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Updated:17 May, 2019, 15:59 PM IST

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Updated:17 May, 2019, 16:01 PM IST

DIRECTORS' REPORT

Dear Members,

Your Company's directors are pleased to present the Twenty–Fifth Annual Report together with audited financial statements for the financial year ended March 31, 2016.

2. BUSINESS OVERVIEW

FY 2015–16 has been a landmark year for us with the annualised revenue base of the Company expanding almost 3 times driven by organic and inorganic strategies. The Company reported robust FY16 Results with Pharma delivering strong operating margins and R&D gaining momentum.

Regulated Markets – Driven by North America and Australia

• Revenues stood at Rs. 10,934 million, registering 75% growth over the last year

• The business contributed to 34% of the group revenue for the period ended March 31, 2016

• North America delivered robust performance in FY 2016. Base Portfolio delivered a strong performance with healthy market share gains for some key products – Vancomycin hardgel (50%), Ergocalciferol softgel (52%), Methoxsalen softgel (37%) and Calcitriol softgel (14%).

• 5 product approvals received from US FDA in FY 2016. New product launches garnered important market share – Benzonatate Softgel (20%), Dutasteride Softgel (14%) and Lamivudine/ Zidovudine Softgel (10%).

• New product filing gained momentum with 10 ANDA filings for H2 FY 2016, R&D spent is Rs. 757 Million in FY 2016 versus Rs. 592 Million in FY 2015

• Cumulative filings of 52 ANDAs in the US with 29 products pending approval.

• Re–entered the Australian market in a leadership position under Arrow Pharmaceuticals. The business consolidated for 7 months in FY 2015–16 delivering steady performance.

Emerging Markets

• Revenues stood at Rs. 4,301 Million versus Rs. 4,609 Million in the previous year

• The business contribution stood at 14% of Group revenue for the period ended March 31, 2016

• Significant corporate actions announced during the year in Africa and India with a focus on improving the quality of the business. Continue to be invested in business from a long term perspective as it has the right pivots to deliver sustainable growth

• Disciplined approach to credit risk helps tide over a volatile operating environment in Africa. Branded business continues to track healthy growth at secondary level. Volatile currency environment during the year impacts demand for generic products by few countries in Africa

• Successfully integrated the acquired businesses of Central Nervous System (CNS) from erstwhile Ranbaxy, brand portfolio from J&J and probiotics business from Medispan in India. Business now has a strong product portfolio and a well–integrated field force to leverage pan India foot print

• Investment in new markets of Russia, CIS and South East Asia on track with a focus on building a strong branded generics platform in the regions.

• Strong Field force of ~1,000+ medical representative across emerging markets

Institutional Business

• Revenues stood at Rs. 5,951 Million with 49% growth over the previous year

• The business vertical contributed 19% of Group revenue for the period ended March 31, 2016

• Increased off–take in ARV (antiretroviral) segment and strong supply chain execution for higher volumes in Anti–Malarials helped deliver best yearly performance in the FY 2016.

• Working in collaboration with Gilead Sciences for development and distribution of generic Sofosbovir and Tenofovir Alafenamide (TAF) in developing economies

• Working in collaboration with Medicines for Malaria Venture (MMV) for the development of rectal artesunate for pre–referral treatment of children with severe malaria

• Signed a sub–licensing agreement with the Medicines Patent Pool (MPP) to develop Dolutegravir (DTG) for treatment of HIV in developing countries

• Received approval from Drug Controller General of India (DCGI) for manufacturing generic version of Sofosbuvir (Gilead's Sovaldi) used for treatment of Hepatitis C. Currently marketing the product under the brand name "Virso". Registrations and sales for "Virso" gaining momentum in key emerging markets

Pharmaceutical Services & Active Ingredients (PSAI)

• Revenues stood at Rs. 10,591 Million, versus Rs. 10,626 Million in the previous year

• The business vertical contributed 33% of Group revenue for the period ended March 31, 2016

• API delivered a steady performance in FY 16 despite impact of incessant rains in the state of Tamil Nadu

• Focus shifts towards captive consumption, New Drug Master File (DMF) filing plan aligned to formulations strategy. Filed 5 new DMFs during the year including 3 filed for captive use.

• R&D function for API and formulations aligned, to ensure seamless execution of backward integration plan for key products across markets.

• Rationalised API portfolio for commodity products with focus on delivering superior margins, retained business to be attractive with increased captive consumptions.

