Home  »  Company  »  Novartis  »  Quotes  »  Directors Report
Enter the first few characters of Company and click 'Go'

Directors Report of Novartis India Ltd.

Mar 31, 2016

The Directors are pleased to present the Annual Report and the Audited Accounts for the financial year ended March 31, 2016.

Summary of the Financial Results

Rs, million

2015-16 2014-15

Revenue from operations (Net)* 8,083.2 8,733.8

Profits

Profit before tax* 2,721.4 932.3

Profit after tax* 1,986.1 791.1

Balance brought forward from previous year 6,156.9 5,750.5

Available for appropriation 8,143.0 6,541.6

The Directors have made the following appropriations:

Dividend (Proposed) 319.6 319.6

Tax on distributed profits 65.1 65.1

General Reserve - -

Carry forward 7,758.3 6,156.9

8,143.0 6,541.6

* Includes continuing as well as discontinuing operations.

Dividend

The Board has recommended payment of dividend at Rs, 10 per equity share of Rs, 5 each for the financial year 2015-16. The dividend, if approved by the members at the Annual General Meeting ("AGM"), will result in a cash outflow of Rs, 384.7 million including dividend tax.

Management Discussion and Analysis For the year under review, the business operations of the Company comprise Pharmaceuticals, Generics, Over-The-Counter ("OTC") and Animal Health. This segmentation forms the basis for review of operational performance by the management.

a. Industry structure and developments

Pharmaceuticals and Generics

The overall economic environment has improved powered by lower oil prices, low inflation, a stable currency and the reforms agenda driven by the new Government at the centre. However, India''s public healthcare spend at less than 1 per cent of GDP continues to remain among the lowest in the world. Many challenges like low profitability due to price controls, low healthcare insurance penetration, uncertainty around enforcement of patents and the threat of compulsory licensing continue to dampen sentiments and negatively impact investments by the research based pharmaceutical industry.

The Indian Pharma Market ("IPM") is valued at Rs, 1,046 billion (IMS, MAT March 2016) and is expected to grow at a CAGR of 12-14 per cent* over the next four years. It continues to be a highly fragmented and competitive market with a large number of players spread across therapeutic segments.

b. Segment-wise operational performance

Pharmaceuticals

The Pharmaceuticals business registered Net Revenue from Operations of Rs, 6,532.4 million representing an increase of 8.9 per cent over the previous year. Reduction in selling prices arising out of the Drug Price Control Order, 2013 ("DPCO") continues to have an adverse impact on the operating profits of the Pharmaceutical business. To mitigate the DPCO impact, several cost containment measures were undertaken by the Company during the year, which resulted in an increase in the operating profit over the last year.

The business continues to hold leadership position in major therapeutic areas such as:

Therapeutic Area Rank Product

Central Nervous System 1 Tegrital®

Pain & Inflammation 2 Voveran®

Transplantation/Immunology 3 Sandimmun® Neoral®

Generics

The Generics business recorded Net Revenue from Operations of Rs, 388.1 million representing a decline of 19.9 per cent over the previous year, due to pruning of a few products and lower service income due to discontinuation of services.

c. Concerns

Pharmaceutical and Generics

India is a self-pay market, which coupled with widespread low affordability poses a significant challenge to the pharmaceutical industry in general. Healthcare insurance has still not penetrated in a way so as to make a positive impact on affordability. The DPCO in turn has adversely impacted the pharmaceutical industry. In 2016, the Government has further expanded the scope of DPCO which in all likelihood will pose further challenges for the already beleaguered pharmaceutical industry. The continued unpredictability of the Patent environment prevalent in the country adds to concerns of the research-oriented pharmaceutical industry.

d. Outlook

Pharmaceutical and Generics

A large and growing population, a favourable demographic and low healthcare penetration presents a growth opportunity for the pharmaceutical industry.

Notwithstanding the strong long-term potential of the IPM given the several factors in favour, investments in the sector and profitability could still be impeded in the short to medium term given the government''s propensity to resort to further price controls. The Company has taken steps to partially offset the severe negative impact of the price cuts and is continuing to drive operational excellence to increase productivity and profitability. In addition, the Company continues to work on innovative strategies to broaden access to its medicines and strives to identify new growth opportunities to deliver strong performance.

During the year under review, the Board of Directors of the Company approved divestment of the OTC and Animal Health businesses of the Company allowing the Company''s management to enhance focus on the Pharmaceuticals and Generics businesses.

e. Internal control systems and their adequacy

The Company maintains appropriate policies, procedures and systems to ensure orderly and efficient conduct of its business, including adherence to Company''s policies, safeguarding of its assets, prevention and detection of frauds and errors, accuracy and completeness of accounting records, and the timely preparation of reliable financial information.

The Head of Internal Audit together with external audit consultants review the effectiveness and efficiency of these systems and procedures to ensure that all assets are protected against loss and that the financial and operational information is accurate and complete in all respects. The Audit Committee of the Board of Directors approves and reviews audit plans for the year based on internal risk assessment. Audits are conducted on an ongoing basis and significant deviations are brought to the notice of the Audit Committee of the Board of Directors following which corrective action is recommended for implementation. All these measures facilitate timely detection of any irregularities and early remedial steps.

