We present you the Thirty-Ninth Annual Report on business and operations along with the audited financial, statements and the auditor''''s report of your Company for the financial year ended March 31, 2017.
In Rs. Million (except EPS)
Share in net profit of joint venture
Profit before tax and exceptional items
Profit before tax
Income tax on exceptional items
Profit for the year
Other comprehensive income, net
Total comprehensive income
Earnings per Share (EPS) before exceptional item
Earnings per Share (EPS) after exceptional item
Standalone and Consolidated Financial Statements
The standalone and consolidated financial statements of your Company have been prepared in accordance with Indian Accounting Standards (''''Ind AS'''') notified under the Companies (Indian Accounting Standards) Rules, 2015. For all periods up to and including the year ended March 31, 2016, your Company along with subsidiaries, associates and joint ventures prepared its financial statements in accordance with accounting standards notified under the Section 133 of the Companies Act 2013, read together with paragraph 7 of the Companies (Accounts) Rules, 2014 (''''Indian GAAP''''). These financial statements for the year ended March 31, 2017 are the first that have been prepared by the Company, its subsidiaries and associates in accordance with Ind AS.
Further, a statement containing the salient features of the financial statements of our subsidiaries pursuant to subsection 3 of Section 129 of the Companies Act, 2013 in the prescribed form AOC-1 is appended as Annexure 1 to the Board''''s report. The statement also provides the details of performance and financial positions of each of the subsidiaries.
State of affairs
The highlights of your Company''''s standalone performance are as under:
- Revenue from operations grew by 12% to Rs. 26,184 mn from Rs. 23,354 mn in FY16. Other income for FY17 at Rs. 988 mn (FY16 Rs. 1,731 mn), primarily due to foreign exchange gain Rs. 160 mn and dividend from subsidiaries Rs. 487 mn in FY16.
- Core operating margins (EBIDTA excluding R&D, forex and dividend from subsidiaries) remained at similar Levels as compared to FY16.
During the previous year, the Company had a gain, net of tax from sale of equity shares of the Company''''s subsidiary, Syngene International Limited (Syngene). MAT credit on such gain was not recorded in the previous year due to uncertainty of utilization. During the current year, pursuant to change in the Income tax Law and other business restructuring, the Company believes that it will be able to utilize the MAT credit entitlement. Accordingly, during the year ended March 31, 2017, the Company has recorded MAT credit entitLement of Rs. 1,042 mn in its standalone financial statements. However, in the consolidated financial statements such entitlement is recognized as a credit in equity along with the underlying dilution gain on sale of equity stake in Syngene, as it did not impact Group''''s control.
- Profit for the year stood at Rs. 5,193 mn up 41% from FY16. PAT excluding exceptional income, net of tax was Rs. 5,193 mn (FY16 Rs. 3,688 mn).
- Effective tax rate (ETR) for the year was 3% due to MAT credit recorded on exceptional income of FY16. ETR before exceptional item was 23%.
During the year, our consolidated revenues registered a growth of 18% to Rs. 40,787 mn from Rs. 34,602 mn in FY16. From a segment perspective, the small molecules recorded a growth of 12% while the research services business registered a year-on-year increase of 7%. Biologics and Branded Formulation recorded an Annual growth of 43% and 24% respectively.
Consolidated profits for the year grew by 11% to Rs. 6,121 mn from Rs. 5,504 mn. Profits of FY17 included tax on exceptional income of Rs. 78 mn as against an exceptional gain of Rs. 1,483 mn (net of taxes) in FY16, which has been explained in detail under the section Management Discussion and Analysis.
With a view to encouraging the participation of small investors by making equity shares of the Company affordable, increasing the Liquidity of the equity shares and to expand the retail shareholders’ base, your directors at their meeting held on April 27, 2017, recommended issue of bonus shares of two equity shares for every one equity share held by the members as on the record date to be determined by the Board of Directors (Board). Consequent to the proposal of issue of bonus shares, the authorized share capital of the Company was proposed to be increased from Rs. 110 crores (22 crores equity shares of Rs. 5/- each) to Rs. 300 crores (60 crores equity shares of Rs. 5/- each). Your directors have decided to seek the approval of the shareholders for the above proposals by way of postal ballot.
Your Directors are pleased to recommend a final dividend of Rs. 3/- (Pre-Bonus) per equity share on the face value of Rs. 5/- per equity share for the financial year ended March 31, 2017 amounting to Rs. 600 mn. In view of net cash generated from operations being substantially deployed in capex and taking into account the future capital commitments, your Directors consider it prudent to propose the above dividend. The dividend payout is subject to approval of members at the ensuing Annual General Meeting (AGM).