Bio Generics

• R&D spent for FY 2016 is Rs. 197 Million, against Rs. 80 Million in FY 2015.

• Company's lead biosimilar asset reached an inflection point as the pilot clinical study in limited subjects was completed successfully. Focus now is on scaling up the asset for pivotal clinical study.

• Successfully scaled up the second biosimilar asset which is now ready for bio–compatibility testing.

• Commenced construction activity of bio–pharmaceutical facility at Doddaballapur, Bengaluru.

• Board approval in place to spin off the Biotech business into a separate entity.

Key Corporate Actions

Merger of Shasun Pharmaceuticals Limited

We successfully completed the merger of Shasun Pharmaceuticals Limited, with the Company, forming the new identity Strides Shasun Limited effective from November 19, 2015 (Appointed Date being April 1, 2015).

The merger provided synergies of complementary product portfolio, strong R&D infrastructure and de–risked manufacturing base. The merger also provides the supply chain security for the formulations business through in house API capabilities. Going forward, we are focused on deriving synergies through backward API  integration of key products across businesses and also building an integrated product portfolio with captive API supplies. Besides, we are committed to further integrating our business to leverage the combined infrastructure and resources in a better way to deliver sustainable growth.

Acquisition of Generics portfolio in Australia

Strides Pharma Global Pte. Ltd, Singapore and Strides (Australia) Pharma Pty Ltd, Australia, both wholly owned subsidiaries of the Company acquired a generic portfolio of pharmaceutical products together with certain branded pharmaceutical assets and business from certain wholly owned subsidiaries of Aspen Pharmacare Holdings Limited, a company listed on the Johannesburg Stock Exchange (Aspen). The acquired business has been branded as Arrow Pharmaceuticals. The business and assets acquired from Aspen have a current prescription market share that ranks Strides and its group entities as one of the top 3 generic pharmaceutical suppliers in Australia and among the top 10 pharmaceutical companies in the Australian pharma market.

Update on Stelis Biopharma

The Company had entered into an agreement with GMS Holdings, ("GMS"), whereby GMS or its affiliates would invest USD 21.90 Million for 25.10% stake in Stelis Biopharma Private Limited, India ("Stelis"), the biotech arm of the Strides Group, to fund its greenfield project. During the year, the Parties have received the FIPB approval vide its letter dated December 23, 2015. Pursuant to the approval, 69,813 equity shares of Stelis Biopharma Private Limited were issued to GMS Pharma (Singapore) Pte. Ltd. Post this allotment, Strides holding in Stelis is 74.90%.

Other Corporate Actions

• Acquired erstwhile Ranbaxy's 'Solus' and 'Solus Care' divisions operating in the Central Nervous System (CNS) segment in India from Sun Pharmaceuticals Limited. The arrangement involved transfer of these two marketing divisions, along with their employees to the Company for a consideration of Rs. 16,500 Lakhs. The transaction has received all the requisite regulatory approvals and has achieved its closure.

• Acquired seven brands from Johnson & Johnson Group. The products acquired are in the category of Dermatology, Antiemetic and Pain Management segments. The brand portfolio includes Otogesic eardrops, Ethnorub ointment and Stugil tablets. The transaction has received all the requisite regulatory approvals and has achieved its closure.

• Acquired majority stake in domestic branded business of Medispan, which enabled entry into niche Probiotics segment. The brand portfolio includes established brands such as Lactovit and Lactogut. The Business in its entirety (including IPs and manpower) was acquired by an SPV, Strides Biologix Private Limited, in which Strides holds 51% and the balance is held by Medispan Limited. The transaction has received all the requisite regulatory approvals and has achieved its closure.

Strides Pharma Global Pte. Ltd, Singapore entered into a definitive agreement in February 2016, to acquire a strategic stake in Generic Partners Holdings Co. Pty Ltd., and its subsidiaries, which includes an Australian pharmaceutical supply and research company. The acquisition provides the Company immediate access to 47 commercialised marketing authorisations, which would make Arrow the second largest generic pharmaceutical products company in Australia with a portfolio of over 180 molecules. The acquisition also provides access to 22 registrations pending approval with TGA and strong pipeline of 32 molecules including host of drugs going off patent in future. Going forward Arrow will consolidate its R&D initiatives for the Australian market under Generic Partners Entity, leveraging its strong product development and registration capabilities. Generic Partners is one of Australia's leading B2B suppliers of generic pharmaceuticals.

