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Updated:18 Oct, 2019, 15:59 PM IST

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Updated:18 Oct, 2019, 16:01 PM IST

DIRECTORS' REPORT

To

The Shareholders

The Directors have the pleasure of presenting the Forty Third Annual Report of your Company together with the Audited Financial Statement for the year ended 31st March, 2016.

HIGHLIGHTS

? Several successful launches in US market, which has led to exceptional growth in profit due to low competition, in some cases.

? Received Enterprise Inspection Report (EIR) from USFDA for Dahej and Indrad plants - commenced commercial dispatches from Dahej facility from 6th April, 2016.

? India business growth at 15% despite impact of hygiene improvement measures and discontinuation of promotional schemes. Successful integration of Elder acquisition. Launched two biosimilars in India, to increase focus on specialty.

? Acquired and amalgamated USFDA approved Derma manufacturing facility of Zyg Pharma Private Limited at Pithampur, Indore.

? Political and economic turmoil leading to major devaluation of currency in Brazil overshadowed the strong growth in that market.

Consolidated Operating Results

The Consolidated sales and operating income increased to Rs. 6676 crores from Rs. 4653 crores in the previous year yielding a growth of 43.48%. The Consolidated operating profit for the year was Rs. 2936 crores as against Rs. 1306 crores in the previous year registering an increase of 124.81%. The Consolidated net profit increased to Rs. 1722 crores from Rs. 751 crores in the previous year registering a growth of 129.29%.

Management Discussion and Analysis (MDA)

The details of operating performance of the Company for the year, the state of affairs and the key changes in the operating environment have been analysed in the Management Discussion and Analysis section which forms a part of the Annual Report.

APPROPRIATIONS

Dividend

As a policy, the Company endeavours to distribute 30% of its annual consolidated net profit after tax as dividend in one or more tranches. The dividend payout for the year has been formulated in accordance with such policy of the Company.

Normal annual dividend of Rs. 20/- per equity share of face value of Rs. 5/- amounting to Rs. 338 crores was paid to the shareholders as an interim dividend. Further, a special dividend of Rs. 15/- per equity share of face value of Rs. 5/- each amounting to Rs. 253 crores was paid as second interim dividend. The aggregate distribution amount including tax on distributed profits works out to be Rs. 713 crores (previous year Rs. 228 crores).The total distribution towards dividend of Rs. 35/- per equity share of face value of Rs. 5/- each amounts to 41.11% of annual consolidated net profit after tax, which is on account of exceptional profits earned during the year from lower than anticipated competition in one of its products and some other one off items. These dividends are tax free in the hands of the shareholders.

Transfer to Reserves

The Board has recommended a transfer of Rs. 123 crores to the Debenture Redemption Reserve and Rs. 700 crores to the General Reserve and an amount of Rs. 1586 crores is retained as surplus in the Statement of Profit and Loss of Standalone Financials.

SHARE CAPITAL

The paid up Equity Share Capital of the Company as on 31st March, 2016 is Rs. 84.62 crores. During the year, the Company has neither issued shares with differential voting rights nor granted stock options or sweat equity.

FINANCE

(a) Deposits

The Company has neither accepted nor renewed any deposits. None of the deposits earlier accepted by the Company remained outstanding, unpaid or unclaimed as on 31st March, 2016.

(b) Loans, Guarantees and Investments

Details of Loans, Guarantees and Investments by Company under the provisions of Section 186 of the Companies Act, 2013, during the year, are provided in Note 24 (b) and 25 to the Financial Statements.

(c) Debentures

The Company has raised an amount of Rs. 490 crores by way of issue of Non Convertible Debentures on private placement basis on 24th June, 2015. The said Non Convertible Debentures are listed on the National Stock Exchange of India Ltd.

