Directors Report of Panacea Biotec Ltd.
Mar 31, 2023
The Directors take pleasure in presenting the 39th Annual Report on the business and operations of the Company together with the Audited Standalone and Consolidated Financial Statements and the Auditors'' Reports thereon for the financial year ended March 31, 2023.
The highlights of standalone and consolidated financial results of the Company are summarized below:
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(Rs. in Million) |
|||||
|
Particulars |
Standalone |
Consolidated |
|||
|
FY 2022-23 |
FY 2021-22* |
FY 2022-23 |
FY 2021-22* |
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|
Revenue from operations |
2,570.67 |
2,355.04 |
4,599.46 |
6,612.32 |
|
|
Other Income |
344.35 |
125.68 |
516.63 |
109.69 |
|
|
Total Income |
2,915.02 |
2,480.72 |
5,116.09 |
6,722.01 |
|
|
Profit / (Loss) before Interest, Tax, Depreciation & Amortization (EBITDA) |
(626.27) |
(726.70) |
(979.59) |
(132.03) |
|
|
Profit / (Loss) before exceptional items and tax |
(627.52) |
(935.76) |
(898.56) |
(2,268.50) |
|
|
Exceptional items |
- |
- |
1,026.61 |
16,762.06 |
|
|
Profit / (Loss) before Tax (PBT) |
(627.52) |
(935.76) |
128.05 |
14,493.56 |
|
|
Profit / (Loss) after Tax (PAT) |
(875.44) |
(935.76) |
(337.45) |
10,783.34 |
|
|
Total Comprehensive Income / (Loss) for the year |
(894.43) |
(930.72) |
(335.41) |
10,779.35 |
|
|
*Previous year''s figures have been re-grouped, re-classified and/or restated wherever necessary |
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During the financial year ended March 31,2023, your Company has registered revenue from operations of ''2,570.67 million as against ''2,355.04 million during the previous financial year, with a growth of ~9%. The revenue from operations have mainly increased due to higher sales of pentavalent vaccines, Easyfive-TT® and sales of bivalent-OPV vaccine, BI-OPV®.
The Company has registered consolidated revenue from operations of ''4,599.46 million during the financial year under review as against ''6,612.32 million during the previous financial year. The decline in consolidated revenue from operations is mainly on account of absence of domestic sale of pharmaceutical formulations as the brand portfolio in India and Nepal was sold by the Company''s Wholly-owned Subsidiary, Panacea Biotec Pharma Limited ("PBPL") during financial year 2021-22 for a total consideration of ''18,720.00 million plus GST, out of which an amount of ''16,762.06 million was recognized as revenue during financial year 2021-22 and an amount of ''1,026.6 million has been recognized as revenue during financial year 2022-23 and the same has been included in the exceptional items.
On standalone basis, the Company has registered EBITDA loss of ''626.27 million during financial year 2022-23 as against EBITDA loss of ''726.70 million during previous financial year. The EBITDA loss is mainly due to one-time provisioning of ''611.69 million pertaining to inventories of Sputnik-V vaccine produced by the Company under the Licensing and Manufacture Agreement entered into by the Company with Human Vaccine LLC, Generium JSC and Dr. Reddy''s Laboratories Ltd. (DRL) for supply thereof to DRL during previous financial year. However, DRL did not take these inventories and the stocks got expired during the year under review (refer note 52 of Standalone Financial Statements).
The Company''s loss before exceptional items and tax has also declined to ''627.52 million as against loss of ''935.76 million during previous financial year, mainly due to increased revenue from sales of pentavalent and bivalent-OPV vaccine. The loss after tax for financial year 2022-23 has also reduced to ''875.44 million as against loss of ''935.76 million during previous financial year.
Panacea Biotec Group has incurred consolidated EBITDA loss of ''979.59 million during financial year 2022-23, as against to EBITDA loss of ''132.03 million during previous financial year. The loss has increased mainly due to one-time provisioning of inventories of Sputnik-V vaccine and absence of domestic pharma revenues, as explained above. Loss before exceptional items and tax has significantly been reduced to ''898.56 million as compared to loss of ''2,268.50 million during previous financial year, mainly due to savings on account of interest pursuant to repayment of Non-Convertible Debentures (NCDs) by PBPL.
The consolidated loss after tax and exceptional items has been ''337.45 million for financial year 2022-23 as against profit of ''10,783.34 million during previous financial year due to the above stated reasons.
A detailed discussion on operations of the Company for the financial year ended March 31,2023 is given in the Management Discussion and Analysis Report forming part of the Annual Report.
Credit Rating
During the year under review, the Company has not availed any bank facility and has consequently not carried out any credit rating.
Dividend and Transfer to Reserves
In view of losses incurred during the year under review, the
Board of Directors has not recommended any dividend on the Equity as well as Preference Shares of the Company. Also, owing to such losses, there has been no transfer of profit to general reserves.
In compliance with Regulation 43A of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 ("SEBI LODR Regulations"), the Company has adopted a Dividend Distribution Policy which endeavors for fairness, consistency and sustainability while distributing profits to the shareholders. The same may be accessed on the Company''s website at the link: https://www.panaceabiotec.com/en/ section/information-repository/policy.
The issued, subscribed and paid-up Share Capital of the Company as on March 31,2023, remains unchanged at ''222.62 million (comprising of ''61.25 million equity share capital divided into 6,12,50,746 Equity Shares of ''1 each and ''161.37 million preference share capital divided into 1,61,37,000 Non-Convertible Cumulative Non-Participating Redeemable Preference Shares of ''10 each). Similarly, the authorised share capital of the Company also remains unchanged at ''1,223.37 million (comprising of 12,50,00,000 Equity Shares of ''1 each and 10,98,37,000 Preference Shares of ''10 each).
During the year under review, the Company has not issued any equity share with differential rights / sweat equity shares under Rule 4 & Rule 8 of the Companies (Share Capital and Debentures) Rules, 2014.
Significant Events during the year under review / current year
The Company has from time to time during the year under review and current year informed its stakeholders about the key developments that took place by disseminating necessary information to the stock exchanges and through various other means of communication.