The dividend will be paid to members whose names appear in the Register of members as on the record date to be determined by the Board, in respect of shares held in dematerialized form, it will be paid to members whose names are furnished by National Securities Depository Limited and Central Depository Services (India) Limited as beneficial owners as on the record date.
Dividend Distribution Policy
As per the provisions of regulation 43A of SEBI LODR, the top 500 Listed companies shall formulate a dividend distribution policy. Accordingly, the policy was adopted to set out the parameters and circumstances that will be taken into account by the Board in determining the distribution of dividend to its shareholders and/ or retaining profits earned by the Company. The policy is appended herewith as Annexure 2 to the Board''''s report and is also available on the Company''''s website, at http://www.biocon.com/docs/Dividend Distribution Policy.pdf.
Transfer of Unpaid and Unclaimed Amounts to IEPF
Pursuant to the provisions of Section 124(5) of the Companies Act, 2013, dividend which remains unpaid or unclaimed for a period of seven years from the date of its transfer to unpaid dividend account is required to be transferred by the Company to Investor Education and Protection Fund (IEPF), established by the Central Government under the provisions of Section 125 of the Companies Act, 2013. During the year under review, the Company has credited unpaid/ unclaimed dividends of financial year 2008-09 amounting to Rs. 648,003 lying in the unpaid dividend account to the Investor Education and Protection Fund (IEPF).
Subsidiaries and Joint ventures
Your Company has formulated a policy for determining ''''material'''' subsidiaries pursuant to the provisions of the Listing Agreement. The said policy is available at the Company''''s website http://www.biocon.com/docs/PolicyDocument_MateriaLSubsidiary.pdf
During the year, Biocon Biologics India Limited, was incorporated on June 08, 2016 as a wholly owned subsidiary of Biocon Biologics Limited, UK (“BUK"). As on March 31, 2017, your Company has 10 subsidiaries. A report on the performance and financial position of each of the subsidiaries is presented below.
Syngene International Limited, India
Syngene International Limited (“Syngene”) is one of India''''s Leading contract research organization offering a suite of integrated, end-to-end discovery and development services for novel molecular entities (NMEs) across industrial sectors including pharmaceutical, biopharmaceutical and biotechnology amongst others. Syngene helps its clients in conducting discovery (from hit to candidate selection), development (including pre-clinical and clinical studies, analytical and bio-analytical evaluation, formulation development and stability studies) and pilot manufacturing (scale-up, pre-clinical and clinical supplies) each with distinctive economic advantage. Unlike the traditional business models, these services are offered through flexible business models ranging from a full-time equivalent (“FTE”) to a fee-for-service (“FFS”) model or a combination customized on the client''''s specific requirement.
During the year ended March 31, 2017, Syngene registered a revenue growth of 14% to Rs. 12,716 mn in FY17 (FY16 Rs. 11,133 mn). EBIDTA margin for the year was 38%, with the operating margin at Rs. 4,783 mn (FY16 - Rs. 3,867 mn), registering a growth of 3%.
Pursuant to a fire incident on December 12, 2016 at Syngene, certain fixed assets, inventory and other contents in one of the buildings were damaged. Syngene lodged an initial estimate of Loss with the insurance company and the survey is currently ongoing. During the year ended March 31, 2017, Syngene has written off the net book value of assets aggregating to Rs. 795 mn and recognized a minimum amount of insurance claim receivable for an equivalent amount. In addition, the Group is in the process of determining its claim for Business Interruption and has accordingly not recorded any claim arising there from at this stage.
On April 27, 2017, the Board of Directors of Syngene recommended a dividend of Rs. 1/- (10%) per equity share for FY17, entailing a pay-out of Rs. 200 mn. The dividend payout is subject to approval of members at their ensuing Annual General Meeting (AGM).
Biocon Research Limited, India
Biocon Research Limited (“BRL”), a 100% subsidiary of the Company, undertakes discovery and development research work in BioLogics and provides scientific support for various development programmes of the group.
BRL''''s current business is Largely directed towards R&D services for Monoclonal antibody molecules and Proteins (mAbs), insulin Tregopil (formally referred to as IN-105) and other insulin products on behalf of other group companies. The research programs undertaken by BRL have made significant inroads to the next Level of gLobaL cLinicaL triaLs. BRL continues to hold 0.93% shareholding in Syngene.