(d) Contracts or Arrangements with Related Parties

All Related Party transactions that were entered during the year were in ordinary course of business and were on arm's length basis. Pursuant to Regulation 23 of the Securities Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (Listing Regulations) {Clause 49 of the Listing Agreement} and applicable provisions of the Companies Act, 2013, the Company has formulated Related Party Policy for dealing with Related Party transactions. Details of the said Policy are provided under the Corporate Governance Report of this Annual Report. In accordance with the Related Party Policy of the Company and pursuant to the provisions of Section 188(1) of the Companies Act, 2013 and Rule 8(2) of the Companies (Accounts) Rules, 2014, particulars of material contracts and arrangements entered between the Company and the Related Parties are annexed herewith as Annexure - A. During the year, the Company has also adopted 'Criteria for granting omnibus approval by Audit and Risk Management Committee' for the Related Parties transactions.

(e) Internal Financial Control System

The Companies Act, 2013 has mandated the Company to have a formal framework of Internal Financial Controls (IFC) and has also laid down specific responsibilities on the Board, Audit Committee, Independent Directors and Statutory Auditors with  regard to IFC.

The financial control system and framework is required to ensure:

- The orderly and efficient conduct of its business,

- Safeguarding of its assets,

- The prevention and detection of frauds and errors,

- The accuracy and completeness of the accounting records and

- The timely preparation of reliable financial information.

The Board reviews the effectiveness of controls documented as part of IFC framework, and take necessary corrective actions where weaknesses are identified as a result of such reviews. This review covers entity level controls, process level controls, fraud risk controls and Information Technology environment.

Based on this evaluation, no significant events had come to notice during the year that have materially affected, or are reasonably likely to materially affect, our IFC. The Management has also come to a conclusion that the IFC and other financial  reporting was effective during the year and is adequate considering the business operations of the Company.

The Statutory Auditors of the Company has audited the IFC over Financial Reporting and their Audit Report is annexed as Annexure - A to the Independent Auditors' Report under Standalone Financial Statements and Consolidated Financial Statements.

HUMAN RESOURCES

At Torrent, we value our employees and believe that Torrent's success is a result of the cumulative contribution of all our employees. The Human Resource Development (HRD) function, continuously strives to emphasize creation of a conducive work environment and development of a robust and consistent approach towards talent management & leadership development.

Attracting and retaining skilled employees, stabilizing the work force in the rapidly changing market, increasing their productivity, putting into place a credible and competent leadership, building an orientation that is consistent but accommodating local differences ? are now increasingly becoming important.

To accomplish this, during this year our focus was to redefine employee welfare policies to enrich their personal, professional and social life. Our gender diversity initiatives, focus towards ensuring that every employee gets the opportunity to effectively balance both work and life with oneself and family, were some of the key endeavours which helped us to strengthen the work culture for our employees.

As an organization, we are conscious about providing healthy life to our employees as well as their family members. This was reflected in various health care initiatives taken during the year towards (a) prevention, (b) cure and (c) safetynet for unknown health risk to employees. Also, in order to strengthen the concept of 'Torrent Parivaar, participation of employees and their family members was encouraged through various social gatherings and events throughout the year.

On the Statutory front, during the year, no case pursuant to the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013, was reported. The year also saw reinforcement of the already existing "Whistle Blower" policy in order to emphasize and encourage reporting of any wrongdoing or any unethical practices. Necessary actions were taken against cases reported. The external stakeholders e.g. stockists were also actively encouraged to participate in the policy.

On the Industrial front, the Company continued to foster cordial Industrial Relations with its workforce during the year.

The Company has a diverse workforce of 10892 employees as on 31st March, 2016 vis-a-vis 10044 as on 31st March, 2015. Moving ahead Company's focus will continue to develop the right talent and drive them towards the common business goal.

VIGIL MECHANISM

To ensure high level of honesty, integrity and ethical behaviour amongst its employees, the Company has a Whistle Blower Policy since 2011. Under this policy all the stakeholders of the Company can report or raise concern against any wrong or unethical practice taking place in the organization, that may affect its business and or reputation. The policy also safeguards the person who uses this mechanism. All the investigations are conducted in a fair manner and equal opportunity is provided to the Whistle Blower and the Subject. After conclusion of the investigation, a written report of the findings is prepared and all concerned are informed about the outcome of the investigation.