During the year, the Company conducted a detailed review of its internal control systems and evaluated the internal financial control systems with the Audit Committee of the Board of Directors, discussed relevant issues with internal and external auditors and obtained external advice/expertise on these matters. Based on the recommendations of the Audit Committee, the Board has stated in its responsibility statement that proper internal financial controls were followed by the Company and such internal financial controls are adequate and were operating effectively.

f. Vigil Mechanism

The Company has established a Vigil Mechanism that enables the Directors and Employees to report genuine concerns. The Vigil Mechanism provides for (a) adequate safeguards against victimization of persons who use the Vigil Mechanism; and (b) direct access to the Chairperson of the Audit Committee of the Board of Directors of the Company in appropriate or exceptional cases. Details of the Vigil Mechanism policy are made available on the Company''s website www.novartis.in

g. Personnel

The Industrial Relations scenario continued to be cordial. The Company regards its employees as a great asset and accords high priority to training and development of employees.

Number of employees as on March 31, 2016 was 752.

The information required pursuant to Section 197 of the Companies Act, 2013 ("the Act") read with Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 in respect of employees of the Company, will be provided upon request. In terms of Section 136 of the Act, the Report and Accounts are being sent to the members and others entitled thereto, excluding the information on employees'' particulars which is available for inspection by the members at the Registered Office of the Company during business hours on working days of the Company up to the date of the ensuing AGM. If any member is interested in obtaining a copy thereof, such member may write to the Company Secretary of the Company in this regard.

Corporate Social Responsibility

The Company has actively supported various initiatives in the areas of health, education and environment over the years. With the introduction of Section 135 of the Act, the Company has constituted a Corporate Social Responsibility ("CSR") Committee. The CSR Policy adopted by the Board of Directors is available on the Company''s website, www.novartis.in. The CSR Committee decided to continue with the existing programs and increase focus on health and education in the years ahead.

Health: India has around 60% of the world''s leprosy case load and leprosy continues to be an area of focus for the Company''s CSR work in India. Leprosy Post Exposure Prophylaxis Project (LPEP) was launched in the union territory of Dadra & Nagar Haveli in March 2015 and continued during the financial year under review. Around 4 research assistants, 1 project supervisor for the project, 7 doctors, 7 supervisors, 14 Auxiliary Nurse Midwives (ANMs), 70 accredited Social Health Activists (ASHAs) from general health care were trained in leprosy as well as in the LPEP project. Awareness was generated in a population of around 350,000 including school children. 13,523 people were screened for leprosy, TB, renal and liver disorders, pregnancy etc. with a prophylactic dose for prevention of transmission of leprosy being given to 12,540 eligible persons. 18 new cases of leprosy were detected while 17 persons were suspected to have contracted TB and were referred to TB referral centres for further investigation and treatment.

The Company is a strong player in the oncology segment and furthered its commitment to patients by funding purchase of equipment to treat patients suffering from renal cancer and to manage hemodynamic in critically ill patients undergoing major lung and GI surgery.

In addition to this major project, the Company initiated associations with various NGOs in the areas of dementia, cancer and medical care to people living in urban slums.

Education: The poor in India are heavily impacted by lack of education owing to children not being sent to school or dropping out of school. The need to supplement the family income to provide food on the table is often a cause. The mid-day meal program, when run effectively, has helped bring and keep children in school. Recognizing this as an important role in education, the Company made significant investments in this area to provide less privileged children with a nutritious meal. The part scholarship to three meritorious, needy women at the Indian School of Business, Hyderabad continued.

Sports: A country of 1.2 billion people, India has as yet not been able to make a significant mark in the area of sports at the Olympic level except for sporadic wins in some sports. Greater focus on academics even among the educated makes sports a neglected field. The Company therefore chose to support the medical, nutritional and training needs of promising Indian athletes who could win medals at the forthcoming Olympics to be held in Rio through its association with an NGO working in the field.

Environment: The city of Mumbai is starved of open green spaces and the Company has contributed in a positive way by supporting the upkeep of two beautiful gardens close to its Mumbai office.

The Company commemorates Community Partnership Week ("CPW") each year encouraging employees to work on causes close to their heart. CPW continues to grow in stature with a rising number of associates participating in a broad range of activities covering the less fortunate be they children, the sick or the elderly.

The Annual Report on Corporate Social Responsibility Activities is annexed herewith as Annexure A.

Related Party Transactions

All Related Party Transactions that were entered into during the financial year were on arm''s length and were in the ordinary course of business. All Related Party Transactions were placed before the Audit Committee of the Board of Directors for their approval. The Audit Committee has granted omnibus approval for Related Party Transactions as per the provisions and restrictions contained in the erstwhile Listing Agreement and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 ("Listing Regulations").

The Company has formulated a policy on materiality of Related Party Transactions and also on dealing with Related Party Transactions. The policy is available on the Company''s website www.novartis.in.

Pursuant to Clause (h) of sub-section (3) of Section 134 of the Act and Rule 8(2) of the Companies (Accounts) Rules, 2014, the particulars of contracts/arrangements entered into by the Company with related parties referred to in sub section (1) of Section 188 of the Act including certain arm''s length transaction under third proviso thereto are required to be disclosed in Form AOC–2. The Form AOC–2 envisages disclosure of material contracts or arrangement or transactions at arm''s length basis.

The details of the material Related Party Transactions in financial year 2015-16, as per the Policy on dealing with Related Parties adopted of the Company are disclosed in Annexure B.

