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Updated:24 May, 2019, 15:56 PM IST

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Updated:24 May, 2019, 16:01 PM IST

REPORT OF THE DIRECTORS

TO

THE MEMBERS OF THE COMPANY

Your Directors have pleasure in presenting the Audited Accounts of your Company for the Sixtieth financial year ended 31st December 2015.

DIVIDEND

An Interim dividend of Rs. 18 per Equity Share of Rs. 10 was declared by the Board of Directors and was paid in August 2015. Your Directors recommend payment of Final dividend of Rs. 25 per Equity share of Rs. 10.

Having regard to the cash generation during the year from the sale of the commercial premises owned by the Company in Mumbai, your Directors recommend a Special One–time dividend of Rs. 14 per Equity share of Rs.10.

As your Company completes sixty years having been incorporated on 2nd May 1956, your Directors recommend a Special One–time Diamond Jubilee dividend of Rs. 8 per Equity share of Rs.10.

If declared by the Shareholders at the Annual General Meeting to be held on 29th April 2016, the Interim Dividend, proposed Final Dividend and the aforesaid two Special One–time dividends will absorb Rs.14,970 lakhs {excluding Dividend Distribution tax).

The proposed Final dividend and the two Special One–time dividends will be paid to:

i) those Members whose names appear on the Register of Members of the Company on 29th April 2016; and

ii) those whose names appear as beneficial owners as at the close of business on 18th April 2016, as per details to be furnished by the National Securities Depository Limited and Central Depository Services {India) Limited.

MANAGEMENT DISCUSSION AND ANALYSIS

As required by Regulation 34(2) of the Securities and Exchange Board of India {Listing Obligations and Disclosure Requirements) Regulations, 2015 {SEBI LODR), a Management Discussion and Analysis Report is appended.

DIRECTORS AND KEY MANAGERIAL PERSONNEL (KMP)

Dr. Vijay Mallya, Chairman of the Board of Directors has informed the Board that he would not seek re–election as a Director at the ensuing Annual General Meeting.

Dr. Mallya will cease to be a Director and Chairman of the Board of Directors of your Company at the conclusion of the Annual General Meeting.

Dr. Mallya became a Director of the Company {then called Hoechst Pharmaceuticals Limited) in December 1973 and Chairman in December 1983. He has served on the Board of your Company for over42 years.

The Board of Directors while accepting Dr. Mallya's decision placed on record its deep appreciation for his exceptional service and leadership firstly as a Director and subsequently as Chairman of the Board for overfour decades.

The Board of Directors has recommended that resolutions be passed at the ensuing Annual General Meeting for electing Mr. Aditya Narayan and Ms. Usha Thoratas Independent Directors for a term of five years each from 30th April 2016.

It is the intention of the Board to appoint Mr. Aditya Narayan as the next Chairman of the Board of Directors, subject to his election as ? n Independent Director at the ensuing Annual General Meeting and subject to the compliances laid down in the Articles of Association of the Company, the Companies Act, 2013 and the rules framed thereunder.

During the year, the three Independent Directors, Mr. S. R. Gupte, Mr. A. K. R. Nedungadi and Mr. Rangaswamy R. Iyer were elected by overwhelming majority by the shareholders through a postal ballot for a term of five years each from 31st March 2015.

The Company has received declarations from all the three Independent Directors that they meet the criteria of independence as laid down underSection 149 {6) of the Companies Act, 2013 and theSEBI LODR.

Mr. J. M. Georges resigned as a Director of the Company with effect from 20th July 2015. Your Directors have placed on record their appreciation of the services rendered by him during his tenure as Director.

The Board has appointed Mr. R Chocat as Director in the casual vacancy caused by the resignation of Mr. J. M. Georges.

Mr. J. Silvestre was appointed a Director of the Company in the casual vacancy caused by the resignation of Mr. A. Ortoli who had resigned in January 2015. Mr. Silvestre holds office uptothe Annual General Meeting and is eligible for election.

The Board of Directors has re–appointed Dr. S. Ayyangar as the Managing Director for a term of five years from 25th October 2015, subject to the approval of the Members of the Company.

Mr. N. Rajaram, Mr. A. Sood and Mr. L. Guerin have been appointed as Alternates to Mr. Silvestre, Mr. Chocat and Mr. F. Briens, respectively with effect from 21st October 2015. They, being employees of the Company, have been appointed as Wholetime Directors, subjectto the approval of the Members of the Company.