The functioning of the Whistle Blower mechanism is reviewed by the Audit and Risk Management Committee on a quarterly basis.

The details of the Whistle Blower Policy is explained in the Report of Corporate Governance and the Policy is available on the website of the Company at <http://www.torrentpharma.com/pdf/whistleblower/Clean_Pharma_whishtleblower.pdf>. CORPORATE SOCIAL RESPONSIBILITY

Torrent Group as a philosophy believes "Think of others also when you think about yourself". Concern for Community and Environment is an imbibed culture at the Company. The Company, as a part of its Corporate Social Responsibility (CSR), made

During the year, the Board had revised the CSR Policy of the Company to align it with the amendments in the Companies Act, 2013. The Revised CSR Policy may be accessed at the web-link: <http://www.torrentpharma.com/pdf/CSR%20Policy.pdf>. During FY 2015-16, the CSR programs and activities undertaken at Group level are described hereunder:

? REACH: Torrent Power Limited and Torrent Pharmaceuticals Limited jointly initiated a Paediatric Health Care Program -REACH - Reach EAch CHild under the aegis of Tornascent Care Institute. Paediatric health check up camps were organised under the banner of "Shaishav" in four villages in the vicinity of the establishments of the Company as a pilot project. More than 1200 children under the age of 6 years were medically examined. Remedial support under the supervision of Paediatricians was provided to the identified anaemic and malnourished children. Support is also being provided to special cases with chronic ailments through further medical treatment and management on need basis.

? Preventive Healthcare Program: Started in July 2014 in four urban slum areas of Sabarmati, Ahmedabad, the program has provided health services to 3881 patients (including 1520 children) through 204 Mobile Medical OPDs. Out of targetted

120 malnourished children, 29 children were transformed to Healthy Grade through daily nutritive food support. Further, 55 sessions on Nutrition & Health education and 31 nutritive recipe demonstation shows for mothers of malnourished children were conducted. Counselling for 100+ women, community awareness for 1000+ persons and 12 monthly meetings of Community Health Committees were carried out.

? Shiksha Setu: Teaching and Learning Excellence Programme involving 6500 students and 230 teachers, achieved 53.18% cumulative learning improvement at the end of fifth year. Programme interventions like computer based adaptive learning tool, continuous teachers' training, learning assessment of students and community sensitization brought positive outcomes that include faster learning pace of students, improved students' attendance and significant improvement in teaching capabilities

The Annual Report on CSR Activities is given as Annexure B to this Report which indicates that the Company has spent Rs. 16.91 crore (more than 2% of the average net profits of last three financial years) in this regard. The Composition of the CSR Committee and other details also form part of the said Annual Report.

Other CSR initiatives undertaken by the Company during FY 2015-16 include:

? Conducted various programs among the students at Middle School at Bhud, Baddi through employee volunteers for their development and advancement.

? The Company had also made donations to various organizations involved in education, healthcare, providing relief to disaster victims and promotion of social welfare, harmony and nationalism.

ENVIRONMENT, HEALTH & SAFETY

We believe that Environment, Health and Safety (EHS) are crucial and paramount pillars for sustainable growth of our business. In the journey of sustainable development in every respect, we have developed policies and guidelines that provide technical support and assistance to all the sites on EHS matters. Regular audits of our various locations by our global customers and regulators, ensure not only our level of compliance but also inform us where do we stand to further elevate our EHS performance for betterment of organisation and society at large.

During the year, all our manufacturing sites remained compliant with applicable EHS regulations. Reuse & recycle of natural resources is one of our key objectives. We have developed adequate infrastructure to treat waste water and reused it to explicated distinctive green belt and mature exotic trees across the various units.

We have undertaken numerous initiatives to enhance safety standards at our manufacturing sites / office premises so that, our employees and all other Stakeholders feel safe while working with us. Most of our facilities have achieved various recognitions / certifications such as ISO-14001 & OHSAS-18001.

