Mar 31, 2015
The Directors have pleasure in presenting their report on the business operations and accounts of the Company for the Year ended 31st March 2015 along with 36th Annual Report.
FINANCIAL SUMMARY /PERFORMANCE OF THE COMPANY
Rs. in Crore
Year ended 31st March 2015 2014 Growth 2015 2014 Growth
Total Income 1389.90 1,127.64 23% 1497.36 1,222.05 23%
EBITDA 472.56 346.04 37% 505.23 368.75 37%
Profit before Tax 451.83 313.06 44% 464.47 329.85 41%
Profit after Tax 306.37 220.86 39% 309.86 233.88 32%
Earnings Per Share (EPS) 34.84 25.13 - 35.24 26.62 -
The Company proposes to transfer an amount of Rs. 160 Crore to the General Reserve. An amount of Rs. 119.40 Crore is proposed to be retained in the statement of Profit and loss.
Your Directors are pleased to recommend a dividend of Rs. 6/- per equity share on the face-value of Rs. 2/- each for the year ended 31st March 2015.
Company posted remarkable performance during the year under review. Consolidated sales scaled up by 23% over the previous year. Profit before interest, depreciation and tax (EBITDA) went up by 37%, whereas Profit after tax was higher by 32% over the previous year. Export sales contributed 66% of the revenue and domestic accounted for the rest. For the last 5 years, the Company has consistently posted healthy performance with its consolidated revenue showing a CAGR of 31% and net profit of 57%.
The Company continues to operate only in one segment i.e pharmaceuticals and there is no change in the nature of business of the Company.
There are no material changes and commitments affecting the financial position of the Company, which have occurred between the end of the financial year of the Company and the date of this report.
No significant or material orders passed or have been passed against the Company by the regulators, courts, or tribunals, which impacts the going concern status and Company''s operations in future.
MANAGEMENT DISCUSSION AND ANALYSIS
A detailed Management Discussion and Analysis forms part of this annual report, which is given elsewhere in the Report.
During the year, 26,700 shares were issued and listed under ESOS, 2011. Further, the Company sub-divided face value of its equity shares from Rs. 5/- to Rs. 2/- per share after taking approval of the members. Consequent thereto, total paid up equity share capital of the Company as on 31st March 2015 stands at Rs. 17.58 Crore divided into 8,79,43,500 shares of Rs. 2/- each.
EMPLOYEES STOCK OPTION SCHEME
Particulars of Employee Stock Options under ESOS 2011 are given in "Annexure A" to this report.
Your Company''s bank facilities have been rated by Credit Analysis and Research Limited (CARE) during September 2014. The Company has received the highest rating A (A plus) for its short term facilities as per which Instruments with this rating are considered to have very strong degree of safety regarding timely payment of financial obligations. Such instruments carry lowest credit risk. For the long term borrowings, the Company has received AA- (Double A minus), which indicates high degree of safety regarding timely servicing of financial obligations. Such instruments carry very low credit risk.
SUBSIDIARIES / JOINT VENTURES / ASSOCIATE COMPANIES
a. Your Company has six subsidiaries overseas, including one step down subsidiary and has one Joint Venture (JV) company. Financials of subsidiaries are disclosed in the consolidated financial statements, which forms part of this Annual Report. The Company does not have significant influence on its JV in Turkmenistan namely, Turkmenderman Ajanta Pharma Limited (TDAPL) as day-to-day management is controlled by the JV partner and the JV operates under severe restriction that significantly impairs its ability to transfer the funds to the Company. The Company is therefore looking for divestment of this JV and as such, JV''s accounts are not consolidated.
Statement containing salient features of financial statements of subsidiaries pursuant to section 129 of the Companies Act, 2013 (Act) read with Rule 5 of the Companies (Accounts) Rules,2014 is annexed to this Report as "Annexure B" in the prescribed Form AOC-I.
The Financial statements of the subsidiary companies are kept for inspection by the shareholders at the registered office of the Company.
The Company has laid down policy on Material subsidiary and the same is placed on the website of the Company at www.ajantapharma.com (www. ajantapharma.com/financials/Investor Articles/ Policy%20on%20Material%20Subsidiaries.pdf). None of the subsidiaries are material subsidiary as per the Policy.
a. Appointment of Mr. Prabhakar Dalal and Dr. Anjana Grewal as Independent Directors was confirmed by the members at the Annual General Meeting held on 5th August 2014. Apart from this, there were no changes in the directors or Key Managerial Personnel during the year.