Arrow Pharmaceuticals Pty Ltd., a wholly owned subsidiary of the Company in Australia has entered into a 10–year supply partnership and trading platform with Pharmacy Alliance, Australia's longest standing co–operative buying groups. The supply agreement is an extension to the existing supply arrangement previously in place between Pharmacy Alliance and Aspen, before the Aspen Generics & Chemists' Own business was acquired by Arrow. The Agreement guarantees Pharmacy Alliance members a market–leading suite of products and services across both the Arrow Generic range and the renowned Chemist Own range of over–the–counter medicinal generics. The Agreement is also reflective of Arrow's current position as the largest generic supplier to Pharmacy Alliance members and the value that Pharmacy Alliance represents to Arrow. The transaction has received all the requisite regulatory approvals and has achieved its closure. 3.

The Group acquired a controlling stake in Universal Corporation Limited (Universal), Kenya. Universal is a Nairobi based pharmaceutical manufacturing and marketing company which is strongly entrenched in the East African territory with its front–end business and has supply contracts with key donor agencies. Strides Shasun currently has a strong foothold in West and French Africa with a significant local manufacturing footprint and front end presence. With this acquisition, the Company will get a strong foothold in the key East African markets. The acquisition also provides access to one of the only two WHO prequalified manufacturing sites in Sub–Saharan Africa which will complement 7 strategically located plants the Company currently has across major geographies in Africa. The acquisition was made through a wholly owned subsidiary. The transaction has received all the requisite regulatory approvals and has achieved its closure.

• Company's wholly owned subsidiary Strides Pharma Inc., USA acquired an OTC portfolio comprising of Jointflex, Fergon and Vanquish brands/trademarks from Moberg Pharma, Sweden and/or its affiliates along with applicable production and commercial know–how, domain name and inventory for an aggregate consideration of ~$10.40 million. The acquisition strengthens the Company's strategy to build a global OTC franchise. The Moberg brands/trademarks that are currently marketed in USA and Middle East will further strengthen the OTC franchise. The transaction has received all the requisite regulatory approvals and has achieved its closure.

• Divestment of CRAMS Business: The Board of Directors at their meeting held on May 16, 2016 have approved the divestment of Shasun Pharma Solutions Ltd, UK (SPSL), which is into CRAMS API business. Divestment would be made to a Company to be set up by the current management team of SPSL and members of promoter group of Strides Shasun Limited. Divestment would be for an enterprise value not less than GBP 25 Million with an equity value of GBP 6 Million (after adjustment of debt and debt like items), to be discharged by way of cash and on such terms and conditions as may be decided by the Board. The divestment is subject to approval of Members of the Company and other applicable laws.

2.1 Nature of Business of the Company

There has been no change in the nature of business of the Company during the year under review.

3.SHARE CAPITAL

Authorized Share Capital

During FY 2016, pursuant to completion of merger of Shasun Pharmaceuticals with the Company effective November 19, 2015, the Authorized Share Capital of Shasun Pharmaceuticals was added to the Authorized Share Capital of the Company and the Preference Share Capital of the Company was reclassified into Equity Share Capital.

Accordingly, the Authorised Share Capital of the Company as at March 31, 2016 is Rs. 1,767,500,000 divided into 176,750,000 equity shares of Rs. 10/– each.

Issued, Subscribed and Paid–Up Share Capital

During the year under review:

• Pursuant to completion of merger of Shasun Pharmaceuticals with the Company, on November 20, 2015 the Company allotted 21,017,329 equity shares of Rs. 10/– each to shareholders of erstwhile Shasun Pharmaceuticals;.

• Shareholders of the Company had approved raising of long–term funds by way of issuance of GDR's/ ADR's/ FCCBs / QIP or such other equity linked instruments as may be permissible for an amount up to Rs. 1,50,000 Lakhs including a green shoe option. In accordance with the said approval, the Company had completed the placement of equity shares through QIP during the current year. On December 23, 2015, the Company has allotted 8,628,028 equity shares of Rs. 10/– each at a price of Rs. 1,278/– per share (including a premium of Rs. 1,268/– per share).

• The Company allotted 75,000 equity shares consequent to exercise of stock options. Consequent to the above, the Issued, Subscribed and Paid–Up Share Capital of the Company as at March 31, 2016 was Rs. 893,459,780 divided into Rs. 89,345,978 equity shares of Rs. 10/– each.