INSURANCE

The Company's plant, property, equipments and stocks are adequately insured against major risks. The Company also has appropriate liability insurance covers particularly for product liability and clinical trials. The Company has also taken Directors' and Officers' Liability Policy to provide coverage against the liabilities arising on them.

BUSINESS RISK MANAGEMENT

The Company has in place a Risk Management Framework for a systematic approach to control risks. The Risk Management process is appropriately handled by functional heads / business process owners. The Audit and Risk Management Committee (ARMC) discharges functions of Risk Management and Risk Minimization process. The details of the ARMC are provided under the Corporate Governance Report forming part of this Annual Report.

The key risks which can affect the profitability of the Company are identified by the Company in the Management and Discussion Analysis section of the Annual Report. As on date, the Company do not envisage risks which could threaten the existence of the Company.

SUBSIDIARIES

As of 31st March, 2016, the Company has 16 subsidiaries, out of which 4 are step down subsidiaries. All the said subsidiaries of the Company remained operational during the year.

During the year, UNM Foundation, a Section 8 company, under the Companies Act, 2013, was promoted and incorporated jointly with Torrent Power Limited during the year as joint venture company. Torrent Pharma Canada Inc, a subsidiary of the Company, was dissloved with effect from 10th December, 2015. Further, Zyg Pharma Private Limited, 100% equity of which was acquired during the year, was merged with the Company, vide the order dated 11th February, 2016 of the Hon'ble High Court of Gujarat, with an Appointed Date as 1st October, 2015. A statement containing salient features of the financial statements of each subsidiary, along with their financial position for the year, is provided under Note 37(a) of the Consolidated Financial Statements.

In addition to the above, the performance and future outlook of the subsidiaries has been discussed under the Management Discussion and Analysis section of the Annual Report.

DIRECTORS AND KEY MANAGERIAL PERSONNEL

(a) Board of Directors

The Board of Directors of the Company is led by the Executive Chairman and comprises eight other Directors as on 31st March, 2016, including one Whole time Director, five Independent Directors which includes one Woman Director as required under Section 149 (1) of the Companies Act, 2013 and two Non-Executive Directors (other than Independent Directors).

All the Independent Directors of the Company have furnished declarations that they meet the criteria of independence as prescribed under the Companies Act, 2013 and under Listing Regulations.

At the Annual General Meeting of the Company held on 27th July, 2015, the members approved the appointment of -

? Dr Chaitanya Dutt, Director (Research and Development) (holding DIN 00110312) as the Whole time Director of the Company for a period of three years effective from 1st January, 2015

? Smt Renu Challu (holding DIN 00157204) as an Independent Director of the Company for a period of three years effective from 27th July, 2015

Smt. Bhavna Doshi (holding DIN 00400508) had resigned from the Board with effect from 15th May 2015.

Shri Samir Mehta (holding DIN 00061903), Executive Chairman, retires by rotation at the ensuing Annual General Meeting and being eligible has offered himself for re-appointment.

The brief resume and other relevant documents of the Director being re-appointed are given in the Explanatory Statement to the Notice convening the Annual General Meeting, for your perusal.

(b) Meetings of Board of Directors

Regular meetings of the Board are held to review performance of the Company, to discuss and decide on various business strategies, policies and other issues. A calendar of Board / Committee meetings for the year is prepared and circulated to the Directors well in advance to enable them to plan their schedule for effective participation in the meetings. During the year, eight meetings of the Board of Directors were convened and held on 16th April, 2015, 15th May, 2015, 27th July, 2015, 8th October, 2015, 29th October, 2015, 4th February, 2016, 9th March, 2016 and 23rd March, 2016. The intervening gap between two consecutive meetings was not more than one hundred and twenty days. Detailed information on the meetings of the Board is included in the Corporate Governance Report which forms part of the Annual Report.

