected on account of Warning Letter in the CMO business and delay in new product launches in Solid Dosage Formulations, which was partially offset by revenue increase in Radiopharmaceuticals.
Life Science Ingredients Segment
This segment comprises our Advanced Intermediates and Specialty Ingredients, Nutritional Products and Life Science Chemicals businesses. In the Financial Year 2014–15, Income from Operations from this segment stood at Rs. 31,442 million, up from Rs. 30,757 million in the previous year, contributing 54% to our overall revenues. EBITDA stood at Rs. 3,220 million with 10% margins for the year as compared to Rs. 4,832 million with 16% margins in the previous year. The segment performance was driven by revenue increase in Life Science Chemicals and Fine Ingredients. The Company witnessed price and volume growth in Nutritional Products. EBITDA was impacted due to unabsorbed cost in Symtet and volume and margin reduction due to anti–dumping duty in China and increased competition in Advanced Intermediates.
For the year ended March 31, 2015, EBITDA stood at Rs. 7,317 million with EBITDA margins at 12.6%.
Reported Net Profit/ Loss After Tax and EPS
Reported Loss After Tax was Rs. 578 million in the Financial Year 2014–15. Basic EPS stood at Rs. (3.63). However, Normalised Loss After Tax stood at Rs. 97 million after adjusting for exceptional items of Rs. 481 million. Exceptional items consisted of mark–to–market book loss of Rs. 251 million mainly on account of
currency movement in US dollar from Rs. 59.91 last year to Rs. 62.50 on March 31, 2015 with respect to the rupee loan swapped into a US dollar loan, which was entirely repaid during the year; interest swap income of Rs. 419 million; FCMITDA amortisation of Rs. 448 million on account of unrealised foreign exchange loss amortised over the tenure of the loan as per the Indian Accounting Standards; goodwill impairment of Rs. 51 million; loss on discard of assets of Rs. 640 million and foreign exchange gain of Rs. 490 million. Normalised EPS stood at Rs. (0.61) for the Financial Year 2014–15.
Consolidated Financial Statements
The Consolidated Financial Statements, in accordance with the Companies Act, 2013 (the "Act"), Clause 32 of the Listing Agreement with the Stock Exchanges (the "Listing Agreement") and Accounting Standard–21 on Consolidated Financial Statements (AS–21) form part of the Annual Report.
Nature of Business
During the year ended March 31, 2015, with the objective of consolidating and re–organising the Company's pharmaceuticals business segment, the Company transferred, by way of a "slump sale", its (i) API business and (ii) Dosage Forms business, on a going concern basis, and also investments in Jubilant Pharma Holdings Inc., USA and Jubilant Pharma NV, Belgium to Jubilant Generics Limited, a wholly–owned subsidiary of the Company through Jubilant Pharma Limited, Singapore. Accordingly, the Company now focuses on the Life Science Ingredients business.
The Board is pleased to recommend a dividend of 300% i.e. Rs. 3 per fully paid up equity share of Rs. 1 for the year ended March 31, 2015. Total dividend payout inclusive of Rs. 97.28 million as tax on dividend will amount to Rs. 575.12 million. The payment of dividend is subject to approval of the shareholders at the forthcoming Annual General Meeting ("AGM") of the Company.
(a) Share Capital
During the year, there has been no change in the authorised, subscribed and paid–up share capital of the Company. As at March 31, 2015, the paid–up share capital stood at Rs. 159,281,139 comprising of 159,281,139 equity shares of Rs. 1 each.
(b) Employees Stock Options (ESOPs)
During the year, no Options were granted under Jubilant
Employees Stock Option Plan 2005 ("Plan 2005") and JLL Employees Stock Option Plan 2011 ("Plan 2011").
– Plan 2005: As on March 31, 2015, 105,495 Options were outstanding under the Plan 2005. Each Option entitles the holder to acquire five equity shares of Rs. 1 each at the exercise price fixed at the time of grant being the market value as per the SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme)
Guidelines, 1999 ("SEBI Guidelines"). A maximum of 527,475 shares will be allotted by the Company/ transferred from Jubilant Employees Welfare Trust upon exercise of these Options.
– Plan 2011: As on March 31, 2015, 1,1 12,306 Options were outstanding under the Plan 2011. Each Option entitles the holder to acquire one equity share of ^ 1 at the exercise price fixed at the time of grant being the market value as per the SEBI Guidelines. A maximum of 1,112,306 shares will be allotted by the Company/ transferred from Jubilant Employees Welfare Trust upon exercise of these Options.
No dilution of capital is expected due to exercise of ESOPs as it is envisaged to transfer the shares held by Jubilant Employees Welfare Trust to the employees on exercise of Options.
Disclosures as required under Regulation 12 of the SEBI Guidelines are given in Annexure–1 and forms part of this Report.