The transactions disclosed in Annexure B relate to material Related Party Transactions with Novartis Pharma AG for purchase, transfer or receipt of products, goods, active pharmaceutical ingredients, materials, services, other obligations as approved by members under erstwhile Clause 49(VII)(E) of the Listing Agreement at 67th Annual General Meeting of the Company held on July 23, 2015.

Risk Management

The Company has devised and implemented a mechanism for risk management and has developed a Risk Management Policy. The Policy provides for constitution of a Risk Committee of the Management. The Committee has created a Risk Register and works towards review and identification of internal and external risks and implementation of risk mitigation steps. The Company provides updates on risk management to the Audit Committee of the Board of Directors of the Company on a regular basis.

Fixed Deposits

The Company has not accepted deposits from the public falling within the ambit of Section 73 of the Act and the rules framed there under .

Particulars of Loans, Guarantees or Investments

As on March 31, 2016, there were no outstanding loans or guarantees covered under the provisions of Section 186 of the Act. The Company has certain unquoted investments in co-operative housing societies for premises owned by the Company. The details of changes in the Loans, Guarantees and Investments covered under the provisions of Section 186 of the Act are given in the notes to the Financial Statements.

Board of Directors

The Company has received declarations from all Independent Directors, that they meet the criteria of independence as laid down under Section 149(6) of the Act and the Listing Regulations.

The members at its Meeting held on July 23, 2015 had approved re-appointment of Mr Ranjit Shahani as Vice Chairman and Managing Director for a period of 5 years commencing from November 1, 2015.

Ms Manisha Girotra resigned as Director of the Company with effect from February 11, 2016.

The Board of Directors appointed Ms Sandra Martyres as Additional Director of the Company at its meeting held on April 19, 2016. Ms Martyres holds office as Additional Director until the ensuing AGM of the Company and is eligible for re-appointment. It is also proposed to appoint Ms Martyres as Independent Director of the Company for a term up to April 18, 2021 at the forthcoming AGM.

Mr Dinesh Charak resigned as Director and Whole Time Director of the Company with effect from May 26, 2016.

Mr Ranjit Shahani retires at the AGM and has offered himself for re-appointment.

Subject to the approval of the members at AGM, Ms Monaz Noble was appointed as Additional Director and Whole Time Director of the Company with effect from June 13, 2016.

Necessary resolutions for the appointment and re-appointment of the aforesaid Directors have been included in the Notice convening the ensuing AGM and details of the proposal for appointment and re-appointment are mentioned in the Explanatory Statement to the Notice.

Familiarization programme for Independent Directors

The Company 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 in a proactive manner. The details of various familiarization programs provided to the Directors of the Company is available on the Company''s website www.novartis.in

Divestment of OTC and Animal Health divisions

During the year, the Company concluded the transactions relating to the slump sale of its OTC and Animal Health divisions.

The Company received the sale consideration in relation to the slump sale of the OTC Division to GlaxoSmithKline Consumer Private Limited amounting to Rs, 1,097.3 million and the same was accounted in the quarter ended September 30, 2015. The sale consideration for the slump sale of the Animal Health Division to Elanco India amounting to Rs, 866.8 million has been received and accounted in the quarter ended December 31, 2015.

The details of the slump sale are provided in Note 51 of the Accounts.

Auditors

M/s Lovelock & Lewes, Chartered Accountants, retire at the end of this AGM and, being eligible, offer themselves for re-appointment. The Board of Directors have recommended their re-appointment.

Cost Audit

The Board of Directors have re-appointed M/s N. I. Mehta and Co., Cost Accountants, as Cost Auditors to audit the accounts relating to drug formulations for the financial year ending March 31, 2017.

Secretarial Audit

Pursuant to the provisions of Section 204 of the Act and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Board of Directors appointed Mr K G Saraf from Saraf & Associates, practicing Company Secretary for conducting secretarial audit of the Company for the financial year 2015-16.

The Secretarial Audit Report is annexed herewith as Annexure C. The Secretarial Audit Report does not contain any qualification, reservation or adverse remark.

Energy, Technology Absorption and Foreign Exchange

Information required under Section 134(3)(m) of the Act read with Rule 8(3) of the Companies (Accounts) Rules, 2014, with respect to conservation of energy, technology absorption and foreign exchange earnings/outgo is included in Annexure D.

Directors'' Responsibility Statement

Pursuant to Section 134 of the Act, the Directors state that:

(a) In the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures, if any;

(b) Appropriate accounting policies have been selected and applied consistently and have 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 as at March 31, 2016 and of the profit and loss of the Company for the year ended March 31, 2016;

(c) 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;

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

(e) Proper internal financial controls were followed by the Company and such internal financial controls are adequate and were operating effectively;

(f) Proper systems are devised to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

Corporate Governance

The Company is committed to good corporate governance in line with the erstwhile Listing Agreement, Listing Regulations and Novartis Group corporate governance norms. The Company is in compliance with the provisions on corporate governance specified in the erstwhile Listing Agreement and Listing Regulations.

A certificate of compliance from Dr K. R. Chandratre, practicing Company Secretary and the report on Corporate Governance form part of this Directors'' Report.

Prevention of Sexual Harassment Policy

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. An Internal Complaints Committee has been set up to redress complaints received regarding sexual harassment. All employees (permanent, contractual, temporary, trainees) are covered under this policy.