(c) Committees of the Board of Directors

In compliance with the requirement of applicable laws and as part of the best governance practice, the Company has following Committees of the Board as on 31st March, 2016:

i. Audit and Risk Management Committee

ii. Securities Transfer and Stakeholders Relationship Committee

iii. Nomination and Remuneration Committee

iv. Corporate Social Responsibility Committee

The details with respect to the aforesaid Committees forms part of the Corporate Governance Report.

(d) Appointment of Directors

(i) Criteria for Appointment of Directors

The Board of Directors of the Company have identified following criteria for determining qualification, positive attributes, and independence of Directors:

1) Proposed Director ("Person") shall meet all statutory requirements and should:

? possess the highest ethics, integrity and values;

? not have direct / indirect conflict with present or potential business / operations of the Company;

? have the balance and maturity of judgment;

? be willing to devote sufficient time and energy;

? have demonstrated high level of leadership and vision, and the ability to articulate a clear direction for an organization;

? have relevant experience (in exceptional circumstances, specialization / expertise in unrelated areas may also be considered);

? have appropriate comprehension to understand or be able to acquire that understanding o Relating to Corporate Functioning

o Involved in scale, complexity of business and specific market and environment factors affecting the functioning of the Company.

2) The appointment shall be in compliance with the Board Diversity Policy of the Company.

(ii) Process for Identification / Appointment of Directors

? Board members may (formally or informally) suggest any potential person to the Chairman of the Company meeting the above criteria. If the Chairman deems fit, necessary recommendation shall be made by him to the Nomination and Remuneration Committee (NRC).

? Chairman of the Company can himself also refer any potential person meeting the above criteria to the NRC.

? NRC delibrate the matter and recommend such proposal to the Board. Board considers such proposal on merit and decide suitably.

(e) Familiarization Programme of Independent Directors

The Independent Directors have been updated with their roles, rights and responsibilities in the Company by specifying them in their appointment letter alongwith necessary documents, reports and internal policies to enable them to familiarise with the Company's procedures and practices. The Company has through presentations at regular intervals, familiarised and updated the Independent Directors with the strategy, operations and functions of the Company and the Pharmaceutical Industry as a whole. Site visits to various plant locations are organized for the Directors to enable them to understand the operations of the Company. They were regularly updated with the changes in the regulatory environment having significant impact on the operations of the Company. During the FY 2015-16 the Company has conducted 13 programmes for familiarizing the Directors for a total duration of 9 hours and 30 minutes. The details of such familiarization programmes for Independent Directors are posted on the website of the Company and can be accessed at <http://www.torrentpharma.com/pdf/bod/Familiarisation_> Program_of_Independent_Directors.pdf.

(f) Board Evaluation

The Evaluation of Board, its Committees, Individual Directors (Independent and Non Independent Directors) and Chairperson was carried out as per the process and criteria laid down by the Board of Directors based on the recommendation of the Nomination and Remuneration Committee:

? The obtaining and consolidation of feedback from all Directors for the evaluation of the Board and its Committees, Individual Directors (i.e. Independent and Non Independent Directors), were co-ordinated by the Chairman of the Board and the feedback received was discussed in the meeting in case of evaluation of the Board and Committee and was discussed with Individual Directors in case of their evaluation.

? The evaluation of Chairperson was co-ordinated by the Chairman of the Independent Directors meeting.

(g) Key Managerial Personnel

There was no change in the Key Managerial Personnel during the year under review.

(h) Directors' Responsibility Statement

In terms of Section134(3)(c) of the Companies Act, 2013, in relation to financial statements of the Company for the year ended 31st March, 2016, the Board of Directors state that:

i. the applicable Accounting Standards have been followed in preparation of the financial statements and there are no material departures from the said standards;

ii. reasonable and prudent accounting policies have been used in preparation of the financial statements and that they have been consistently applied and that reasonable and prudent judgments and estimates have been made in respect of items not concluded by the year end, so as to give a true and fair view of the state of affairs of the Company as at 31st March, 2016 and of the profit for the year ended on that date;

iii. proper and sufficient care has been taken for maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013, for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

iv. the financial statements have been prepared on a going concern basis;

v. proper internal financial controls were in place and were adequate and operating effectively; proper systems to ensure compliance with the provisions of applicable laws were in place and were adequate and operating effectively.