All Independent Directors have given declarations that they meet the criteria of independence as laid down under Section 149(6) of the Act and Clause 49 of the Listing Agreement.
Mr. Rajesh M. Agrawal retires by rotation at the ensuing Annual General Meeting and being eligible offer himself for re-appointment.
Mr. Madhusudan B. Agrawal, was appointed as Whole time Director of the Company for five years w.e.f. 1st April 2010. The Board has on the recommendation of the Nomination and Remuneration Committee, reappointed him as Vice Chairman and Executive Director for another term of 5 years w.e.f. 1st April 2015, on the terms and condition including remuneration set out in the Agreement and subject to approval of members.
The Board recommends re-appointment of Mr. Rajesh M. Agrawal and Mr. Madhusudan B. Agrawal at the ensuing Annual General Meeting. Based on disclosures provided by them, none of them are disqualified from being appointed as Directors as per section 164 of the Companies Act, 2013.
b. Board meetings
During the year, five Board meetings were held, with gap between Meetings not exceeding the period prescribed under the Act. Details of Board and Board committee meetings held during the year are given in the Corporate Governance Report.
Board meeting dates are finalised in consultation with all directors and agenda papers backed up by comprehensive notes and detailed background information are circulated well in advance before the date of the meeting thereby enabling the Board to take informed decisions. A detailed presentation is also made to apprise the Board of important developments in industry, segments, business operations, marketing, products etc.
c. Independent Director''s familiarisation Programme
As per requirements under the Listing Agreement, the Company undertook directors'' familiarisation programme for Independent Directors in order to familiarise them with business model, management structure, product portfolio, Industry overview, manufacturing operations, internal control system and processes, FOREX management, risk management framework, functioning of various divisions, HR Management, CSR activities etc. Details of such familiarisation programme is placed on the Company''s website at www.ajantapharma.com (www. ajantapharma.com/financials/Investor Articles/ FPFID.pdf).
d. Evaluation of Board, Committees and Directors
Pursuant to the provisions of the Act and Clause 49 of the Listing Agreement, the Board had carried out performance evaluation of its own, the Board Committees and of the Independent directors. Independent Directors at a separate meeting evaluated performance of the Non-Independent Directors, Board as a whole and of the Chairman of the Board. The manner in which the evaluation has been carried out has been detailed in the Corporate Governance Report.
e. Policy on appointment and remuneration of Directors
The Board has on the recommendation of the Nomination & Remuneration Committee, formulated criteria for determining Qualifications, Positive Attributes and Independence of a Director as also a Policy for remuneration of Directors, Key managerial Personnel and senior management. The details of criteria laid down and the Remuneration Policy are given in the Corporate Governance Report.
Your Company is committed to continuously invest in the infrastructure well in advance to complement its growth plans. It demonstrates the vision and foresight of the management to anticipate the future requirements and take bold initiatives at the right time. When building the facilities and infrastructure, Company has been guided with its philosophy of doing the best in uncompromising way and giving lot of attention to details. The work on new Dahej facility is just completed and management has already started work on another new facility.
The Dahej facility has been specially constructed for catering to the requirements of markets like USA, WHO and Emerging Markets with a total investment of about Rs.220 Crore. It has world class standard, employing latest technology and state of the art machinery complying with USFDA / UKMHRA / WHO standards. This new facility has capacities to manufacture annually 1,740 Million Tablets, 216 Million Capsules and 150 Million Powder sachets. The facility will start taking validation batches in next few months.
The Company is also expanding its R & D facilities at Mumbai to cater to the growing needs. This expansion will take about 2 years and has spent Rs. 70 Crore on the same during the year.
a. Statutory Auditors
Your Company''s statutory auditors, M/s. Kapoor & Parekh Associates, Chartered Accountants, Mumbai, retire at the conclusion of ensuing Annual General Meeting. Your Company has received a letter from them to the effect that their reappointment, if made, will be in accordance with the provisions of section 139 & 141 of the Act, and are eligible for re-appointment, holding peer review certificate. Audit Committee and the Board recommend their reappointment.