As on March 31, 2015, the Company had 48 subsidiaries. Brief particulars of the principal subsidiaries are given below:
Jubilant Pharma Limited
Jubilant Pharma Limited, Singapore ("Jubilant Pharma") is the wholly–owned subsidiary of the Company. Jubilant Pharma holds the global pharmaceutical business of the Company through its subsidiaries in USA, Canada, Europe and India. These subsidiaries of Jubilant Pharma are engaged in manufacturing and marketing of various pharmaceutical products and services like active pharmaceutical ingredients, oral dosage forms (tablets and capsules), contract manufacturing of sterile injectables, ointment, creams and liquids, allergy therapy products and radiopharmaceutical business.
Jubilant Generics Limited
Jubilant Generics Limited ("JGL") is a wholly–owned subsidiary of the Company through Jubilant Pharma. During the year, JGL has, by way of slump sale, acquired (i) API business and (ii) Dosage Forms business of the Company through Business Transfer Agreement, on a going concern basis. JGL has also acquired investments of the Company in Jubilant Pharma Holdings Inc., USA and Jubilant Pharma NV, Belgium.
JGL owns two manufacturing locations; one at Nanjangud, Karnataka and another at Roorkee, Uttarakhand which are engaged in API and Dosage Forms business, respectively.
i) Cadista Holdings Inc. ("Cadista"), a corporation incorporated in Delaware, USA, is a wholly–owned subsidiary of Jubilant Pharma Holdings Inc. Effective December 22, 2014, Jubilant Generics Inc. which held 82.38% shares in Cadista, acquired 17.62% shares held by the minority shareholders in Cadista through Tender Offer. Pursuant to this acquisition, Jubilant Generics Inc. merged into Cadista.
ii) Jubilant Cadista Pharmaceuticals Inc., a corporation incorporated in Delaware, USA is a wholly–owned subsidiary of Cadista Holdings Inc. This company is in the business of manufacturing solid dosage forms of generic pharmaceuticals at its USFDA approved manufacturing facility in Salisbury, Maryland, USA. Its customer base includes all the large wholesalers, retail and grocery chains. Besides manufacturing its own label products, it also provides Product Development and Contract Manufacturing Services. As on March 31, 2015, there were 22 products commercialized in the US with focus in the therapeutic areas of CVS, CNS, Anti Allergic, Steroids, etc. This company is the US market leader in 2 products and ranked top 2 in 4 products.
Jubilant Pharmaceuticals NV
This is a wholly–owned subsidiary of your Company through Jubilant Pharma NV, Belgium, which holds 99.8% of its shares and Jubilant Pharma holds the balance shares. This company is engaged in the business of licensing generic dosage forms providing regulatory services to generic pharmaceutical companies.
PSI Supply NV
This is a wholly–owned subsidiary of your Company. 99.5% of its shares are held by Jubilant Pharma NV and the balance by Jubilant Pharma. It is engaged in the supply of generic dosage forms to the European markets.
Jubilant Life Sciences NV
This is a wholly–owned subsidiary of your Company. 99.99% of its shares are held by the Company and the balance by Jubilant Infrastructure Limited. It is engaged in the supply of bulk chemicals such as acetyls, acetic anhydride and vitamins to the European markets.
Jubilant Pharma NV
This is a wholly–owned subsidiary of your Company through Jubilant Generics Limited, India and Jubilant Pharma. This company holds shares of Jubilant Pharmaceuticals NV (99.8%) and PSI Supply NV (99.5%) along with Jubilant Pharma which holds the balance shares.
Jubilant DraxImage Inc.
Jubilant DraxImage Inc. ("JDI") is a wholly–owned subsidiary of your Company through Jubilant Pharma. JDI develops, manufactures and markets radiopharmaceuticals used in Nuclear Medicine for the diagnosis, treatment and monitoring of various diseases. It serves hospital–based customers (Nuclear Medicine Physicians and Technologists) in addition to specialized radiopharmacies and through them patients, globally with high quality and reliable specialty products. The business is backed by a dedicated research and development team, specialized manufacturing, strong regulatory affairs and commercial operations. The areas of specialization include cardiac, lung and bone imaging as well as thyroid therapy. JDI employs around 150 skilled professionals and is based in Montreal, Canada, where it operates a manufacturing facility approved by U.S. Food and Drug Administration (USFDA) and Health Canada.
JDI has earned and maintained market leadership in North America for several specialty niche products including I–131 Therapeutic & Diagnostic capsules for thyroid and cancer,
Methylene–Diphosphonate (MDP) for bone imaging, Macro–Aggregated Albumin (MAA) for lung imaging, Diethylene Triamine Penta–acetic Acid (DTPA) for renal and brain imaging.
In the Financial Year 2014–15, revenues doubled to USD 81 million due to price correction in key products in our Radiopharmaceutical Business.
JDI intends to expand the range of product offerings and consolidate its market share for Radiopharmaceuticals in North America. It is also expanding in markets such as Latin America, Europe and Asia through collaboration and contractual arrangements with partners and new distribution channels to drive growth in the current and pipeline products.
