TO THE MEMBERS OF AARTI DRUGS LIMITED
The Directors have pleasure in presenting the Thirty Second Annual Report together with the Audited Financial Statements along with the Report of the Auditors for the year ended 31st March, 2017.
COMPANY’S FINANCIAL RESULTS
Net Sales/ Income from Operations
Other Operating Income
Total Income from Operations
Profit Before Depreciation, Amortization, Interest and Tax Expenses
Depreciation & Amortization
Profit/(Loss) before other income
Profit/(Loss) Before Tax
Less: Provision for taxation - Current
- Earlier Year
Profit After Tax
Add: Surplus brought forward
Profit available for appropriation
Transfer to General Reserve
1st Interim Dividend
2nd Interim Dividend
3rd Interim Dividend
Tax on Dividend
Balance carried to Balance Sheet
During the financial year 2016-17, the Company has bought back 3,60,000 (Three Lacs Sixty Thousand) fully paid - up Equity shares of face value of Rs.10/- (Rupees Ten only) each representing up to 1.49% of the total no. of Equity shares at a price of Rs.750/- per Equity share (including premium of Rs.740/- per share) for an aggregate amount of Rs.27,00,00,000/- (Rupees Twenty Seven Crores only), on a proportionate basis through the tender offer using stock exchange mechanism in accordance with the provisions of the Companies Act, 2013 and the SEBI (Buyback of Securities) Regulations, 1998. Post Buy-back of shares, the paid-up Equity Share Capital as on 31st March, 2017 was Rs.23,85,71,000/-.
The Company has neither issued shares with differential rights as to dividend, voting or otherwise nor issued sweat equity shares. There is no scheme for employee stock option or provision of money for shares of the Company to employees or Directors of the Company.
Your Directors recommend a dividend of 10% i.e. Re. 1/- per Equity Share of Face Value of Rs.10/- each aggregating to Rs.2,38,57,100/-.
As per Regulation 43A of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, top five hundred listed entities based on the market capitalization are required to formulate Dividend Distribution Policy. The listed entities other than top five hundred listed entities based on market capitalization may formulate their Dividend Distribution Policies on a voluntary basis. Accordingly, the Company has formulated its Dividend Distribution Policy and the details of which are available on the Company’s website www.aartidrugs.com.
During the year under review, Gross Sales of the Company is Rs.1185.93 Crores (Previous Year: Rs.1166.10 Crores) registering a growth of 1.70%.
The Company has achieved Export Sales of Rs.422.95 Crores as against Rs.389.19 Crores for the last year, registering a growth of 8.67%.
EBITDA has been Rs.177.71 Crores (Previous Year: Rs.171.70 Crores), registering a growth of 3.50%. PAT has been Rs.74.24 Crores (Previous Year Rs.66.29 Crores), registering a growth of 11.99%.
INTERNAL FINANCIAL CONTROLS AND THEIR ADEQUACY
Your Company’s internal control systems commensurate with the nature and size of its business operations. Your Company has maintained a proper and adequate system of internal controls. This ensures that all Assets are safeguarded and protected against loss from unauthorized use or disposition and that the transactions are authorized, recorded and reported diligently.
The Audit Committee and M/s. Raman S. Shah & Associates, Chartered Accountants, Independent Internal Auditors, regularly review internal financial controls and operating systems and procedures for efficiency and effectiveness. The Internal Auditor’s Reports are regularly reviewed by the Audit Committee of the Board.
DIRECTORS’ RESPONSIBILITY STATEMENT
As required u/s. 134(3)(c) of the Companies Act, 2013, your Directors hereby state that-
a) in the preparation of the Annual Accounts for the financial year ended 31st March, 2017, the applicable accounting standards have been followed. There are no material departures from the applicable accounting standards;
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 as on 31st March, 2017 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 the Companies Act, 2013 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;
d) the Directors had prepared Annual Accounts on a going concern basis;
e) the Directors had laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively and
f) the Directors had devised proper systems to ensure compliance with the provisions of all applicable laws and such systems were adequate and were operating effectively.
