MARKSANS PHARMA Directors Report

The Directors take pleasure in presenting the Twenty Fifth (25) Annual Reports along with the financial statements for the year ended 31st March 2017.


Financial Highlights (Rs, in Lakh)









































Particulars



2016-17



2015-16



Turnover



21584.00



35813.21



Profit before Depreciation & Amortization expenses, Non-recurring expenses and Tax expenses



2758.03



10637.73



Less: Depreciation & Amortization Expenses



1500.16



1474.85



Non-recurring expenses



-



-



Tax expenses



35.32



2014.33



Profit after Tax



1222.55



7148.55



Dividend


Your Directors have recommended a Dividend, subject to approval of the Members at the ensuing Annual General Meeting, of RS,0.05 (5%) per equity share of Re. 1/- each and dividend of RS,7/- (7%) per preference share of RS,100/- each for the financial year ended 31st March, 2017. Total cash outflow on account of dividend payment including dividend distribution tax will be RS,338.99 Lakh for the financial year ended 31st March, 2017. The Dividend will be paid in compliance with applicable regulations.


Operations/State of Affairs of the Company


During the year 2016-17, your Company achieved turnover of RS,21584.00 Lakh with net profit of RS,1222.55 Lakh as compared to turnover of RS,35813.21 Lakh with net profit of RS,7148.55 Lakh in the previous year. During the year, the UK business witnessed price erosion on account of higher competition and adverse currency movement due to Brexit.


On consolidated basis, your Company achieved turnover of RS,76716.13 Lakh with net profit of RS,951.88 Lakh as compared to turnover of RS,89332.62 Lakh with net profit of RS,7851.16 Lakh in the previous year.


In compliance with the Accounting Standard - 21 on Consolidated Financial Statements, this Annual Report also includes Consolidated Financial Statements for the financial year under review.


Subsidiaries, Joint Ventures and Associate Companies


i. Performance of Marksans Pharma (UK) Limited, which operates in the European markets has not been satisfactory mainly due to price erosion on account of higher competition, channel consolidation, government action on pricing/reimbursement and adverse currency movement due to Brexit.


ii. Marksans Pharma Inc., through its step down subsidiary, Time-Cap Laboratories Inc. which operates mainly in US and North America, has performed well.


iii. Performance of Nova Pharmaceuticals Australasia Pty Ltd (your company holds 60% of the share capital) which operates mainly in Australia is satisfactory.


Pursuant to a Central Government''''s Circular dated 8th February, 2011, the audited accounts together with Directors'''' Report and Auditors'''' Report of the subsidiaries namely Marksans Pharma (U.K.) Limited, Marksans Pharma Inc. and Nova Pharmaceuticals Australasia Pty Limited are not being appended to the Annual Report. However, a statement giving information in aggregate for each subsidiary including subsidiaries of subsidiaries are attached to the Consolidated Balance Sheet. Statement on the highlights of performance of the subsidiary companies and their contribution to the overall performance of the company are given in Note No.


2.24 of the consolidated financial statements and forms part of this report.


Your Company has no Joint Ventures and Associate Companies.


Management Discussion and Analysis


A report on Management Discussion and Analysis covering industry structure and developments, financial and operational performance of the Company, risks, concerns, opportunities, threats and outlook forms a part of this Report.


Reserves


Your Company has not transferred any amount out of the profit of the year to the General Reserve.


Share Capital


During the year under review, there was no change in the Equity Share Capital of the Company.


During the year under review, your Company has redeemed 1,50,000 Preference Shares of RS,100/- each at par. Accordingly, Issued, Subscribed and Paid-up Preference Share Capital has reduced from 12,50,000 Preference Shares of RS,100/- each to 11,00,000 Preference Shares of RS,100/- each with effect from 31st March, 2017.


The Company has not issued any equity shares with differential rights as to dividend, voting or otherwise, during the year under review.


The Company has not issued ESOP or sweat equity shares to Directors or employees, during the year under review.