Some of the key events held during the year under review / current year are mentioned below:
a) Receipt of UNICEF and PAHO awards for supply of Pentavalent Vaccine: During the year under review, the Company has received long-term supply award worth ~''1,040 Crore from United Nations Children''s Fund (UNICEF) and Pan American Health Organization (PAHO) for supply of its WHO pre-qualified fully liquid Pentavalent vaccine, Easyfive-TT® (DTwP-HepB-Hib). UNICEF award is worth ~''813 Crore for supply of ~99.70 million doses during calendar years 2023-2027 and PAHO award is worth ~''235 Crore for supply of ~24.83 million doses during calendar years 2023-2025. In addition, the Company also received awards from UNICEF and Govt. of Mozambique for supply of 98.60 million doses of b-OPV vaccine worth ~''106 Crore during calendar year 2022 and 2023. The Company continues to save lives by supporting U.N. Agencies and partners for global immunization programs and to bring to market additional vaccines in coming years to meet programmatic needs of UNICEF and PAHO.
b) Collaboration with CEPI and THSTI to develop broadly protective Beta coronavirus vaccines: The Company has partnered with the Coalition for Epidemic Preparedness Innovations ("CEPI") and the Translational Health Science and Technology Institute ("THSTI"), an autonomous institute of the Department of Biotechnology, Ministry of Science and Technology, Government of India, for development of vaccine candidates that could provide broad protection against SARS-Cov-2 variants and other Beta coronaviruses. CEPI has awarded funding support of upto US$ 12.50 million (including US$ 4.00 million to subawardees) to a consortium comprised of the Company and THSTI, under its US$200 million programme launched in March, 2021 to advance the development of said vaccines.
CEPI will provide the said funding to the Company and THSTI in a phased manner to support development of multi-epitope, nanoparticle-based vaccine candidates and advance manufacturing process upto the stage of Phase I / II clinical trials to be completed by August, 2025. During the financial year 2022-23, the Company has received an amount of US$ 2.99 million under this grant for undertaking the research & development activities as per the project plan.
c) Receipt of award for Fortune India - The Next 500: Sectoral Star - Pharma Category, 2023: Fortune India Magazine, a monthly publication, has tracked the achievements of India''s biggest emerging companies in 2023 across different industry sectors and has awarded PBPL with the Fortune "The Next 500" 2023, Sectoral Star - Pharma category award on July 07, 2023. The award was given by Mr. Anurag Thakur, Union Minister for Information & Broadcasting, Sports and Youth Affairs, Government of India who was the Chief Guest to commemorate Fortune India''s annual special issue "The Next 500" that lists the Top 500 emerging companies in the Country.
d) Launch of pediatric nutrition products: PBPL has recently entered into a new business of nutrition products. It has developed its own product portfolio for nutrition segment at its Sampann R&D Center and has set-up a manufacturing facility to manufacture these products at Baddi, Himachal Pradesh. This manufacturing facility currently has installed capacity of ~6 tons per day. To start with, in June 2023, PBPL has launched pediatric nutrition products under the brand name, ChilRunfullTM, ChilRun® 7 , ChilRun® No Sucrose in ~100 territories across India covering almost 4,000 doctors. It plans to add more products going forward to expand the product portfolio and markets including other specialties like gynecology and adult nutrition.
e) Site Inspection by the United States Food and Drug Administration ("USFDA"): Upon site inspection of PBPL''s pharmaceutical formulations facility at Baddi, Himachal Pradesh, India, conducted by the USFDA between May 30 andJune 08, 2022, PBPL was issued a''FDA Form 483''with few observations in response thereto PBPL had immediately initiated actions to address specific observations raised in the ''FDA Form 483'' and submitted its response alongwith Corrective and Preventive Actions ("CAPA") with USFDA. USFDA issued letter maintaining facility status as Official Action Indicated, which does not impact existing business of PBPL in US. However, satisfactory resolution of the observations raised by USFDA, is necessary for approval of the ANDA filed for Paclitaxel Protein-Bound Particles for Injectable Suspension (Albumin-Bound) from the above said pharmaceutical formulations facility. In this regard, PBPL has made a request with USFDA for an early inspection and is maintaining constant touch with USFDA for an update on proposed inspection, if any.
f) Under the collaboration with the Limited Liability Company "Human Vaccine", an indirect Wholly owned Subsidiary of Joint Stock Company "Management Company of Russian Direct Investment Fund" for manufacture of Covid-19 vaccine using the technology to be provided by Human Vaccine, the Company had received from Human Vaccine an advance amount of US$ 7.00 million out of which ~US$ 6.58 million was used to meet the expenses relating to Sputnik-V and Sputnik Light vaccine project. Due to the failure on the part of Human Vaccine, to demonstrate and transfer the technology and certain other reasons beyond the control of the Company, the complex process of technology transfer and manufacture of Sputnik-V vaccine could not be completed successfully and the contract stood frustrated and accordingly both the parties stood automatically discharged from their contract by operation of law. In view of the fact that the Company has already incurred huge expenses on the said project, it has been decided to adjust the advance received from Human Vaccine against expenses incurred by the Company and communication in this regard has already been sent to Human Vaccine along with relevant details / documents pertaining to the said expenses. The Company has received legal advice from its counsel and believes that it will not be liable to pay back the amount adjusted towards expenses under dispute with Human Vaccine.
g) In August 2021, the Company had entered into a Licensing and Manufacture Agreement with Human Vaccine LLC, Generium JSC and Dr. Reddy''s Laboratories Limited ("DRL"). As per the terms of the Agreement, the Company was to undertake fill-and-finish activities of Sputnik-V vaccine using the ready-to-fill drug substance supplied by Generium and supply the Sputnik-V vaccine so produced to DRL. Pursuant to the said Agreement, the Company received drug substance from Generium and produced ~ 1.96 million doses of Sputnik-V vaccine out of which DRL purchased ~0.86 million doses only and refused to purchase and pay for the remaining ~1.10 million doses. Because of breach of their respective obligations by DRL and Generium, the pending payment of ~US$ 7.41 million for the drug substance received from Generium could not be made. After several rounds of discussion among the parties to settle the dispute amicably, Generium has filed notice of arbitration with Singapore International Arbitration Centre (SIAC) for arbitration of dispute with respect to the said pending payment and interest thereon aggregating to ~US$ 8.90 million. The Company has also initiated a parallel arbitration proceeding regarding its claims against DRL, Generium and Human Vaccine and filed notice of arbitration with SIAC during the current financial year. Both the arbitration proceedings have been clubbed together and the sole arbitrator has been appointed by SIAC. Further arbitration proceedings, including filing of pleadings, shall commence in due course. The Company has obtained legal opinion from its legal counsel who, considering the nascent stage of the proceedings, have opined that (a) the Company has a reasonable defence against the claim brought by
Generium and (b) the possibility of the claim falling to the Company may be classified as low at this stage.
h) Alteration in the Articles of Association: The existing Articles of Association ("AOA") of the Company have been replaced in its entirety by new set of AOA with a view to delete the provisions relating to the terms of warrant and debentures, which are no more required; and to incorporate other relevant modifications / additions.
