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Directors Report of Merck Ltd.

Dec 31, 2014

Dear Members,

We are pleased to present the report on business and operations for the year ended December 31, 2014.

FINANCIAL HIGHLIGHTS:

The financial performance of your Company for the year ended December 31, 2014 is summarized below:

(Rupees million)

Particulars 2014 2013

Income from Operations 8,674.9 7,977.8

Other Income 203.3 214.5

Profit before Interest, Depreciation and Tax 792.4 983.2

Depreciation 126.8 100.7

Provision for Taxation (net) 233.4 323.7

Profit after tax 432.2 558.8

Profit available for appropriations 2,100.5 1,889.3

Appropriations:

Transfer to General Reserve 43.2 55.9

Dividend (including Tax on Dividend) 119.5 165.1

Balance carried to the Balance Sheet 1,937.8 1,668.3

EPS

– Basic (Rs.) 26.0 33.7

– Diluted (Rs.) 26.0 33.7

COMPANY''S OPERATIONAL PERFORMANCE:

Details of operational working of your Company are given in the Management Discussion and Analysis Report forming part of this Report. During the financial year ended December 31, 2014, your Company achieved a turnover of Rs. 8,324.5 million as against a turnover of Rs. 7,729.6 million in the previous year, registering a growth of 7.7%. During the year under report, the Pharmaceuticals segment registered an increase in turnover of 5.1% and, the Chemicals segment registered an increase of 13.5% as compared to the respective segment turnover achieved during the previous financial year.

The export turnover of your Company during the year 2014 was Rs. 677.4 million as against Rs. 707.7 million achieved in the previous year.

SHARE CAPITAL:

Share Capital Audit as per the directives of the Securities and Exchange Board of India is being conducted on a quarterly basis by Messrs Saraf and Associates, Practicing Company Secretaries. The Share Capital Audit Reports are duly forwarded to the Bombay Stock Exchange and National Stock Exchange of India Limited where the equity shares of your Company are listed. During the year ended December 31, 2014 there is no change in the issued and subscribed capital of your Company, the outstanding capital as on December 31, 2014 is Rs. 166.0 million comprising of 16 million equity shares of Rs. 10/- each.

DIVIDEND:

Your Board of Directors have recommended a dividend of Rs. 6/- (Rupees six) per equity share for the year ended December 31, 2014. This is subject to approval of the Members at forthcoming Annual General Meeting.

FIXED DEPOSITS:

Your Company has not accepted any public deposits from the public or the Members during the year 2014 and no amount on account of principal or interest on public deposits was outstanding as on the date of the balance sheet.

CORPORATE SOCIAL RESPONSIBILITY:

In terms of the provisions of Section 135 of the Companies Act, 2013 your Company has constituted a CSR Committee under the chairmanship of an Independent Director of the Company. The Company also adopted CSR policy which is available on its website www.merck.co.in

During the year under review the Company has initiated following projects to meet its corporate social responsibility obligations.

(a) Narmada Samgara Project: During the year your Company has collaborated and extended support for improving lives of the people living in inaccessible areas along the banks of river Narmada, Madhya Pradesh. These tribal people are not having access to healthcare facilities, clean drinking water, and education. The Company has provided assistance by way of provision of medicines, sponsorship of doctors and water test equipment. The Company has also provided cash assistance for running a river ambulance which travels to villages inhabited along the banks of the river Narmada. The ambulance carries medicines and medical staff for on-the-spot medical checkup and providing treatment to sick. During the current financial year the Company intends to provide a boat for extending this service to additional areas. The Company has spent Rs. 3.0 million on this project, in the current financial year.

(b) CSR activities at Goa: The Company, in the villages close to its factory in Goa, distributed free school uniforms and note books to students, through village Panchayat. A medical camp was also organized for the benefit of villagers. During the year the Company has spent Rs. 0.12 million on these activities.

(c) Scholarships to bright stars from weaker section of the Society: During the year the Company, through Merck India Charitable Trust (MICT), continued to provide scholarships to students from the weaker sections of the society. A lump sum amount is given to selected students to meet their expenses on tuition fee, books and other education expenses. Student once selected gets the annual scholarship until she/he continues to perform well in studies and passes the graduation or equivalent examination.

During the year the Company could not spend 2% of its average profit for the last three years since during the year it used its managerial resources to lay the basic frame work for undertaking the CSR activities in accordance with the provisions of the Companies Act, 2013 including finalizing the CSR policy, constituting statutory and executive committees for undertaking CSR activities, identifying the CSR projects which meet the Company policy and statutory requirements.