Directors and Key Managerial Personnel (KMP):


Your Company''''s Board comprises of 6 (Six) Directors, of which 3 (Three) are Non-Executives Independent and 3 (Three) Directors are Executives.


a. Appointment / resignations of Directors:


During the year under review, there is no change in the composition of the Board of Directors of the Company.


b. Retirement of Director by rotation:


In terms of Section 152 of the Companies Act, 2013, Mrs. Sandra Saldanha (DIN: 0021023) will retire by rotation at the ensuing Annual General Meeting and being eligible, offers herself for re-appointment.


c. Appointment / resignation of Key Managerial Personnel: During the year under review, there is no change in Key Managerial Personnel of the Company.


Number of Meetings of the Board


The Board met 6 (Six) times in financial year 2016-17 on 30.05.2016, 13.08.2016, 12.11.2016, 19.12.2016, 06.02.2017 and 29.03.2017.


Policy on Directors Appointment and Remuneration


Your Company has in place a policy relating to nomination and remuneration of directors as well as key managerial personnel and other employees formulated by the Nomination and Remuneration Committee. The Nomination and Remuneration Policy, inter alia, provides for the following:


The Committee shall identify and ascertain the integrity, qualification, expertise and experience of the person for appointment as Director in terms of Diversity Policy of the Board and recommend to the Board his / her appointment.


For the appointment of KMP (other than Managing / Whole time Director) or Senior Management, a person should possess adequate qualification, expertise and experience for the position he / she is considered for the appointment. For administrative convenience, the Managing Director is authorized to identify and appoint a suitable person for the position of KMP (other than Managing / Whole-time Director) and Senior Management.


The remuneration / compensation / commission, etc., as the case may be, to the Managing / Whole-time Director is determined by the Nomination and Remuneration Committee and recommended to the Board for approval. Such remuneration / compensation / commission, etc., as the case may be, is subject to approval of the shareholders of the Company and is in accordance with the provisions of the Companies Act, 2013 and Rules made there under. Remuneration of KMP (other than Managing / Whole time Director) and Senior Management is decided by the Managing Director based on the standard market practice and prevailing HR policies of the Company.


The remuneration / commission / sitting fees, as the case may be, to the Non-Executive / Independent Director, is in accordance with the provisions of the Companies Act, 2013 and the Rules made there under for the time being in force or as may be decided by the Committee / Board / shareholders.


An Independent Director is not entitled to stock option of the Company.


During the financial year ended 31st March, 2017, the remuneration paid to Dr. Vinay Gopal Nayak, Whole-time Director has exceeded the permissible limit as prescribed under Section 197 read with Schedule V of the Companies Act, 2013 by C79,52,068.00 due to inadequacy of profit. The Company is in the process of complying with the statutory requirements prescribed to regularise such excess payment including seeking approval from Members and the Central Government, as necessary. Pending such approvals, the excess amount is held by the Whole-time Director in trust for the Company.


Evaluation of Performance of Board, Committee and Directors


Performance evaluation of the Board as a whole, the Committees of Directors and all individual Directors including Independent Directors has been carried out for the year under review in accordance with the criteria framed pursuant to the provisions of the Companies Act, 2013, SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 and Guidance Notes issued by SEBI.


Performance Evaluation of each individual director including independent director


A questionnaire containing performance evaluation criteria was circulated to each Director including Independent Directors. The Directors filled-up the questionnaire pertaining to other Directors (except for himself/herself) and submitted the same to the Chairman of the Board for review.


The Nomination and Remuneration Committee also carried out performance evaluation of each director of the Company for the year 2016-17. The evaluation of each director was done by all the other directors (other than the director being evaluated) in accordance with the performance criteria suggested by the Committee and applicable SEBI Guidance Note.


Performance Evaluation of the Board and Committees of Directors


The Board reviewed a questionnaire containing performance criteria for the Board and the Committees of Directors. For the evaluation, the Board took into consideration composition of the Board and Committees of Directors, frequency of the meetings, attendance of each directors at the Board and respective Committee Meetings, discharge of key functions and responsibilities prescribed under law, effectiveness of corporate governance practices in the Company, integrity of the Company''''s accounting/auditing and financial reporting/control systems, etc.


All the independent directors of your Company also had a separate meeting without the attendance of executive directors and management personnel and reviewed the performance of the Board of Directors as a whole, the Chairman of the Board and the executive non-independent directors during the year 2016-17. The independent directors have also reviewed the quality, quantity and timeliness of flow of information between the Company management and the directors that was necessary for the directors to effectively and reasonably perform their duties.