BOARD OF DIRECTORS
Aarti Drugs Limited (ADL) Board presently consists of 12 Directors out of which 7 (Seven) are Non-Executive. Out of 7 (Seven) Nonexecutive Directors 6 (Six) Directors are Independent Directors.
Retirement by Rotation
In accordance with the provisions of the Companies Act, 2013 and the Articles of Association of the Company, Shri Harshit M. Savla (DIN: 00005340), Jt. Managing Director and Shri Prakash M. Patil (DIN: 00005618), Chairman, Managing Director & CEO of the Company retires by rotation and being eligible have offered themselves for re-appointment as Directors.
The Independent Directors hold office for a fixed term up to 31st March, 2019 and are not liable to retire by rotation. In accordance with Section 149(7) of the Companies Act, 2013, each Independent Director has given a written declaration to the Company confirming that he/she meets the criteria of independence as mentioned under Section 149(6) of the Companies Act, 2013 and SEBI (Listing Obligations & Disclosure Requirements) Regulations, 2015.
Number of Meetings of the Board
The Board of Directors met 5 (Five) times in the year 2016 - 17. The details of Board and Committee Meeting and the attendance of the Directors at such meetings are provided in the Corporate Governance Report.
During the year, the Board evaluated its performance and as well as that of its Committees and Individual Directors, including the Chairman of the Board. Separate exercise was carried out to evaluate the performance of Non-Independent Directors including the
Chairman of the Board who were evaluated on parameters such as Key achievements, Short term and long term targets, challenges faced, Implementation of Strategic decisions, organizational success, participation and attendance in Board and Committee Meetings etc.
The evaluation of the Independent Directors was carried out by the entire Board and that of the Chairman and Non-Independent Directors was carried out by the Independent Directors.
Independent Directors were evaluated on the parameters such as attendance and participations in the meetings and timely inputs on the minutes of the meetings, adherence to ethical standards & code of conduct of the Company, disclosure of non-independence, as and when exists and disclosure of interest, interpersonal relations with other Directors and Management, understanding of the Company and the external environment in which it operates and contribution to strategic direction, safeguarding interest of whistleblowers under vigil mechanism and safeguard of confidential information.
The Directors were satisfied with the evaluation results, which reflected the overall engagement of the Board and its Committees with the Company.
FAMILIARIZATION PROGRAMME FOR INDEPENDENT DIRECTORS
The Chairman and Managing Director have one to one discussion with all Directors to familiarize them with the Company’s operations. Further the Company has put in place a system to familiarize the Independent Directors about the Company, its products, business and on-going events relating to the Company. The details of such familiarization programmes for Independent Directors are posted on the website of the Company viz. www.aartidrugs.co.in/images/stories/details%20of%20familirisation%20programme.pdf.
KEY MANAGERIAL PERSONNEL
Shri Prakash M. Patil, Chairman, Managing Director & Chief Executive Officer, Shri Rashesh C. Gogri, Managing Director, Shri Harshit M. Savla, Jt. Managing Director, Shri Harit P. Shah, Whole-time Director, Shri Uday M. Patil, Whole-time Director, Shri Adhish P. Patil, Chief Financial Officer and Shri Vibhav S. Ranade, Company Secretary & Compliance Officer of the Company are the Key Managerial Personnel of the Company as on the date of this report.
DETAILS RELATING TO DEPOSITS COVERED UNDER CHAPTER V OF COMAPANIES ACT, 2013
Your Company has not accepted any deposits within the meaning of Section 73 of the Companies Act, 2013 and the Companies (Acceptance of Deposits) Rules, 2014 and no amount on account of principal or interest on public deposits was outstanding as on the date of the balance sheet.
PARTICULARS OF LOANS, GUARANTEES AND INVESTMENTS
Details of Loans, Guarantees and Investments covered under the provisions of Section 186 of the Companies Act, 2013, are given in the notes to the Financial Statements.