During FY17, BRL registered a turnover of Rs. 1,657 mn and reported a net profit of Rs. 661 mn compared to a turnover of Rs. 4,100 mn and a net profit of Rs. 832 mn in FY16. FY16 turnover included out-Licensing of development and commercialization rights of mAbs to BUK for a consideration of Rs. 2,820 mn.
Biocon Pharma Limited, India
Biocon Pharma Limited (“BPL”) is a wholly owned subsidiary of the Company. BPL would be engaged in the development and manufacture of generic formulations for sale in global markets, especially opportunities in US and EU. BPL is in the process of setting up its formulations manufacturing facility for oral solid dosages at Biocon SEZ, Bangalore. During FY17, 7 mn equity shares of face value of Rs. 10 each were issued to Biocon Limited at face value. As of March 31, 2017, BPL has not commenced commercial operations and had capital work-in-progress of Rs. 1,130 mn (FY16 Rs. 150 mn).
Biocon Pharma Inc, USA
Biocon Pharma, Inc. (“BPI”), a wholly owned subsidiary of Biocon Pharma Limited was incorporated in July 2015 in the United States of America. BPI will be engaged in commercialization of generic formulations in the United States. As at March 31, 2017, BPI has not commenced commercial operations.
Biocon Biologics Limited, UK
Biocon Biologics Limited (“BUK”) is a wholly owned subsidiary of the Company. Incorporated in the United Kingdom in March 2016, BUK houses Biocon''''s biosimilar biologics business. Biocon SDN. BHD. is a wholly owned subsidiary of BUK. During the year ended March 31, 2017, BUK earned Rs. 1,826 mn as revenue and reported a net Loss of Rs. 189 mn.
Biocon SDN. BHD, Malaysia
Biocon SDN. BHD., Malaysia is a step down subsidiary of the Company, wholly owned by BUK. Biocon SDN. BHD. was established with an objective to set up the group''''s first overseas manufacturing facility at MaLaysia. The facility is Located within Bioxcell, a biotechnology park in Nusajaya, Johor, which is being promoted by the Malaysian government.
The manufacturing facility, designed to manufacture recombinant human insulin and insulin analogs received Local CGMP certification from the National Pharmaceutical Control Bureau. The plant was capitalized (Rs. 16,851 mn) at the end of the current year, based on its readiness to start commercial supplies. Average useful Life of the plant is expected to be 16 years. Biocon SDN BHD will seek approvals from Leading regulatory agencies across the globe for marketing its products in rest of the world from FY 18. Approval from the developed markets are expected in the coming years.
Biocon SDN. BHD. will also continue the research and development activities pertaining to human insulin and analogues which it acquired from Biocon SA. Biocon SDN. BHD. reported a total revenue of Rs. 998 mn and net profit of Rs. 5 mn in FY17.
Biocon Biologics India Limited, India
Biocon Biologics India Limited (“BBIL”) is a step down subsidiary of the Company, wholly owned by BUK. BBIL was incorporated on June 08, 2016 in India with an objective to set up green field dissimilar biologics facilities. As at March 31, 2017, BBIL has not commenced commercial operations.
Biocon SA, Switzerland
Biocon SA, a wholly owned subsidiary of the Company, is primarily engaged in identifying and developing other novel molecules into commercial products or Licensable assets through strategic partnerships.
For the current year, Biocon SA registered net profit of Rs. 684 mn against Rs. 1,229 mn in FY16. Exceptional gains as explained below resulted in increased net profits for FY16.
Exceptional items comprises of
(a) a n amount of Rs. 2,561 mn (net of tax) released from deferred balance pursuant to contract with Laboratories PISA S.A. de C.V (PISA) of Mexico for the co-development and commercialization of generic recombinant human insulin (rh-insulin) for the US market.
(b) impairment charge of Rs. 1,078 mn of the marketing rights of T1H product for US and Canada region (''''Territory'''') due to uncertainties over commercialization of the products in the Territory owing to OFAC sanctions.
(c) during the year ended March 31, 2017, Biocon SA and Biocon Sdn. Bhd. have entered into an Assignment and License Agreement pursuant to which Biocon SA transferred all of its rights, interests and obligations in Insulin Analogs (IPR) to Biocon SDN. BHD. Consequent to this transfer BSA recorded a gain of Rs. 1,150 mn, net of tax Rs. 78 mn.