Apart from the updates mentioned above, there were no significant events during and after the end of the financial year ended March 31,2023.
Employee Stock Options
The Company has an approved Employee Stock Option Plan 2020 ("ESOP 2020"/ "Plan") for the employees of the Company and its subsidiaries. However, no options have been granted under ESOP 2020 till date.
Significant and material orders impacting the going concern status and Company''s operations in future
During the year under review, no significant and material order was passed by any regulator or court or tribunal which may impact the going concern status and your Company''s operations in future.
During the financial year 2011-12, a search operation was conducted by Income Tax Department in the premises of the Company and hence the Company re-filed the income tax returns for the Assessment Years ("AY") 2006-07 to 2012-13. During the financial year 2014-15, the Income Tax Department completed the assessment of the said years, disallowed certain expenses, and issued demand of ''3,294.9 million (including interest) on various grounds. The Company preferred appeals before CIT (Appeals) against the orders of the Income Tax Department and after several hearings in the matter and based on the facts of the matter, the appeals were decided in favour of the Company and the entire demand of ''3,294.9 million was cancelled. However, CIT (Appeals) made certain disallowances of ''60.2 million with respect to AY 2010-11 & AY 2011-12 against which the Company has filed appeals before the Income Tax Appellate Tribunal ("ITAT"). The Income Tax Department has also filed appeals before ITAT against the orders of CIT (Appeals). The appeals before ITAT are pending at present. Based on the expert opinion, the Company believes that it has merit in these cases.
Report on Corporate Governance
Your Company has always placed thrust on managing its affairs with diligence, transparency, responsibility and accountability. The Board supports the broad principles of Corporate Governance and lays emphasis on its role to align and direct the actions of the Company in achieving its objectives. Your directors reaffirm their commitment to adhere to the highest corporate governance and ethical practices. In compliance with Regulation 34(3) of the SEBI LODR Regulations, a report on corporate governance for the financial year under review is presented in a separate section and forms an integral part of the Annual Report. The requisite certificate from the Practicing Company Secretary confirming compliance with the conditions of Corporate Governance is attached thereto and forms part of the Annual Report.
Management Discussion and Analysis Report
Pursuant to Regulation 34(3) of the SEBI LODR Regulations, Management Discussion and Analysis Report for the year under review, is presented in a separate section and forms an integral part of the Annual Report.
Business Responsibility and Sustainability Report
The Business Responsibility & Sustainability Report for the year under review, as required pursuant to Regulation 34(2)(f) of the SEBI LODR Regulations, is presented in a separate section and forms an integral part of the Annual Report. The Report provides a detailed overview of initiatives taken by the Company from environmental, social and governance perspectives.
Subsidiaries, Associates and Joint Ventures
A. Subsidiaries
As on March 31, 2023, your Company had 3 Wholly Owned Subsidiary ("WOS") companies, viz. Panacea Biotec Pharma Limited ("PBPL"), Meyten Realtech Private Limited ("Meyten") and Panacea Biotec (International) S.A. ("PBS") and 1 indirect WOS company, viz. Panacea Biotec Germany GmbH ("PBGG"), the WOS of PBS.
PBPL is engaged in the research, development, manufacturing and marketing of pharmaceutical formulations and nutrition products in India and international markets. As on March 31, 2023, the Company holds 10,00,000 equity shares of ''1 each with an investment of ''1.00 million in PBPL.
Meyten: During financial year 2022-23, the Hon''ble NCLT has vide its order dated January 18, 2023, approved the Composite Scheme of Arrangement ("Scheme") amongst Meyten, Radhika Heights Limited, an erstwhile WOS of the Company ("RHL") and Cabana Structures Limited (WOS of RHL), and their respective shareholders and creditors for, inter-alia, demerger of specified Leasing Business of RHL into Meyten. The appointed date for the Scheme was April 01, 2020 and the Scheme became effective from March 18, 2023. Consequently, Meyten has now recorded the assets and liabilities in its books as per the said Scheme and now owns the immovable property which is being used by the Company as its corporate office at New Delhi.
As on March 31, 2023, the Company was holding 1,00,000 equity shares of ''1 each with an investment of ''0.10 million in Meyten. Pursuant to the terms of the said Scheme, the Board of Directors of Meyten in its Meeting held on April 20, 2023 issued and allotted 47,76,319 equity shares of ''1 each to the Company. Accordingly, as on date of this report, the Company holds 48,76,319 equity shares of ''1 each in Meyten.
PBS was earlier engaged in the business of trading of pharmaceutical products and is currently not pursuing any business. Since no further activity is envisaged to be undertaken by PBS, it has been decided to liquidate PBS. The Company holds 6,000 equity shares of CHF 100 each with an investment of ''34.36 million in PBS as on March 31,2023.
PBGG is engaged in marketing of pharmaceutical products including the Company''s products in Germany. PBGG is proposed to be converted into indirect WOS of the Company through PBPL by way of acquisition of 100% shares of PBGG by PBPL from PBS.
B. Joint Ventures and Associates
Your Company has 2 joint ventures, viz. Adveta Power Private Limited ("Adveta") and Chiron Panacea Vaccines Private Limited (Under Liquidation) ("CPV") and 1 associate company, viz. PanEra Biotec Private Limited ("PanEra"). Adveta and PanEra have been considered as subsidiaries for the purpose of consolidation of accounts pursuant to the provisions of Indian Accounting Standards ("Ind AS").
Adveta: The Company''s 50:50 joint venture with PanEra, was granted in-principle approval by Government of Arunachal Pradesh for allotment of two Power Projects of 80 MW and 75 MW in the financial year 2012-13. Adveta has in the past initiated taking preliminary steps in connection with the implementation of projects. However, in view of the difficulties faced by Adveta in implementing the projects within the stipulated period, the Government of Arunachal Pradesh has cancelled the said allotment of power projects and accordingly, Adveta has written-off the investments in hydropower projects. As part of business restructuring, Adveta was proposed to be merged into PBPL, however, considering the cancellation of projects, alternate options are being explored.
CPV: The Liquidators have completed the voluntary winding-up of CPV and the Company has received surplus amount of ''55.88 million (including initial share capital of ''22.96 million and TDS of ''2.47 million deducted on surplus) from CPV during financial year 2020-21. Thereafter, during the previous financial year, the Liquidators of CPV have submitted the final Liquidator''s Statement of Account with the Official Liquidator, Mumbai. Final order of liquidation by the Hon''ble High Court is awaited.