Jubilant HollisterStier LLC
This subsidiary is based in Spokane, State of Washington, USA. It is a wholly–owned subsidiary of HSL Holdings Inc. It is engaged in the contract manufacturing of sterile injectables, which includes, lyophilized products, liquid fills, biologics, suspensions, WFI/ diluents. This company provides a complete range of services to support drug manufacturing in the pharmaceutical and biopharmaceutical industries. Additionally, it is an innovator, manufacturer and distributor of allergenic extracts, targeted primarily at treating allergies and asthma.
Its contract manufacturing capabilities include aseptic liquid fill/ finishing and lyophilization of small lot parenterals for commercial and clinical requirements. Its capabilities can be applied to a variety of projects from pre–clinical through commercial scale across a multitude of dosage forms including microspheres, suspensions, WFI/ diluents, biologics (proteins), lyophilized products and liposomes. Jubilant HollisterStier is approved across global regulated markets including FDA (both CDER and CBER), EMA, Japan, Brazil and Canada. Its contract manufacturing business serves customers including innovators ranging from small biotechnology to large pharmaceutical companies.
With nearly 100 years of leadership in research, extract production and immunotherapy products, the organization is respected worldwide in the field of allergy. Currently, the business is comprised of allergenic extracts and mixes, along with specialized skin test diagnostic devices. The business lays special emphasis on innovation towards introducing new products to treat and cure allergies.
Jubilant Biosys Limited
This company is a subsidiary of your Company through Jubilant Biosys (Singapore) Pte. Ltd., a wholly–owned subsidiary of the Company, which holds 66.98% equity of this company.
This company provides Drug Discovery Services to global pharmaceutical and biotech companies in:
• Standalone Service Model
– Functional services in the areas of Discovery Informatics, In Vitro Biology, In Vivo Biology, Structural Biology, Computational Chemistry, DMPK and Toxicology on Full time equivalent (FTE) or Fee for service (FFS) based model
• Collaborative/ Partnership Model
– Integrated discovery program across a single or a portfolio of molecules
– Shared risk model
– Milestone and Hybrid Model
• Research Funding
• Payments for scientific milestones including bonus achieved through Discovery and Development phase
• Royalties on successful commercialization of drug
Jubilant Chemsys Limited
This company is a wholly–owned subsidiary of your Company through Jubilant Drug Development Pte. Ltd., Singapore. This company offers the following services to drug discovery companies of US, Europe and rest of the world on Full Time Equivalent, Fee for Service and Hybrid Model in:
• Synthetic Organic Chemistry
• Combinatorial Chemistry
• Medicinal Chemistry
• Process Research & Development and Manufacturing, and
• Scale up services
It also works closely with Jubilant Biosys Limited in collaborative drug discovery research.
Jubilant Clinsys Limited
This company is a wholly–owned subsidiary of your Company through Jubilant Drug Development Pte. Ltd., Singapore.
This company is engaged in providing Pharmacovigilance, Medical Writing, Electronic Data Capturing and Staffing Solution services to external and internal customers. During the year, this company has closed down its operations relating to Clinical Trial and Data Management services.
Jubilant Clinsys Inc.
This New Jersey based USA Corporation is a wholly–owned subsidiary of Jubilant Pharma Holdings Inc.
This company provides Clinical Research Data Management services through TrialStat platform.
Jubilant Discovery Services Inc.
This Delaware based USA Corporation is a wholly–owned subsidiary of Jubilant Biosys Limited. This company is providing Ion channel screening capabilities using electrophysiology and atomic absorption spectroscopy, Assay development, medium–high–throughput screening, comprehensive cell–culture related capabilities to Mnemosyne, Orion and Jansen Pharmaceutical NV. Apart from fee for services, it also provides sales, marketing and liaising services to Jubilant Biosys Limited and Jubilant Chemsys Limited.
Jubilant Infrastructure Limited
This wholly–owned subsidiary of your Company had entered
into a Memorandum of Understanding ("MOU") with the Government of Gujarat during the 'Vibrant Gujarat' conference in 2007 for development of Sector Specific Special Economic Zone ("SEZ") for Chemicals in Gujarat. About 107 hectares land was taken on lease from Gujarat Industrial Development Corporation ("GIDC") in Bharuch District, Gujarat.
This SEZ became operational in October 2011 with the best in class infrastructure facilities and utility plants like Boiler, Gas Turbine, Effluent Treatment, Incinerator and DM Water.
The Company has set up two units in this SEZ and both the units have commenced commercial production. The finished products of Unit–1 and Unit–2 are fully backward integrated and are using in–house developed innovative technologies.
The global scale plants of Vitamin B3 and 3–Cynopyredine at SEZ make your Company the largest producer of Vitamin B in India and the second largest globally. The production of Symtet in Unit–2 will make your Company the world's largest producer of the crop science ingredient for the insecticide through green route. The operations of Unit–2 are stabilizing in steps.
Jubilant First Trust Healthcare Limited
Jubilant First Trust Healthcare Limited ("JFTHL") is a wholly–owned subsidiary of your Company. 95.8% of its capital is held directly by the Company and the balance 4.2% by First Trust Medicare Private Limited.