During the year 2015-16, no complaints were received by the Company related to sexual harassment.

Auditors'' Comments

The Auditors in the Auditors'' Report dated May 26, 2016 have commented that the backup of the books of accounts and other books and papers are not maintained in electronic mode on servers physically located in India. The Company would like to clarify that the Company''s SAP ERP is centralized in Global Data Centres'' outside India where the backup storage is maintained. The Company is reviewing maintenance of backup of SAP data in India as required under Rule 3 of the Companies (Accounts) Rules, 2014.

Extract of Annual Return

The details forming part of the extract of the Annual Return in form MGT 9 is annexed herewith as Annexure E.

Acknowledgement

The Board appreciates and places on record the contribution made by the employees during the year under review and the support received from the parent company, Novartis AG. The Board also places on record their appreciation of the support of all stakeholders particularly shareholders, customers, suppliers, medical fraternity and business partners.

Cautionary Note

The statements forming part of the Directors'' Report may contain certain forward looking remarks within the meaning of applicable securities laws and regulations. Many factors could cause the actual results, performances or achievements of the Company to be materially different from any future results, performances or achievements that may be expressed or implied by such forward looking statements.

On behalf of the Board of Directors

CHRISTOPHER SNOOK

Chairman

June 13, 2016


Mar 31, 2015

Dear Members,

The Directors are pleased to present the Annual Report and the Audited Accounts for the financial year ended March 31, 2015.

Summary of the Financial Results

Rs. million

2014-15 2013-14

Revenue from operations (Net)* 8,733.8 8,622.3

Operating Profits

Profit before tax* 932.3 899.0

Profit after tax* 791.1 985.3

Balance brought forward from previous year 5,750.5 5,237.6

Available for appropriation 6,541.6 6,222.9

The Directors have made the following

appropriations:

Dividend (Proposed) 319.6 319.6

Tax on distributed profits 65.1 54.3

General Reserve - 98.5

Carry forward 6,156.9 5,750.5

6,541.6 6,222.9

* Includes continuing as well as discontinuing operations.

Dividend

The Board has recommended payment of dividend at Rs. 10 per equity share of Rs. 5 each for the financial year 2014-15. The dividend, if approved by the members at the Annual General Meeting ("AGM"), will result in a cash outflow of Rs. 384.7 million including dividend tax.

Corporate Social Responsibility

The Company has actively supported various initiatives in the areas of health, education and environment over the years. With the introduction of Section 135 of the Act, which came into effect during this financial year, the Company has constituted a Corporate Social Responsibility ("CSR") Committee. The CSR Policy adopted by the Board of Directors is available on the Company''s website www.novartis.in. The CSR Committee decided to continue with the existing programmes and increase focus on health and education in the years ahead.

Health: India lives in her villages and a large proportion of people who live there do not have access to quality healthcare. Health is a low priority for the rural poor and creating health awareness is critical in such a scenario. The Company has in place a rural health initiative called Arogya Parivar for several years now. During this financial year, Arogya Parivar held health camps in 11 states in India covering hand and foot disease, hypertension, diabetes, cancer and malaria. Health education camps were also held to increase health awareness and encourage people to seek medical care early on.

India has around 60% of the world''s leprosy case load and leprosy continues to be an area of focus for the Company''s CSR work in India. Comprehensive care programmes were held throughout the year for leprosy patients including providing them with Grip-aids to increase their level of independence and surgical and economic rehabilitation. A series of training programmes were organized for ASHAs (Accredited Social Health Activists) where they were also provided with literature and other educational material to help them identify suspected cases for further review.

These were the major initiatives. In addition, the Company initiated associations with various NGOs in the areas of epilepsy, cancer and medical care to people living in urban slums.

Education: The poor in India are heavily impacted by lack of education owing to children not being sent to school or dropping out of school. The need to supplement the family income to provide food on the table is often a cause. The mid-day meal programme, when run effectively, has helped bring and helped keep children in school. Recognizing this as an important role in education, the Company made significant investments in this area to provide less privileged children with a nutritious meal.

Unlike children who go to elite schools, children who go to government and charitable schools not only have no access to high quality education but they also suffer from lack of access to high quality study material. The Company endeavored to reduce this barrier by offering subscriptions to high quality study material for teachers and students across several such schools.

Sports: A country of 1.2 billion people, India has as yet not been able to make a significant mark in the area of sports at the Olympic level except for sporadic wins in some sports. Greater focus on academics even among the educated makes sports a neglected field in some sense. The Company therefore chose to support the medical, nutritional and training needs of promising Indian athletes who could win medals at the next Olympics through its association with an NGO working in the field.

The Company commemorates Community Partnership Week ("CPW") each year encouraging employees to work on causes close to their heart. CPW continues to grow in stature with a rising number of associates participating in a broad range of activities covering the less fortunate be they children, the sick or the elderly.

The Annual Report on Corporate Social Responsibility Activities is annexed herewith as Annexure A.

Related Party Transactions

All Related Party Transactions that were entered into during the financial year were on arm''s length and were in the ordinary course of business. All Related Party Transactions were placed before the Audit Committee of the Board of Directors for their approval. The Audit Committee has granted omnibus approval for Related Party Transactions as per the provisions and restrictions contained in the Listing Agreement.