Biocon FZ - LLC, UAE
Biocon FZ LLC is a wholly owned subsidiary of the Company based in Dubai. Incorporated in June 2015, Biocon FZ LLC was established as a marketing entity for pharmaceutical products to target markets in the MiddLe East and GCC. During the year ended March 31, 2017, Biocon FZ LLC earned Rs. 1,328 mn as revenue and reported a net Loss of Rs. 21 mn.
Biocon Academy, India
Biocon Academy spearheads Biocon''''s CSR initiatives in the technical / professional education segment. The academy was established as a Centre of Excellence for Advanced Learning in Biosciences in 2014. Biocon Academy Leverages rich industry experience of Biocon and subject matter expertise of international Education Partners such as Keck Graduate Institute of Claremont, California (USA). The academy is dedicated exclusively to industry oriented biosciences education. The programs offered by the academy aim to empower the Biotechnology and Engineering graduates with advanced Learning and industrial proficiency through job-skills development essential to build a promising career in the Biotech industry.
Management discussion and analysis
In terms of the provisions of Regulation 34 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (SEBI LODR), the Management''''s discussion and analysis is set out in this Annual Report.
Your Company is committed to maintain the highest standards of corporate governance. We believe sound corporate governance is critical to enhance and retain investor trust. Our disclosures seek to attain the best practices in corporate governance as prevalent globally. We have implemented several best corporate governance practices in the Company to enhance Long-term shareholder value and respect minority rights in all our business decisions. Corporate governance report for FY 2016-17 forms part of this Annual Report.
The requisite certificate from the auditors of the Company confirming compliance with the conditions of corporate governance as stipulated under SEBI LODR is annexed to the corporate governance report.
Business Responsibility Report
The ''''Business Responsibility Report'''' (BRR) of your Company for the year 2016-17 forms part of this Annual Report as required under Regulation 34(2)(f) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.
Employee Stock Option Plan (ESOP)
Nomination and Remuneration Committee of the Board, inter alias administers and monitors the Company''''s employees’ stock option plan (Plan) in accordance with SEBI (Share Based Employee Benefits) Regulations, 2014 (SBEB Regulations). The Plan is implemented through Biocon India Limited Employees’ Welfare Trust (ESOP Trust).
During the year ended March 31, 2017, a total of 499,689 shares were transferred from the ESOP Trust to the eligible employees under the Company''''s prevailing ESOP plan. As at March 31, 2017, the ESOP Trust held 3,529,870 equity shares of the Company. During the year ended March 31, 2017, there has been no material change in the Company''''s existing plan and the plan is in compliance with SBEB Regulations. Information as required under SBEB Regulations read with SEBI Circular CIR/CFD/POLICY CELL/2/2015 dated June 16, 2015 have been uploaded on the Company''''s website and can be accessed at the web-Link: http://www.biocon.com/biocon_invreLation_Annual reports.asp?subLink=finance
The applicable disclosures as stipulated under the SBEB Regulations as on March 31, 2017 is appended herewith as Annexure 3 to the Board''''s report. The Company has received a certificate from the statutory auditors that the scheme has been implemented in accordance with SBEB Regulations and the resolutions passed by the shareholders. The certificate would be placed at the AGM for inspection by the members.
Your Company has not accepted any deposit and as such no amount of principal and interest were outstanding as of the Balance Sheet date.
Loans, Guarantees or Investments
Details of Loans, guarantees and investments covered under the provisions of Section 186 of the Companies Act, 2013 form part of the notes to the financial statements.
Policy on Directors'''' appointment and remuneration
The Company''''s current policy is to have an appropriate mix of Executive and Independent Directors to maintain the independence of the board and separate its functions of governance and management. As on March 31, 2017, the Board consists of 10 Directors, majority of them being Independent Directors. Besides the Chairperson and Managing Director who is a Promoter, the Board comprises of Vice Chairman who is a Whole-time Director, a CEO & Joint Managing Director, a Non- Executive Director and 6 Independent Directors. The Board periodically evaluates the need for change in its composition and size. The policy of the Company on Director''''s appointment and remuneration, including criteria for determining qualifications, positive attributes, independence of a director and other matters as required under sub-section (3) of Section 178 of the Companies Act, 2013 are formulated by the Nomination and Remuneration Committee. The policy of the Company on Director''''s appointment and remuneration is appended herewith as Annexure 4 to the Boards'''' Report.