DIRECTORS'' RESPONSIBILITY STATEMENT:

In accordance with Section 217(2AA) of the Companies Act, 1956, your Directors confirm that:

(a) In the preparation of the annual accounts, the applicable Accounting Standards/Rules have been followed along with proper explanation relating to material departures;

(b) The accounting policies have been consistently applied and reasonable and prudent judgment and estimates have been made so as to give a true and fair view of the state of affairs of the Company as at December 31, 2014 and the profit for the year ended on that date;

(c) Proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 has been taken for safeguarding the assets of the Company and for detecting and preventing fraud and other irregularities; and

(d) The annual accounts have been prepared on a going concern basis.

DIRECTORS:

Mrs. Rani Ajit Jadhav was appointed as an Additional Director with effect from February 05, 2015 who holds office up to the date of the ensuing Annual General Meeting. She was appointed as an Independent Director for a term of five years with effect from subject to the approval of the shareholders at the ensuing Annual General Meeting.

Mr. Anand Nambiar was appointed as an additional Director with effect from February 05, 2015 who holds office up to the date of the ensuing Annual General Meeting. He was also appointed as "Managing Director" for a period from February 05, 2015 to September 30, 2017 subject to the approval of the shareholders at the ensuing Annual General Meeting and approval of the Central Government.

Dr. Claus-Dieter Boedecker resigned as a Director and Managing Director of the Company with effect from January 31, 2015, due to his desire to re-locate to Germany, his home country. The Directors placed on record their appreciation of his valuable contributions as member of the Board during his tenure as Managing Director of the Company.

Mr. Brijesh Kapil was appointed as an additional Director with effect from February 05, 2015 who holds office up to the date of the ensuing Annual General Meeting. He was also appointed as Wholetime Director for a period of five years with effect from February 05, 2015 subject to the approval of the shareholders at the ensuing Annual General Meeting.

Mr. Ali Sleiman was appointed as an additional Director with effect from February 05, 2015 who holds office up to the date of the ensuing Annual General Meeting. He was appointed as Wholetime Director for a period from February 05, 2015 to September 30, 2017 subject to the approval of the shareholders at the ensuing Annual General Meeting and approval of the Central Government.

Mr. Pramod Pimplikar, Director (Technical Operations) resigned as Director and Wholetime Director of the Company with effect from January 13, 2015. The Directors placed on record their appreciation of his valuable contributions as member of the Board and senior member of the management team.

Mr. E.A. Kshirsagar, Independent Director resigned from the Board of Directors effective January 13, 2015 to create a vacancy for induction of a woman director on the Board of the Company in compliance with the provisions of the Companies Act, 2013 and to adhere to the Merck principle of keeping its board structure lean. The Directors placed on record their appreciation of his valuable contributions as member of the Board.

In terms of the provisions of Section 149 of the Companies Act, 2013 and other applicable provisions, if any, the Board has recommended the appointment of Mr. S.N. Talwar and Mr. H.C.H. Bhabha, existing Independent Directors, as Independent Directors of the Company for a period of 5 years effective from April 08, 2015.

Mr. N. Krishnan, Director (Finance) will retire by rotation at the forthcoming Annual General Meeting of the Company and being eligible offers himself for re-appointment as Director of the Company. Board recommends his re-appointment.

AUDITORS:

Messrs BSR & Co. LLP, Chartered Accountants, retires as Statutory Auditors of the Company at the conclusion of the forthcoming Annual General Meeting and has confirmed their eligibility and willingness to accept the office of the Auditors for the year 2015, if re-appointed.

A certificate from them has been received to the effect that their appointment as Statutory Auditors if made would be in accordance to the provisions of Sections 139 and 141 of the Companies Act, 2013 and rules framed thereunder.

The Board and Audit Committee of your Company have recommended the re-appointment of Messrs BSR & Co. LLP, Chartered Accountants, as Statutory Auditors of your Company, to hold office as such from the conclusion of the forthcoming Annual General Meeting until the conclusion of subsequent Annual General Meeting to be held in 2016.

COST AUDIT:

Pursuant to Section 233B of the Companies Act, 1956, the Central Government has prescribed cost audit of the accounts to be maintained by your Company concerning its bulk drugs and formulations divisions. To conduct the cost audit of these divisions, M/s. Sanghvi Randeria & Associates, a firm of Cost Accountants has been re-appointed as Cost Auditors of your Company for the year 2014 in the meeting of Board of Directors held on Friday, January 31, 2014, subject to the approval of the Central Government, required if any. The Cost Audit Report for the financial year ended December 31, 2013 was due to be filed on June 30, 2014 has been filed on June 29, 2014.

PERSONNEL:

As on December 31, 2014, the total number of employees on the payroll was 1515. Industrial relations with the employees at various levels generally continued to be cordial.