REMUNERATION

(a) Remuneration Policy

The Company has formulated following policy relating to the remuneration for the Directors, Key Managerial Personnel and other employees of the Company. The salient features of this policy are as under:

1. Components of Remuneration

1.1. Fixed Pay comprising of Basic Salary, HRA, Car Allowance (applicable to General Manager and above employees),  Conveyance Allowances / Reimbursement, Company's Contribution to Provident Fund, Superannuation Fund, Gratuity, etc.

1.2. Variable Pay which is either in the form of :

(i) Commission to Managing Directors

(ii) Commission to Whole - time Directors for special one-time reward

(iii) Performance Based Pay to General Managers and above (upto 20% of Cost to Company (CTC)), based on unit performance grades

(iv) One time reward for identified employees, given in exceptional cases to employees who undertake tasks which go beyond their normal call of duties and play a crucial role in success of an event.

1.3. Retention Pay: In case where stability is an issue, part of the CTC is kept as retention pay which is being paid after 3 years or more.

2. Annual Appraisal Process:

2.1. Annual Appraisals are conducted following which annual increments and promotions in deserving cases are decided once in a year based on:

(i) Employees self-assessment

(ii) Assessment of Immediate Superior and

(iii) Assessment of Head of Department

2.2. The increments as decided for a particular financial year are paid during the subsequent financial year. e.g. the performance appraisal of an employee for the FY 2014-15 is conducted in FY 2015-16 and his / her salary rise in FY 2015-16 reflects his performance for FY 2014-15.

2.3. Performance Based Pay is also based on annual appraisal process

2.4. Annual increment consist of

(i) Economic Rise : Based on All India Consumer Price Index published by the Government of India or Internal survey wherein inflation on commonly used items is calculated

(ii) Performance Rise : Based on Industry and overall business scenario and factoring the following aspects:

1) Company's performance vis-a-vis the industry

2) Unit Performance* (Grades ranging from A+ to C-. Higher the grades, higher the rating)

3) Individual Performance / track record including care for health / balance between quality of work and family life.

*Unit Performance is carried out based on various financial and non-financial parameters (also used for working out overall ceiling at unit level and performance based pay) such as

a) Comparison of Company's Revenue and Profit growth with competition.

b) Employee Cost.

c) Return on Equity.

d) Production, Quality and Regulatory compliance.

Unit: Domestic and International Operations, Manufacturing, Research & Development and Corporate.

2.5. Promotion Rise (Other than Managing Directors)

(b) Criteria for Remuneration to Non Executive Directors (NEDs):

1. The payment of commission to the Directors of the Company who are neither in the whole time employment nor Managing Director(s) (NEDs) is approved by the shareholders of the Company. The Board or its Committee specifically authorised for this purpose, determines the manner and extent upto which the commission is paid to the NEDs in accordance with the shareholders' approval. The commission is determined based on the participation of the Directors in the meetings of Board and / or Committees thereof, as well as on industry practice, performance of the Company and contribution by the Directors, etc.

2. Payment of Commission to be made annually on determination of profit

3. Commission as per above criteria is subject to the condition that total commission paid to all Directors (other than Managing Director or Whole-time Director) including service tax thereon shall not exceed the limit of 1% of net profit in a financial year as laid down under the provisions of Section 197(1) of the Companies Act, 2013 read with Section 198 of the said Act.

4. Independent Directors will be reimbursed for all the expenses incurred for attending any meeting of the Board or Committees thereof, and which may arise from performance of any special assignments given by the Board.

1) The rise in case of Shri Sudhir Mehta and Shri Samir Mehta should be viewed considering the fact that the rise in the profit before tax of the Company is 151.49% on Consolidated basis and 196.61% on Standalone basis.