This company has filed a Scheme of Arrangement and Reduction of Capital before the Hon'ble High Court of Allahabad whereby First Trust Medicare Private Limited will be merged into JFTHL and subsequently, capital of the merged entity shall be reduced.
Jubilant Life Sciences (USA) Inc.
This corporation incorporated in Delaware, USA is a wholly–owned subsidiary of the Company. It undertakes sales and distribution of advance intermediates, nutrition ingredients, fine chemicals and APIs in the USA.
Jubilant Life Sciences (Shanghai) Limited
This wholly–owned subsidiary of your Company is held through Jubilant Pharma. It undertakes sales and distribution of products in China. This company is engaged in trading of advance intermediates (pyridine and its derivatives), speciality ingredients and nutrition products. It is catering to pharmaceutical, animal feed and agrochemical industries in China. This subsidiary is also a sourcing hub of raw materials for your Company.
Jubilant DraxImage Limited
This is a wholly–owned subsidiary of your Company through DraxImage Limited, Cyprus. It operates under the Jubilant India Branded Pharmaceuticals Banner in India. This company is engaged in marketing of innovative diagnostic imaging, radiopharmaceutical solution and therapeutic radiopharmaceutical products. It has launched the Lyophilized kits MDP, MAA and Sestamibi and would soon be launching DTPA and DMSA. It is also involved in distribution of wide range of radioisotopes which include Tc–99m Generator (used in the diagnosis of Bone Cancer,
Renal Imaging, Cerebral Perfusion Imaging and Myocardial Perfusion Imaging), Thallium–201 and Iodine–131 capsules and solution (for the diagnosis and treatment of Thyroid and its related disease), Lutetium–177, Gallium–68 generator and Rhenium–188 generator via various partnerships across the world. The target customers are Nuclear Medicine physicians, Cardiologists and Oncologists of various hospitals and imaging labs.
Other subsidiaries are mentioned below:
First Trust Medicare Private Limited
Jubilant Innovation Pte. Limited
Jubilant Biosys (Singapore) Pte. Limited
Jubilant Drug Development Pte. Limited
Drug Discovery and Development Solutions Limited
Jubilant Life Sciences International Pte. Limited
Jubilant Innovation (BVI) Limited
Jubilant Life Sciences (BVI) Limited
Jubilant Biosys (BVI) Limited
Jubilant Innovation (USA) Inc.
Jubilant Generics Inc. 1
Jubilant Pharma Holdings Inc.
HSL Holdings Inc.
Jubilant DraxImage (USA) Inc.
Deprenyl Inc., USA
Draxis Pharma LLC
Jubilant HollisterStier Inc.
Draximage Limited, Cyprus
Draximage Limited, Ireland
6963196 Canada Inc. 6981364 Canada Inc. DAHI Animal Health (UK) Limited
Draximage (UK) Limited
Jubilant Drug Discovery & Development Services Inc. Jubilant Life Sciences (Switzerland) AG Jubilant Pharma Trading Inc.2
Vanthys Pharmaceutical Development Private Limited Jubilant Innovation (India) Limited
1. Merged into Cadista Holdings Inc. effective from December 22, 2014
2. Became a subsidiary effective from April 24, 2014
Performance and Financial Position of Subsidiaries
The performance and financial position of the subsidiaries are given in Form AOC–1 attached to the Financial Statements for the year ended March 31, 2015.
Jubilant HollisterStier General Partnership
It is a Canada based partnership managed by two subsidiaries of the Company – Jubilant HollisterStier Inc. and Draxis Pharma LLC. This partnership provides contract manufacturing services. It manufactures products in two categories: sterile products and non–sterile products. Sterile products include liquid and freeze–dried (lyophilized) injectables and sterile ointments and creams. Non–sterile products include non–sterile ointments, creams and liquids.
Draximage General Partnership
It is a Canada based partnership managed by two subsidiaries of the Company – Jubilant DraxImage Inc. and 6981364 Canada Inc.
M/s B S R & Co. LLP, Chartered Accountants ("BSR") was appointed as the Statutory Auditor of the Company at the 36th Annual General Meeting of the Company to hold office until the conclusion of Annual General Meeting to be held in the year 2018, subject to ratification by the members at every Annual General Meeting. BSR has confirmed its eligibility to the effect that ratification of its appointment, if made, would be within the limits prescribed under the Act and it is not disqualified for re–appointment.
Observations made in the Auditor's Report are self–explanatory and do not call for any comments.
Pursuant to Section 148 of the Act read with the Companies (Cost Records and Audit) Rules, 2014, the Central Government has prescribed audit of cost records for certain products. Accordingly, the Company needs to carry out cost audit of its products.
Based on the recommendations of the Audit Committee, the Board of Directors has re–appointed M/s. J. K. Kabra & Co., Cost Accountants as Cost Auditors of the Company to conduct the cost audit for the Financial Year 2014–15.