The particulars of employees, as required under Section 217(2A) read with the Companies (Particulars of Employees) Rules, 1975, form part of this Report. However, pursuant to the provisions of Section 219(1)(b)(iv) of the Companies Act, 1956, the Reports and Accounts are being sent to the Members excluding the statement of particulars of employees. Any Member may obtain a copy of the said statement by writing to the Company Secretary at the registered office of the Company.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO:

The information pertaining to conservation of energy, technology absorption, foreign exchange earnings and outgo required to be disclosed as per Section 217(1)(e) of the Companies Act, 1956, read with the Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules 1988, is given in the annexure forming part of this Report.

CORPORATE GOVERNANCE:

A Report on the compliance of Corporate Governance Code along with Auditors'' certificate thereon, as stipulated under Clause 49 of the Listing Agreement, is annexed to this Report.

GREEN INITIATIVE:

Your Company has taken the initiative of going green and minimising the impact on the environment. The Company has been circulating the copy of the Annual Report in electronic format to all those Members whose email address is available with the Company. Your Company would encourage other Members also to register themselves for receiving Annual Report in electronic form. Kindly refer the contact details and ways to register your email address given under the heading ''Request to the Members'' at the end of the notice of the Annual General Meeting.

ACKNOWLEDGEMENTS:

Your Directors thank and express their gratitude to the Company''s employees, customers, vendors, investors, and institutions for their continued support to the Company. Your Directors also thank the State Government and concerned Government Departments/ Agencies for their cooperation.

Your Directors also register sincere thanks and infinite appreciations to the contributions made by every Member of the Merck family globally.

On behalf of the Board of Directors

S. N. Talwar Chairman

Mumbai, February 05, 2015


Dec 31, 2013

The financial performance of your Company for the year ended 31 December, 2013 is summarized below:

(Rupees million)

Particulars 2013 2012

Income from Operations 7,977.8 6,872.8

Other Income 214.5 202.0

Profit before Interest, Depreciation

and Tax 983.2 1,256.9

Depreciation 100.7 89.0

Provision for Taxation (net) 323.7 383.9

Profit after tax 558.8 784.0

Profit available for appropriations 1,889.3 1,457.1

Appropriations:

Transfer to General Reserve 55.9 78.4

Dividend (including Tax on 165.1 48.2

Dividend)

Balance carried to the Balance 1,668.3 1,330.5

Sheet

EPS

– Basic (Rs.) 33.7 47.2

– Diluted (Rs.) 33.7 47.2

COMPANY''S OPERATIONAL PERFORMANCE:

Detailed operational working of your Company are discussed in the Management Discussion and Analysis Report forming part of this Report. During the financial year ending 31 December, 2013, your Company achieved a turnover of Rs. 7,729.6 million as against a turnover of Rs. 6,580.7 million in the previous year, registering a growth of 17.5%. During the year under report, the Pharmaceuticals segment showed an increase in turnover of 20%, the Chemicals segment registered an increase of 12% as compared to the respective segment turnover in the previous year.

The devaluation of the Indian Rupee vis-a-vis major currencies resulted in increase of input costs, sluggish in economic environment and impairment of current assets, were key reasons for the dent in operating margins. The Profit after Tax for the year under review was Rs. 558.8 million as against Rs. 784.0 million in previous year, showing a fall of 28.7%.

The export turnover of your Company during the year 2013 was Rs. 707.7 million as against Rs. 729.8 million achieved in the previous year.

SHARE CAPITAL:

Share Capital Audit as per the directives of the Securities and Exchange Board of India is being conducted on a quarterly basis by Messrs K.G. Saraf & Company, Practicing Company Secretaries. The Share Capital Audit Reports are duly forwarded to the Bombay Stock Exchange and National Stock Exchange of India Limited where the equity shares of your Company are listed. During the year ended 31 December, 2013 there was no change in the issued and subscribed capital of your Company, the outstanding capital as on 31 December, 2013 was Rs. 166.0 million comprising of 16.6 million equity shares of Rs. 10.00/- each.

DIVIDEND:

Your Board of Directors has recommended a dividend of Rs. 8.50/- (Rupees Eight and paisa Fifty) per equity share for the year ended 2013. This is subject to approval of Members at the forthcoming Annual General Meeting.

FIXED DEPOSITS:

Your Company has not accepted any public deposits from the public or the Members during the year 2013 and no amount on account of principal or interest on public deposits that may have been accepted in the past was outstanding as on the date of the Balance Sheet.

DIRECTORS'' RESPONSIBILITY STATEMENT:

In accordance with Section 217(2AA) of the Companies Act, 1956, your Directors confirm that:

(a) in the preparation of the annual accounts, the applicable Accounting Standards/Rules have been followed along with proper explanation relating to material departures;

(b) the accounting policies have been consistently applied and reasonable and prudent judgment and estimates have been made so as to give a true and fair view of the state of affairs of the Company as at 31 December, 2013 and the profit for the year ended on that date;

(c) proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 has been taken for safeguarding the assets of the Company and for detecting and preventing fraud and other irregularities; and

(d) the annual accounts have been prepared on a going concern basis.