PARTICULARS OF CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES
All related party transactions made during the financial year 2016-17 were on arm’s length basis and were in the ordinary course of business. All transactions with related parties are placed before the Audit Committee as also the Board for approval. Prior omnibus approval of the Audit Committee is obtained for the transactions which are of a foreseen and repetitive nature. The transactions entered into pursuant to the omnibus approval so granted are specifically certified by Statutory Auditors and statement specifying the nature, value and terms & conditions of all related party transactions is placed before the Audit Committee and the Board of Directors for their approval on a quarterly basis. The statement is supported by a certification from the Jt. Managing Director and the Chief Financial Officer (CFO). The details of related party transactions are provided in the accompanying financial statements.
The Policy on Related Party Transactions as approved by the Board is available on the Company’s website and can be accessed through www.aartidrugs.com
All transactions entered into with related parties during the year were on an arm’s length basis and were in the ordinary course of business. Accordingly, there are no transactions that are required to be reported in Form AOC-2.
EXTRACT OF ANNUAL RETURN
As required by Section 92(3) of the Companies Act, 2013 and rules framed there under, the extract of the Annual Return in Form MGT-9 is enclosed as "Annexure- A”.
The Company has one non - material subsidiary, namely, Pinnacle Life Science Private Limited. The Company has attached along with its financial statement, a separate statement containing the salient features of the financial statement of the said subsidiary in ”Form AOC-1” which is annexed as "Annexure - B”.
CONSOLIDATED FINANCIAL STATEMENTS
As stipulated under the provisions of the SEBI (Listing Obligations & Disclosure Requirement), Regulations, 2015, the Consolidated Financial Statements have been prepared by the Company in accordance with the applicable Accounting Standards. The Audited Consolidated Financial Statement together with Auditors’ Report form part of the Annual Report.
MATERIAL CHANGES AND COMMITMENTS AFFECTING THE FINANCIAL POSITION
There are no material changes and commitments, affecting the financial position of the Company which have occurred between the end of the financial year of the Company to which the financial statement relate and the date of the report.
BUSINESS RISK MANAGEMENT
During the year under review, the Company has identified and evaluated elements of business risk. Business risk, inter-alia, further includes fluctuations in foreign exchange, Raw Material Procurement risk, Environmental & Safety Risk, Working Capital Risk, Market Risk and Business Operations Risk. The risk management framework defines the risk management approach of the Company and includes periodic review of such risk and also documentation, mitigating controls and reporting mechanism of such risks. The Board of Directors and senior management team currently assess the operations and operating environment to identify potential risks and take necessary mitigation actions.
DISCLOSURES RELATED TO COMMITTEES & POLICIES
1. Audit Committee
The Audit Committee of Directors is constituted as per the provisions of Section 177 of the Companies Act, 2013. The Composition of the Audit Committee is in conformity with the provisions of the said section and SEBI (Listing Obligations & Disclosure Requirements) Regulations, 2015. The composition & terms of reference of Audit Committee of the Board of Directors of the Company is disclosed in the report of Corporate Governance, which forms part of this report.
During the year under review, the Board of Directors of the Company had accepted all the recommendations of the Audit Committee.
2. Nomination & Remuneration Committee
The Nomination & Remuneration Committee of Directors is constituted in accordance with the requirements of Section 178 of the Companies Act, 2013.
The Company strives to maintain an appropriate combination of executive, non-executive and Independent Directors. In terms of provisions of Section 178 of the Companies Act, 2013, the Nomination and Remuneration Committee considers and recommends the Board on appointment and remuneration of Directors and Key Managerial Personnel and the Company’s Nomination and Remuneration Policy is enclosed as "Annexure - C”.
3. Stakeholders Relationship Committee
Pursuant to Section 178 of the Companies Act, 2013, the Board of Directors has constituted the Stakeholders Relationship Committee, details of which are given in the Corporate Governance Report.
The Company Secretary acts as the secretary to the Committee.