The Board has appointed M/s Sanjay Grover & Associates, Company Secretaries to conduct Secretarial Audit pursuant to the provisions of Section 204 of the Act for the Financial Year 2014–15. The report of the Secretarial Auditor is attached as Annexure–2 to this Report. Observations made in the Secretarial Auditor's Report are self–explanatory and do not call for any comments.
Directors and Key Managerial Personnel
During the year, Dr. Ashok Misra was appointed as an Additional Director with effect from September 15, 2014.
Mr. Abhay Havaldar, Mr. Suresh Kumar and Dr. Inder Mohan Verma resigned as Directors during the year. Consequent to the appointment of Mr. Shyam S. Bhartia as Chairman and Managing Director of Jubilant Pharma Limited, Singapore, a wholly–owned subsidiary of the Company, he has resigned from the position of Managing Director of the Company effective from March 25, 2015. He continues to be Nonexecutive Chairman and Director of the Company.
Mr. Hari S. Bhartia retires by rotation at the forthcoming Annual General Meeting and being eligible, offers himself for re–appointment. The Board commends his re–appointment.
Mr. R. Sankaraiah, Executive Director–Finance, has been designated as the Chief Financial Officer in the category of Key Managerial Personnel during the year.
Further, Mr. Lalit Jain, Company Secretary, retired from the services of the Company during year. In his place, Mr. Rajiv Shah has been appointed as the Company Secretary and designated as Compliance Officer in the category of Key Managerial Personnel during the year.
Meetings of the Board
Five meetings of the Board of Directors of the Company were held during the Financial Year 2014–15.
Declaration of Independent Directors
All Independent Directors have given declaration that they meet the criteria of independence as provided under Section 149 of the Act and Clause 49 of the Listing Agreement.
Appointment and Remuneration Policy
The Company has framed an Appointment and Remuneration Policy pursuant to the provisions of Section 178 of the Act read with Clause 49 of the Listing Agreement. The Policy has been disclosed in the Corporate Governance Report attached to this Report.
Annual Performance Evaluation of the Board
A statement on annual evaluation by the Board of its performance and performance of its Committees as well as individual Directors forms part of the Corporate Governance Report attached to this Report.
Directors' Responsibility Statement
Your Directors, based on the representation received from the management, confirm that:
(i) in the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures;
(ii) the Directors 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 on March 31, 2015 and of the profits of the Company for the year ended March 31, 2015;
(iii) the Directors 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;
(iv) the Directors had prepared the annual accounts on a going concern basis;
(v) the Directors have laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and are operating effectively.
Based on the framework of internal financial controls including the Control Manager for financial reporting and compliance systems established and maintained by the Company, work performed by the internal, statutory and secretarial auditors and the reviews performed by the management and the relevant Board committees, including the Audit Committee, the Board is of the opinion that the Company's internal financial controls are adequate and effective during the Financial Year 2014–15; and
(vi) the Directors have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems are adequate and operating effectively.
Composition of Audit Committee
As on date, the Audit Committee comprises of Mr. S. Sridhar, Chairman, Ms. Sudha Pillai and Dr. Ashok Misra. The Board has accepted all the recommendations made by the Audit Committee.
Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo
Information relating to Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo, required to be disclosed pursuant to Section 134 of the Act read with the Companies (Accounts) Rules, 2014, is given in Annexure–3 and forms part of this Report.
Particulars of Directors and Employees, as required under Section 197(12) of the Act read with Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, are given in Annexure–4 and form part of this Report.
Risk–taking is an inherent trait of any enterprise. However, if risks are not properly managed and controlled, they can affect the Company's ability to attain its objectives. Risk management and internal financial control systems play a key role in directing and guiding the Company's activities by continually preventing and managing risks. The Board, Audit Committee and Senior Management team collectively set the overall tone and risk culture of the Company by identifying the risks impacting the Company's business and documenting the process of risk identification, risk minimization and risk optimization as a part of the risk management policy through defined and communicated corporate values, clearly assigned risk responsibilities, appropriately delegated authority and a set of processes and guidelines.
There exists a critical risk management framework across the Company and the same is reviewed on a six monthly basis by the Board. Some of the critical risks identified in various businesses of the Company are:
• Cost competitiveness
• Foreign Currency and Interest Rate Exposures
• Capacity Planning and Optimisation
• R&D Effectiveness
• Human Resources– Acquire and Retain Talent
• Portfolio and Mix: Customer and Product Concentration
• Compliance and Regulatory
• Environment, Health and Safety
• Protecting Intellectual Property Rights
The Company promotes strong ethical values and high levels of integrity in all its activities, which in itself is a significant risk mitigator. With the growth strategy in place, risk management holds the key to the success of the Company's journey of continued competitive sustainability in attaining the desired business objectives. A detailed note on Internal Control Systems and Risk Management is given in the "Management Discussion & Analysis Report".