The results of the above performance evaluations are satisfactory and adequate and meet the requirement of the Company.


Declaration From Independent Directors


The Company has received necessary declaration from all the Independent Directors under Section 149(7) of the Companies Act, 2013 confirming that they meet the criteria of independence laid down in Section 149(6) of the Companies Act, 2013 and Regulation 25 of SEBI (LODR) Regulations, 2015.


Familiarization Programme For Independent Directors


The Company proactively keeps its Directors informed of the activities of the Company, its management and operations and provides an overall industry perspective as well as issues being faced by the industry. Company''''s policy on the familiarization program for the independent directors is available on the Company''''s website www.marksanspharma. com.


Committees of the Company


Currently, the Company has five committees; The Audit Committee, The Nomination and Remuneration Committee, The Stakeholders'''' Relationship Committee, The Corporate Social Responsibility Committee and the Risk Management Committee. Details of the composition of these committees are given in the Corporate Governance Report section of this Annual Report.


Name of the Policy


Code of Conduct for Directors & Employees


Code of Conduct to Regulate, Monitor and Report Trading in securities


Policy on Related Party Transactions Corporate Social Responsibility (CSR) Policy Whistle Blower Policy (Vigil Mechanism)


Code of Practice and Procedure for Fair Disclosure of Unpublished Price Sensitive Information


Details Relating to Deposits, Covered Under Chapter V of the Companies Act, 2013


The Company has not accepted any public deposits and as such, no amount on account of principal or interest on public deposits was outstanding as on the date of the Balance Sheet.


Loans, Guarantees or 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.


Policies


Your Company always strives to promote and follow the highest level of ethical standards in all its business transactions. SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 mandated formulation of certain policies for all listed companies. All the policies adopted by your Company are available on the website www.marksanspharma.com. These policies are reviewed periodically by the Board and updated based on need and new compliance requirement. Key policies that have been adopted by the Company are as follows:


Brief Description


The Code envisages directors and employees of the Company to observe in day to day operations of the Company


The Code provides framework for dealing with securities of the Company by directors and employees of the Company


The Policy regulates all transactions between the Company and its related parties


The Policy outlines Company''''s strategy to bring about a positive impact on society


The Policy provides for directors and employees to report concerns about unethical behavior, actual or suspected fraud or violation of the Company''''s codes of conduct and ethics


The Code envisages fair disclosure of events and occurrences that could impact price discovery in the market for the Company''''s securities.


Research and Development (R&D)


Your Company is committed to continuously fund its R&D capabilities. One of the Company''''s biggest strength lies in vibrant and productive R&D function that has continuously placed your Company ahead through consistent development of niche technology, processes and products. Your Company will continue to invest in R&D to keep pace with the changing domestic and global scenario.


Your Company is setting up a new Research & Development Centre at Navi Mumbai, Maharashtra with a view to foray into new segments, respond to globally unmet therapeutic needs, enhance the Company''''s opportunity responsiveness and file a larger number of ANDAs.


Regulatory Compliances


Your Company''''s facilities in UK and USA are approved by UK MHRA and US FDA respectively. During the year under review, the Goa facility has gone through successful GMP audit by UK MHRA and Australian TGA Authorities.


Particulars Regarding Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo


As required under section 134(3)(m) of the Companies Act, 2013 read with Rule 8(3) of the Companies (Accounts) Rules, 2014, the relevant information and data are annexed to this report as Annexure - A.


Internal Financial Control Systems and their Adequacy


Your Company has in place adequate system of internal control and management information systems which covers all financial and operating functions. These systems are designed in a manner which provides assurance with regard to maintenance of strict accounting control, optimum efficiency in operations and utilization of resources as well as financial reporting, protection of Company''''s tangible and intangible assets and compliance with policies, applicable laws, rules and regulations. Your Company has in place a mechanism to identify, assess, monitor and mitigate various risks to key business objectives. The Audit Committee has a process for timely check for compliance with the operating systems, accounting procedures and policies. Major risks identified by the businesses and functions are systematically addressed through mitigating action on continuing basis.