The remarks as contained in the Auditor''s Report read with Notes forming part of the accounts are self-explanatory.
b. Cost Auditors
Pursuant to Section 148 of the Act, read with the Companies (Cost Records and Audit) Amendment Rules, 2014, the cost audit records maintained by the Company in respect of its Bulk Drugs and Formulations activity are required to be audited by cost auditors. The Board has on the recommendation of the Audit Committee, appointed M/s. Sevekari, Khare & Associates, Practicing Cost Accountants to audit the cost accounts of the Company for the financial year 2015-16 on a remuneration of Rs. 3 lacs, subject to ratification by members. Accordingly, a resolution seeking Member''s ratification for the remuneration payable to M/s. Sevekari, Khare & Associates, Cost Auditors is included at Item No. 7 of the Notice convening the Annual General Meeting.
c. Secretarial Auditors
Pursuant to the provisions of Section 204 of the Act and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Company has appointed M/s. Alwyn D''Souza & Company, a firm of Company Secretaries in Practice to undertake the Secretarial Audit of the Company. The Secretarial Audit Report is annexed herewith as "Annexure C". There is no qualification, reservation or adverse remark in the report.
INTERNAL CONTROL SYSTEM AND COMPLIANCE FRAMEWORK
The Company has an Internal Control System, commensurate with size, scale and complexity of its operations. The internal financial controls are adequate and are operating effectively so as to ensure orderly and efficient conduct of business operations.
The Company has appointed M/s. Mahajan & Aibara as Internal Auditors of the Company. The Audit Committee in consultation with the internal auditors formulates the scope, functioning, periodicity and methodology for conducting the internal audit. The internal auditors carry out audit, covering inter alia, monitoring and evaluating the efficacy and adequacy of internal control systems in the Company, its compliance with operating systems, accounting procedures and policies at all locations and submit their periodical internal audit reports to the Audit Committee. Based on the internal audit report and review by the Audit committee, process owners undertake necessary actions in their respective areas. The internal auditors have expressed that the internal control system in the Company is robust and effective.
The Board has also put in place requisite legal compliance framework to ensure compliance of all the applicable laws and that such systems are adequate and operating effectively.
Company has implemented an integrated risk management approach through which it reviews and assesses significant risks on a regular basis to help ensure that there is a robust system of risk controls and mitigation in place. Senior management periodically reviews this risk management framework to keep updated and address emerging challenges.
Major risks identified for the Company by the management are Currency fluctuation, Compliance, Regulatory changes, Manufacturing & Supply, Litigation, Information Technology and new capital investments return. The management is however, of the view that none of the above risks may threaten the existence of the Company as robust Risk mitigation mechanism is put in place to ensure that there is nil or minimum impact on the Company in case any of these risks materialise.
The Company has set up vigil mechanism viz. Whistle Blower Policy to enable the employees and Directors to report genuine concerns and irregularities, if any in the Company, noticed by them. It is posted on the intranet of the Company. The same is reviewed by the Audit Committee from time to time.
RELATED PARTY TRANSACTIONS AND POLICY ON RELATED PARTY TRANSACTIONS
All related party transactions that were entered into during the financial year were on an arm''s length basis and were in the ordinary course of business. There are no materially significant related party transactions made by the Company which may have a potential conflict with the interest of the Company at large and thus disclosure in Form AOC-2 is not required.
The Board has formulated Policy on Related Party Transactions and the same is uploaded on the Company''s website at www.ajantapharma.com (www.ajantapharma. com/financials/Investor Articles/Policy%20on%20 Related%20Party%20Transactions.pdf).
None of the Non-Executive Directors has any pecuniary relationship or transactions with the Company other than sitting fees and commission payable to them.
MANAGERIAL REMUNERATION AND PARTICULARS OF EMPLOYEES
The information required under Section 197(12) of the Companies Act, 2013 read with Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 forms part of this Report.
The above information is not being sent along with this Report to the Members of the Company as per the provision of Section 136 of the Companies Act, 2013. Members who are interested in obtaining these particulars may write to the Company Secretary at the Registered Office of the Company. The aforesaid Annexure is also available for inspection by Members at the Registered Office of the Company, 21 days before the 36th Annual General Meeting and upto the date of the Annual General Meeting during the business hours on working days.
LOANS, GUARANTEES OR INVESTMENTS
Details of Loans, Guarantees and Investments, if any covered under the provisions of Section 186 of the Act are given in the notes to the Financial Statements.
CORPORATE SOCIAL RESPONSIBILITY (CSR)
Pursuant to the provisions of section 135 of the Act, read with CSR Rules, the Company has constituted CSR committee and formulated CSR policy. The Policy primarily rests on four broad categories: Healthcare, Education, Community Development and Ecology. During the year, the Company undertook several initiatives under the CSR program. The details of CSR policy and CSR activities undertaken during the year are annexed herewith as "Annexure D".