PanEra: PanEra was granted in-principle approval by Government of Himachal Pradesh for allotment of a hydropower project of 4 MW, in earlier years. However, no major investment has been made in this regard. As part of business restructuring, PanEra is proposed to be merged into PBPL so that PBPL can move towards net zero carbon emission and use energies which are sustainable and good for environment and at the same time economical to PBPL. Also, post this merger, PBPL will largely become self-reliant in its own energy requirements.
Pursuant to Regulation 46(2)(h) of the SEBI LODR Regulations, the Company has formulated a Policy for determining material subsidiaries which may be accessed on the Company''s website at the link: https://www.panaceabiotec.com/en/section/ information-repository/policy.
As on March 31, 2023 as well as on the date of this report, Panacea Biotec Pharma Limited is the only material subsidiary of the Company pursuant to SEBI LODR Regulations.
Financial Details of Subsidiaries, Associates and Joint Ventures
In accordance with the first proviso to Section 129(3) of the Companies Act, 2013 ("the Act") and Rules 5 and 8(1) of the Companies (Accounts) Rules, 2014, a separate statement containing the salient features of financial statements, performance and financial position of each of the Company''s Subsidiaries, Associates and Joint Ventures, in the prescribed Form AOC-1, forms part of the Annual Report and hence not repeated here for the sake of brevity.
The contribution of the Subsidiaries, Associates and Joint Ventures to the overall performance of your Company is outlined in Note No. 50 of the Consolidated Financial Statements for the year ended March 31,2023.
The separate Audited Financial Statements of the Subsidiaries are available on the website of the Company at https://www. panaceabiotec.com/en/section/information-repository/ subsidiaries-financial-information. The same will also be made available upon request of any member of the Company who is interested in obtaining the same.
Consolidated Financial Statements
The Consolidated Financial Statements of the Company and its Subsidiaries, Associates and Joint Ventures, prepared in terms of Section 129 of the Act, Regulation 33 of the SEBI LODR Regulations and in accordance with Ind AS 110 read with Ind AS 28 and 31 as specified in the Companies (Indian Accounting Standards) Rules, 2015 ("Ind AS Rules") and provisions of Schedule III to the Act, together with Auditors'' Report thereon, forms part of the Annual Report.
Indian Accounting Standards, 2015
The annexed financial statements comply in all material aspects with Indian Accounting Standards notified under Section 133 of the Act, the Ind AS Rules and other relevant provisions of the Act.
Listing of Equity Shares
The Equity Shares of the Company continue to be listed on National Stock Exchange of India Limited ("NSE") and BSE Limited ("BSE"). The requisite annual listing fees for the financial year 2023-24 have been paid to these Exchanges well within the due dates.
During the year under review, your Company has neither invited nor accepted any deposits from the public / members pursuant to the provisions of Sections 73 and 76 of the Act read with the Companies (Acceptance of Deposits) Rules, 2014 and therefore, no amount of principal or interest was outstanding in respect of deposits from the Public as on the balance sheet date.
The details of loans received from directors of the Company have been disclosed in Note No. 42 to the Standalone Financial Statements forming part of the Annual Report.
Directors and Key Managerial Personnel
i) Cessation of Director: Shri Soshil Kumar Jain (DIN: 00012812), Whole-time Director designated as Chairman and the founder promoter of the Company, departed for his heavenly abode on October 07, 2022 and accordingly ceased to be the director and Chairman of the Company with immediate effect. With the sad demise of Shri Soshil Kumar Jain, the Company has lost a visionary, creative, genius and a dynamic leader. He has left behind a very strong company with a Purpose, Values and Mission that each one at the Company needs to continue to work on, along with a solid and huge infrastructure, latest technology, state of the art manufacturing facilities, excellent research and development centers, strong brands, global network of partners and above all highly committed, talented, smart
and hardworking people with a culture of performance. His spirit will forever be the foundation of the Company.
Your directors place their sincere appreciation towards the invaluable contributions, guidance and support received from him during his tenure as director, towards the progress of the Company. Further, your directors pray to the Almighty that the departed soul of Shri Soshil Kumar Jain rest in peace.
ii) Appointment of Non-Executive and Non-Independent Director: Mr. Narotam Kumar Juneja (DIN: 01204817) has been appointed as Non-Executive Non-Independent Director of the Company w.e.f. April 01, 2022. The said appointment was also approved by the shareholders on June 26, 2022, by way of passing resolution through Postal Ballot.
iii) Elevation of Director: The Board of Directors has, on the recommendation of Nomination and Remuneration Committee ("NRC"), elevated Dr. Rajesh Jain (DIN: 00013053), the then Managing Director of the Company to the position of Chairman and Managing Director w.e.f. November 14, 2022, on the existing terms and conditions for the remaining tenure upto March 31,2025 and he shall continue to be liable to retire by rotation.
iv) Directors Retiring by Rotation: In accordance with the provisions of Section 152 of the Act and Article 119 of the Articles of Association of the Company, Mr. Sandeep Jain (DIN: 00012973), Joint Managing Director and Mr. Ankesh Jain (DIN: 03556647), Whole-time Director designated as Director Sales & Marketing of the Company are liable to retire by rotation. Being eligible they have offered themselves for their re-appointment as directors at the ensuing Annual General Meeting ("AGM") of the Company.
v) Profile of Directors seeking re-appointment: The brief resume of the Directors seeking re-appointment along with other details as stipulated under Regulation 36(3) of the SEBI LODR Regulations and Secretarial Standards issued by The Institute of Company Secretaries of India, are provided in the Notice convening the ensuing AGM of the Company and the Corporate Governance Report forming part of the Annual Report.
vi) Declaration of independence: Your Company has received declarations from all the Independent Directors of the Company confirming that they meet the criteria of independence provided in Section 149(6) of the Act and Regulation 16 of the SEBI LODR Regulations, and that there has been no change in the circumstances which may affect their status as Independent director during the year under review.
viii) Registration in Independent Directors'' Data Bank: The Company has received confirmation from all its Independent Directors that they are registered in the Independent Directors'' Data Bank of the Indian Institute of Corporate Affairs at Manesar, for a period of 5 years, in compliance with the provisions of sub-rule (1) of rule 6 of Companies (Appointment and Qualification of Directors) Rules, 2014.
All the above re-appointments by the Board of Directors are
based on the performance evaluation and recommendation
of the Nomination and Remuneration Committee of the Board
of Directors. Your directors recommend re-appointment of the above said directors in the ensuing AGM of the Company.