(2) The percentage increase in remuneration including payment of a one-time additional commission to Independent

Directors namely Shri Shailesh Haribhakti, Shri Haigreve Khaitan, Shri Pradeep Bhargava, and Prof. Ashish Nanda is 237.93%, 223.81%, 176.47% and 33750% (not comparable as he was Director during part of the year during  2014-15) respectively.

(3) Has been appointed in 2015-16, hence % increase cannot be calculated.

(4) The percentage increase in remuneration including the arrears of salary and leave encashment paid during the last year and onetime commission for the year is 14.73%.

(5) The percentage increase in remuneration including onetime reward, performance pay and leave encashment pertaining to accumulated leave of earlier years is 10.84%.

(6) The percentage increase in remuneration is excluding onetime reward, performance pay and leave encashment pertaining to accumulated leave of earlier years.

$ Remuneration of INEDs is based on the presence and meetings as well as their membership in Committees of Board  of Directors.

* Remuneration does not include premium for group personal accident and group mediclaim policy

3. The percentage increase in the median remuneration of employees in the financial year under review is 16.01%. The unionized employees whose remuneration is determined based on negotiations have been excluded for this purpose.

4. The Company has 10892 employees on the rolls of Company as on 31st March, 2016.

5. The Consolidated Profit Before Tax of the Company increased by 151.49% for the year under review while it increased by 196.61% on a Standalone basis. For the same period the overall increase in remuneration of employees was 16.12%. During the financial year 2015-16, the Company had earned an exceptional profit on account of lower than anticipated competition in one of its products being marketed in US. This profit was not reflective of normal business operations and might not be sustainable. However, it may please be noted that the increase in remuneration to employees in the year was given based on the performance of the previous year i.e. 2014-15. Of course, any increase has to be calibrated based on the individual merit and the economical situation prevailing in the market such as inflation, availability of the required talent, the status of the relevant industry, etc.

6. The rise in the remuneration of Shri Samir Mehta is to be viewed in the context of the factors mentioned under clause 8 below. The increase in remuneration of Dr. Chaitanya Dutt, Whole time Director, the Chief Financial Officer and the Company Secretary were in line with the general % increase for all employees of the Company.

8. The percentage increase already made in the salaries of employees other than the managerial personnel in the last financial year was 16.12%.

The Pharma sector has been witnessing enormous opportunities as well as challenges. Over the last couple of years, the regulatory scrutiny faced by the Indian pharma companies, particularly from developed markets such as US, has not only questioned the credibility of the companies but also their ability to sustain current levels of operations and achieve the future growth targets. At the same time, the focus on generisisation in the pharma sector, emanating from the needs of Governments across the world to reduce healthcare costs, has thrown open greater opportunities for the sector. The Company continues to grow both in size and stature as is evident from the enhanced performance levels and blemish less regulatory record under the leadership of Shri Samir Mehta.

9. The variable component of remuneration is Commission which is paid to Whole-time Directors / Managing Directors. Such Commission is paid in lieu of full or part of their annual remuneration. For Managing Directors, the amount of commission is generally based on the performance of the Company whereas for the Whole-time Directors, who are generally entitled to salary and perquisites, the amount of commission is determined based on any specific recognizable contribution / event / happening in the relevant financial year for which the concerned Whole - time Director is principally responsible as well as instrumental.

10. There were no employees who are not Directors but receive remuneration in excess of the highest paid Director during the year.

11. The remuneration paid is as per the remuneration policy of the Company.

(d) Remuneration to Managerial Personnel

The details of remuneration paid to the Managerial Personnel forms part of the Corporate Governance Report.

(e) Particulars of Employees

The information required under Section 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, forms part of this Report as Annexure-C. However, as per the provisions of Section 134 and Section 136 of the Companies Act, 2013, the Reports and Accounts are being sent to the Members excluding the information on employees' particular which are available for inspection by the Members at the Registered Office of the Company during business hours on working days of the Company up to the date of ensuing Annual General Meeting. Any Member interested in obtaining a copy of such statement may write to the Company Secretary at the Registered Office of the Company.

