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Disclosure in board of directors report explanatory

DIRECTORS' REPORT TO THE SHAREHOLDERS

Dear Members

Metropolis Healthcare Limited

Your Directors have pleasure in presenting their 15th Report together with the Audited Accounts of your Company for the year ended 31st March, 2015.

Company Performance Review

Financial Highlights (In INR)

The salient features of the Company’s financial results for the year under review are as follows:

 

 

(Rs. in Lacs)

Particulars

For the year ended March 31, 2015

For the year ended March 31, 2014

Earnings before Interest, Tax, Depreciation & Amortisation (EBIDTA)

7318

6499

Add: Other Income

393

1208

Less: Finance Cost

187

249

Less: Depreciation

1030

819

Profit before tax

6494

6639

Less: Provision for Taxes

2166

2169

Profit after Tax carried to Balance Sheet

4328

4470

Performance of the Company

During the year under review, the Operational Revenue grew by 15%. The EBIDTA growth however was slower since the Cost base increased with the Company setting up a number of Collection points across India. This strategy is expected to help in future as it would accelerate the Revenue growth in the years to come.

Other Income for the year dropped compared to previous year due a change in the Tax Laws which required the Company to remain invested rather than liquidating & booking profits, to minimize the Tax impact. Further a change in the Depreciation rates brought about by the new Company Law, resulted in a higher Depreciation charge. Both these changes reduced the PBT to less than the last year’s figure.

However since both these are in the nature of book adjustments having no impact on the health of the Company, your Board is quite satisfied with the performance of the Company during the year under review.

Dividend

In order to conserve the resources of the Company and to build up its reserves considering the business plans, the Directors do not recommend payment of dividend on Equity Shares for the Financial Year ended March 31, 2015.

Operations

a. The dual strategy followed by the Management for increasing the footprints of the Company, of setting up new Collection Points in areas where the potential is plentiful & converting the mature Collection Points into processing Centers, continued successfully during 14–15. In this year the Company added another 9 Greenfield Labs.

b. This strategy was also supported with a considerable increase in the Company’s Sales force. This has tremendously added a reach & depth to its coverage of the Markets

c. The focus on Africa continent as the next growth area, continued with the Group adding more Labs in existing locations & initiating steps to establish its presence in more Countries.

d. The Company’s efforts to optimize costs are also yielding results with its Gross Margin improving by a percent. This is helping the Company to invest & strengthen its resources in areas in which it is looking for improvement, without affecting the profitability too adversely.

e. The Company is sparing no effort & cost to ensure delivery of consistently Best Service to its Customers.  Continuous Audits followed with corrective actions is helping the Company in the planned improvement.

f. Information Technology is the backbone of any business & more so in case of the Service Sector that your Company operates in. Realizing this very early the Management has diligently but speedily automated all the aspects of doing business which do not require Medical knowledge & expertise. The Company’s plan of ensuring that the smallest center or area gets the benefits of IT is just a year away from full implementation.

Awards & Accolades

– In 2015, Metropolis bagged the Best Diagnostic Service Provider Award at the National Awards for excellence in healthcare by CMO Asia Group.

– In 2014, Metropolis won the Emerging Companies Award hosted by Business Today and Yes Bank. – Metropolis Healthcare won ‘India’s most promising brand award’ in the Healthcare category at the Global Indian Excellence Summit 2014 held in London. Process advisors for the award were Ernst & Young.

– Ms. Ameera Shah was chosen as one of the most respected leaders under 40 years (40 under 40) by Economic Times & Spencer Stuart (2014)

– Ms. Ameera Shah was also featured in the Forbes Asia Power List in 2015

– Ms. Ameera Shah featured in ‘’The Young Global Leader List’’ put together by the World Economic Forum.

Accreditations & Certifications

– Metropolis laboratory has been accredited by CAP (College of American Pathologists) (Since 2005)

– Metropolis laboratory is accredited by NABL (National Accreditation Board for testing and Calibration Laboratories). (Since 2005)

– Metropolis, South Africa is accredited by SANAS (South African National Accreditation System is the only accreditation body approved by South African Government).