A diverse Board enables efficient functioning through differences in perspective and skill. It also fosters differentiated thought processes at the back of varied industrial and management expertise, gender, knowledge and geographical background. The Board recognizes the importance of a diverse composition and has adopted a Board Diversity Policy which sets out the approach to diversity. The policy is available at the web-Link: http://www.biocon. com/docs/PolicyDocument BoardDiversity.pdf
Declaration by Independent Directors
The Company has received necessary declaration from each Independent Director under Section 149(7) of the Companies Act, 2013, that he/she meets the criteria of independence Laid down in Section 149(6) of the Companies Act, 2013 and regulation 25 of SEBI LODR.
Pursuant to the provisions of the Companies Act, 2013 and Regulation 19 of SEBI LODR, 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 various committees. A structured questionnaire was prepared after taking into consideration inputs received from the directors, covering various aspects of the Board''''s functioning such as adequacy of the composition of the Board and its Committees, Board culture, execution and performance of specific duties, obligations, independence, governance, ethics and values, adherence to corporate governance norms, Interpersonal relationships, attendance and contribution at meetings etc.
A separate exercise was carried out to evaluate the performance of individual directors including the Chairperson of the Board, who were evaluated on parameters such as participation and contribution, commitment including guidance provided to the senior management outside of Board / committee meetings, effective deployment of knowledge and expertise, effective management of relationship with various stakeholders, independence of behavior and judgment etc. The performance evaluation of the Independent Directors were carried out by the entire Board. The performance evaluation of the Chairperson & Managing Director was carried out by the Independent Directors. The evaluation process has been explained in the corporate governance report. The Board reviewed the evaluation results as collated by the Nomination and Remuneration Committee.
Appointment of Directors and Key Managerial Personnel
The members at the 38th AGM held on June 30, 2016 appointed Mr. M. Damodaran as an Independent Director for a period of three consecutive years for a term up to the conclusion of 41st AGM of the Company in the calendar year 2019. The members at the said AGM also appointed Dr. Arun S Chandavarkar, CEO & Joint Managing Director, as a director LiabLe to retire by rotation. We thank the members for their support in confirming the above mentioned appointments.
The Board, on the recommendation of the Nomination and Remuneration Committee, appointed Mr. Rajiv Balakrishnan as the Company Secretary and Compliance Officer effective January 24, 2017 in place of Mr. Kiran Kumar. G who relinquished his post as the Company Secretary of the Company, to pursue other interests within the group. The Board places on record its appreciation for the services rendered by Mr. Kiran Kumar. G during his tenure as the Company Secretary.
Retirement and Re-appointment
As per the provisions of Section 152(6) of Companies Act, 2013, Prof. Ravi Mazumdar, retires by rotation at the ensuing AGM and being eligible, seeks reappointment. The Board recommends his re-appointment.
The current term of appointment of Mr. Russell Walls, Ms. Mary Harney and Mr. Daniel Bradbury, Independent Directors of the Company shall come to an end at the ensuing AGM. Based on the outcome of the performance evaluation, the Nomination and Remuneration Committee has recommended to continue the term of appointment of the above Independent Directors and nominated to the Board, re-appointment of Mr. Russell Walls, Ms. Mary Harney and Mr. Daniel Bradbury as Independent Directors for an additional term of five consecutive years. The Company has received declarations from all the three Independent Directors confirming that they meet with the criteria of independence as prescribed under sub-section (6) of Section 149 of the Companies Act, 2013 and regulation 25 of SEBI LODR. The Company has also received requisite notices in writing from members proposing Mr. Russell Walls, Ms. Mary Harney and Mr.
Daniel Bradbury as Independent Directors of the Company.
The Board recommends the re- appointment of Mr. Russell Walls, Ms. Mary Harney and Mr. Daniel Bradbury as Independent Directors.
Committees of the Board
Currently, the Board has four Committees: Audit and Risk Committee, Nomination and Remuneration Committee, Corporate Social Responsibility Committee and Stakeholders’ Relationship Committee. As required under the provisions of Section 177 (8) of the Companies Act, 2013, the composition of the Audit Committee is disclosed as under:
Mr. Russell Walls, Chairman, Mr. Daniel M Bradbury, Dr. Jeremy M Levin and Mr. M. Damodaran.