AUDITORS

(a) Statutory Auditors

The term of appointment of M/s. Deloitte Haskins & Sells, Ahmedabad (Firm Registration No. 117365W), Statutory Auditors of the Company will expire at the ensuing Annual General Meeting. The Company has received a certificate from them about their eligibility for appointment as Statutory Auditors in accordance with Rule 4 of the Companies (Audit and Auditors) Rules, 2014 read with third proviso of Section 139(2) of the Companies Act, 2013. The Board has recommended to the shareholders their appointment for the year 2016-17 at the ensuing Annual General Meeting.

(b) Cost Auditors

The Company has appointed M/s. Kirit Mehta & Co., Cost Accountants, Mumbai (Firm Registration No. 000353) as the Cost Auditors of the Company for audit of cost accounting records of its activities (Formulation & Bulk Drugs activities) for the financial year ended 31st March, 2016. Further, the Cost Audit Report to the Central Government for the financial year ended 31st March, 2015 was filed on 30th September, 2015, within the statutory timeline. The Board of Directors has, on recommendation of the Audit and Risk Management Committee, at its meeting held on 23rd May, 2016 appointed M/s. Kirit Mehta & Co. as the Cost Auditor of the Company for audit of cost accounting records of its activities (Formulation & Bulk Drugs activities) for the financial year 2016-17 and has also fixed their remuneration. In terms of Section 148(3) of the Companies Act, 2013 and Rule 14 of the Companies (Audit & Auditors) Rules, 2014, it is proposed by the Board to recommend the remuneration approved in its meeting, for ratification by the shareholders in the ensuing Annual General Meeting of the Company.

(c) Secretarial Auditor

The Board, pursuant to Section 204 of the Companies Act, 2013 read with Rule 9 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, including any statutory modification(s) or re-enactment thereof, had appointed M/s. M. C. Gupta & Co., Company Secretaries, as the Secretarial Auditors of the Company to conduct the Secretarial Audit as per the provisions of the Companies Act, 2013 for the year 2015-16 (Apr-15 to Mar-16).

M/s. M. C. Gupta & Co., Company Secretaries have carried out the Secretarial Audit of the Company for FY 2015-16 and the Report of Secretarial Auditors in Form MR-3, is annexed with this Report as Annexure-D. There were no qualification / observations in the report.

CORPORATE GOVERNANCE

As required by Regulation 34 read with Schedule V of the Listing Regulations, a separate Report on Corporate Governance forms part of the Annual Report. The report on Corporate Governance also contains certain disclosures required under the Companies Act, 2013. A certificate from the Statutory Auditors of the Company regarding compliance of conditions of Corporate Governance as stipulated under Clause E of Schedule V of the Listing Regulations forms part of this report as Annexure - E.

EXTRACT OF ANNUAL RETURN

As required under the provisions of Section 134(3)(a) and of Section 92(3) of the Companies Act, 2013 read with Rule 12 of the Companies (Management and Administration) Rules, 2014, the extract of annual return in Form No. MGT-9 forms part of this report as Annexure-F.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, ETC.

A statement containing the necessary information on Conservation of energy, Technology absorption and Foreign exchange earnings and outgo stipulated under Section 134(3)(m) of the Companies Act, 2013 read with Rule 8 of the Companies (Accounts) Rules, 2014 is annexed to this report as Annexure-G.

APPRECIATION AND ACKNOWLEDGEMENTS

Your Directors appreciate the trust reposed by the medical fraternity and patients in the Company and look forward to their continued patronage. The Directors are also grateful and pleased to place on record their appreciation for the excellent support, guidance and cooperation extended by the Government of India, Government of Gujarat, Government of Himachal Pradesh, Government of Sikkim, Central and State Government Bodies and Authorities, Financial Institutions and Banks. The Board also expresses its appreciation of the understanding and support extended by the shareholders and the commitment shown by the employees of the Company.

For and on behalf of the Board

Samir Mehta

Executive Chairman

 Place : Ahmadabad

Date : 23rd May, 2016

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