4. DIVIDEND

Your Directors are pleased to recommend a Final Dividend of Rs. 4/– (Rupees Four Only) per equity share of face value of Rs. 10/– each for the year ended March 31, 2016.

During the year under review, the Board of Directors of erstwhile Shasun Pharmaceuticals Limited at its meeting held on July 30, 2015, had declared an interim dividend of Rs. 1/– per equity share of face value of Rs. 2 each and the same was paid on August  12, 2015.

Considering the above, the total dividend payout for the year under review, including the proposed Final Dividend will absorb Rs. 513.5 Million of reserves, which is inclusive of Dividend Distribution Tax of Rs. 88.87 Million.

5. DEPOSITS

The Company has not accepted any deposits and accordingly no amount is outstanding as on the balance sheet date.

6. SUBSIDIARY AND JV COMPANIES

As at March 31, 2016, the Company had 40 subsidiaries overseas, 7 subsidiaries in India and 2 overseas Joint Ventures. List of subsidiaries/ JVs  which have become or ceased to be part of the Company is attached as Annexure 1.

Accounts of Subsidiaries

In accordance with Section 129(3) of the Companies Act, 2013, the Company has prepared a consolidated financial statement of the Company and all its subsidiary companies, which is forming part of the Annual Report. Statement containing salient features of the financial statements of the subsidiary companies / joint venture as required in Form AOC 1 is enclosed as Annexure 2 to this Report.

7. CORPORATE GOVERNANCE

The Company has complied with all the mandatory requirements of Corporate Governance as stipulated in Schedule V of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. As required by the said regulation, a separate report on Corporate Governance forms part of the Annual Report of the Company. A certificate from the Statutory Auditors of the Company regarding compliance with the conditions of Corporate Governance also forms part of this Report.

8. MANAGEMENT DISCUSSION AND ANALYSIS

Pursuant to Schedule V of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, Management Discussion and Analysis is given separately and forms part of this Report.

9. EMPLOYEE STOCK OPTION SCHEME

SEBI had notified the Share Based Employee Benefits Regulations 2014, which replaced the erstwhile SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999. It mandates that all listed companies having existing stock option schemes comply with the revised regulation in their entirety.

The Company had 4 ESOP Schemes viz., Strides Arcolab ESOP 2006, Strides Arcolab ESOP 2008, Strides Arcolab ESOP 2008 (Directors) and Strides Arcolab ESOP 2011. While there are no outstanding options under the ESOP 2006, ESOP 2008 and ESOP 2008 (Directors) Schemes, there were 350,000 options due for vesting over the next three years under the ESOP 2011 Scheme.

Considering the provisions of the new Regulation, the Nomination and Remuneration Committee resolved that the existing ESOP Schemes, under which there are no outstanding options, be terminated. Further, the Committee resolved that it should not grant further stock options under the ESOP 2011 Scheme. However, the outstanding options under the ESOP 2011 shall continue to vest as per the offer letter granted to employees of the Company.

Pursuant to completion of merger of Shasun Pharmaceuticals with the Company, a new ESOP

Scheme titled Strides Arcolab ESOP 2015 was launched to allot upto 70,000 stock options to employees of erstwhile Shasun holding stock options under Shasun ESOP Scheme. The Scheme has received shareholder approval and In–Principle approval from Stock Exchanges.

Consequent to the cancellation of the old ESOP Scheme, the Nomination and Remuneration Committee has launched a new ESOP Scheme titled Strides Shasun ESOP 2016, which enables grant of upto 30 Lakh stock options to Employees of the Company, whether in India or overseas. The Scheme has received shareholder approval and In–Principle approval from Stock Exchanges.

Statement giving detailed information on stock options granted to Employees under the Company's Employee Stock Option Schemes as required under the SEBI Regulation is enclosed as Annexure 3 to this Report.

10. BOARD OF DIRECTORS & KEY MANAGERIAL

PERSONNEL

Board Composition

The Board comprises of adequate number of Executive and Non–Executive Directors as required under the Companies Act, 2013 read with Rules made thereunder and the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

As on date of this Report, the Board comprises of 9 Directors comprising of 2 Executive Directors, 5 Independent Directors and 2 Non–Executive Directors. Chairman of the Board is Non–Executive.