Apart from the above, there is no other change in the Directors and Key Managerial Personnel ("KMP") during the year under review and thereafter.
An annual performance evaluation of the Board, its Committees and of individual directors was carried out by the Board in terms of the provisions of Section 134(3)(p) of the Act read with Rule 8(4) of the Companies (Accounts) Rule, 2014. In compliance with Regulation 17(10) of the SEBI LODR Regulations, the Board carried out performance evaluation of independent directors without the participation of director being evaluated. In a separate meeting of independent directors, performance of non-independent directors, the Board as a whole and the Chairman was evaluated. The exercise was carried out through a structured evaluation process covering various aspects such as Board composition & quality, strategic & risk management, board functioning, etc. which are briefly stated in the Corporate Governance Report, forming part of the Annual Report. Performance evaluation of independent directors was conducted based on criteria such as ethics and values, knowledge and proficiency, behavioral traits, etc. The Board of Directors has expressed its satisfaction with the evaluation process.
Board Meetings
During the year under review, four (4) Board Meetings were held on May 18, 2022, August 09, 2022, November 14, 2022, and February 14, 2023, in physical mode with the facility for attending the meeting through video conferencing. The intervening gap between two Board Meetings was within the maximum period prescribed under the Act. The detailed information is furnished in the Corporate Governance Report, forming part of the Annual Report.
The Audit Committee of the Board of Directors comprises entirely of Independent Directors.The details of the composition and number of meetings of the Audit Committee held during the financial year under review including attendance thereat, are furnished in the Corporate Governance Report, forming part of the Annual Report. During the year under review, all the recommendations made by the Audit Committee were accepted by the Board.
Policy on Directors'' appointment & remuneration
The management of the Company is immensely benefitted from the guidance, support and mature advice from the members of the Board who are also members of various committees. The Board consists of directors possessing diverse skills and rich experience to enhance quality of its performance. Pursuant to the provisions of Section 178(3) of the Act, Regulation 19(4) of the SEBI LODR Regulations and as per the recommendations by the Nomination and Remuneration Committee ("NRC") of the Board, the Board has adopted a policy for appointment and remuneration of the Directors, Key Managerial Personnel, Senior Management Personnel and other employees of the Company. The policy includes criteria for determining qualifications, positive attributes and independence of directors. In terms of the policy, the NRC evaluates balance of skills, knowledge and
experience of directors, Key Managerial Personnel or Senior Management Personnel whom it recommends to the Board for appointment. The components of remuneration policy are briefly stated in the Corporate Governance Report, forming part of the Annual Report.
This policy may be accessed on the Company''s website at the link: https://www.panaceabiotec.com/en/section/information-repository/policy.
Energy Conservation, Technology Absorption & Foreign Exchange Earnings & Outgo
As required under Section 134(3)(m) of the Act read with Rule 8 of the Companies (Accounts) Rules, 2014, the particulars regarding conservation of energy, technology absorption and foreign exchange earnings & outgo, are given in Annexure A hereto and forms part of this Report.
Annual Return
As required pursuant to Section 92(3) and 134(3)(a) of the Act, the Annual Return of the Company as on March 31, 2023, is available on the Company''s website at: https://www. panaceabiotec.com/en/section/information-repository/ annual-return.
During the year under review, all the related party transactions entered into were in the ordinary course of business and on an arm''s length basis. The Company has not entered into any material related party transactions, i.e. transactions exceeding 10% of the annual consolidated turnover as per the last audited financial statements. Accordingly, the disclosure of Related Party Transactions as required under Section 134(3)(h) of the Act read with Rule 8(2) of the Companies (Accounts) Rules, 2014 in the prescribed Form AOC-2 is not applicable. Suitable disclosures as required under Ind AS 24 have been made in the notes to the Financial Statements forming part of the Annual Report. Apart from remuneration and sitting fees, there is no pecuniary transaction with any director, which had potential conflict of interest with the Company.
All related party transactions are placed before the Audit Committee for its review and further recommendation to the Board for its approval. Wherever applicable, approval is obtained for related party transactions which are of repetitive nature and / or entered in the ordinary course of business and are at arm''s length basis.
As per the provisions of the Act and Regulation 46(2)(g) of the SEBI LODR Regulations, your Company has formulated a policy on Related Party Transactions which is available on Company''s website at the link: https://www.panaceabiotec.com/en/ section/information-repository/policy.
The policy intends to ensure that proper reporting, approval and disclosure processes are in place for all transactions between the Company and the Related Parties. This policy specifically deals with the review and approval of material related party transactions keeping in mind the potential or actual conflicts of interest that may arise because of entering into these transactions.
Particulars of Employees and Related disclosures
Disclosures pertaining to remuneration and other details
as required under Section 197(12) of the Act read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 ("Managerial Personnel Rules") are provided in Annexure B hereto and the same forms part of this Report.
In terms of the provisions of Section 197(12) of the Act read with Rules 5(2) and 5(3) of the Managerial Personnel Rules, a statement showing the names and other particulars of the employees drawing remuneration in excess of the limits set out in the said Rules is provided in Annexure C hereto and the same forms part of this Report.
i) Statutory Auditors and Audit Report: Pursuant to the provisions of Section 139 of the Act and the rules framed thereunder, M/s. Walker Chandiok & Co. LLP, Chartered Accountants (Regn. No. 001076N/N500013) were re-appointed as Statutory Auditors of the Company for a second term of five (5) consecutive years to hold office from the conclusion of the 35th AGM of the Company held on September 30, 2019 till the conclusion of the 40th AGM of the Company. Pursuant to Section 141 of the Act, the Statutory Auditors have confirmed they are not disqualified from continuing as Auditors of the Company.
M/s. Walker Chandiok & Co. LLP have also confirmed that they are free from the disqualifications specified in Section 141 read with Sections 139 to 147 and their appointment meets the requirements prescribed in Section 141(3) (g) and 147 of the Act. They also confirmed that they are independent, maintained an arm''s length relationship with the Company and that no orders or proceedings were pending against them before the Institute of Chartered Accountants of India or any competent court / authority relating to matters of professional conduct.
The Auditors'' Report on the standalone as well as consolidated financial statements for the year ended March 31,2023 does not contain any qualification, reservation or adverse remark. The Key Audit Matters as contained in the Auditors'' Report on the Standalone Financial Statements are also mentioned as Key Audit Matters in the Auditors'' Report on the Consolidated Financial Statements in similar manner.
The management response to the observations / comments / key audit matters contained in the Auditors'' Report and Annexure thereto has been suitably given in the respective Notes to the Financial Statements referred to therein.