4. Corporate Social Responsibility Committee
As per the provisions of Section 135 of the Companies Act, 2013 read with Companies (Corporate Social Responsibility Policy) Rules, 2014, the Board of Directors has constituted a Corporate Social Responsibility (CSR) Committee and the Board of Directors of the Company has approved CSR Policy based on the recommendations of the CSR Committee.
The CSR Policy is available on the Company’s website and can be accessed through www.aartidrugs.com.
Your Company actively contributes to the following segments-
i. Education & Skill Development
iv. Social Welfare
v. Promotion of Sports and allied trainings
i. Education & Skill Development
Your Company through Aarti Foundation and various other NGO’s has been doing work in this segments. In this year, the Company has provided furniture to School located in the state of Maharashtra. The Company has also actively contributed towards Literacy Education Programmes during the year under review.
Your Company through Aarti Foundation is in process of developing Medical College in the State of Gujarat. Also the Company has provided various infrastructure facilities to the Hospitals in the State of Maharashtra.
Your Company has entered into an agreement with The Governor, Government of Maharashtra through Deputy Conservator of Forest, Dahanu Forest Division, Dahanu through local NGO M/s. Sudha Pratishthan, Masvan, Palghar to participate and assist Government in implementing Afforestation Programme in the degraded forest land of Dahanu Forest Division spread over 100 Hectares Government Land over a period of 7 years. During the year under review, the Company has successfully completed plantation programme of 60,000 trees in the Palghar District.
iv. Social Welfare
During the year under review, your Company has actively contributed for issues pertaining to Social Welfare in the District Palghar, Maharashtra.
v. Promotion of Sports and allied trainings
In order to impart trainings to promote rural sports, the Company has conducted various sports activities in the State of Sikkim during the year under review.
In addition to above, your Company participates into a spectrum of CSR activities evolving around the general up-liftment of the economically backward class of people. Your Company also makes active contribution to various local NGOs to assist in the relief measures in the affected areas.
During the year under review, the Company was required to spend Rs.185.11 Lakhs on CSR activities. However, the Company has spent Rs.185.07 Lakhs on CSR activities. There was a slight difference between estimated expenditure and actual expenditure on account of change in project’s cost estimation. The Company is constantly evaluating various projects to fulfill its obligations towards the society.
The Annual Report on CSR activities is annexed as "Annexure - D” and forms an integral part of the Report.
5. Vigil Mechanism / Whistle Blower Policy
The Company has a vigil mechanism/whistle blower policy to deal with instance of fraud and mismanagement. The details of the said policy is explained in the Corporate Governance Report and also posted on the website of the Company, viz. www. aartidrugs.com
SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS
There are no significant material orders passed by the Regulators/Courts which would impact the going concern status of the Company and its future operations.
A separate section on Corporate Governance practices followed by the Company, together with a certificate from the Company’s Auditors confirming compliance, forms a part of this Annual Report, as per SEBI (Listing Obligations & Disclosure Requirements), Regulations, 2015.
MANAGEMENT DISCUSSION AND ANALYSIS
Management Discussion and Analysis Report as required under the provisions of SEBI Regulations, 2015 is annexed hereto forming part of this Report.
CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO
The information on conservation of energy, technology absorption and foreign exchange earnings and outgo as stipulated in Section 134(3)(m) of the Companies Act, 2013 and rules framed there under is enclosed herewith as "Annexure - E”.
At the Annual General Meeting held on 11th July, 2014, M/s. Gokhale & Sathe, Chartered Accountants (Firm Regn. No. 103264W) was appointed as Statutory Auditors of the Company to hold office till the conclusion of the Thirty Second Annual General Meeting. Hence, M/s. Gokhale & Sathe will retire as Company’s Auditors at the conclusion of the ensuing 32nd Annual General Meeting.