The Company follows several externally developed initiatives in the economic, environmental and social areas. Manufacturing plants at Gajraula, Nira, Savli, Nanjangud, Ambernath and Bharuch are ISO 9001:2008 certified for Quality Management System. Plants at Gajraula, Nira,
Savli, Nanjangud and Bharuch are also ISO 14001:2004 certified for Environmental Management System and OHSAS 18001:2007 for Occupational Health and Safety at work place. Plants at Gajraula, Nira, Savli and Bharuch are certified for IMS (Integrated Management System).
ANU (Animal Nutrition Unit) at Savli is certified for FAMI–QS Code Version 5.1 in Feed Safety Management System.
Vitamins plant at Bharuch is certified for FAMI–QS Code Version 5 (in Feed Safety Management System), Kosher, Halal–India, Halal–Malaysia, Halal Indonesia, ISO 22000:2005 (in Food Safety Management System), HACCP (Hazard Analysis and Critical Control Points), GMP (Good Manufacturing Practices) and is FSSC 22000:2010 (Global Food Safety) Compliance.
Gajraula Quality Control Laboratory has also been certified for chemical testing by NABL (National Accreditation Board for Testing and Calibration Laboratories) in accordance with the ISO/ IEC 17025:2005. In addition to this, Gajraula Carbon Dioxide manufacturing facility has been certified for FSSC 22000:2010 (Food Safety System Certification) for production and dispatch of Carbon Di–oxide for Beverages of food grade Carbon Di–oxide. Ethyl Acetate & Acetic Anhydride manufacturing facility has been approved for KOSHER certification. 2 Acetyl Pyridine, 3 Hydroxyl Methyl Pyridine, Acetic Anhydride, Beta Picoline, Cetyl Pyridinium Chloride, Ethyl Acetate, Glacial Acetic Acid, Niacin and Pyridine facility are certified for KOSHER certification.
Ethyl Acetate and Acetic Anhydride manufacturing facility at Nira plant has been approved for KOSHER and HALAL certification. Dosage Forms facility at Roorkee follows Good Manufacturing Practices ("GMP") as per World Health Organisation ("WHO") specifications in manufacturing and testing of pharmaceutical products and hence, has been granted WHO GMP certificate by the Drug Licensing and Controlling Authority, Uttarakhand. This facility is also approved by UK–Medicines and Healthcare Products Regulatory Agency (UK–MHRA) to export drugs to European Market and USFDA to export drugs to the US market. The other approvals for the plant are Jordan Food & Drug Administration, Agencia Nacional de Vigilancia Sanitaria Brazil (ANVISA) Brazil, Pharmaceuticals and Medical Devices Agency (PMDA) Japan, Medicines Control Council (MCC), South Africa, Health Canada, Therapeutic Goods Administration (TGA), Australia and several Ministries of Health of countries like Uganda, Tanzania, Ivory Coast, Taiwan, Kenya, Zimbabwe, Botswana and Belarus.
Nanjangud plant has received USFDA approval for exporting certain products to the US market, ANSM (agence nationale de securite du medicament et des produits de sante–the French Health Products Safety Agency) approval for exporting products to EU countries, PMDA approval for exporting products to the Japanese market, Korea Food and Drug Administration approval for exporting products to Korean market, COFEPRIS approval (Federal Commission for Protection against Health Risks, Mexico) for exporting products to Mexican market, ANVISA approval for exporting products to Brazil market and TGA approval for exporting certain products to Australia. This plant was audited by CDSCO (Central Drugs Standard Control Organization) and received written confirmation to export products to EU countries.
At Jubilant, our employees are the backbone of our growth strategy and play a vital role in ensuring sustainable business growth and future readiness. The Company has been focusing on strengthening its talent management and employee engagement processes through clear role expectations with specific and well defined Key Performance Indicators for each role. We believe in creating a culture of performance and merit that provides all our employees with opportunities to excel, learn and progress. We have been focusing on attracting the best talent from India's leading campuses to have a steady fresh talent flow thereby creating a strong pool of internal talent.
Our well defined Leadership Competency Framework lays tremendous focus on outlining a common leadership culture throughout the organization. We reinforce the leadership values through development initiatives like Development Centres and 3600 Feedback. All the initiatives are backed by an action oriented development plan. The development initiatives lay the foundation of our talent pipeline.
We strive toward technology enabled HR systems and processes that are based on globally adopted best practices. In this direction, we have implemented world renowned PeopleSoft based Human Resource Information System ("HRIS") at the facilities of the Company in India and North America. The common HRIS platform enables us to weave a common performance and process culture across the organization thereby bringing in efficiency and consistency.
At Jubilant, we ensure that there is full adherence to the Code of Business Conduct and Fair Business Practices. We have signed a policy on CII Code of Conduct on Affirmative Action that reconfirms our commitment that equal opportunity in employment for all sections of the society is a component of our growth and competitiveness.
As on March 31, 2015, a total of 399 employees at our manufacturing plants at Savli, Nira and Gajraula were members of unions or had collective bargaining capability. During the year, we enjoyed cordial relations with our employees and there have been no instances of major strikes, lockouts or other disruptive labour disputes.