The notes to accounts and other observations, if any, in the Auditors'' Report are self-explanatory and therefore, do not call for any further comments.
ii) Cost Accounts and Auditors: The Company is required to maintain cost records as specified by the Central Government under Section 148(1) of the Act and accordingly, such accounts and records have been duly made and maintained by the Company in compliance with the provisions of the Act.
Pursuant to the provisions of Section 148 of the Act read with the Companies (Cost Records and Audit) Amendment Rules, 2014, M/s. GT & Co., Cost Accountants (Firm''s
Registration Number: 000253) were acting as the Cost Auditors to conduct the audit of the Company''s Cost Records for the financial year ended March 31, 2023 and their remuneration has been ratified by the shareholders in the 38th AGM of the Company held on September 28, 2022.
The cost audit for the financial year 2022-23 has been completed and the Cost Auditors Report will be submitted with the Central Government within the prescribed time. The Cost Audit Report for the financial year 2021-22 was filed on September 07, 2022.
During the current year, the Board of Directors has, pursuant to the provisions of Section 148 of the Act and based on the recommendations of the Audit Committee, appointed M/s. Jain Sharma & Associates, Cost Accountants, as cost auditors of the Company to conduct the audit of the Company''s Cost Records for the financial year 2023-24. M/s. Jain Sharma & Associates have confirmed their independence and arm''s length relationship with the Company and that they are free from the disqualifications specified in Section 139, 141 of the Act and their appointment meets the requirements prescribed in Section 141(3)(g) and 148 of the Act. They have also confirmed that they are independent, maintained an arm''s length relationship with the Company and that no orders or proceedings were pending against them relating to matters of professional conduct before the Institute of Cost Accountants of India or any competent court / authority.
In compliance with Rule 14 of the Companies (Audit and Auditors), Rules, 2014, an item for ratification of remuneration of cost auditor for conducting the audit for the financial year 2023-24 has been included in the Notice of the ensuing AGM for shareholders'' approval.
iii) Secretarial Auditors and Secretarial Audit Report: Pursuant to the provisions of Section 204 of the Act read with Rule 9 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 and Regulation 24A of the SEBI LODR Regulations, the Board of Directors had appointed M/s. R&D Company Secretaries, Practicing Company Secretaries as Secretarial Auditors to conduct the Secretarial Audit of the Company for the financial year ended March 31, 2023. The Secretarial Audit Report issued by them is annexed as Annexure D to this Report. The Secretarial Audit Report does not contain any qualification, reservation or adverse remarks.
In compliance with the requirements of the SEBI LODR Regulations, the material unlisted subsidiary of the Company, viz. PBPL had also appointed M/s R&D Company Secretaries, Practicing Company Secretaries as Secretarial Auditors to conduct the Secretarial Audit for the financial year ended March 31,2023. The Secretarial Audit Report issued by them to PBPL is annexed as Annexure E to this Report. The said Secretarial Audit Report does not contain any qualification, reservation or adverse remarks.
In addition to the above and in compliance with Regulation 24A(2) of the SEBI LODR Regulations, Annual Secretarial Compliance Report issued by M/s. R&D Company Secretaries, Secretarial Auditors, for the year
ended March 31,2023, has been submitted with the stock exchanges within prescribed time.
In terms of the applicable provisions of the Act, SEBI LODR Regulations and based on the recommendation of the Audit Committee, the Board of Directors has re-appointed M/s R&D Company Secretaries, Practicing Company Secretaries, as Secretarial Auditors to conduct the secretarial audit of the Company for the financial year 2023-24. They have also confirmed their eligibility for the said re-appointment.
Material changes and commitments affecting the financial position
As required under Section 134(3) of the Act, the Board of Directors inform the members that during the financial year under review, there have been no material changes, except as disclosed elsewhere in the Annual Report:
⢠in the nature of Company''s business;
⢠in the Company''s subsidiaries or in the nature of business carried out by them; and
⢠in the classes of business in which the Company has an interest.
Further, except as disclosed elsewhere in the Annual Report, there have been no material changes and commitments which can affect the financial position of the Company between the end of the financial year and the date of this Report.
The Directors state that applicable Secretarial Standards i.e. SS-1 and SS-2, relating to ''Meetings of the Board of Directors'' and ''General Meetings'', respectively, issued by the Institute of Company Secretaries of India, have been duly followed by the Company.
Transfer to Investor Education and Protection Fund
During the year under review, no amount was required to be transferred by the Company to the Investor Education and Protection Fund established by the Ministry of Corporate Affairs, Government of India.
Directors'' Responsibility Statement
In compliance with the provisions of Section 134(3)(c) read with Section 134(5) of the Act, to the best of their knowledge and belief, the Directors hereby confirm that:
a) in the preparation of the annual financial statements for the financial year ended March 31, 2023, the applicable Accounting Standards have been followed along with proper explanation relating to material departures;
b) they had selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at March 31, 2023, and of the profit/ (loss) of the Company for the year ended March 31,2023;
c) they had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of
the Company and for preventing and detecting fraud and other irregularities;
d) the annual financial statements have been prepared on a going concern basis;
e) they had laid down proper internal financial controls to be followed by the Company and that the same are adequate and were operating effectively; and
f ) proper systems have been devised to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.
Details in respect of frauds reported by auditors
During the year under review, there were no frauds reported by the auditors to the Audit Committee or the Board under Section 143(12) of the Act.
Particulars of loans, guarantees or investments
The Company has made investments or extended loans / guarantees to its wholly-owned subsidiaries for their business purposes. Pursuant to the provisions of Section 134(3)(g) of the Act, the particulars of loans / guarantees and investments covered under the provisions of Section 186 of the Act along with the purpose for which such loans, guarantees or security were proposed to be utilised by the recipient, have been disclosed in the notes to the Financial Statements forming part of the Annual Report and hence not repeated here for the sake of brevity.
The Board of Directors has constituted a Risk Management Committee which is entrusted with the responsibility of overseeing various organizational risks. Risk Management Committee is compliant with the Regulation 21 of the SEBI LODR Regulations as regards composition, frequency and quorum of the meetings. The Board has defined the roles, responsibilities and functions of the Committee. The details of the composition, number of meetings held and attendance thereat during the financial year under review and terms of reference are furnished in the Corporate Governance Report, forming part of the Annual Report.
The Company has formulated a Risk Management Policy and monitors the risk management plan on a periodic basis. The Company has defined a structured approach to manage uncertainty and to make use of these in the decision making in business decisions and corporate functions.