Your Company has not accepted any deposits from the public falling within the purview of Section 73 of the Act, read with the Companies (Acceptance of Deposits) Rules, 2014.
EXTRACT OF THE ANNUAL RETURN
The extract of the Annual Return in form MGT 9 is annexed herewith as "Annexure E".
DIRECTORS'' RESPONSIBILITY STATEMENT
To the best of their knowledge and belief and according to the information and explanations obtained by them, your Directors confirm:
a. that in the preparation of the annual accounts for the year ended 31st March 2015, the applicable Accounting Standards had been followed along with proper explanation relating to material departures, if any;
b. that the directors had selected 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 2015 and of the profit of the Company for that period;
c. that proper and sufficient care has been taken 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. that the annual accounts/financial statements have been prepared on a going concern basis;
e. that proper internal financial controls were in place and that the financial controls were adequate and were operating effectively;
f. that the Directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.
CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO
The information relating to Conservation of energy, technology absorption, foreign exchange earnings and outgo, pursuant to Section 134 of the Act, read with the Companies (Accounts) Rules, 2014 is given as "Annexure F" and forms part of this report.
Report on Corporate Governance is given elsewhere in this Annual Report. Certificate from the Auditors regarding compliance of conditions of Corporate Governance as stipulated in Clause 49 of the Listing Agreement with Stock Exchanges is also appended to the report on Corporate Governance.
Your Company firmly believes that employees are the most valuable assets and key players of business success and sustained growth. Various employee benefits, recreational and team building programs are conducted to enhance employee skills, motivation as also to foster team spirit. Company also conducts in-house training programs to develop leadership as well as technical/functional capabilities in order to meet future talent requirements. Industrial relations were cordial throughout the year.
GRATITUDE & ACKNOWLEDGMENTS
Your Directors place on record their earnest appreciation for the unstinted commitment, dedication, hard work and significant contribution made by employees across the globe in ensuring sustained growth of the Company. Your Directors also sincerely thanks all the stakeholders, medical professionals, business partners, government, other statutory bodies, banks, financial institutions, analysts and shareholders for their continued assistance, co-operation and support.
For and on behalf of the Board of Directors
Mannalal B. Agrawal
Mumbai, 8th May 2015
Mar 31, 2013
The directors have pleasure in presenting their report on the business and operations of your company along with Thirty Fourth Annual Report for the year ended 31st March, 2013.
Financial Results (Rs. Crores)
2013 2012 Growth 2013 2012 Growth
Total Income 846.61 605.48 39% 933.04 678.65 37%
EBITDA 207.28 123.23 68% 224.29 137.00 64%
Profit before Tax 163.51 79.75 105% 176.79 90.96 95%
Profit after Tax 101.12 66.49 52% 112.11 77.27 45%
Earnings Per Share (EPS) (Rs.) 43.17 28.39 47.87 32.99
Your Directors are pleased to recommend a dividend of Rs.6.25 per equity share on the face-value of Rs.5/- each for the year ended 31st March, 2013.
During the year, your company''s performance has been excellent both at Stand Alone and Consolidated level. Operational Income grew by 39% in Stand Alone results with 52% growth in Net Profit. Exports contributed 65% of Total Revenue, which indicates a balanced growth in both the segments of domestic and exports business over years. During the year, income tax provision has seen sharp increase as all carry forward losses were exhausted and a liability of Rs.15.75 crs. was provided towards previous years. Consolidated results kept the pace with equally good performance by both subsidiaries. Consolidated Operational Income grew by 37%, whereas Net Profit has seen a growth of 45%.
Management Discussion and Analysis A detailed Management Discussion and Analysis forms part of this annual report which is given in the beginning pages.
During the year, number of equity shares of your company increased two fold consequent to split in face value of shares from Rs.10/- each to Rs.5/- each.
Credit Analysis and Research Limited (CARE) has upgraded its rating for short term facilities of your company to CARE A1 (pronounced as "A One Plus"), the highest credit quality by CARE for such borrowings. It also reaffirmed CARE A (pronounced as "A Plus") rating for long term facilities of your company.
As on 31st March, 2013, your company had 5 subsidiaries overseas, including one step down subsidiary. During the year, for administrative convenience, old subsidiary in US was wound up and new subsidiary was formed. However, there was no impact on the operations due to this change. Statement pursuant to section 212 of the Companies Act 1956 forms part of this annual report. Consolidated Financial Statements incorporating results of all subsidiaries as per Accounting Standards AS21 prescribed by the Institute of the Chartered Accountants of India is also enclosed.