A detailed note on the composition of the Board and other committees is provided in the corporate governance report section of this Annual report. Meetings of the Board
The meetings of the Board are scheduled at regular intervals to decide and discuss on business performance, policies, strategies and other matters of significance. The schedule of the meetings are circulated in advance, to ensure proper planning and effective participation in meetings. In certain exigencies, decisions of the Board are also accorded through circulation.
The Board during the financial year 2016-17 met four times. The maximum interval between any two meetings did not exceed 120 days, as prescribed in the Companies Act, 2013. Detailed information regarding the meetings of the Board are included in the report on Corporate Governance, which forms part of the Board''''s Report.
Related party contracts or arrangements
ALL transactions entered into with Related Parties as defined under Companies Act, 2013 during the year were in the ordinary course of business and on an arm''''s Length basis. The Company has formulated a policy on “materiality of related party transactions” and the process of dealing with such transactions, which are in Line with the provisions of the Companies Act, 2013 and SEBI LODR. The same is also available on the web-Link: http://www.biocon.com/docs/ PolicyDocument_ReLatedPartyTransaction_2015.pdf
Prior omnibus approval from the Audit and Risk Committee are obtained for transactions which are repetitive and also normal in nature. Further, disclosures on related party contracts and arrangements are made to the Audit and Risk Committee and the Board on a quarterly basis.
During the year under review, there were no material related party transactions under regulation 23 (4) of SEBI LODR entered into by the Company, which necessitates approval of shareholders. Particulars of contracts or arrangements with related parties referred to in Section 188 (1) of the Companies Act, 2013, in the prescribed Form AOC - 2, is appended herewith as Annexure 5 to the Board''''s report.
CRISIL and ICRA continued to reaffirm their rating of “AA / Stable” and “A1 ”, for various banking facilities throughout the year enabling your Company to avail facilities from banks at attractive rates indicating a very strong degree of safety for timely payment of financial obligations.
Conservation of energy, technology absorption, foreign exchange earnings & outgo
The particulars as prescribed under sub-section (3)(m) of Section 134 of the Companies Act, 2013, read with the Companies (Accounts) Rules, 2014, is appended herewith as Annexure 6 to the Board''''s report.
Auditors Statutory Auditors
Messrs B S R & Co. LLP, Chartered Accountants (ICAI Registration No. 101248W/W-100022) were appointed as the Statutory Auditors of the Company to hold office from the conclusion of the 38th AGM held on June 30, 2016 until the conclusion of the 43 rd AGM of the Company to be held in the calendar year 2021 (subject to ratification of their appointment by the members at every AGM).
As required under the provisions of Section 139(1) of the Companies Act, 2013, the Company has received a written consent from B S R & Co. LLP, Chartered Accountants to their appointment and a certificate, to the effect that their appointment, if made, would be in accordance with the Companies Act, 2013 and the Rules framed there under and that they satisfy the criteria provided in Section 141 of the Companies Act, 2013.
The members are requested to ratify the appointment of the Statutory Auditors at the ensuing AGM.
The Auditors'''' Report on the financial statements of the Company for the year ending March 31, 2017 is unmodified i.e. it does not contain any qualification, reservation or adverse remark. The Auditors'''' Report is enclosed with the financial statements forming part of the Annual report.
The Board of Directors on the recommendation of the Audit and Risk Committee, appointed Messrs Rao & Murthy, Cost Accountants (Firm Registration Number 000065), as the Cost Auditors of the Company for the FY 2017-18 under Section 148 of the Companies Act, 2013. Messrs Rao & Murthy, Cost Accountants, have confirmed that their appointment is within the Limits of section 141(3) (g) of the Companies Act, 2013 and have also certified that they are free from any disqualifications specified under Section 141(3) and proviso to Section 148(3) read with Section 141(4) of the Companies Act, 2013.
The Audit and Risk Committee has also received a certificate from the Cost Auditors certifying their independence and arm''''s Length relationship with the Company.
As per the provisions of the Companies Act, 2013, the remuneration payable to the Cost Auditors is required to be placed before the members in a General Meeting for their ratification. Accordingly, a resolution seeking members'''' ratification for the remuneration payable to Messrs Rao & Murthy, Cost Accountants is included in the notice convening the 39th AGM.
Pursuant to the provisions of Section 204 of the Companies Act, 2013 and rules there under, M/s Sreedharan & Co, Practicing Company Secretaries was appointed to conduct the secretarial audit of the Company for the FY 2016-17. The secretarial audit report for FY 2016-17 is appended herewith as Annexure 7 to the Board''''s report. The secretarial audit report does not contain any qualification, reservation or adverse remark.