The Company has regularly invested in insuring itself against unforeseen risks. The Company''s stocks and insurable assets like building, plant & machinery, computer equipment, office equipment, furniture & fixtures, leasehold improvements and upcoming projects have been adequately insured against major risks. The Company has also taken appropriate product liability insurance policies for conducting clinical trials and for insuring its products (manufactured and sold) with an extension of unnamed vendor liability and add on cover of public liability inclusive of pollution liability to cover the risk on account of claims, if any, filed against the Company.
Internal Control System
Your Company has established adequate system of internal
controls, policies and procedures to ensure orderly and efficient conduct of business and also that assets are safeguarded and transactions are appropriately authorized, recorded and reported.
The detailed explanation is provided in the Management Discussion and Analysis Report, forming part of the Annual Report.
The Company has designed and implemented a process driven framework for Internal Financial Controls ("IFC") within the meaning of the explanation to Section 134(5)(e) of the Act. For the year ended on March 31,2023, the Board is of the opinion that the Company has sound IFC commensurate with the size, scale and complexity of its business operations.
The IFC operates effectively, and no material weakness exists. The effectiveness of IFC is ensured through management reviews, controlled self-assessment and independent testing by the internal audit team.
Vigil Mechanism / Whistle Blower Policy
Your Company adheres to uncompromising integrity in conduct of its business and strictly abides by a well-accepted norm of ethical, lawful and moral conduct. It has zero tolerance for any form of unethical conduct or behavior. With the above said view and pursuant to the provisions of Section 177(9) of the Act read with Rule 7 of the Companies (Meetings of Board and its Powers) Rules, 2014, Regulation 22 of the SEBI LODR Regulations and Regulation 9A of Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 2015, your Company has adopted a Vigil Mechanism / Whistle Blower Policy to provide its directors and employees an avenue to raise any sensitive and genuine concerns regarding any unethical behavior or wrongful conduct and to enable them to report instances of leak of unpublished price sensitive information and to provide adequate safeguards for protection from any victimization. This Policy is available on the website of the Company and can be accessed at: https://www.panaceabiotec.com/en/section/ information-repository/policy. This Policy, inter-alia, provides a direct access to the Chairman of the Audit Committee. Further, as mandated by Regulation 18(3) read with Schedule II Part C (18) of the SEBI LODR Regulations, the Audit Committee reviews the functioning of Vigil Mechanism / Whistle Blower Policy.
Your Company hereby affirms that no director / employee has been denied access to the Chairman of the Audit Committee and that no complaint has been received during the year under review.
Corporate Social Responsibility
The provisions of Section 135 of the Act and the Rules made thereunder regarding Corporate Social Responsibility are not attracted to the Company as the Company does not fall under the threshold limit of net worth of ''5,000 million or more, or turnover of ''10,000 million or more, or a net profit (as defined under Section 198 of the Act) of ''50 million or more during the immediately preceding financial year. However, the Company has been, over the years, pursuing Corporate Social Responsibility by putting continuous efforts in the areas of health, education and patient awareness / assistance programs towards the development of happier and healthier society.
Prevention of Sexual Harassment at Workplace
The Company is committed to provide safe and conducive work environment to all its employees and associates. It is the continuous endeavour of the Management of the Company to create and provide an environment to all its employees that is free from discrimination and harassment including sexual harassment. The Company has in place a Policy on Prevention of Sexual Harassment in line with the requirements of The Sexual Harassment of Women at the Workplace (Prevention, Prohibition and Redressal) Act, 2013 ("POSH Act"). All employees (permanent, contractual, temporary, trainees) are covered under this policy.
Your Company has complied with the provisions relating to constitution of Internal Complaints Committee under the POSH Act for dealing with the complaint, if any, relating to sexual harassment of women at workplace. No case has been reported during the year under review.
Proceeding under Insolvency and Bankruptcy Code, 2016
During the year under review, neither any application is made nor any proceeding is pending against the Company, under the Insolvency and Bankruptcy Code, 2016.
The Company has installed fire walls and other softwares to protect against the cyber-crime. The back-ups are also being kept on Cloud to prevent any kind of data loss. No incident relating to cyber security, breaches or loss of data or documents has been reported during the year under review.
Your directors acknowledge with gratitude the co-operation and assistance received from the WHO, UNICEF, PAHO and other UN Agencies, Central Government, State Governments and all other Government agencies and the encouragement they have extended to the Company. Your directors also thank the shareholders, banks, funding agencies, customers, vendors and other business associates for their confidence in the Company & its management and look forward for their continuous support in future. The Board wishes to place on record its appreciation for the dedication and commitment of the employees at all levels which has continued to be our major strength.
Mar 31, 2018
Directors'' Report
Dear Members,
Your Directors are pleased to present the 34th Annual Report on the business and operations of the Company together with the Audited Standalone and Consolidated Financial Statements and the Auditors'' Reports thereon for the financial year ended March 31, 2018.
Financial Results
The highlights of financial results of the Company for the financial year 2017-18 are as under:
Rs.5,961.61 million as against Rs.5,579.51 million during the corresponding previous financial year. The Company''s consolidated loss before tax has increased to Rs.661.39 million from Rs.518.78 million in the previous financial year.