DIRECTORS:

Mr. S. N. Talwar and Mr. H. C. H. Bhabha, both Non- Executive Independent Directors, will retire by rotation at the forthcoming Annual General Meeting of the Company and being eligible they offer themselves for re-appointment as Directors of the Company.

AUDITORS:

Messrs B S R & Co. LLP, Chartered Accountants, retires as Statutory Auditor of the Company at the conclusion of the forthcoming Annual General Meeting and has confirmed their eligibility and willingness to accept the office of the Auditors for the year 2014, if re-appointed. The Board and Audit Committee of your Company has recommended the re-appointment of Messrs B S R & Co. LLP, Chartered Accountants, as Statutory Auditor of your Company, to hold office as such from the conclusion of the forthcoming Annual General Meeting until the conclusion of the next Annual General Meeting.

COST AUDIT:

Pursuant to Section 233B of the Companies Act, 1956, the Central Government has prescribed cost audit of the accounts to be maintained by your Company with regard to its bulk drugs and formulations divisions. To conduct the cost audit of these divisions, M/s. Sanghvi Randeria & Associates, a firm of Cost Accountants, has been re-appointed as Cost Auditors of your Company for the year 2014 in the meeting of Board of Directors held on Friday, 31 January, 2014, subject to the approval of the Central Government, required if any. The Cost Audit Report for the financial year ended 31 December, 2012 was due to be filed on 30 June, 2013, which was filed on 27 June, 2013.

PERSONNEL:

As on 31 December, 2013, the total number of employees on the payroll was 1,496. Industrial relations with the employees at various levels generally continued to be cordial.

The particulars of employees, as required under Section 217(2A) read with the Companies (Particulars of Employees) Rules, 1975, form part of this Report. However, pursuant to the provisions of Section 219(1)(b) (iv) of the Companies Act, 1956, the Reports and Accounts are being sent to the Members excluding the statement of particulars of employees. Any Member may obtain a copy of the said statement by writing to the Company Secretary at the registered office of the Company.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO:

The information pertaining to conservation of energy, technology absorption, foreign exchange earnings and outgo required to be disclosed as per Section 217(1)(e) of the Companies Act, 1956, read with the Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules 1988, is given in the annexure forming part of this Report.

CORPORATE GOVERNANCE:

A Report on the compliance of Corporate Governance Code along with Auditors'' certificate thereon, as stipulated under Clause 49 of the Listing Agreements, is annexed to this Report.

GREEN INITIATIVE:

Your Company has taken the initiative of going green and minimising the impact on the environment. The Company has been circulating the copy of the Annual Report in electronic format to all those Members whose email address is available with the Company. Your Company would encourage other Members also to register themselves for receiving Annual Report in electronic form. Kindly refer the contact details and ways to register your email address given under the heading ''Request to the Members'' at the end of the notice of the Annual General Meeting.

ACKNOWLEDGEMENTS:

Your Directors thank and express their gratitude to the Company''s employees, customers, vendors, investors, and institutions for their continued support to the Company. Your Directors also thank the State Government and concerned Government Departments/Agencies for their co-operation.

Your Directors also register sincere thanks and infinite appreciations to the contributions made by every Member of the Merck family globally.

On behalf of the Board of Directors

S. N. Talwar

Chairman

Mumbai, 31 January, 2014


Dec 31, 2012

The are pleased to present the report on our business and operations for the year ended December 31, 2012.

FINANCIAL HIGHLIGHTS:

(Rupees million)

2012 2011

Income from Operations 6,872.8 5,895.7

Other Income 202.0 168.8

Profit before Interest, Depreciation and Tax 1,257.1 892.8

Interest 0.2 0.2

Depreciation 89.0 79.5

Impairment (reversal) - (142.8)

Provision for Taxation (net) 383.9 319.1

Profit after tax 784.0 636.8

Profit available for appropriations 1,457.1 673.1

Appropriations:

Transfer to General Reserve 78.4 -

Dividend 41.5 -

Balance carried to the Balance Sheet 1,330.5 673.1

EPS

- Basic (Rs.) 47.2 38.4

- Diluted (Rs.) 47.2 38.4

OPERATIONS:

The operational working of the Company in detail is discussed in the Management Discussion and Analysis Report forming part of this Report. During the financial year ending December 31, 2012 the Company achieved turnover of Rs. 6,580.7 million as against turnover of Rs 5,575.7 million achieved during the previous year, registering a growth of 18%. During the year under report, the Pharmaceuticals segment showed an increase in turnover of 14.4% and the Chemicals segment registered an increase of 26.3% as compared to the respective segment turnover in the preceding financial year.

The Profit after Tax for the year under review was Rs. 784.0 million as against Rs. 636.8 million in 2011, showing an increase of 23°/o.