The Company has formulated a policy on materiality of Related Party Transactions and also on dealing with Related Party Transactions. The policy is available on the Company''s website www.novartis.in.

The Company in the ordinary course of its business, enters into transactions relating to purchase, transfer or receipt of products, goods, active pharmaceutical ingredients, materials, services, other obligations from Novartis Pharma AG, Basel, who is a ''Related Party'' within the meaning Section 2(76) of the Act and Clause 49(VII) of the Listing Agreement. The current and the future transactions are/will be deemed to be ''material'' in nature as defined in Clause 49(VII) of the Listing Agreement as they may exceed 10 per cent of the annual turnover of the Company based on future business projections. Thus, in terms of Clause 49(VII)(E) of the Listing Agreement, these transactions would require the approval of the members by way of a Special Resolution.

A resolution for approval of this Related Party Transaction has been included in the Notice convening the ensuing AGM of the Company.

Risk Management

The Company has devised and implemented a mechanism for risk management and has developed a Risk Management Policy. The Policy provides for constitution of a Risk Committee, which will work towards creating a Risk Register, identifying internal and external risks and implementing risk mitigation steps. The Committee will, on a quarterly basis, provide status updates to the Board of Directors of the Company.

Fixed Deposits

The fixed deposits accepted by the Company as part of Voluntary Retirement Scheme, 1992, were repaid in full at the beginning of the year under review. No fresh deposits were accepted after April 1, 2014. The Company did not have any unclaimed or overdue deposits as on March 31, 2015.

Particulars of Loans, Guarantees or Investments

As on March 31, 2015, there were no outstanding loans or guarantees covered under the provisions of Section 186 of the Act. The Company has certain unquoted investments in co-operative housing societies for premises owned by the Company. The details of changes in the Loans, Guarantees and Investments covered under the provisions of Section 186 of the Act are given in the notes to the Financial Statements.

Directors and Key Managerial Personnel

The members at its Meeting held on July 25, 2014, had appointed Mr Jai Hiremath, Dr Rajendra Nath Mehrotra and Ms Manisha Girotra as Independent Directors of the Company for a term up to March 31, 2019. The Company has received declarations from all Independent Directors that they meet the criteria of independence as laid down under Section 149(6) of the Act and Clause 49 of the Listing Agreement.

The members at its Meeting held on July 25, 2014, had appointed Mr Dinesh Charak as Additional Director and subsequently, as Whole Time Director and Key Managerial Personnel ("KMP") of the Company with effect from May 22, 2014.

Mr Dinesh Charak retires at the AGM and has offered himself for re-appointment.

The members had approved appointment of Mr Ranjit Shahani as Vice Chairman and Managing Director for a period of 5 years with effect from November 1, 2010. The term of appointment for Mr Ranjit Shahani ends on October 31, 2015. Subject to the approval of the members, the Board of Directors has re-appointed Mr Ranjit Shahani as Vice Chairman and Managing Director of the Company for a further period of 5 years with effect from November 1, 2015.

Necessary resolutions for the re-appointment of the aforesaid Directors have been included in the Notice convening the ensuing AGM and details of the proposal for re-appointment are mentioned in the Explanatory Statement to the Notice.

Mr Ranjit Shahani, Vice Chairman and Managing Director; Mr Dinesh Charak, Whole Time Director; Ms Monaz Noble, Chief Financial Officer and Mr Girish Tekchandani, Company Secretary are the KMPs of the Company as per the provisions of the Act.

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. The details of various familiarization programmes provided to the Directors of the Company is available on the Company''s website www.novartis.in.

Divestment of OTC and Animal Health divisions

On April 22, 2014, Novartis AG, Basel, Switzerland ("Novartis AG") entered into the following agreements with GlaxoSmithKline plc, UK ("GSK") and Eli Lilly and Company, USA ("Lilly"):

(a) Novartis AG and GSK have agreed to create a consumer healthcare business through a Joint Venture between Novartis AG OTC and GSK Consumer Healthcare. The transaction, except in respect of the Company''s OTC Division, closed on March 2, 2015.

In connection with the divestment of the Novartis AG OTC business to GSK, the Board of Directors of the Company at its meeting held on January 13, 2015 approved the slump sale of the Company''s OTC Division to GlaxoSmithKline Consumer Private Limited ("GSK CPL"), a private unlisted company incorporated under the Companies Act, 2013 (or another affiliate of GSK) for a consideration of Rs. 1,097.3 million. Closing of this slump sale is subject to the receipt of all applicable legal and regulatory approvals, consents, permissions and sanctions as may be necessary from concerned authorities. The Company had made a separate announcement on January 13, 2015 to Bombay Stock Exchange Limited ("BSE") in this regard.

(b) As part of its global portfolio transformation, Novartis AG, agreed on April 22, 2014 to divest its global Animal Health business to Lilly. Closing of this global transaction was subject to receipt of applicable anti-trust and regulatory approvals, as well as the satisfaction or waiver (as applicable) of various other conditions (the "Global Animal Health Transaction").