The Board has appointed Mr. M. Damodaran of M/s. Damodaran & Associates, Practicing Company Secretaries as secretarial auditor of the Company for the financial year 2017-18.
Risk Management Policy
The Company has put in place an enterprise wide Risk Management Framework with an object of timely identification of risks, assessment and evaluation of the same in Line with overall business objectives and define adequate mitigation strategy. On a quarterly basis, the Audit and Risk Committee reviews critical risks on a rotation basis in Line with the mitigation progress/ effectiveness and its impact on overall risk exposure of the company, all the critical risk areas are covered at Least once a year. Annually, all critical risk areas identified are re-evaluated.
Internal Financial Control
The Company has Laid down certain guidelines, processes and structures, which enable implementation of appropriate internal financial controls across the organization. Such internal financial controls encompasses policies and procedures adopted by the Company for ensuring the orderly and efficient conduct of business, including adherence to its policies, safeguarding of its assets, prevention and detection of frauds and errors, the accuracy and completeness of accounting records and the timely preparation of reliable financial information. These include control processes both on manual and IT applications including the ERP applications wherein the transactions are approved and recorded. Appropriate review and control mechanisms are built in place to ensure that such control systems are adequate and are operating effectively.
Because of the inherent Limitations of internal financial controls, including the possibility of collusion or improper management override of controls, material misstatements in financial reporting due to error or fraud may occur and not be detected. Also, evaluation of the internal financial controls are subject to the risk that the internal financial control may become inadequate because of changes in conditions, or that the compliance with the policies or procedures may deteriorate.
The Company has, in all material respects, an adequate internal financial controls system and such internal financial controls were operating effectively based on the internal control criteria established by the Company considering the essential components of internal control stated in the guidance note on audit of internal control over financial reporting issued by the Institute of Chartered Accountants of India.
The Vigil Mechanism as envisaged in the Companies Act, 2013, the rules prescribed there under and SEBI LODR is implemented through the Company''''s Whistle Blower Policy to enable the Directors, employees and all stakeholders of the Company to report genuine concerns, to provide for adequate safeguards against victimization of persons who use such mechanism and make provision for direct access to the Chairman of the Audit and Risk Committee.
Whistle Blower Policy of your Company is available on the Company''''s website and can be accessed at the web-Link:http://www.biocon.com/docs/Biocon_ Group_Integrity_WhistLe_BLower_Policy.pdf
Directors'''' Responsibility Statement
Pursuant to the requirement under Section 134 (3) (c) of the Companies Act, 2013, your Directors confirm that:
(a) I n the preparation of the Annual accounts, the appLicabLe accounting standards had been followed along with proper explanation relating to materiaL departures.
(b) t hey 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 and Loss of the Company for that period.
(c) a hey 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 accounts on a going concern basis.
(e) t hey have Laid down internal financial controls based on internal controls framework established by the Company, which were adequate and are operating effectively and
(f) t hey have devised proper systems to ensure compliance with the provisions of all applicable Laws and that such systems were adequate and operating effectively.
Particulars of Employees
The statement containing particulars in terms of Section 197 (12) of the Companies Act, 2013 read with rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 forms part of this report and is appended herewith as Annexure 8 to the Boards'''' report.
The statement containing particulars in terms of Section 197(12) of the Companies Act, 2013 read with rule 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 forms part of this report.
Considering the first proviso to Section 136(1) of the Companies Act, 2013, the Annual Report, excluding the aforesaid information, is being sent to the members of the Company and others entitled thereto. The said information is available for inspection at the registered office of the Company during business hours on working days of the Company up to the date of the ensuing Annual General Meeting. Any shareholder interested in obtaining a copy thereof, may write to the Company Secretary in this regard.
Corporate Social Responsibility (CSR)
At Biocon, CSR has been an integral part of our business since its inception. With the incorporation of Biocon Foundation in 2004, the Company formally structured its CSR activity. Today, the Company span its CSR efforts through Biocon Foundation, Biocon Academy and some partnership programs with Like-minded private organizations and government. The Company promotes social and economic inclusion for the marginalized communities with its integrated system focusing Largely in the following areas:
Health Care services: The Company firmly believes that the use of technology can make healthcare delivery in rural areas more efficient and therefore we have developed an integrated and holistic healthcare delivery service, which seeks to address critical gaps in the delivery of healthcare in rural India. Our efforts are targeted at enabling Last mile reach of preventive and primary health services in rural areas.
