Alkem Laboratories Limited
The Directors are pleased to present their 43rd Annual Report on the business and operations together with the Audited Financial Statements of the Company for the year ended 31st March, 2017. Consolidated performance of the Company and its subsidiaries has been referred to wherever required.
(Rs. in Million)
Year ended 31st March, 2017 31st
Year ended March, 2016
Year ended 31st March, 2017 31st
Year ended March, 2016
Income from Operations
Profit before Interest, Depreciation and Tax
Profit before tax
Less: Provision for Taxation (net)
Profit after tax and before Non-controlling Interest
Less: Non-controlling Interest
Profit for the year
Other comprehensive income
Other Comprehensive income attributable to Non-Controlling Interest
Total comprehensive income attributable to owners of the Company
Balance of other equity attributable to owners of the Company / Parent - opening balance
Less: Interim Dividend
Less: Dividend Distribution Tax
Employee Compensation Expenses
Less: Decrease in equity on Acquisition of additional stake in subsidiary
Balance of other equity attributable to owners of the Company / Parent - closing balance
ADOPTION OF INDIAN ACCOUNTING STANDARDS (IND AS)
Beginning 1st April, 2016, the Company has, for the first time, adopted Indian Accounting Standard (Ind AS) with a transition date of 1st April, 2015. Accordingly, the financial statements have been prepared in compliance with Ind AS as notified by the Ministry of Corporate Affairs and prescribed under Section 133 of the Companies Act, 2013 (hereinafter referred to as “the Act”) read with relevant rules made thereunder and other accounting pronouncements generally accepted in India. Accordingly, the figures for the corresponding year ended 31st March, 2016 have also been presented after incorporating the applicable Ind AS adjustments.
OVERVIEW OF FINANCIAL PERFORMANCE
During the financial year ended 31st March, 2017, the Company’s total revenue including other income was Rs.47,850.5 million on standalone basis as against Rs.42,023.2 million achieved in the previous year, registering a growth of 13.87%.
The export turnover of the Company during the financial year 2016-17 was Rs.7,242.0 million as against Rs.6,472.3 million achieved in the previous year registering a growth of 11.89%.
During the financial year ended 31st March, 2017, the Company achieved total revenue including other income of Rs.59,645.1 million on consolidated basis, as against a turnover of Rs.52,876.4 million achieved in the previous year, registering a growth of 12.80%.
During the financial year ended 31st March, 2017, Standalone Profit before interest, depreciation and tax increased by 2.42% at Rs.9,945.9 as against Rs.9,710.5 million in the previous year, whereas Consolidated Profit before interest, depreciation and tax increased by 1.65% at Rs.11,109.6 million as against Rs.10,929.6 million in the previous year.
During the financial year 2015-16, the Company had higher Other Income on account of Ind AS adjustment of real estate investments and consideration received from sale of some brands and trademarks.
Standalone Profit before tax was Rs.8,944.3 million, higher by 6.63% over the previous year and Consolidated Profit before tax was Rs.9,646.3 million, higher by 3.9 % over the previous year.
After providing for taxes, standalone net profit was Rs.8,831.6 million higher by 26.13 % over the previous year while the consolidated net profit after tax was Rs.8,920.3 million higher by 20.29% over the previous year.
During the financial year 2016-17, your Company declared and paid an interim dividend at Rs.6/- (Rupees Six only) per Equity Share of Rs.2/- (Rupees Two only) each, being 300% of paid up share capital on 11th November, 2016. In addition, your Directors are pleased to recommend payment of Rs.9/-(Rupees Nine only) per equity share of the face value of Rs.2/-(Rupees Two only) each as final dividend for the financial year 2016-17, for the approval of the shareholders at the ensuing Annual General Meeting (AGM). If approved, the total dividend (interim and final dividend) for the financial year 2016-17 will be Rs.15/- (Rupees Fifteen only) per equity share of the face value of Rs.2/- (Rupees Two only) each as against the total dividend of Rs.12.7/- (Rupees Twelve and Paisa Seven only) per equity share of the face value of Rs.2/- (Rupees Two only) each paid for the previous financial year.