Information Technology


Your Company continues to make required investments in the Information Technology area to cope up with the growing information needs necessary to manage operations efficiently. Your Company has implemented state-of-the-art IT applications in automating the processes in Quality, Manufacturing and R & D. Your Company has also invested significant amount of resources to build IT platform to derisk manufacturing process and to adopt best practices in the industry. The implementations spread across Lab automation, instrument integration and manufacturing execution systems. Your Company''''s virtually every aspect of the business operations is carried out through SAP (Systems Applications and Products in Data Processing) Enterprise Resource Planning.


Health, Safety & Environment


Your Company is committed to ensure Safety and sound Health of the employees at the work place. Your Company is also committed to strengthen pollution prevention and waste management practices for a safe and healthy environment. The Company''''s plants are environment regulations compliant.


Related Party Transactions


There are no material related party transactions during the year under review with the Promoters, Directors or Key Managerial Personnel or their relatives.


All Related Party Transactions (with the subsidiaries) that were entered into during the financial year were in the ordinary course of business on arm''''s length basis and repetitive in nature. These transactions are placed before the Audit Committee for information and are entered in the Register maintained under Section 189 of the Companies Act, 2013. The Audit Committee has granted omnibus (ad hoc) approval for Related Party Transactions as per the provisions and restrictions contained in the policy framed under Regulation 23 of the SEBI (LODR) Regulations, 2015. Company''''s Policy on Related Party Transactions is available on the Company''''s website www.marksanspharma.com.


Whistle Blower Policy/Vigil Mechanism


Your Company has in place a Whistle Blower Policy to deal with instance of fraud and mismanagement, if any. Under the policy, an effective vigil mechanism for directors and employees has been established to report their genuine concerns, actual or suspected fraud or violation of the Company''''s codes of conduct. Details of the Whistle Blower Policy are available on the Company''''s website www. marksanspharma.com.


The said mechanism also provides for adequate safeguards against victimization of the persons who use such mechanism and makes provision for direct access to the chairperson of the Audit Committee. We confirm that during the financial year 2016-17, no employee of the Company was denied access to the Audit Committee. During the financial year 2016-17, there were no instance of any unethical behavior, actual or suspicious fraud or violation in the Company''''s operational policies.


Risk Management System


Your directors are aware of the risks associated with the Company''''s business. Your Company makes timely and regular analyses of various risks associated with the Company''''s business and takes corrective actions for managing/mitigating the same. Your Company has institutionalized the policy/ process for identifying, minimizing and mitigating risks under the supervision of the Risk Management Committee of the Company. The key risks and mitigation measures are also reviewed by the Audit Committee.


Corporate Social Responsibility


During the financial year 2016-17, your Company has not spent any amount towards CSR. Your Company understands its responsibility towards the Society, Community, Environment and committed to spend sensibly after identifying right avenues for the purpose. Your Company is continuously exploring various focus areas for its CSR activities and is also in the process of identifying NGOs working in the area of health and education to support them in their endeavors.


The particulars required to be disclosed pursuant to the Companies (Corporate Social Responsibility Policy) Rules,


2014 are given in Annexure - B annexed to this Report.


Disclosure Under Sexual Harassment of Woman at Workplace (Prevention, Prohibition and Redressal) Act, 2013


Your Company is fully committed to uphold and maintain dignity of women working in the Company and has zero tolerance towards any actions which may fall under the a mbit of sexua l ha rassment at work place. The Company has in place a Prevention of Sexual Harassment Policy in line with the requirements of the Sexual Harassment of Women at the Workplace (Prevention, Prohibition and Redressal) Act, 2013. Internal Complaints Committees have been set up to redress complaints regarding sexual harassment at Mumbai office as well as Goa plant. All employees (permanent, contractual, temporary, trainees) are covered under this policy. During the year under review, your Company has not received any complaints related to sexual harassment at both the sites.


Significant and Material orders Passed by the Regulators or Courts or Tribunals


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


Change in the Nature of Business


During the year under review, there is no change in the nature of Business of the Company.


Material changes and commitment if any, affecting financial position of the company from the end of the financial year till the date of the report.


There have been no material changes and commitments, if any, affecting the financial position of the Company which have occured between the end of the financial year of the company to which a financial statements relate and the date of this report.