The Audit Committee of the Company has proposed and the Board of Directors of the Company has recommended appointment of M/s. GBCA & Associates (Firm Registration No. 103142W) as the new Statutory Auditors of the Company to hold office as such from the conclusion of 32nd Annual General Meeting to the conclusion of 33rd Annual General Meeting in terms of provisions of Section 139(2) of the Companies act, 2013. M/s. GBCA & Associates are proposed to be appointed for a period of one year i.e. from the conclusion of 32nd Annual General Meeting till the conclusion of 33rd Annual General Meeting of the Company. M/s. GBCA & Associates have informed the Company that their appointment, if made, would be within the limits prescribed under Section 141 of the Companies Act, 2013. M/s. GBCA & Associates have confirmed that they have subjected themselves to the peer review process of the Institute of Chartered Accountants of India (ICAI) and hold valid certificates issued by the Peer Review Board of the ICAI. M/s. GBCA & Associates have also furnished a declaration in terms of Section 141 of the Companies Act, 2013 that they are eligible to be appointed as auditors and that they have not incurred any disqualification under the Companies Act, 2013.
There are no qualifications, reservation or adverse remarks or disclaimers made by the Statutory Auditors in their Audit Report.
Mr. Girikrishna S. Maniar, the Cost Auditor was re-appointed by the Company under Section 148 of the Companies Act, 2013. The due date for filing the Cost Audit Reports in XBRL mode for the financial year ended 31st March, 2016 was 30th September, 2016 and the Cost Audit Report was filed on 3rd November, 2016. The due date for filing the Cost Audit Reports for the financial year ended 31st March, 2017 is 27th September, 2017.
On the recommendation of Audit Committee, the Board of Directors in its meeting held on 23rd May, 2017 has appointed GMVP & Associates LLP, Cost Accountants as Cost Auditor of the Company for the Financial Year 2017 - 18. The Company is seeking the ratification of the remuneration to be paid to GMVP & Associates LLP, Cost Auditor of the Company in respect of Cost Audit for the financial year ended 31st March, 2018 as mentioned in the Notice convening AGM.
The Secretarial Audit Report for the financial year ended 31st March, 2017 issued by CS Sunil M. Dedhia of Sunil M. Dedhia & Co., Practicing Company Secretaries, Secretarial Auditor is annexed as "Annexure - F”. In connection with the auditor’s observation in the report, it is clarified that the non - filing of e-forms for board resolutions and changes in shareholding with Ministry of Corporate Affairs (MCA) are technical lapses that occurred inadvertently and necessary steps are being taken to file the same.
PARTICULARS OF EMPLOYEES
Disclosure pertaining to the remuneration and other details as required under Section 197(12) of the Companies Act, 2013 read with rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is enclosed as "Annexure - G”. However, as per the provisions of the section 136(1) of the Companies Act, 2013, this Report is sent to the shareholders excluding the said information. Any shareholder interested in obtaining such particulars may write to the Company Secretary at the Registered Office of the Company.
HUMAN RESOURCES ENVIRONMENT & SAFETY
Your Company recognizes its human resources as one of its prime & critical resources. The relations between the Management and the Staff Members remained very cordial throughout the year under review. As on 31st March, 2017 the Company had 1181 permanent employees at its manufacturing plants and administrative office.
The Company has constituted an Internal Complaint Committee pursuant to the provisions of Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 for prevention, prohibition or redressal of complaints/grievances on the sexual harassment of women at work places.
Your Directors further states that during the year under review, there were no cases filed pursuant to the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013.
Your Company has adopted green initiative to minimize the impact on the environment. The Company has been circulating the copy of the Annual Report in electronic format to all those members whose email addresses are available with the Company. Your Company appeals other Members also to register themselves for receiving Annual Report in electronic form.
We place on record our sincere Green appreciation to the employees of the Company at all levels for their co-operation and dedicated services. We also thank all our customers and suppliers who are always co-operative.
We also express our sincere thanks to Bankers, Financial Institutions and the Shareholders for their continued support.
For and on behalf of the Board of Directors
of Aarti Drugs Limited
Prakash M. Patil
Place: Mumbai Chairman & Managing Director
Date: 23rd May, 2017 DIN: 00005618