As per the provisions of Regulation 43A of the SEBI (Listing Obligation and Disclosure Requirements) Regulations, 2015 (hereinafter referred to as “SEBI LODR Regulations”), top 500 listed companies based on the market capitalization are required to formulate Dividend Distribution Policy. In compliance with the said requirement, the Company has formulated its Dividend Distribution Policy, which is available on the Company’s website at http://www.alkemlabs.com/admin/ Photos/Policies/977928327Dividend distribution policy.pdf. The said Policy is also annexed to this Report as Annexure A.
TRANSFER TO RESERVES
The Company has not transferred any amount to the General Reserve for the financial year 2016-17.
The paid up Equity Share Capital of the Company as on 31st March, 2017 was Rs.239.1 million. The Company has neither issued shares with differential rights as to dividend, voting or otherwise nor issued shares to the employees or Directors of the Company, under any Scheme (including sweat equity shares).
The Company has not accepted any deposits from the public/ members under Section 73 of the Act, read with Companies (Acceptance of Deposits) Rules, 2014 during the year. There are no deposits which are outstanding as on 31st March, 2017. The Company has no deposits which are not in compliance with the requirements of Chapter V of the Act .
As on 31st March, 2017, the Company had 18 subsidiaries. The Company does not have any joint venture / associate company (ies) within the meaning of Section 2(6) of the Act.
None of the companies have become or ceased to be subsidiary, associates and joint ventures of the Company, during the year under review.
Pursuant to the first proviso to Section 129(3) of the Act and Rule 5 and Rule 8(1) of the Companies (Accounts) Rules, 2014, the salient features of financial statements, performance and financial position of each subsidiary is given in Form AOC-1 as Annexure B to this Report.
The Audited Financial Statements of the subsidiaries are available on the Company’s website at www.alkemlabs.com and are available for inspection by the Members at the Registered Office of the Company during business hours on all working days as required under Section 136 of the Act. Any Member desirous of obtaining a copy of the said financial statements may write to the Company Secretary at the Registered Office of the Company.
MANAGEMENT DISCUSSION AND ANALYSIS
A detailed report on the Management Discussion and Analysis is provided as a separate section forming part of this Report.
A detailed report on the Corporate Governance systems and practices of the Company is provided as a separate section along with a certificate from the Statutory Auditors conforming the Company’s compliance with the conditions of Corporate Governance, forming part of this Report.
BUSINESS RESPONSIBILITY REPORT
As stipulated under the SEBI LODR Regulations, the Business Responsibility Report, describing the initiatives taken by the Company from an environmental, social and governance perspective, is provided as a separate section forming part of this Report.
CORPORATE SOCIAL RESPONSIBILITY
The Company continues with its belief in operating and growing its business in a socially responsible way. The Company’s CSR framework drives its strategies and actions towards wider social concerns with focus on holistic development of its host community and immediate social and environmental surroundings qualitatively. During the financial year under review, the Company continued its efforts towards communities near its manufacturing facilities through its CSR initiatives in areas like education, vocational training for skill building and health & hygiene, thereby contributing towards the social and economic development of the communities in areas in which it operates.
Details about the Company’s CSR Policy and initiatives undertaken by the Company during financial year 2016-17 are outlined in the Report on CSR Activities annexed to this Report as Annexure C.
DIRECTORS AND KEY MANAGERIAL PERSONNEL Appointments
As per the provisions of Section 161 read with Section 149 of the Act and the Articles of Association of the Company, Dr. Dheeraj Sharma (DIN 07683375) was appointed as an Additional Director designated as Independent Director of the Company w.e.f. 26th May, 2017. Dr. Dheeraj Sharma shall hold office upto the date of the ensuing AGM. The Company has received notice in writing with requisite deposit from a member proposing the candidature of Dr. Dheeraj Sharma as an Independent Director of the Company.
Appropriate resolution for his appointment is included in the Notice of AGM for seeking approval of Members. The Directors recommend his appointment for your approval.
A brief resume and particulars relating to him are given in the Notice of AGM.
Mr. Mangaldas Chhaganlal Shah (DIN 01353574) resigned from the Board with effect from 17th May, 2017. The Board places on record its appreciation for his valuable contribution during his tenure as a Director of the Company.