Dr. S. Ayyangar, Managing Director, Ms. Virginie Boucinha {Chief Financial Officer and Wholetime Director upto 23rd July 2015), Mr. L. Guerin, Chief Financial Officer {from 24th July 2015) and Wholetime Director {Alternate to Mr. F. Briens) {from 21st October

2015), Mr. N. Rajaram, Wholetime Director {Alternate to Mr. J. Silvestre) {from 21st October2015), Mr. A. Sood, Wholetime Director {Alternate to Mr. R Chocat) {from 21st October2015) and Mr. K. Subramani, Company Secretary were the Key Managerial Personnel {KMP) during the year under review.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO

Information pursuant to Section 134{3){m) of the Companies Act, 2013, read with Rule 8(3) of the Companies {Accounts) Rules, 2014 is given in the Annexe to this Report.

CASH FLOW AND CONSOLIDATED FINANCIAL STATEMENTS

As required by Regulation 34{2) of the SEBI LODR, a Cash Flow Statement is appended.

As the Company does not have any subsidiaries, it is not required to publish Consolidated Financial Statements.

CORPORATE GOVERNANCE

As required by Regulation 34 of the SEBI LODR, a Report on Corporate Governance is appended along with a Certificate of Compliance from the Auditors.

MEETINGS OF THE BOARD OF DIRECTORS

Four meetings of the Board of Directors were held during the year. Dates of the meetings are given in the Report on Corporate Governance.

AUDIT COMMITTEE

Details pertaining to composition of the Audit Committee are included in the Report on Corporate Governance. All the recommendations made by the Audit Committee were accepted by the Board.

DIRECTORS' TRAINING, FAMILARISATION & EVALUATION AND NOMINATION AND REMUNERATION POLICY

The Directors are regularly informed during meetings of the Board and Committees of the activities of the Company, its operations and issues facing the pharmaceutical industry. Considering the long association of the Directors with the Company and their seniority and expertise in their respective areas of specialization and knowledge of the pharmaceutical industry, their training and familiarisation were not considered necessary and accordingly no such programmes were conducted.

Pursuanttothe provisions of the Companies Act, 2013 and Regulations 17 & 19 read with part D of Schedule II to the SEBI LODR, the Board has carried out an evaluation of the Directors as well as the evaluation of the Board and Committees. The process was carried out by circulating evaluation forms on the Board and Committees' functioning on certain parameters set out in the Performance Evaluation Policy adopted by the Board. The performance evaluation of the Independent Directors was carried out by the entire Board. The performance evaluation of the non– Independent Directors including the Executive Directors was carried out by the Independent Directors. The Directors expressed satisfaction with the evaluation process and performance of the Board of Directors and Committees.

Your Board has adopted a Nomination and Remuneration Policy as required by Section 178 of the Companies Act, 2013. The policy provides for the appointment and removal of Directors, Key Mangaerial Personnel and Senior Management employees and their remuneration. The terms of reference of the Nomination and Remuneration Committee are given in the Report on Corporate Governance.

SUBSIDIARIES, ASSOCIATE COMPANIES AND JOINT VENTURES

Your Company does not have any subsidiaries or joint ventures. Fellow subsidiaries of Sanofi {ultimate holding company of the Company) are associate companies.

CORPORATE SOCIAL RESPONSIBILITY

The Board of Directors has constituted a Corporate Social Responsibility {CSR) Committee to monitor implementation of CSR activities of your Company.

Based on the recommendation of the CSR Committee, your Board has adopted a CSR policy. The details of the composition of the CSR Committee, CSR policy, CSR initiatives and activities during the year are given in the Annual Report on CSR activities in Annexe B to this Report.

RELATED PARTY TRANSACTIONS

All related party transactions which were entered into during the year under review were on arm's length basis and in the ordinary course of business. There were no materially significant related party transactions made by the Company with the Promoters, Directors  and Key Managerial Personnel which may have a potential conflict with the interests of the Company at large. Your Company had entered into material related party transactions with sanofi–aventis Singapore Pte. Ltd. for the purchase of raw materials and finished goods and exports of finished goods. The transactions were within the limits approved by the Members at the Fifty–ninth Annual General Meeting held on 29th April2015.

Pursuant to Section 134 of the Companies Act, 2013 and rules made thereunder, particulars of transactions with related parties as required under Section 188 {1) of the Companies Act, 2013, in the prescribed form AOC–2 is annexed herewith as Annexe C to this Report.

DEPOSITS FROM PUBLIC

Your Company has not accepted any deposits from the public and as such no amount of principal or interest on deposits from the public was outstanding as on the date of the Balance Sheet.