The Company has adopted a Policy on Prevention of Sexual Harassment at workplace and the Company has not received any complaint during the year under the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013.
A detailed note on Human Resource Management is given in the "Management Discussion & Analysis Report".
The Company values its investors immensely. With a view to keep its investors well informed of its activities, the Company has taken the following initiatives:
• E–mailing quarterly results, press releases and other similar communications to the shareholders soon after they are sent to the stock exchanges; e–mailing Annual Reports and Corporate Sustainability Report;
• Maintaining user friendly Investor Section on the website of the Company www.jubl.com
• A dedicated e–mail ID viz. firstname.lastname@example.org for interacting on various matters with respect to share transfer, transmission, dividends and other related issues with the Company Secretary and Compliance Officer;
• Mailing feedback forms to the investors on an annual basis so as to obtain valuable feedback and suggestions for improvement. The Company has also placed an online Investor Feedback form on its website www.jubl.com under the head "Investor Feedback Form" to facilitate electronic submission of the Form;
• Earnings calls are conducted and the transcripts are uploaded on the website www.jubl.com. The Earnings call is typically accompanied by Results Presentation and Release that are also uploaded on the website; and
• The Company's management also meets institutional investors and analysts at their request.
Awards and Accolades
During the year, various awards and accolades were received by the Company/ its management. These are:
– ASSOCHAM's 'Responsible Organization Excellence' Award 2014–15
– 15th Annual Greentech Environment Award 2014 – Gold Category winner under "Chemicals and Pharmaceutical sector" – Gajraula plant, India
– Two Awards at UBM India Pharma Awards 2014: Excellence in Corporate Social Responsibility & Excellence in Environment, Health & Safety (EHS)
– CII Energy Efficient Unit Award 2014 conferred to our Gajraula plant, India
– I.C.O.N.I.C IDC Insights Award under 'Health and Life Sciences' vertical
– CIO 100 Awards and Express Uptime Champion Award conferred to Jubilant's CIO, Mr. Umesh Mehta
– Golden Peacock Global Award for Excellence in Corporate Governance for the year 2014, presented by the Rt Hon Theresa May MP, Secretary of State for the Home Department, Government of UK
– FICCI Chemicals & Petrochemicals Awards 2014 –"Process Innovator of the Year 2014" in Fine Chemicals category
– Golden Peacock Business Excellence Award–2014 recognized under the Chemicals and Pharmaceutical category, presented by The Hon'ble Governor of Tamil Nadu, Mr. K. Rosaiah to our Gajraula plant, India
– 3rd FICCI Quality Systems Excellence Awards for Manufacturing–2014 – First Prize in the large size category presented to our Gajraula plant, India
– Dataquest Business Technology Awards for Best IT Implementation in Analytics, Mobility, Cloud, ERP/ CSM/ CRM
– 50 Most Talented Sustainability Leaders Award, conferred to Jubilant Life Sciences' CSO, Mr. Ganesh C. Tripathy during the World CSR Congress
The details of Vigil Mechanism (Whistle Blower Policy) adopted by the Company have been disclosed in the Corporate Governance Report attached to this Report and form an integral part of this report.
With the aim of going green and minimising our impact on the environment, the Company continued with its green initiatives in its operations which include:
• Conducting paperless Board/ Committee Meetings;
• Publishing and circulating Corporate Sustainability Report in CD form; and
• E–mailing Annual Reports to the shareholders whose e–mail addresses are provided by the depositories or who have opted for the electronic version.
Corporate Social Responsibility
Corporate Social Responsibility ("CSR") at Jubilant is the commitment of businesses to contribute to sustainable economic development by working with the employees, their families, the local community and the society at large to improve their lives in ways that are good for business and for its development.
During the Financial Year 2014–15, Jubilant continued its CSR initiatives in various fields.
At Jubilant, we ensure transparency and accountability of our practices. We present our values and disclose our economic, environmental and social performance through our Sustainability Report. Jubilant is an Organisational Stakeholder of the Global Reporting Initiative ("GRI"), an international not–for–profit organisation which sets guidelines for sustainability reporting. The Company's first Corporate Sustainability Report was published in the year 2003. Since then, Sustainability Reports are released annually in accordance with the GRI Guidelines and are externally assured by Ernst & Young. In the year 2013, we also started voluntary reporting of sustainability performance in line with National Voluntary Guidelines. Jubilant also ensures to report community and social initiatives in line with United Nations Millennium Development Goals. With the aim of mitigating impact on the environment, like last year, this year too we are sending Corporate Sustainability Report in CD form alongwith the Annual Report to the shareholders. The same is also available on the Company's website at www.jubl.com
CSR initiatives of the Company are conceptualized and implemented through Jubilant Bhartia Foundation ("JBF"), the social wing of Jubilant Bhartia Group, established in 2007 as a not–for–profit organisation. JBF works on 4P model (Public–Private–People–Partnership) for empowering communities and believes that for sustainable social intervention, participation of communities must be ensured in the Company's CSR projects/ programmes. Jubilant's role is to act as a catalyst and facilitate the process.