Directors liable to Retirement by Rotation
Mr. Balmiki Prasad Singh (DIN 00739856) is liable to retire by rotation at the ensuing AGM pursuant to the provisions of Section 152 of the Act read with the Companies (Appointment and Qualification of Directors) Rules, 2014 and the Articles of Association of the Company and being eligible he has offered himself for re-appointment. Appropriate resolution for his re-appointment is included in the Notice of AGM for seeking approval of Members. The Directors recommend his re-appointment for your approval.
A brief resume and particulars relating to him are given in the Notice of AGM.
Key Managerial Personnel
Mr. Prabhat Agrawal, Chief Executive Officer, Mr. Rajesh Dubey, President and Chief Financial Officer and Mr. Manish Narang, President - Legal, Company Secretary and Compliance Officer are the Key Managerial Personnel of the Company in accordance with the provisions of Sections 2(51) and 203 of the Act read with Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014.
There has been no change in the Key Managerial Personnel during the financial year 2016-17.
The Independent Directors hold office for a fixed term of 5 (Five) years and are not liable to retire by rotation.
In accordance with the Section 149(7) of the Act, 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 Act and SEBI LODR Regulations.
The terms and conditions of the appointment of the Independent Directors are posted on Company’s website.
In compliance with the requirements of SEBI LODR Regulations, the Company has put in place a framework for Directors’ Familiarization Programme to familiarize them with their roles, rights and responsibilities as Directors, the working of the Company, nature of the industry in which the Company operates, business model etc. The details of the familiarization programmes conducted / sponsored during the year are explained in the Corporate Governance Report. The same are also available on the Company website athttp://www.alkemlabs. com/corporate-governance.
Annual Evaluation of Board’s Performance
Pursuant to the provisions of the Act and the SEBI LODR Regulations, the Board has carried out the annual performance evaluation of its own performance, the Directors individually as well as the evaluation of the working of its Committees. The criteria applied in the evaluation process is explained in the Corporate Governance Report.
The Independent Directors, at a separate meeting held on 29th March, 2017, evaluated performance of non-independent directors, performance of the Board as a whole and performance of the Chairpersons of the Company.
The Company follows a policy for selection and appointment of Directors, Senior Management and their remuneration, which is available on the Company’s website at http://www.alkemlabs. com/admin/Photos/Policies/516234455Nomination and Remuneration Policy.pdf. The said policy is annexed to this Report as Annexure D.
PARTICULARS OF EMPLOYEES
The disclosure pertaining to remuneration and other details as required under Section 197(12) of the Act read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is annexed to this Report as Annexure E.
Further a statement showing the names and other particulars of top ten employees in terms of remuneration drawn and of employees drawing remuneration in excess of the limits specified in Rule 5(2) and Rule 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 forms part of this Report. However, in terms of first proviso to Section 136(1) of the Act, the Annual Report and annual financial statements are being sent to the Members and others entitled thereto, excluding the aforesaid information. The said information is available for inspection for the Members at the Registered Office of the Company during the business hours on working days and also shall be provided to any Member on a written request to the Company Secretary.
NUMBER OF MEETINGS OF THE BOARD
The Board of Directors met 6 (Six) times during the financial year 2016-17. The details of the Board meetings and the attendance of Directors thereat are provided in the Corporate Governance Report, forming part of this Report.
In terms of requirements of Schedule IV of the Act, a separate meeting of Independent Directors was also held on 29th March, 2017 to review the performance of Non-Independent Directors (including the Chairpersons), the entire Board and quality, quantity and timelines of the flow of information between the Management and the Board.
COMMITTEES OF THE BOARD Audit Committee
The Audit Committee comprises of Mr. Ranjal Laxmana Shenoy, Chairman and Mr. Mritunjay Kumar Singh, Ms. Sudha Ravi and Ms. Sangeeta Singh as Members. The terms of reference of the Audit Committee and the particulars of meetings held and attendance thereat are mentioned in the Corporate Governance Report forming part of the Annual Report.