Corporate Governance


Corporate Governance is an ethical business process to create and enhance value of stakeholders and reputation of an organization. Your directors function as trustee of the shareholders and ensure long term economic value for its stakeholders. Pursuant to Schedule V of SEBI (LODR) Regulations, 2015, a detailed report on Corporate Governance and a certificate from the Auditors regarding compliance with the conditions of Corporate Governance is annexed to this report as Annexure - C.


Extract of Annual Return


The Extract of Annual Return as provided under Section 92(3) of the Companies Act, 2013 and as prescribed in Form No. MGT-9 of the Companies (Management and Administration) Rules, 2014 is annexed to this report as Annexure - D.


Employees


The ratio of the remuneration of each Director to the median employee''''s remuneration and other details 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, is annexed to this report as Annexure - E.


The statement showing particulars of employees as required under 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 is annexed to this report as Annexure - F.


Human Resources Development and Industrial Relations


The guiding principle of HR Policy at your Company is that the "Intellectual Capital" and dedication of employees will help the Company emerge as a successful player in this highly competitive scenario.


The recruitment procedure ensures that people with talent and the right skill sets are selected. Nurturing of talent and a Performance Management System (PMS) is in place to ensure that the coordinated efforts of our people lead to achievement of the Business Goals of the company.


Empowerment and a motivational package ensure that employees keep performing at peak levels. The HR Policy is directed towards creating "Ownership of Goals" at each level and synchronizing the efforts of all employees to achieve the company''''s quality and business goals.


Development of skills through mentoring and training by our seasoned professionals ensures that the talent pool keeps expanding. The Leadership Role played by our senior professionals helps to keep the next rung of leadership ready to take up the challenges thrown up by the global market.


The management helps the process of decision making by decentralizing and empowering professionals to execute tasks in a speedy manner. The management fosters information sharing and free exchange of ideas. Above all, the sense of ownership and empowerment to take decisions helps the Company to adapt and be ahead of the competition in this rapidly changing global environment.


The industrial relation at all the plant sites of your Company is cordial.


As on 31st March, 2017, the Company''''s permanent employee strength was 717 (574 as on 31st March, 2016).


Directors Responsibility Statement


In terms of provisions of Section 134(3)(c) of the Companies Act, 2013, your Directors confirm that:


- in the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures, if any;


- the directors had 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 ended 31st March, 2017 and Profit of the Company for the period ended 31st March, 2017;


- proper and sufficient care has been taken 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;


- the annual accounts have been prepared on a going concern basis;


- proper internal finance controls were in place and that the financial controls were adequate and were operating effectively;


- had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.


Audit & Auditors Statutory Audit


Tenure of M/s. N. K. Mittal & Associates, Statutory Auditors of the Company will come to end at the conclusion of the ensuing Annual General Meeting. Your directors have decided, based on the recommendation of the Audit Committee, to recommend the appointment of M/s.


V S Lalpuria & Company, Chartered Accountants (Firm Registration No. 105581W) as Statutory Auditors of the Company under section 139 of the Companies Act, 2013.


The Board placed on record its appreciation for the services of the retiring Auditors M/s. N. K. Mittal & Associates, who have been Auditors of the Company for a long time.


The Auditors Reports do not contain any qualification, reservation or adverse remark.


Secretarial Audit


Pursuant to Section 204 of the Companies Act, 2013, the Board of Directors has appointed Ms. Khushboo Bakul Gopani, a Practicing Company Secretary (Membership No.29194, Certificate of Practice No. 10560) as Secretarial Auditor to undertake Secretarial Audit of the Company. The report of the Secretarial Auditor is annexed to this report as Annexure - G.


The Secretarial Audit Report does not contain any qualification, reservation or adverse remark except three observations which are self explanatory.


Cost Audit


Your Company is a 100% export oriented unit and therefore, it is exempted from audit of its cost accounting records.


Appreciation


The directors place on record their appreciation for the contribution made by the employees at all levels enabling the Company to achieve the performance during the year under review.


The directors also appreciate the valuable co-operation and continued support extended by Company''''s Bankers, Medical Professionals, Business Associates and Investors who have put their faith in the Company.


For and on behalf the Board of Directors of


Marksans Pharma Limited


Mark Saldanha


Mumbai Chairman & Managing Director


Dated 11th August, 2017 DIN: 00020983

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