The export turnover of the Company during the year 2012 was Rs. 729.8 million as against Rs. 538.9 million achieved in the preceding year.

SHARE CAPITAL:

Share capital audit as per the directives of the Securities and Exchange Board of India is being conducted on a quarterly basis by K.G. Saraf ft Company, Practising Company Secretaries. The Share Capital Audit Reports are duly forwarded to the Bombay Stock Exchange and National Stock Exchange of India Limited where the equity shares of the Company are listed. During the year ended December 31, 2012 there is no change in issued and subscribed capital of the Company, the outstanding capital as on December 31, 2012 is Rs. 166.0 million comprising of 16.60 million equity shares of Rs. 10 each.

DIVIDEND:

The Board of Directors has recommended a dividend of Rs. 2.50/- (Rupees two and fifty paisa per share only) per equity share of the company for the year 2012. This is subject to the approval of the Members at the ensuing annual general meeting.

FIXED DEPOSITS:

The Company has not accepted any public deposits from the public or the members during the year 2012.

DIRECTORS'' RESPONSIBILITY STATEMENT:

In accordance with Section 217(2AA) of the Companies Act, 1956, your Directors confirm that:

(a) in the preparation of the annual accounts, the applicable Accounting Standards/Rules have been followed along with proper explanation relating to material departures;

(b) the accounting policies have been consistently applied and reasonable and prudent judgement and estimates have been made so as to give a true and fair view of the state of affairs of the Company as at December 31, 2012 and the profit for the year '' ended on that date;

(c) proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956, has been taken for safeguarding the assets of the Company and for detecting and preventing fraud and other irregularities and;

(d) the annual accounts have been prepared on a going concern basis.

DIRECTORS:

During the year Dr. Claus-Dieter Boedecker was appointed as Managing Director of the Company for a period of three (3) years effective from August 01, 2012 in place of Dr. Marek Dziki, whose contract of employment expired on July 31, 2012.

The Board appointed Mr. N. Krishnan as Whole- time Director of the Company for a period of five (5) years effective from October 22, 2012 in place of Mr. R. L. Shenoy who ceased to be the Whole-time Director and Chief Financial Officer of the Company upon attaining superannuation.

Terms of appointment of Dr. Claus-Dieter Boedecker and Mr. N. Krishnan are set out in the notice convening annual general meeting.

Pursuant to Article 110 of the Articles of Association of the Company, Merck KGaA, Germany, has appointed Dr. Peter-Ulrich Mannheimer as Director of the Company in place of Mr. Tim Kneen with effect from October 01, 2012.

We place on record our sincere appreciation for the contributions made by Dr. Marek Dziki, Mr. Tim Kneen and Mr. R.L. Shenoy during their respective tenures as members of the Board of the Company.

Mr. Pramod Pimplikar, Executive Director, and Mr. E.A. Kshirsagar, Director, will retire by rotation at the forthcoming Annual General Meeting of the Company being eligible they are seeking re-appointment as Director of the Company. Board recommends their re-appointment.

AUDITORS:

Messrs B S R ft Co., Chartered Accountants, retires as Auditors of the Company at the conclusion of the forthcoming Annual General Meeting and has confirmed their eligibility and willingness to accept the office of the Auditors for the year 2013, if re-appointed. The Board and audit committee of the Company has recommended the reappointment of Messrs B S R ft Co., Chartered Accountants, as statutoiy auditor of the Company to hold office as such until the conclusion of next Annual General Meeting.

COST AUDIT:

Pursuant to Section 233B of the Companies Act, 1956, the Central Government has prescribed cost audit of the accounts to be maintained by the Company concerning its bulk drugs and formulations divisions. To conduct the cost audit of these divisions, Messrs Sanghvi Randeria Et Associates, Cost Accountants, has been re-appointed as Cost Auditors of the Company for the year 2013, subject to the approval of the Central Government.

PERSONNEL:

As on December 31, 2012, the total number of employees on the payroll was 1,277. Industrial relations with the employees at various levels generally continued to be cordial. During the year under review workers union at Goa plant initiated negotiations with the Company which is under finalization and active discussions.

The particulars of employees, as required under Section 217(2A) read with the Companies (Particulars of Employees) Rules, 1975, form part of this Report. However, pursuant to the provisions of Section 219(l)(b) (iv) of the Companies Act, 1956, the Report and Accounts are being sent to the Members excluding the statement of particulars of employees. Any Member may obtain a copy of the said statement by writing to the Company Secretary at the registered office of the Company.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO:

The information pertaining to conservation of energy, technology absorption, foreign exchange earnings and outgo required to be disclosed as per Section 217(l)(e) of the Companies Act, 1956, read with the Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988, is given in the annexure forming part of this Report.