– RNTCP CERTIFICATE for C&DST: Metropolis Healthcare is certified by the National Mycobacteriology Certification System of Central TB Division Ministry of Health, Government of India for TUBERCULOSIS DRUG SUSCEPTIBILITY TESTING.

Future Outlook

Through its various strategies & actions, the Management of the Company has substantially added value to the Company. This has been demonstrated time & again during the stake sale of its various investors over a period of time.

This has now placed the Company in the unique position of being able to build on its strong foundation & successes. It proposes to do so in the coming years by

a. Exploiting the extensive network it has created & the Quality that it is known by to ramp up its Revenue Growth faster

b. Ensuring that it has fully drained the areas that it is strong in instead of spreading itself too thin

c. Resorting to a ‘technical sale’ rather that a ‘price sale’ by using the medico–marketing concept that has been launched

d. Adding further value to the Brand by promoting it more vigorously but in a focused & scientific manner

e. Reducing the wastages in the processes through more & more automation

f. Leveraging more the benefits of scale thus reducing the impact of natural cost increases

Meanwhile the Management also expects that certain environmental factors such as clarity on provisions relating to Clinical Trials, impetus to Public Private Partnerships in Healthcare, higher use of Pathological services in Insurance sector & growth of preventive healthcare also get resolved in the coming days leading to a fillip to the Healthcare demand in India.

Capital Structure

The Authorized Share Capital of the Company is Rs. 55,00,00,000 (Rupees Fifty Five Crores Only) divided in to 5,50,00,000 (Five Crore Fifty Lakhs) Equity Shares of Rs.10/– each and the Paid–up Share Capital of the Company is Rs.9,86,41,300 (Nine Crore Eighty Six Lakhs Forty One Thousand Three Hundred Only) divided in to 98,64,130 (Ninety Eight Lakhs Sixty Four Thousand One Hundred Thirty) Equity Shares of Rs. 10/– (Ten) each.

Foxcreek Investments Limited has sold its entire stake in the Company in favour of M/s. Bacchus Hospitality Services and Real Estate Pvt. Ltd (Bacchus) along with its right attached thereto, vide Deed of Adherence dated March 30, 2015 as required under the Shareholders Agreement. Bacchus continues to hold 26.94% stake in the Company.

Directors & Key Managerial Personnel

The Board of Directors of the Company comprises of Seven Directors.

Independent Directors

Mr. Mihir Doshi and Mr. Shailesh Haribhakti are appointed as an Independent Directors of the Company w.e.f. March 27, 2015 and March 31, 2015 respectively. The Company has received the declarations from both the Independent Directors stating that they meet the criteria of Independence as provided u/s. 149 (6) of the Companies Act, 2013.

The Board has recommended the appointment of the Independent Directors for the approval of the Members in the General Meeting of the Company.

Nominee Director

In the view of Change in shareholding from Foxcreek Investment Limited to Bacchus Hospitality Services and Real Estate Pvt. Ltd, the following were the Changes in the Nominee Director during the year:

– Mr. Niten Malhan resigned as a Nominee Director of the Company w.e.f. April 6, 2015.

– Mr. Rajiv Sahney was appointed as a Nominee Directors of the Company w.e.f. April 8, 2015.

Director liable to retire by Rotation

In accordance with the provisions of the Companies Act 2013, and Articles of Association of the Company Dr. Sushil Shah is liable to retire by rotation and being eligible, offers himself for re appointment at this Annual General Meeting.

Your directors have recommended his re–appointment.

It is further confirmed that none of the above directors are disqualified under Section 164 (2) of the Companies Act, 2013.

Key Managerial Personnel

Mr. Sanket Shah was appointed as a whole–time Company Secretary w.e.f. March 27, 2015 falling under the definition of Key Management Personnel as per Companies Act, 2013.

Mr. Gajendra Mewara resigned as a Company Secretary w.e.f. May 25, 2014.

Company’s Policy on Directors Appointment & Remuneration

The Company’s policy on Directors Appointment & Remuneration u/s. 178 (3) of the Companies Act, 2013, is enclosed as Annexure 1.