Nomination and Remuneration Committee
The Nomination and Remuneration Committee comprises of Mr. Arun Kumar Purwar, Chairman and Mr. Basudeo N. Singh, Mr. Akhouri Maheshwar Prasad and Ms. Sangeeta Singh as Members. The terms of reference of the Nomination and Remuneration Committee and the particulars of meetings held and attendance thereat are mentioned in the Corporate Governance Report forming part of the Annual Report.
Corporate Social Responsibility Committee
The Corporate Social Responsibility Committee comprises of Mr. Ranjal Laxmana Shenoy, Chairman and Mr. Dhananjay Kumar Singh, Mr. Sandeep Singh and Mr. Balmiki Prasad Singh as Members. The terms of reference of the Corporate Social Responsibility Committee and the particulars of meetings held and attendance thereat are mentioned in the Corporate Governance Report forming part of the Annual Report.
Stakeholders’ Relationship Committee
The Stakeholders’ Relationship Committee comprises of Mr. Ranjal Laxmana Shenoy, Chairman and Mr. Dhananjay Kumar Singh, Mr. Sandeep Singh and Mr. Akhouri Maheshwar Prasad as Members. The terms of reference of the Stakeholders’ Relationship Committee and the particulars of meetings held and attendance thereat are mentioned in the Corporate Governance Report forming part of the Annual Report.
Risk Management Committee
The Risk Management Committee comprises of Mr. Dhananjay Kumar Singh, Chairman and Mr. Mritunjay Kumar Singh, Mr. Sandeep Singh, Ms. Sudha Ravi and Dr. Dheeraj Sharma as Members. The terms of reference of the Risk Management Committee are mentioned in the Corporate Governance Report forming part of the Annual Report.
BUSINESS RISKS AND OPPORTUNITIES
The Company has framed Risk Management Policy to identify and assess the key risk areas, monitor and report compliance and effectiveness of the policy and procedure.
The Company has implemented an integrated Enterprise-wide Risk Management (ERM) function which helps the management and the Board to periodically identify, review and manage the business risks and timely and suitably address them, depending on whether the risks are internal, strategic or external. An independent risk-focused audit is carried out across all functions of the business, which actively identifies areas, where business process controls are ineffective or may need improvement.
DIRECTORS’ RESPONSIBILITY STATEMENT
To the best of their knowledge and belief, the Directors, pursuant to the requirement of Section 134(3) (c) of the Act, confirm that:
(a) in the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures, if any;
(b) they have selected such accounting policies and applied consistently and made judgements 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 at 31st March, 2017 and of the profit of the Company for the year ended on that date;
(c) they have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Act, for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;
(d) they have prepared the annual financial statements on a going concern basis;
(e) they have laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and operating effectively;
(f) they have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.
AUDITORS AND AUDITORS’ REPORT
Pursuant to the provisions of Section 139 of the Act and the Companies (Audit and Auditors) Rules, 2014, M/s BSR & Co. LLP (Firm Registration No: 101248W/W-100022), Chartered Accountants, the Statutory Auditors of the Company, hold office upto the conclusion of the Forty Fifth (45th) AGM. However, their appointment as Statutory Auditors of the Company is subject to ratification by the Members at every AGM. The Company has received a certificate from the said Auditors that they are eligible to hold office as the Auditors of the Company and are not disqualified from being so appointed.
A resolution for ratification of appointment of the said Auditors is included in the Notice of AGM for seeking approval of Members.
The Auditors’ Report for financial year ended 31st March, 2017, does not contain any qualification, reservation or adverse remark.
Pursuant to the provisions of Section 148 of the Act and the Rules made thereunder read with notifications/ circulars issued by the Ministry of Corporate Affairs from time to time and as per the recommendation of the Audit Committee, the Board of Directors at its meeting dated 12th August, 2016, appointed Mr. Suresh D. Shenoy, Cost Accountant (Membership No. 8318), as the Cost Auditor of the Company for the financial year 2016-17 to conduct the audit of the cost records of the Company. The Company had also received certificate from the Cost Auditor certifying his independence and arm’s length relationship with the Company. A resolution for ratification of the remuneration payable to the Cost Auditor is included in the Notice of AGM for seeking approval of Members. The Cost Audit Report will be filed within the period stipulated under the Act.