CORPORATE GOVERNANCE:

A Report on the compliance of Corporate Governance Code along with auditors'' certificate thereon, as stipulated under Clause 49 of the Listing Agreements, is annexed to this Report.

GREEN INITIATIVE:

Your company has taken the initiative of going green and minimizing the impact on the environment. This year we are circulating the copy of the annual report only in electronic format to all those Members who have registered their email address with us. This would substantially reduce the number of paper printed copies. We would encourage other Members also to register themselves for receiving annual report in electronic form.

ACKNOWLEDGEMENTS:

The Directors thank the Company''s employees, customers, vendors, investors, and institutions for their continued support to the Company. The Directors also thank the Government of various countries, Government of India, State Government and concerned Government Departments/Agencies for their co-operation.

On behalf of the Board of Directors

S. N. Talwar

Chairman

Mumbai, January 30, 2013


Dec 31, 2010

The Directors have the pleasure in presenting their Report on the business and operations of your Company along with the Accounts for the year ended December 31, 2010.

FINANCIAL HIGHLIGHTS:

(Rs. mio.)

2010 2009

TURNOVER 5,090.8 4,731.1

OTHER INCOME 433.7 432.1

Profit before Interest, Depreciation 1,171.6 1,039.9 and Taxation

Interest 0.7 0.3

Depreciation/Impairment loss 213.8 75.1

PROFIT BEFORE TAXATION 957.1 964.5

Provision for Taxation (net) 325.3 309.7

PROFIT AFTER TAXATION 631.8 654.8

Profit & Loss Account brought

forward 1,306.5 1,366.7

PROFIT AVAILABLE FOR

APPROPRIATION 1,938.3 2,021.5

APPROPRIATIONS:

Transfer to General Reserve 63.2 326.6

Interim Dividend Paid 1,576.9 --

Dividend Tax on Interim Dividend 261.9 --

Final Dividend (Proposed) -- 332.0

Dividend Tax on Proposed Final Dividend -- 56.4

Balance carried to the Balance Sheet 36.3 1,306.5

OPERATIONS:

The operational working of the Company, in detail is discussed in the Management Discussion and Analysis Report forming part of this Report. The turnover of the Company showed an increase of 7.6% over the turnover achieved in the previous year. As against Rs. 4,731.1 mio. achieved in the year 2009, the turnover of the Company in 2010 was Rs. 5,090.8 mio. While the Pharmaceuticals segment showed an increase in the turnover of 3.1%, the Chemicals segment showed an increase of 20.9% compared to the respective turnover of the segments in the preceding year.

The Profit After Tax for the year under review was Rs. 631.8 mio. as against Rs. 654.8 mio. in 2009, a decline of 3.5%.

The F.O.B. value of exports of the Company during the year 2010 was Rs. 468.8 mio. as against Rs. 522.2 mio. achieved in the preceding year. The fall in the value of the exports turnover was on account of the decline in the value of Oxynex exports in the year 2010.

The Company has debited the Profit and Loss Account towards the impairment loss to the extent of Rs. 142.8 mio. on the assets used for the manufacture of Oxynex at its Goa plant for the following reasons:

1. There has been an unexpected steep fall in the demand for Oxynex internationally and the future cash flows warrant the impairment of the value of assets to the extent of Rs. 142.8 mio.

2. It will be difficult to get a willing customer to purchase the assets used for the manufacture of Oxynex as the same are located in the midst of Goa plant. Therefore, any interested customers may find it difficult to have an easy access and also find difficulties in installing the utilities as currently most of the utilities of the Goa plant are installed centrally for all the production units.

Under the circumstances, as obtaining the fair value of the assets may not be feasible, the Directors have taken the decision to impair the value of Oxynex assets used for the manufacture of Oxynex to the extent of Rs. 142.8 mio. based on the value in use of the said assets.

SHARE CAPITAL:

The buy back offer of the Companys equity shares process which was initiated in May 2009, was closed in May 2010. The details of the buy back of Companys equity shares are as follows:

Number of equity shares bought back 261,842

The total cost of equity shares bought back Rs. 109.1 mio.

The paid up capital after the buy back Rs. 166.0 mio.

Share capital audit as per the directives of the Securities and Exchange Board of India is being conducted on a quarterly basis by K.G. Saraf ft Company, Practicing Company Secretaries. The Share Capital Audit Reports are duly forwarded to the Bombay Stock Exchange and National Stock Exchange of India Limited where the equity shares of the Company are listed.

DIVIDEND:

Your Company has been exploring the best way to utilize the surplus money lying and invested in the low yielding bank deposits and debt funds for the last few years. This fact was brought to the notice of the Members from time to time. Having not been able to acquire any business or brands meeting our requirements and having received a limited response to the buy back offer, your Directors felt that it would be prudent to distribute a part of the surplus funds lying to the Members. Accordingly, the Directors declared an interim dividend of Rs. 95 per share for the year 2010 in October last year.