Pursuant to the provisions of Section 135 of the Act read with the Companies (Corporate Social Responsibility Policy) Rules, 2014, the Company has framed a Corporate Social Responsibility Policy ("CSR Policy") which is placed on the Company's website. The Sustainability & CSR Committee approved the following projects of JBF which are in line with Schedule VII to the Act:
• Project Arogya and Swasthya Prahari: Improving health indices through innovative services and promoting health seeking behavior;
• Project Muskaan: Universalizing elementary education and improving quality parameters for primary education through community involvement;
• Nayee Disha: Enhancing employability through vocational training; and
• Rural Development: Supporting the community infrastructure as and when identified in the project area.
With these initiatives beginning to show results, Jubilant plans to continue its focus on the social initiatives of the Company and slowly spread its area of influence in terms of geography. A summary of the activities of JBF is provided on its website www.jubilantbhartiafoundation.com Details of the sustainability initiatives are given in the Corporate Sustainability Report.
Annual Report on CSR including contents of the CSR Policy is attached as Annexure–5.
During the year, Jubilant Pharma has taken loan from International Finance Corporation ("IFC").
IFC carried out a detailed Environmental & Social ("E&S") due diligence of Jubilant Pharma's business for evaluating the E&S management system in order to ascertain capacity, maturity and reliability of Jubilant Pharma's environmental and social management systems to manage environmental and social risks. Based on the due diligence, IFC suggested optimisation through time bound Environmental and Social Action Plan to match the Jubilant Pharma's operating system with IFC's Performance Standard requirements. Jubilant Pharma has since completed the action plan in timely manner and ensured compliance with the relevant IFC Performance Standards as stated below:
• PS1: Assessment and Management of Environmental and Social Risks and Impacts
• PS2: Labour and Working Conditions
• PS3: Resource Efficiency and Pollution Prevention
• PS4: Community Health, Safety and Security
In addition, Jubilant Pharma has also submitted Annual Monitoring Report for the Financial Year 2014–15 to IFC.
i. Extracts of Annual Return: Pursuant to the provisions of Section 92 of the Act read with Rule 12 of the Companies (Management and Administration) Rules, 2014, the extract of Annual Return is attached as Annexure–6 to this Report.
ii. Fixed Deposits: No deposits have been accepted by the Company during the year from the public. As on March 31, 2015, the Company had no outstanding, overdue or unclaimed deposits.
iii. Loans, Guarantees and Investments: Details of loans, guarantees/ securities and investments along with the purpose for which the loan, guarantee or security is proposed to be utilised by the recipient have been disclosed in Note nos. 15, 18, 34, 35 and 36 of the Notes to the Standalone Financial Statements.
iv. Particulars of Contracts or Arrangements with the Related Parties: The Company has not entered into any transaction with a Related Party which is not at arm's length or any material transaction with any Related Party, as defined in the policy of the Company on materiality of Related Party Transactions. Your Directors draw attention of the members to Note no. 53 to the Standalone Financial Statements which sets out Related Party disclosures.
v. Material Changes in Financial Position: No material change or commitment has occurred after the close of the Financial Year 2014–15 till the date of this Report, which affects the financial position of the Company.
vi. Orders Passed by Courts/ Regulators: There is no significant or material order passed by the regulators or courts or tribunals impacting the going concern status and the Company's operations in future.
As a responsible corporate citizen, the Company is committed to maintain the highest standards of Corporate Governance and believes in adhering to the best corporate practices prevalent globally.
A detailed report on Corporate Governance is attached as Annexure–7. A certificate from a Practising Company Secretary confirming compliance with the conditions of Corporate Governance, as stipulated in Clause 49 of the Listing Agreement, is attached to the Corporate Governance Report.
The Board Members and Senior Management Personnel have affirmed compliance with the Code of Conduct for the year ended March 31, 2015. A certificate from the Co–Chairman & Managing Director confirming the same is attached to the Corporate Governance Report.
A certificate from the CEO and CFO confirming correctness of the financial statements, adequacy of internal control measures, etc. is also attached to the Corporate Governance Report.
Management Discussion & Analysis Report
The Management Discussion and Analysis Report on the operations of the Company as provided under the Listing Agreement has been given separately and forms part of the Annual Report.
Your Directors acknowledge with gratitude the cooperation and assistance received from the Central and State Government authorities. Your Directors thank the Shareholders, Private Equity Investors, Financial Institutions, Banks/ other lenders, Customers, Vendors and other Business Associates for their confidence in the Company and its management and look forward to their continued support. The Board wishes to place on record its appreciation for the dedication and commitment of the Company's employees at all levels, which has continued to be our major strength. We look forward to their continued support in the future.
For and on behalf of the Board
Shyam S Bhartia Chairman
Hari S Bhartia Co–Chairman & Managing Director
Date: May 12, 2015