Pursuant to the provisions of Section 204 of the Act read with the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Board of Directors had appointed M/s. Manish Ghia & Associates, Practicing Company Secretaries, (Membership No. F6252, COP No. 3531) to conduct the Secretarial Audit of the Company for the financial year 2016-17. The Secretarial Audit Report is annexed to this Report as Annexure F. The said Report does not contain any qualification, reservation or adverse remark.
EXTRACT OF ANNUAL RETURN
As required under Section 92(3) of the Act and the Rules made thereunder, extract of the Annual Return in Form MGT-9 is annexed to this Report as Annexure G.
RELATED PARTY TRANSACTIONS
All the Related Party Transactions are entered into by the Company, at arm’s length basis, in the ordinary course of business and are in compliance with the applicable provisions of the Act and the SEBI LODR Regulations and the Company’s Policy on Related Party Transactions. During the financial year 2016-17, the Company did not enter into any material related party transactions, i.e. transactions exceeding ten percent of the consolidated turnover as per the last audited financial statements. Accordingly, the disclosure of related party transactions as required under Section 134(3) (h) of the Act in Form AOC-2 is not applicable.
The Related Party Transactions Policy as approved by the Board is uploaded on the Company’s website at http://www.alkemlabs. com/admin/Photos/Policies/84051713915915Policy on Related Party Transactions.pdf
PARTICULARS OF LOANS / GUARANTEES AND INVESTMENTS
The particulars of loans, guarantees and investments covered under the provisions of Section 186 of the Act have been disclosed in the Notes to the financial statements forming part of the Annual Report.
VIGIL MECHANISM / WHISTLE BLOWER POLICY
Pursuant to the provisions of Section 177(9) of the Act, the Board of Directors of the Company has framed the Vigil Mechanism / Whistle Blower Policy for Directors and employees of the Company. Under the said policy, provisions have been made to safeguard persons who use this mechanism from victimization. The policy also provides access to the Chairperson of the Audit Committee under certain circumstances. The Whistle Blower Policy is uploaded on the website of the Company at http://www.alkemlabs.com/admin/Photos/Policies/8503638853592Whistle Blower Policy.pdf
PREVENTION OF SEXUAL HARASSMENT AT WORKPLACE
The Company has adopted a policy in line with the provisions of Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 and the Rules made thereunder. An Internal Complaints Committee has also been set up to redress complaints received on sexual harassment. During the financial year 2016-17, the Company had received one complaint with allegations of sexual harassment and the same was investigated and resolved.
DISCLOSURES UNDER THE ACT Change in Nature of Business, if any:
During the financial year 2016-17, there was no change in the nature of business of the Company.
Material Changes and Commitments affecting the financial position of the Company:
There are no material changes and commitments which have occurred between the end of the financial year and the date of the Report which have affected the financial position of the Company.
Significant and Material Orders:
There are no significant and material orders passed by the regulators or courts or tribunals during the year impacting the going concern status and Company’s operations in future.
Reporting of Frauds by Auditors:
There were no frauds reported by Auditors under Section 143(12) of the Act.
DETAILS ON INTERNAL FINANCIAL CONTROLS RELATED TO FINANCIAL STATEMENTS
During the year, the Internal Financial Controls were reviewed and tested by an outside consulting firm and no reportable material weaknesses in design or operations were observed.
CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE DETAILS
The information on conservation of energy, technology absorption and foreign earnings and outgo as stipulated under Section 134(3)(m) of the Act and the Rules made thereunder is annexed to this Report as Annexure H.
Your Directors are thankful to the Central and State Government Departments, Organizations and Agencies for their continued guidance and co-operation. The Directors are grateful to all valuable stakeholders of the Company viz. our customers, shareholders, dealers, vendors, banks, medical fraternity, patients and other business associates for their excellent support and help rendered during the financial year. The Directors also place on record their sincere appreciation for the significant contribution made by our employees through their dedication, hard work and unstinted commitment.
For and on behalf of the Board
Alkem Laboratories Limited
Date: 26th May, 2017 Chairman Emeritus
Place: Mumbai DIN: 00760279