Number of Board Meetings

During the period under review 3 Board Meetings were held on 30/06/2014, 26/08/2014, 27/03/2015. The Company could not hold the Board Meeting for the quarter ended December 2014 due to non–availability of the Directors.

The Company is in the process of filing a suo moto Compounding application with Registrar of Companies in order to rectify the said the non–compliance u/s. 621 A of the Companies Act, 1956 as a matter of Good Corporate Governance Practices.

Audit Committee

The Audit Committee comprises of three members with any two forming the quorum. The composition of the Audit Committee meets the requirements of Section 177 of the Companies Act, 2013.

The members of the Audit Committee as on date are Rajiv Sahney, Mr. Mihir Doshi, Mr. Shailesh Haribhakti.

Mr. Mihir Doshi acts as the Chairman of the Audit Committee.

Extract of Annual Return

An extract of the Annual Return as prescribed under Section 92 (3) of the Act and the Companies (Management and Administration) Rules, 2014 in the prescribed Form No. MGT. 9 is attached as

Annexure 2.

Public Deposits

Your Directors wish to confirm that the Company has not accepted any deposits from public covered by provisions of 73 of the Companies Act, 2013 and rules there under.

Particulars of Loans, Guarantees or Investments

The details of loans, guarantees and investments covered under Section 186 of the Companies Act, 2013 are given in the notes to the Financial Statements.

Related Party Transactions

All contracts / arrangements / transactions entered by the Company during the financial year with related parties were in the ordinary course of business and on an arm’s length basis. As required under Section 134[3][h] of the Act and Rules made thereunder, disclosure of particulars of transactions with related parties entered into by the Company is included in the prescribed format annexed to this report as Annexure 3 . Further, disclosures on related party transactions are also set out in Notes to the financial statements.

Auditors

At the Annual General Meeting held on September 25, 2014, M/s. Walker Chandiok & Co. LLP, Chartered Accountants, were appointed as statutory auditors of the Company to hold office till the conclusion of the Annual General Meeting to be held in the calendar year 2019. In terms of the first proviso to Section 139 of the Companies Act, 2013, the appointment of the auditors shall be placed for ratification at every Annual General Meeting. Accordingly, the appointment of M/s. Walker Chandiok & Co. LLP, Chartered Accountants, as statutory auditors of the Company, is placed for ratification by the shareholders. In this regard, the Company has received a certificate from the auditors to the effect that if they are reappointed, it would be in accordance with the provisions of Section 141 of the Companies Act, 2013.

Development and Implementation of Risk Management Policy

The Company is in the process of identifying and developing a formal Risk Management Policy which will help management to exhaustively list and evaluate the Risks associated with the business of the Company. It expects the formulation and the implementation of the Policy to be completed during the current year.

Internal Financial Controls with reference to the Financial Statements

The Company has in place SOPs covering all the critical business processes, which are followed at all its Units. These are updated & modified time to time as required. It also has a reputed firm of Internal Auditors which follows a preapproved schedule of Audits. All their observations are discussed with the Management & corrective actions are taken. The Internal Auditors track & report on the improvements during the next cycle of Audits. The final presentation is made to the Audit Committee showing the major observations & status of the corrective action.

Your Board generally feels that the Internal Financial Controls with reference to the Financial Statements of the Company are adequate for capturing the financial impacts of all its activities & their accurate quantification and disclosure in the Financial Statements. The Management continually reviews the weaknesses identified therein by the Internal Auditors or otherwise and is conscious in taking corrective action. Nevertheless during the current year a more thorough assessment of the said Controls by an outside agency will be carried out.

Corporate Social Responsibility (CSR) Initiatives

The CSR Committee was constituted by your Board before the year under review. However due to the extensive changes in the shareholding & consequent change in the Composition of your Board, the Committee had to be reconstituted.

The new Committee is in the process of finalizing the CSR Policy & the Board is keen to proceed with its duties as per the CSR provisions without any further delay.