The Directors, therefore, do not propose to recommend any final dividend.

FINANCE:

The Company has invested most of the surplus funds in fixed deposits with banks and a small amount in debt based mutual funds.

FIXED DEPOSITS:

The Company has not accepted any public deposits from the public or the Members during the year 2010.

DIRECTORS RESPONSIBILITY STATEMENT:

In accordance with Section 217(2AA) of the Companies Act, 1956, your Directors confirm that:

(a) in the preparation of the annual accounts, the applicable Accounting Standards/Rules have been followed along with proper explanation relating to material departures;

(b) the accounting polices have been consistently applied and reasonable and prudent judgement and estimates have been made so as to give a true and fair view of the state of affairs of the Company as at December 31, 2010 and the profit for the year ended on that date;

(c) proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 has been taken for safeguarding the assets of the Company and for detecting and preventing fraud and other irregularities and;

(d) the annual accounts have been prepared on a going concern basis.

DIRECTORS:

During the year, Mr. Ralph Zaat - Non Executive Director of the Company resigned from the services of the parent company, Merck KGaA which consequent upon such resignation withdrew his nomination as Director from the Board of your Company. In the place of Mr. Ralph Zaat, Mr. Timothy Kneen was nominated by Merck KGaA as Director of your Company in accordance with Article 110 of the Articles of Association of the Company. The Directors while welcoming Mr. Kneen to the Board place on record their sincere appreciation for the valuable contribution and guidance rendered by Mr. Ralph Zaat during his tenure as a Director of the Company.

AUDITORS:

Messrs B S R Et Co., Chartered Accountants, retire as Auditors of trie Company at the conclusion of the ensuing Annual General Meeting and have confirmed their eligibility and willingness to accept the office of the Auditors for the year 2011, if re-appointed. The Audit Committee of the Board recommends the re-appointment of Messrs B S R ft Co. as the Statutory Auditors for the year 2011.

COST AUDIT:

Pursuant to Section 233B of the Companies Act, 1956, the Central Government has prescribed cost audit of the accounts maintained by the Company concerning its bulk drugs and formulations divisions. To conduct the cost audit of these divisions, Messrs S. S. Mani ft Co. have been re-appointed as Cost Auditors of the Company for the year 2011, subject to the approval of the Central Government.

PERSONNEL:

As on 31 December, 2010, the total number of employees on the payroll was 1,257. Industrial Relations with the employees at various levels continue to be cordial.

The particulars of employees, as required under Section 217(2A) read with the Companies (Particulars of Employees) Rules, 1975, form part of this Report. However, pursuant to the provisions of Section 219(l)(b) (iv) of the Companies Act, 1956, the Report and Accounts are being sent to the Members excluding the statement of particulars of employees. Any Member interested in obtaining a copy of the said statement may write to the Company Secretary at the Registered Office of the Company.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO:

The information pertaining to conservation of energy, technology absorption, foreign exchange earnings and outgo required to be disclosed as per Section 217{l(e) of the Companies Act, 1956, read with the Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules 1988, is given in the annexure forming part of this Report.

CORPORATE GOVERNANCE:

The Report on the Corporate Governance Code along with a certificate from the Auditors of the Company regarding compliance of conditions of Corporate Governance as stipulated under Clause 49 of the Listing Agreements, as also the Management Discussion and Analysis Report, are annexed to this Report.

On behalf of the Board of Directors

S. N. Talwar Chairman

Mumbai, February 8, 2011.


Dec 31, 2009

The Directors have pleasure in presenting their Report on the business and operations of your Company along with the Accounts for the year ended December 31, 2009.

FINANCIAL HIGHLIGHTS:

(Rs. mio.)

2009 2008

SALES 4.731.1 3,894.6

OTHER INCOME 432.1 477.1

Profit before Interest, Depreciation and Taxation 1,039.9 974.8

Interest 0.3 0.1

Depreciation 75.1 57.3

PROFIT BEFORE TAXATION 964.5 917.4

Provision for Taxation (net) 309.7 287.3

PROFIT AFTER TAXATION 654.8 630.1

Profit a Loss Account Balance brought forward 1,366.7 1,423.5

PROFIT AVAILABLE FOR APPROPRIATION 2,021.5 2,053.6

APPROPRIATIONS:

Transfer to General Reserve 326.6 341.7

Dividend (Proposed) 332.0 295.1

Dividend Tax 56.4 50.1

Balance carried to the Balance Sheet 1,306.5 1,366.7

OPERATIONS:

The turnover of the Company for the year 2009 was Rs. 4,731.1 mio. as against Rs. 3,894.6 mio. for the year 2008, showing a growth of 21.5°/o during the year under review. The profit after tax for the year under review was Rs. 654.8 mio as against Rs. 630.1 mio. in the previous year.