In connection with the Global Animal Health Transaction, the Board of Directors of the Company considered and approved on November 7, 2014, the transfer of the Company''s Animal Health Division as a going concern by way of a ''slump sale'' to Elanco India Private Limited ("Elanco India"), or another affiliate of Lilly, for a consideration of Rs. 866.8 million, on or before July 22, 2015, subject to the receipt of all applicable legal and regulatory approvals, consents, permissions and sanctions as may be necessary from concerned authorities, as well as closing of the Global Animal Health Transaction (the "Animal Health Transaction"). This approval of the Company''s Board of Directors was disclosed to BSE Limited on November 7, 2014. The Global Animal Health Transaction closed globally (but not with respect to India, as explained below) on January 1, 2015.

Closing of the Animal Health Transaction in India is conditional upon the receipt by Elanco India of the written approval of the Foreign Investment and Promotion Board, Government of India (the "FIPB"). Further to the FIPB''s response to Elanco India''s application that it would not approve the Animal Health Transaction due to the existence of the restrictions on competition explained below, and at Elanco India''s request, the Company and Elanco India have executed a letter which records the parties'' agreement that the terms of the Global Animal Health Transaction agreed between Novartis AG and Lilly restricting the competition by the Novartis AG group of companies in connection with animal health activities will not apply with respect to the Company vis-a-vis Elanco India in India (the "Non-Compete Amendment Letter"). The Non- Compete Amendment Letter will be submitted by Elanco India to the FIPB, together with a representation against the FIPB''s non-approval of Elanco India''s application for the Animal Health Transaction. The Company will continue to co-operate with Elanco India, to the extent necessary, and monitor the FIPB process in this matter and will provide further updates if and when required.

The consideration to be received by the Company in relation to the slump sales of the Animal Health business to Elanco India Private Limited (or another affiliate of Lilly) and the OTC business to GSK CPL (or another affiliate of GSK) totalling to Rs. 1,964.1 million has not been accounted in the results for the twelve months ended March 31, 2015 because the transactions are subject to the receipt of all applicable legal and regulatory approvals, consents, permissions and sanctions as may be necessary from the concerned authorities. Costs incurred by the Company in relation to the transactions have been shown under Extraordinary Items.

Auditors

M/s Lovelock & Lewes, Chartered Accountants, retire at the end of this AGM and, being eligible, offer themselves for re-appointment. The Board has recommended their re-appointment.

Cost Audit

The Directors have re-appointed M/s N. I. Mehta and Co., Cost Accountants, as Cost Auditors to audit the accounts relating to drug formulations for the financial year ending March 31, 2016.

Secretarial Audit

Pursuant to the provisions of Section 204 of the Act and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Board of Directors has appointed Mr K G Saraf from Saraf & Associates, practicing Company Secretary for conducting secretarial audit of the Company for the financial year 2014-2015.

The Secretarial Audit Report is annexed herewith as Annexure B. The Secretarial Audit report does not contain any qualification, reservation or adverse remark.

Energy, Technology Absorption and Foreign Exchange

Information required under Section 134(3)(m) of the Act read with Rule 8(3) of the Companies (Accounts) Rules, 2014, with respect to conservation of energy, technology absorption and foreign exchange earnings/outgo is included in Annexure C.

Directors'' Responsibility Statement

Pursuant to Section 134 of the Act, the Directors state that:

(a) In the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures, if any;

(b) Appropriate accounting policies have been selected and applied consistently and have 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 as at March 31, 2015 and of the profit and loss of the Company for the year ended March 31, 2015;

(c) 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;

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

(e) Proper internal financial controls were followed by the Company and such internal financial controls are adequate and were operating effectively;

(f) Proper systems are devised to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

Corporate Governance

The Company is committed to good corporate governance in line with the Listing Agreement and Novartis Group corporate governance norms. The Company is in compliance with the provisions on corporate governance specified in the Listing Agreement with BSE.

A certificate of compliance from Dr K. R. Chandratre, a practicing Company Secretary and the report on Corporate Governance form part of this Directors'' Report.

Prevention of Sexual Harassment Policy

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. An Internal Complaints Committee has been set up to redress complaints received regarding sexual harassment. All employees (permanent, contractual, temporary, trainees) are covered under this policy.

During the year 2014-2015, no complaints were received by the Company related to sexual harassment.

Auditors'' Comments

The Auditors in the Auditors'' Report dated May 27, 2015 have commented that the backup of the books of accounts and other books and papers are not maintained in electronic mode on servers physically located in India. The Company would like to clarify that the Company''s SAP ERP is centralized in Global Data Centers. The backup storage is maintained at Global Data Centers outside India. The Company is reviewing maintenance of backup of SAP data in India as required under Rule 3 of the Companies (Accounts) Rules, 2014.

Extract of Annual Return

The details forming part of the extract of the Annual Return in form MGT 9 is annexed herewith as Annexure D.

Acknowledgement

The Board appreciates and places on record the contribution made by the employees during the year under review and the support received from the parent company, Novartis AG. The Board also places on record their appreciation of the support of all stakeholders particularly shareholders, customers, suppliers, medical fraternity and business partners.

Cautionary Note

The statements forming part of the Directors'' Report may contain certain forward looking remarks within the meaning of applicable securities laws and regulations. Many factors could cause the actual results, performances or achievements of the Company to be materially different from any future results, performances or achievements that may be expressed or implied by such forward looking statements.



On behalf of the Board of Directors

CHRISTOPHER SNOOK Chairman

Mumbai, May 27, 2015


Mar 31, 2013

The Directors are pleased to present the Annual Report and the Audited Accounts for the financial year ended March 31, 2013.