Comments of the Board on the adverse remarks of the Statutory Auditors in their Statutory Audit report

With regard to Clause 8 of the Auditors’ Report, your directors continue to hold the view that:

(i) In respect of the investment in the Joint Venture, it’s value has not diminished considering the strategic location & potential of the Market and

(ii) As to the receivables from the Joint Venture, the Management is exploring various options & is therefore hopeful of recovering the full amount

Secretarial Auditor and Secretarial Audit Report

Pursuant to Section 204 of the Companies Act, 2013 and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Board of Directors had appointed  M/s. Haresh M & Associates, Practicing Company Secretaries, to undertake the Secretarial Audit of the Company for the Financial Year ended March 31, 2015. The Secretarial Audit Report in the prescribed Form No. MR–3 is attached as Annexure – 4

Comments of the Board on the adverse remarks of the Secretarial Auditors in their Secretarial

Audit report

A. With regard to non–compliance under Section 203 & Section 173(1) of the Companies Act, 2013, the Company is in the process of filing Compounding applications and meanwhile has given effect to the full financial implications in the books.

B. With regard to non–compliance under Section 135, the Company was unable to comply with the provisions for the reasons mentioned above under the heading ‘CSR initiatives’. However corrective action is already under progress.

Directors' Responsibility Statement

As stipulated under Section 134 (5) of the Companies Act, 2013 your Directors subscribe to “Directors’ Responsibility Statement” and confirm that:

i) in the preparation of the annual accounts, the applicable Accounting Standards had 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 responsible 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 profit or loss of the company for that period;

iii) the directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities;

iv) the directors had prepared the accounts on a going concern basis.

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

Subsidiary Companies

On the date of reporting, your Company has 17 domestic (including two step down subsidiaries) and 7 overseas subsidiaries (including three step down subsidiaries) and One Foreign Branch of a subsidiary which is considered as a Foreign Company in the respective country.

During the year under review, the following Foreign Branch was incorporated/ became the step –down subsidiaries of the Company.

1. Metropolis Healthcare (Uganda) Ltd (Step–down subsidiary)

2. Metropolis Healthcare (Zambia) Ltd (foreign branch)

The accounting year of Metropolis Healthcare (Uganda) Ltd and Metropolis Healthcare (Zambia) ends on December 31, 2015.

The details of the Subsidiaries is attached as Annexure –5

Stock Options

The details of “Metropolis Employee Stock Options Scheme revised 2007” (MESOS – 2007 revised) including the number of outstanding options, are given in the Annexure 6 forming part of this report.

Conservation of Energy, Technology Absorption

Since the Company is not engaged in any manufacturing activity, the particulars relating to conservation of energy and technology absorption as stipulated in the Companies (Disclosures of Particulars in the Report of the Board of the Directors), Rules 1988 are not applicable.

Foreign Exchange Earnings and Outgoings

During the year, your Company earned foreign exchange revenue of Rs. 5,26,90,304 and incurred foreign exchange expenditure of Rs. 24,00,341.

Industrial Relations

The Company’s relations with all its employees remained cordial and satisfactory during the year under review.

Particulars of Employees

In terms of the provisions of Section 197 of the Companies Act, 2013 with Rule 5 (2) of The Companies (Appointment and Remuneration of Managerial Personnel), Rules, 2014, the particulars of employees are set out in Annexure 7 to this report.

Dematerialization of Shares

All the Shares of your Company are in Dematerialization mode. The ISIN of the Equity Shares of your Company is INE112L01012.

Registrar & Share Transfer Agent

Your Company’s Registrar and Share Transfer Agent is:

M/s. System Support Services

Gala 209, Shivai Industrial Estate

Near Logitech Park, Andheri Kurla Road

Sakinaka, Andheri (E),

Mumbai – 400072

Appreciations

The Directors acknowledge the valuable contribution of all its employees in the continuous growth of the Company & in making it a dominant player in the market.

Further, they on behalf of the Company, would like to express their sincere gratitude to the Medical Profession for their unconditional support.

They would also like to thank the Company’s Joint Venture Partners, Banks and other stakeholders for their help in the Company’s operations.

for and on behalf of the Board of Directors

Dr. Sushil Shah

Chairman

Place: Mumbai

Date: September 4, 2015

 

Remuneration Policy

1.0 PROLOGUE:

Pursuant to the Section 178 of the Companies Act, 2013 read with the rule 6 of the Companies (Meeting of the Board and its powers

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