Meetings of the Board

During the year ended March 31, 2016, the Board met 5 times. These meetings were held on May 22, 2015, July 30, 2015, September 25, 2015, October 27, 2015 and February 8, 2016. For further details, please refer to the Corporate Governance Report, which forms part of this Report.

Policy on Directors' Appointaient and Remuneration

The Directors of the Company are appointed by shareholders at the General Meetings.

As regards the appointment and tenure of Independent Directors, the Company has adopted the provisions of the Companies Act, 2013 read with Regulation 25 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

The Company's Remuneration Policy for Directors, Key Managerial Personnel and Senior Management is enclosed as Annexure 4.

Board Evaluation

As stipulated in SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015,  the Companies Act, 2013, and Schedule IV of the Companies Act, 2013, the evaluation of the Board as a whole and all directors was conducted based on identified criteria and framework.

The performance evaluation of the Chairman, Managing Director, Executive Director and the Non–Independent Directors were carried out by the Independent Directors and the performance evaluation of the Independent Directors was carried out by the entire Board excluding the director being evaluated.

Declaration by Independent Directors

The Company has received necessary declaration from each of the Independent Director that he/ she meets the criteria of independence as laid down in Section 149 (6) of the Companies Act, 2013.

Retirements and Appointments

Mr. Deepak Vaidya, non–executive Director retires by rotation at the ensuing Annual General Meeting and being eligible, offers himself for reappointment. Your Directors recommend his re–appointment to the Board.

During the year under review, Mr. S. Abhaya Kumar was appointed as an Executive Director (Additional Director) of the Company effective from November 19, 2015 and in terms of Section 161 of the Companies Act, 2013, he holds office until the date of the ensuing Annual General Meeting of the Company. Your Directors recommend his appointment as an Executive Director of the Company for a period of 3 years with effect from November 19, 2015.

Further, Mr. Bharat Shah was re–designated as an Independent Director of the Company effective from June 15, 2016. Mr. Shah was originally appointed as a Non–Executive Director of the Company on July 25, 2014. While he met the criteria stipulated for Independent Directors under the Act, he was designated as Non–Executive Director to ensure compliance with Section 152 of the Act, which stipulates retirement of Directors by rotation. Subsequently, as the Board of the Company has requisite number of Non–Executive Directors who can fulfil the compliance requirement and considering that Mr. Shah continues to meet the criteria stipulated for Independent Directors, he was re–designated as Independent Director of the Company. Your Directors recommend his appointment as an Independent Director for a period of 5 years with effect from June 15, 2016.

Key Managerial Personnel

During the year under review, Mr. S. Abhaya Kumar, who was appointed as an Executive Director was designated as a Key Managerial Personnel (KMP) of the Company in terms of Section 203 of the Companies Act, 2013.

The KMPs of the Company as on the date of this report are Mr. Arun Kumar, Managing Director, Mr. S. Abhaya Kumar, Executive Director and Mr. Badree Komandur, Group CFO and CS.

11. PARTICULARS OF EMPLOYEES

The statement containing particulars of employees as required under Section 197 of the Companies Act, 2013 read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, is enclosed as Annexure 5 of this Report. Further, the particulars of employees required under Rule 5(2) and 5(3), showing statement of names and other particulars of employees drawing remuneration in excess of the limits as set out in the said rules is provided in a separate annexure forming part of this Report. The report and the accounts are being sent to the members excluding the aforesaid annexure. The said annexure is open for inspection at the Registered Office of the Company. Any shareholder interested in obtaining a copy of the same may write to the Company Secretary.

12. CORPORATE SOCIAL RESPONSIBILITY (CSR)

The Company has undertaken Corporate Social Responsibility (CSR), initiatives in areas of Health, Education and Employability which are projects in accordance with Schedule VII of the Companies Act, 2013 ('Act'). During the year under review, your Company has spent Rs. 42.38 Million in CSR activities as against Rs. 25.55 Million required under the Act. The CSR spend also reflects the erstwhile Shasun Pharmaceutical's spending on CSR activities.

A detailed report on CSR activities undertaken during FY 2015–16 is enclosed as Annexure 6 to this Report.

13. VIGIL MECHANISM/ WHISTLE BLOWER

POLICY

The Company has a vigil mechanism pursuant to which a Whistle Blower Policy is in place. The Policy ensures that strict confidentiality is maintained whilst dealing with concerns and also that no discrimination will be meted out to any person for a genuinely raised concern.