Summary of the Financial Results Rs. million

2012-2013 2011-2012

Revenue from operations (Net) 9,033.6 8,442.9

Operating Profits

Profit before tax 1,694.2 2,246.9

Profit after tax 1,197.3 1,520.2

Balance brought forward from previous year 4,533.9 3,537.1

Available for appropriation 5,731.2 5,057.3

The Directors have made the following appropriations:

Dividend (Proposed) 319.6 319.6

Tax on distributed profits 54.3 51.8

General Reserve 119.7 152.0

Carry forward 5,237.6 4,533.9

5,731.2 5,057.3

Dividend

The Board has recommended payment of dividend at Rs. 10 per equity share of Rs. 5 each for the financial year 2012-13. The dividend, if approved by the members at the Annual General Meeting, will result in a cash outflow ofRs. 373.9 million including dividend tax.

Number of employees as on March 31, 2013 was 1,378.

Information as per Section 217(2A) of the Companies Act, 1956 ("the Act"), read with the Companies (Particulars of Employees) Rules, 1975, and Companies (Particulars of Employees) Amendment Rules, 2011 can be obtained by an interested shareholder by submitting a written request to the Company Secretary. This practice is followed as per the provisions of Section 219(1) (b) (iv) of the Act. Thus, the Report and the Accounts are being sent to all shareholders, excluding the Statement of Particulars under Section 217(2A).

Corporate Social Responsibility

The Company continues to focus its attention on health and education of the underprivileged through its association with various non-government organisations. During the year under review, the Company maintained its support to the NGO Akanksha, which works with slum children. A scholarship to three deserving women at the Indian School of Business, Hyderabad continues.

The Company continues to grow the Biotechnology Leadership Camp ("BioCamp") for students in Hyderabad and nominated three students to attend the Novartis International Biotechnology Leadership Camp in Basel, Switzerland.

Community Partnership Week continues to attract a rising number of associates who participate in a range of activities including spending time with abandoned children, the sick, the differently- abled and the elderly.

The Company''s commitment to Health, Safety and Environment ("HSE") Protection continues to be an integral dimension of its overall corporate social responsibility and includes occupational safety and health protection; building safety; process safety; product stewardship; environmental protection and conservation of natural resources and energy. Managerial and operational responsibility for alf HSE aspects lies with the businesses.

Fixed Deposits

No fresh fixed deposits were accepted from the public during the year. However, deposits under the Voluntary Retirement Scheme 1992, continued to be accepted. Total deposits as at March 31, 2013 stood at Rs. 1.8 million. The Company does not have any unclaimed or overdue deposits as of date.

Directors

Mr J. Hiremath retires at the end of this Annual General Meeting and has offered himself for re-appointment.

Mr Hiremath is a Chartered Accountant from England and has completed the ''Owner President Management Program'' at Harvard University, Boston, USA. He is the Chairman & Managing Director of Hikal Limited and on the Board of the National Safety Council of India. He was the President of Indian Chemical Council from 2009 to 2010 and Chairman of the Chemicals Committee of Federation of Indian Chambers of Commerce & Industry ("FICCI") from 2009 to 2011. He is currently on the Executive Committee of Indian Chemical Council ("ICC"). He is also a member of the National Committee on Chemicals of Confederation of Indian Industries ("CII"), and National Chemicals Committee of FICCI. He was nominated finalist for the Ernst & Young Entrepreneur of the year in 2000. In April 2005 he was awarded the prestigious ChemTech Award for ''Business Leader of the Year - Chemicals''.

Auditors

M/s Lovelock & Lewes, Chartered Accountants, retire at the end of this Annual General Meeting and, being eligible, offer themselves for re-appointment. The Board has recommended their re-appointment.

Cost Audit

The Directors have re-appointed M/s N. I. Mehta and Co., Cost Accountants, as Cost Auditors to audit the accounts relating to drug formulations for the financial year ending March 31, 2014.

Energy, Technology Absorption and Foreign Exchange

Information required under Section 217(l)(e) of the Act, read with the Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988, with respect to conservation of energy, technology absorption and foreign exchange earnings/outgo is included in Annexures A and B.

Directors'' Responsibility Statement

Pursuant to Section 217(2AA) of the Act, the Directors confirm that:

(a) In the preparation of the annual accounts, the applicable accounting standards have been followed;

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

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

Corporate Governance

The Company is committed to good corporate governance in line with the Listing Agreement and Novartis Group corporate governance norms. The Company is in compliance with the provisions on corporate governance specified in the Listing Agreement with the Bombay Stock Exchange Limited.

A certificate of compliance from Dr K. R. Chandratre, a practicing Company Secretary and the report on Corporate Governance form part of this Directors'' Report.

Acknowledgement

The Board places on record the contribution made by employees to the continued satisfactory business performance during the period under review and the sustained management support received from the parent company, Novartis AG. The Board also places on record their appreciation of the support of all stakeholders particularly shareholders, customers, suppliers, the medical fraternity and business partners, all of whom have contributed to the Company''s success.

Cautionary Note

The statements forming part of the Directors'' Report may contain certain forward looking remarks within the meaning of applicable securities laws and regulations. Many factors could cause the actual results, performances or achievements of the Company to be materially different from any future results, performances or achievements that may be expressed or implied by such forward looking statements. On behalf of the Board of Directors

CHRISTOPHER SNOOK

Mumbai, May 14, 2013 Chairman


Mar 31, 2012

The Directors are pleased to present the Annual Report and the Audited Accounts for the financial year ended March 31, 2012.