LOANS, GUARANTEES OR INVESTMENTS

Your Company has not given any guarantees or given new loans or made any new investments during the year under review. Details of the existing loans and investments made by your Company are given in the notes to the financial statements.

RISK MANAGEMENT

Your Company has implemented a mechanism for risk management and has formulated a Risk Management Policy. The policy provides for creation of a Risk Register, identification of risks and formulating mitigation plans. The Audit Committee and the Board

? re informed of the risk assessment and minimization procedures.

DIRECTORS' RESPONSIBILITY STATEMENT

As required by Section 134{3) of the Companies Act, 2013, your Directors, to the best of their knowledge and belief, confirm that:

1. in the preparation of the annexed accounts for the financial year ended 31st December 2015 all the applicable accounting standards have been followed along with proper explanation relating to material departures;

2. your Directors have selected such accounting policies and applied them consistently and made judgements and estimates that  ore reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year  and of the profit of the Company for that year;

3. your Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

4. the said accounts have been prepared on a going concern basis;

5. internal financial controls to be followed by the Company have been laid down and that internal controls are adequate and were operating effectively; and

6. proper systems to ensure compliance with the provisions of all applicable laws have been devised and that such systems are adequate and operating effectively

COST AUDIT

Pursuant to Section 148 of the Companies Act read with the Companies {Cost Records and Audit) Rules, 2014, the cost records maintained by the Company in respect of bulk drugs and formulations are required to be audited. Your Directors have, on the recommendation of the Audit Committee, appointed M/s N.I.Mehta & Co. to audit the cost accounts maintained by the Company for pulk drugs and formulations for the financial year ending 31st December 2016. As required by the Companies Act, 2013, the remuneration payable to the Cost Auditor is required to be placed before the Members in General Meeting for their ratification. Accordingly, a resolution seeking aproval of the remuneration payable to M/s. N.I.Mehta &Co. as fixed by the Board is included in the Notice convening the Annual General Meeting.

The cost audit reports for the financial year ended 31st December 2014 were filed on 28th August 2015.

The cost audit reports for the financial year ended 31st December 2015 are required to be submitted by the Cost Auditor to the Board of Directors by 27th June 2016 and the same are required to be filed by the Company with the Central Government within 30 days of the receipt of the reports.

AUDITORS

M/s. S R B C & CO. LLP Chartered Accountants were appointed Statutory Auditors of your Company for a term of two years from the conclusion of the Fifty– ninth Annual General Meeting held on 29th April 2015 till the conclusion of the Sixty–first Annual General Meeting, subject to ratification by Members at every subsequent Annual General Meeting.

They have confirmed their eligibility and willingness to be re–appointed.

A resolution seeking ratification of their appointment has been included in the Notice convening the Annual General Meeting. The Auditors have issued a clean report and there are no qualifications.

EXTRACT OF ANNUAL RETURN

As required by Section 92 {3) of the Companies Act, 2013 read with Rule 12{1) of the Companies {Management and Administration) Rules, 2014, extract of the Annual Return in Form MGT9 is annexed herewith as Annexe D to this Report.

SECRETARIAL AUDIT

Pursuant to the provisions of Section 204 of the Companies Act, 2013 and the Companies {Appointment and Remuneration of Managerial Personnel) Rules, 2014, your Directors had appointed M/s. S.N.Ananthasubramanian & Co., a firm of Company Secretaries in Practice, to undertake the Secretarial Audit of your Company. Their report is annexed herewith as Annexe E to this Report.

PERSONNEL

Information required under the provisions of Sections 134{3){q) and 197{12) of the Companies Act, 2013 read with Rule 5{2) of the Companies {Appointment and Remuneration of Managerial Personnel) Rules, 2014 is respect of employees of the Company forms part of this report. Details of remuneration of managerial personnel as required under Section 197(12) of the Companies Act, 2013 read with Rule 5{1) of the Companies {Appointment and Remuneration of Managerial Personnel) Rules, 2014 also form part of this report.

In terms of the first proviso to sub–section {1) of Section 136 of the Companies Act, 2013, the report and accounts are being sent to the shareholders excluding the aforesaid information. Any shareholder interested in inspection of the documents pertaining to the above information or desires a copy thereof may write to the Company Secretary.

Your Directors place on record their appreciation of the valuable contribution made by the employees of your Company.

By Authority of the Board

S. R. GUPTE

DIRECTOR  DIN:00109548

SHAILESH AYYANGAR

MANAGING DIRECTOR DIN:00268076

Place : Mumbai,  

date : 23rd March 2016

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