There is no improvement in the performance of your Company''s joint venture in Turkmenistan, which continues to be under performing and we continue to explore exit options from this JV.
Mr. Madhusudan B. Agrawal and Mr. Chandrakant M. Khetan, the Directors of your Company, retire by rotation and being eligible, offer themselves for re- appointment.
Mr. Yogesh M. Agrawal & Mr. Purushottam B. Agrawal are Executive Directors, whose terms are ending on 31st March, 2013. As such being eligible, offer themselves for their re-appointment as Managing Director and Whole-Time Director respectively. Their contribution to the growth of your company has been immense. Members are requested to consider their candidature and re-appoint them for a period of five years effective from 1st April, 2013.
Mr. Rajesh M. Agrawal and Mr. K H Vishwanathan have been appointed as Additional Directors by the Board effective from 30th April, 2013. The company has received request of their candidature accompanied by a deposit of Rs.500/- each. As such the members are requested to consider their appointment as directors of the company.
Your company''s statutory auditors, M/s. Kapoor & Parekh Associates, Chartered Accountants, Mumbai, retire at the conclusion of ensuing Annual General Meeting. Your company has received a letter from them to the effect that their reappointment, if made, will be in accordance with the provisions of section 224 (1-B) of the Companies Act, 1956 and are eligible for re-appointment, holding peer review certificate. The Audit Committee and the Board recommend their reappointment.
The remarks as contained in the Auditor''s Report read with Notes forming part of the accounts are self- explanatory.
Pursuant to the provisions of Section 233B of the Companies Act, 1956 and in terms of General Circular No. 15/2011 dated 11th April, 2011 and with the prior approval of the Central Government, M/s. Sevekari Khare & Associates, practising Cost Accountant, were appointed to conduct audit of cost records of Bulk Drugs and Formulations for the year ended 31st March, 2013. Cost audit reports would be submitted to the Central Government within the prescribed time.
Pursuant to Rule 5 of the Companies (Cost Audit Report) Rules, 2011, cost audit reports for Bulk Drugs and Formulations for the year ended 31st March, 2012 were filed with the Central Government on 2nd January, 2013.
Your Company has not accepted any fixed deposits from the public under Section 58A of the Companies Act, 1956.
Directors'' Responsibility Statement Your Directors confirm-
1. that in the preparation of the annual accounts, the applicable accounting standards have been followed;
2. that the directors have selected such accounting policies and applied them consistently and made judgements and estimates that were 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 31st March, 2013, and of the profit or loss account of the company for that year;
3. that the directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956, for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities;
4. that the directors have prepared the Annual Accounts on a going concern basis.
Employees Stock Option Scheme
During the year, no new options were granted to the employees under Employee Stock Option Scheme 2011. Pursuant to the provisions of the Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999, the details of stock options are attached as Annexure - B to the Director''s Report.
Your company considers people as its most valuable resource, who play a key role in achieving the goals of the company. Your company has been fairly successful in attracting, retaining and developing best of the talent. Company enjoyed cordial relations at all levels and has been proactive to take different steps for development of its people.
Information as per Section 217(2A) of the Companies Act, 1956, read with Companies (Particulars of Employees) Rules, 1975, is available at the registered office of the company. However, as per the provisions of Section 219(1)(b)(iv) of the Companies Act, 1956, the report and accounts are being sent to all shareholders of the Company, excluding the aforesaid information, which is available for inspection at the Registered Office of the Company during working hours. Any shareholder interested in such particulars may inspect the same.
Conservation of energy, technology absorption, foreign exchange earnings and outgo
The additional information relating to Conservation of energy, technology absorption, foreign exchange earnings and outgo, pursuant to Section 217(1)(e) of the Companies Act, 1956 read with Companies (Disclosure of particulars in the report of the Board of Directors) Rules 1988 is given in annexure and forms part of this report.
Report on Corporate Governance forms an integral part of this Annual Report. Certificate from the Auditors regarding compliance of conditions of Corporate Governance as stipulated in Clause 49 of the Listing Agreement with Stock Exchanges is also enclosed.
Gratitude and Acknowledgments
Your Directors express their sincere gratitude to all its stakeholders, medical professionals, business partners, government, other statutory bodies, banks, financial institutions, analysts and shareholders for their assistance, co-operation and encouragement. Your Directors also place on record their earnest appreciation for dedication, hard work and commitment of all employees.
For and on behalf of the Board of Directors,
MANNALAL B. AGRAWAL
Mumbai, 30th April, 2013