The Policy covering all employees, Directors and other persons having association with the Company is hosted on the Company's website at www.stridesarco.com

14. INSURANCE

The assets/ properties of the Company are adequately insured against loss due to fire, riots, earthquake, terrorism, etc., and against other perils that are considered necessary by the management.

15. ADEQUACY OF INTERNAL FINANCIAL  CONTROLS

The Company has designed and implemented a framework for Internal Financial Controls ("IFC") as required under Section 134 (5) (e) of the Companies  Act, 2013.

For the Year ended March 31, 2016, the Board believes that the Company has sound IFC commensurate with the nature and size of its business operations; wherein controls are in place and operating effectively and no material weaknesses exist.

The Company has a process in place to continuously monitor the existing controls and identify gaps, if any, and implement new/ improved controls.

16. RISK MANAGEMENT

The Company has a risk management framework for identification and managing risks. Please refer the Management Discussion and Analysis report forming part of the Annual Report for additional details.

17. PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS BY THE COMPANY

Particulars of investments made, loans given and guarantees covered under the provisions of Section 186 of the Companies Act, 2013 are provided in Note no. 47 to the standalone financial statements in the Annual Report.

18. PARTICULARS OF CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES

All the transactions with related parties are in the ordinary course of business and at arm's length basis. Hence disclosure under Form AOC2 is not part of this report. However, transactions with related parties are disclosed in Note no. 47 to the standalone financial statements in the Annual Report.

The Company has formulated a policy for transacting with Related Parties, which is uploaded on the website of the Company.

Further, there are no materially significant related party transactions with its subsidiaries, promoters, the directors or the management, or their relatives etc., that may have potential conflict with the interests of the Company at large.

19. SIGNIFICANT AND MATERIAL ORDERS  PASSED BY THE REGULATORS OR COURTS

There are no significant and material orders passed by the Regulators/ Courts that would impact the going concern status of the Company and its future operations.

20. EXTRACT OF ANNUAL RETURN

Extract of Annual Return in Form MGT 9 is enclosed as Annexure 7 to this Report.

21. CONSERVATION OF ENERGY, R&D, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS/ OUTGO

Details of Energy Conversation, R&D, Technology Absorption and Foreign Exchange Earnings/Outgo are enclosed as Annexure 8 to this Report.

22. SECRETARIAL AUDIT REPORT

Pursuant to the provisions of Section 204 of the Companies Act, 2013 and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Company has appointed M/s Gopalkrishnaraj HH & Associates, a firm of Company Secretaries in Practice (Certificate of Practice No: 4152) to undertake the Secretarial Audit. The Secretarial Audit Report is annexed as Annexure 9 to this Report. There are no qualifications, observations or adverse remarks in the Secretarial Audit Report.

23. AUDIT REPORT

There are no qualifications or adverse remarks in the Audit Report issued by the Statutory Auditors of the Company on the financial statements for the financial year ended March 31, 2016.

24. STATUTORY AUDITORS

At the Annual General Meeting held on September 9, 2014, M/s. Deloitte Haskins & Sells, Chartered Accountants, (ICAI Registration Number 008072S) were appointed as statutory auditors of the Company for a period of 3 years viz., till the conclusion of 26th Annual General Meeting. In terms of the first proviso to Section 139 of the Companies Act, 2013, the appointment of auditors shall be placed for ratification at every Annual General Meeting. Accordingly, the appointment of M/s. Deloitte Haskins & Sells, 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 139 read with Section 141 of the Companies  Act, 2013.

25. DIRECTORS' RESPONSIBILITY STATEMENT

Pursuant to the requirement under clause (c) of sub–section (3) of Section 134 of the Companies Act, 2013 with respect to the Directors' Responsibility

Statement, the Board of Directors of your company state that:

(a) in the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures;

(b) the directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit of the Company for that period;

(c) the directors have 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;

(d) the directors have prepared the annual accounts of the Company on a going concern basis;

(e) 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.

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

26. ACKNOWLEDGEMENT

Your Directors place on record their sincere appreciation for the significant contribution made by the employees through their dedication, hard work and commitment and the trust and confidence reposed on us by the medical profession and trade.

We also acknowledge the support and wise counsel extended to us by the bankers, financial institutions, Government agencies, analysts, shareholders and investors at large.

For and on behalf of the Board of Directors

Deepak Vaidya

Chairman

Arun Kumar

Executive Vice Chairman & Managing Director

Date: June 15, 2016

Place: Bengaluru

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