Summary of the Financial Results in Rs million

2011-2012 2010-2011

Revenue from operations (Net) 8,442.9 7,512.1

Operating Profits

Profit before tax 2,246.9 2,189.1

Profit after tax 1,520.2 1,466.7

Balance brought forward from previous year 3,537.1 2,588.5

Available for appropriation 5,057.3 4,055.2

The Directors have made the following appropriations:

Dividend (Proposed) 319.6 319.6

Tax on proposed dividend 51.8 51.8

General Reserve 152.0 146.7

Carry forward 4,533.9 3,537.1

5,057.3 4,055.2

Dividend

The Board has recommended payment of dividend at Rs 10 per equity share of Rs 5 each for the financial year 2011-12. The dividend, if approved by the members at the Annual General Meeting, will result in a cash outflow of Rs 371.4 million including dividend tax.

Number of employees as on March 31, 2012 was 1,359.

Information as per Section 217(2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees) Rules, 1975, and Companies (Particulars of Employees) Amendment Rules, 2011 can be obtained by an interested shareholder, by submitting a written request to the Company Secretary. This practice is followed as per the provisions of Section 219(1) (b) (iv) of the Companies Act, 1956. Thus, the Report and the Accounts are being sent to all shareholders, excluding the Statement of Particulars under Section 217(2A).

Corporate Responsibility

The Company continues to focus its attention on health and education of the underprivileged through its association with various non-government organisations. During the year under review, the Company continued its support to the NGO Akanksha, which works with slum children. A scholarship to three deserving women at the Indian School of Business, Hyderabad continues.

The Company continues to grow the Biotechnology Leadership Camp (BioCamp) for students in Hyderabad and nominated three students to attend the Novartis International Biotechnology Leadership Camp in Basel, Switzerland.

Community Partnership Week continues to attract a rising number of associates who participate in a range of activities including spending time with abandoned children, the sick, the differently-abled and the elderly.

The Company's commitment to Health, Safety and Environment (HSE) Protection continues to be an integral dimension of its overall corporate responsibility and includes occupational safety and health protection; building safety; process safety; product stewardship; environmental protection and conservation of natural resources and energy. Managerial and operational responsibility for all HSE aspects lies with the businesses.

Dematerialisation of promoters shareholding

As per a requirement of the Securities and Exchange Board of India, the promoters of the Company dematerialized the remaining part of its total shareholding, earlier held in physical form. The entire promoters holding, being 76.42 per cent, is held in dematerialized form.

Fixed Deposits

No fresh fixed deposits were accepted from the public during the year. However, deposits under the Voluntary Retirement Scheme, 1992, continued to be accepted. Total deposits as at March 31, 2012 stood atRs 1.9 million. The Company does not have any unclaimed or overdue deposits as of date.

Directors

Dr R. Mehrotra, who retires at the end of this Annual General Meeting, has been on the Board of the Company from May 30, 2000 and offers himself for re-appointment. Dr Mehrotra is an Electrical and Mechanical Engineer with a Masters and Doctorate in Management and possesses a rich experience across various sectors. He is on the Board of PAE Limited and has retired from the United Nations' International Labour Organisation (ILO) as Senior Specialist on Employees' activities for South Asia.

Auditors

M/s Lovelock & Lewes, Chartered Accountants, retire at the end of this Annual General Meeting and, being eligible, offer themselves for re-appointment. The Board recommends their re-appointment.

Cost Audit

The Directors have re-appointed M/s N. I. Mehta and Co., Cost Accountants, as Cost Auditors to audit the accounts relating to drug formulations for the financial year ending March 31, 2013.

Energy, Technology Absorption and Foreign Exchange

Information required under 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, with respect to conservation of energy, technology absorption and foreign exchange earnings/ outgo is included in Annexures A and B.

Directors' Responsibility Statement

Pursuant to Section 217(2AA) of the Act, the Directors confirm that:

(a) In the preparation of the Annual Accounts, the applicable Accounting Standards have been followed;

(b) Appropriate accounting policies have been selected and applied consistently and have made judgements and estimates that are reasonable and prudent, so as to give a true and fair view of the state of affairs of the Company as at March 31, 2012 and of the profit of the Company for the year ended March 31, 2012;

(c) Proper and sufficient care has been taken 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;

(d) The Annual Accounts have been prepared on a going concern basis.

Corporate Governance

The Company is committed to good corporate governance in line with the Listing Agreement and Novartis Group Corporate Governance norms. The Company is in compliance with the provisions on Corporate Governance specified in the Listing Agreement with the Bombay Stock Exchange Limited.

A certificate of compliance from Dr K. R. Chandratre, a practicing Company Secretary and the report on Corporate Governance form part of this Directors' Report.

Acknowledgement

The Board places on record the contribution made by employees to the continued satisfactory business performance during the period under review and the sustained management support received from the parent company, Novartis AG. The Board also places on record their appreciation of the support of all stakeholders particularly shareholders, customers, suppliers, the medical fraternity and business partners, all of whom have contributed to the Company's success.

On behalf of the Board of Directors

C. SNOOK

Mumbai, May 24, 2012 Chairman

 
Subscribe now to get personal finance updates in your inbox!