Education: While the Company projects address experiential Learning in basic maths, computer skills and Language skills of the underserved young people in rural areas, it also imparts advanced training necessary and skills required for gainful employment in the Biopharma sector to young graduates through Biocon Academy.
Promote Art & Culture: India has a rich heritage of Art and Culture across the Land which needs to be preserved and promoted. Our various forms of music and dance, style of paintings and sculptures have intrigued many across the globe, yet a Large pool of our artistes have not gained enough recognition. Biocon Foundation believes in creating a platform to promote art & culture, encourage artists and share this knowledge with the marginalized communities through various initiatives to help them develop a keen sense of appreciating fine arts.
Safety of women and children: Biocon believes that the safety of women and children is the collective responsibility of society. The Company provides safe transport for pregnant women to come to primary health centers for ante natal check-ups and for children attending our “Aata Paata Wadi". It also provides vehicles for the police to support their work in managing the safety of citizens.
Gender Equality: Gender Equality and equity is basic human right and your Company works towards this in all its communities. The Company works towards gender equality by providing vocational skills and assisting with employment opportunities. The Company, counsel, mentor and protect young women at risk from sexual trafficking and assist women and girls with Life skills coaching and employment opportunities.
Rural Development: The Company is working to build townships, schools, sanitation and water supply systems that can fulfill the basic needs of underprivileged rural and urban communities. The Company has adopted a township in North Karnataka and is also providing support infrastructure, including a school, safe drinking water, a health centre and community hall in the village. The Company has installed solar Lights, rain water harvesting systems and household and community toilets to enable clean sanitation facilities for the rural communities.
In compliance with the provisions of Section 135 of the Companies Act, 2013, the Board has formed a Corporate Social Responsibility Committee, which monitors and oversees various CSR initiatives and activities of the Company. The CSR Committee comprises of Ms. Mary Harney (Chairperson), Dr. Vijay Kuchroo and Prof. Ravi Maunder.
A detailed report regarding Corporate Social Responsibility is appended herewith as Annexure 9 to the Boards'''' report.
SexuaL Harassment of Women at Workplace (Prevention, Prohibition and Redressal), Act, 2013
The Company has in place an Anti-Sexual Harassment Policy in Line with the requirements of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and RedressaL) Act, 2013. Internal Complaints Committee (ICC) has been set up to redress complaints received regarding sexual harassment. ALL employees (permanent, contractual, temporary, trainees) are covered under this Policy. The Policy is gender neutraL. During the year under review, 7 complaints with allegations of sexual harassment were filed, all of which were disposed-off as per the provisions of Sexual Harassment of Women at Workplace (Prevention, Prohibition and RedressaL) Act, 2013.
Significant and material orders
There are no significant and material orders passed during the year by the regulators, courts or tribunals impacting the going concern status and Company''''s operations in the future.
None of the Directors of your Company are disqualified as per the provisions of Section 164(2) of the Companies Act, 2013. Your Directors have made necessary disclosures, as required under various provisions of the Act and SEBI LODR.
Material changes and commitments
No material changes and commitments affecting the financial position of the Company have occurred between March 31, 2017 and the date of this report.
Change in nature of business
There has been no change in the nature of business of the Company. Your Company continues to be a pioneer biopharmaceutical company engaged in manufacturing active pharmaceutical ingredients and formulations, including dissimilar drugs for diabetics, oncology and autoimmune diseases with sales in markets across the globe.
Extract of Annual Return
In accordance with the provisions of Section 134(3) (a) of the Companies Act, 2013, an extract of the Annual return in the prescribed format is appended herewith as Annexure 10 to the Board''''s report.
We place on record our appreciation for the committed services by every member of the Biocon family globally whose contribution was significant to the growth and success of the Company. We would Like to thank all our clients, partners, vendors, investors, bankers and other business associates for their continued support and encouragement during the year.
We also thank the Government of India and Malaysia, Government of Karnataka, Government of Telangana, Ministry of Information Technology and Biotechnology, Ministry of Commerce and Industry, Ministry of Finance, Department of Scientific and Industrial Research, Ministry of Corporate Affairs, Customs and Excise Departments, Income Tax Department, CSEZ, LTU Bangalore and all other regulatory agencies for their assistance and co-operation during the year and Look forward to their continued support in the future.
For and on behalf of the Board
Bangalore, Kiran Mazumdar -Shaw
April 27, 2017 Chairperson & Managing Director