The turnover of the Pharmaceuticals division grew from Rs. 3,189.6 mio. in 2008 to 3,525.5 mio. in 2009 showing a growth of 10.5%. The turnover of the Chemicals division for the year was 1,205.6 mio. as against Rs. 705.0 mio. in the previous year, registering an impressive growth of 71.0%.

During the year under review, the Companys exports increased to Rs. 579.8 mio. as against Rs. 353.2 mio. for the previous year registering an impressive growth of 64.2
BUY BACK OF SHARES:

The Board at its meeting held on May 20, 2009 approved the buy back of Companys fully paid up Equity Shares from the open market at a price not exceeding Rs. 435/- per share. The buy back is limited to an amount of Rs. 451.4 mio being 10% of total paid up capital and free reserves based on audited accounts for the year ended December 31, 2008. The Company has bought back 2,61,842 Equity Shares and all the shares bought back in the buy back offer have been extinguished as on date.

DIVIDEND:

The Board of Directors has recommended a divided of Rs. 20/- per share as against Rs. 17.50 per Equity Share paid for the previous year. This is subject to the approval of the Members at the ensuing Annual General Meeting.

FINANCE:

The investments of the Company in various debt funds, and fixed deposits with Banks as on the date of the Report amount to Rs. 3,435.8 mio.

DIRECTORS RESPONSIBILITY STATEMENT:

In accordance with Section 217(2AA) of the Companies Act, 1956, your Directors confirm that:

(a) in the preparation of the annual accounts, the applicable Accounting Standards/Rules have been followed along with proper explanation relating to material departures;

(b) the accounting polices have been consistently applied and reasonable and prudent judgement and estimates have been made so as to give a true and fair view of the state of affairs of the Company as at December 31, 2009, and the Profit for the year ended on that date;

(c) proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 has been taken for safeguarding the assets of the Company and for detecting and preventing fraud and other irregularities and;

(d) the annual accounts have been prepared on a going concern basis.

DIRECTORS:

Mr. S. N. Talwar and Mr. E. A. Kshirsagar will retire by rotation at the ensuing Annual General Meeting and being eligible, offer themselves for re-appointment. During the year, Mr. Ralph Zaat was nominated on the Board by Merck KGaA pursuant to the provisions of Article 110 of the Articles of Association of the Company in place of Dr. H. S. Hermansson. The Board placed on record its appreciation of the valuable services rendered by Dr. Hermansson during his tenure as a Director of the Company.

Mr. R. L. Shenoys tenure as a Whole-time Director expired on December 26, 2009. The Directors are of the opinion that it would be advisable to re-appoint Mr. R. L. Shenoy as a Whole-time Director for an additional period of two years with effect from December 27, 2009 subject to Members approval at the ensuing Annual General Meeting.

FIXED DEPOSITS:

During the year, the Company has not accepted any fixed deposit.

AUDITORS:

Messrs B S R ft Co., Chartered Accountants retire as the Statutory Auditors at the conclusion of the ensuing Annual General Meeting and are eligible for re-appointment. The Audit Committee of the Board recommends the re-appointment of Messrs B S R Et Co., as the Statutory Auditors for the year 2010. Messrs B S R 8t Co. have confirmed their eligibility and willingness to continue to act as the Statutory Auditors of the Company for the year 2010, if re-appointed.

COST AUDIT:

Messrs S. S. Mani Et Co. have been re-appointed to conduct the cost audit of the accounts maintained by the Company in respect of bulk drugs and formulations, for the year 2010.

PERSONNEL:

As on December 31, 2009, the total number of employees on the payroll was 1,245. Industrial Relations with the employees at various levels continue to be cordial.

The particulars of employees as required under Section 217(2A) read with the Companies (Particulars of Employees) Rules, 1975, form part of this Report.

However, pursuant to the provisions of Section 219(l)(b) (iv) of the Companies Act, 1956, the Report and Accounts are being sent to the Members excluding the statement of particulars of employees under Section 217(2A) of the Companies Act, 1956. Any Member interested in obtaining a copy of the said statement may write to the Company Secretary at the Registered Office of the Company.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO:

The information pertaining to conservation of energy, technology absorption, foreign exchange earnings and outgo required to be disclosed as per Section 217(l)(e) of the Companies Act, 1956, read with the Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988, is given in the annexure forming part of this Report.

CORPORATE GOVERNANCE:

The Report on the Corporate Governance Code along with a certificate from the Auditors of the Company regarding compliance of conditions of Corporate Governance as stipulated under Clause 49 of the Listing Agreements, as also the Management Discussion and Analysis Report, are annexed to this Report.

On behalf of the Board of Directors

S. N. Talwar Chairman

Mumbai, January 22, 2010.



 
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