During the year under review:
i) Your Company has entered into Joint Collaboration with Bionpharma Inc., a generic pharmaceutical company based in the United States for research, development and manufacturing activities for commercialization of Abbreviated New Drug Applications (ANDAs), which were earlier under development at Panacea Biotec;
ii) Your Company has expanded its existing collaboration with Apotex Inc., the largest Canadian-owned pharmaceutical company, for sales & distribution of Prasugrel 5mg and 10mg tablets (generic version of Eli Lilly''s Effient) in the USA. Under the terms of the agreement, Apotex shall be responsible for sales & distribution of the product in the USA and the Company shall be responsible for manufacturing and supply;
iii) Your Company has received USFDA approval for its first-to-file abbreviated new drug application (ANDA) of Prasugrel 5mg and 10mg tablets and has launched the same in U.S. markets. Under the provisions of Hatch-Waxman Act, the Company is entitled for 180 days of shared marketing exclusivity for Prasugrel HCL tablets with this final FDA approval;
iv) Your Company''s ANDA submitted under section 505(j) of the Federal Food, Drug and Cosmetic Act (FD&C Act) for Paclitaxel Protein Bound Particles for injectable Suspension, 100mg/vial has been accepted for filing by USFDA;
v) Your Company has received the Establishment Inspection Report (EIR) from USFDA indicating the formal closure of the Inspection conducted by USFDA, at its Pharmaceutical Formulation Facility for Oncology Parenteral and Oral Solids Dosage at Baddi, Himachal Pradesh;
vi) Your Company has received the Certificate of GMP Compliance from State Service of Ukraine on Medicines and Drugs Control with manufacturing authorization for 22 medicinal products, including 4 oncology products valid till June 24, 2020. Under this Manufacturing Authorization, the Company''s oral solid dosage manufacturing facility and oncology facility at Baddi, Himachal Pradesh have been certified as complying with the Good Manufacturing Practices;
vii) Your Company has entered into the collaboration with signing of two long term agreements with Serum Institute of India Pvt. Ltd. ("SII") and SII''s wholly owned subsidiary, Bilthovan Biologicals B.V., The Netherlands ("BBIO"). Under the collaboration, (a) SII will ensure supply of IPV bulk, an important constituent of the fully liquid Whole cell Pertussis (wP) and Salk based Injectable Polio Vaccine (IPV) based Hexavalent vaccine (DTwP-HepB-Hib-IPV) to the Company from BBIO; (b) SII is also entitled to manufacture & sell hexavalent vaccine; and
(c) in next 2 years the Company and SII will work together to get this Hexavalent Vaccine introduced in the National Immunization Program of Govt. of India and developing countries by working closely with key stakeholders including national governments, WHO, GAVI, Bill and Melinda Gates Foundation and other United Nation Agencies, etc;
# Figures re-grouped, re-classified and/or restated wherever necessary as per Ind-AS
Indian Accounting Standards
Effective from April 01, 2017, the Company has adopted the Indian Accounting Standards ("Ind-AS") and the adoption was carried out in accordance with Ind AS 101 ''First-time adoption of Indian Accounting Standards'' with April 1, 2016 as the transition date. The transition was carried out from Indian Accounting Principles generally accepted in India as prescribed under Section 133 of the Companies Act, 2013 (the "Act") read with the relevant rules issued thereunder and the other accounting principles. The impact of transition has been accounted for in the retained earnings as at April 1, 2016 and the figures for the financial year ended March 31, 2017 have been restated accordingly.
Performance Highlights
During the year ended March 31, 2018, your Company has registered revenue from operations of Rs.5,799.31 million as against Rs.5,440.25 million during the corresponding previous financial year. The revenues from operations have mainly increased due to increased sale of hexavalent vaccine Easy SixTM.
The pharmaceutical formulations segment registered a turnover of Rs.3,839.55 million as against Rs.3,700.10 million during the previous financial year. The vaccines segment registered a turnover of Rs.1,863.16 million as against Rs.1,648.95 million during the previous financial year. The Research & Development segment earned revenue of Rs.96.60 million as against Rs.91.20 million during the previous financial year. The Company''s total export revenue was Rs.1,675.30 million as compared to Rs.2,000.30 million in the previous financial year.
The Company''s loss before tax has reduced to Rs.612.35 million from Rs.840.43 million in the previous financial year. During the year ended March 31, 2018, the Group has registered consolidated revenue from operations of
|
Particulars |
Standalone 2017-18 2016-17# |
|
|
Revenue from operations |
5,799.31 |
5,440.25 |
|
Other Income |
176.16 |
536.64 |
|
Total Income |
5,975.47 |
5,976.89 |
|
Earnings Before Interest, Depreciation & |
990.41 |
1,231.49 |
|
Tax (EBITDA) |
||
|
Profit/ (Loss) before tax and exceptional |
(612.35) |
(465.02) |
|
items |
||
|
Exceptional items |
- |
(375.41) |
|
Profit/(Loss) before Tax (PBT) |
(612.35) |
(840.43) |
|
Profit/(Loss) after Tax (PAT) |
(718.76) |
(726.61) |
|
Other Comprehensive Income |
(14.16) |
(7.68) |
|
Total Comprehensive Income |
(732.92) |
(734.29) |
viii)Your Company has entered into an agreement with Technology Development Board (TDB), Govt. of India for financial assistance of Rs.28.99 Crores for theâ Development and commercialization of Dengue Tetravalent Vaccine (Live Attenuated, Recombinant, Lyophilized)"in the form of soft loan carrying nominal interest rate of 5% p.a. and has received first instalment of Rs.57.98 million.
Further, during the current financial year, your Company along with its partner, Apotex Inc. and Apotex Corp. (Apotex) have entered into a Settlement Agreement with Celgene Corporation, a global biopharmaceutical company headquartered in USA and its subsidiary Abraxis BioScience, LLC, for settlement of disputes regarding patents covering Abraxane® drug product and the Company''s Abbreviated New Drug Application (ANDA) for paclitaxel protein bound particles for injectable suspension, 100mg/vial, a generic version of Abraxane®. As part of the Settlement Agreement, Panacea Biotec and Apotex will receive a non-exclusive license under which Panacea Biotec may, through its partner Apotex, begin selling Panacea Biotec''s generic version of Abraxane® in the U.S. and its territories on a mutually agreed-upon date, and also in certain jurisdictions outside of the U.S. on a mutually agreed-upon date. As a part of the settlement, the Company has also received an amount of Rs.206.59 million as Litigation Avoidance Fee.
A detailed discussion on operations for the year ended March 31, 2018 is given in the Management Discussion and Analysis Report forming part of the Annual Report.
Credit Rating
During the year, the Credit Analysis & Research Ltd. (CARE) has revised the credit rating from CARE B ; Stable (Single B Plus; Outlook:Stable) to CARE D for Long Term Bank Facilities and for Short Term Bank Facilities, the rating has been revised from CARE A4 (A Four) to CARE D due to overdue payment of instalment of ECB loan from Bank of India. Earlier, in March 2017, the Credit rating for Long Term Bank Facilities was improved from CARE B- (Single B Minus) to CARE B (Single B Plus) and for Short Term Bank Facilities the same was reaffirmed as CARE A4 (A Four).
Goods and Services Tax
Goods and Services Tax (GST), which was implemented on July 1, 2017, is the biggest indirect tax reform of India. This transformational reform has comprehensively impacted all areas of businesses across various sectors including the pharmaceutical industry. Due to its multifaceted impact, GST has become an important factor in competitive business environment.
The applicable rate of GST on drugs in general is 12%, API is 18%, Formulations is 12% and for life saving drugs is 5%. While the headline indirect tax rate on API/Bulk drugs remains constant, the rate increased from 10.5% to 12% on Formulations. However, the increase in headline tax is likely to be offset by the tax efficiencies that may accrue on procurements. Early analysis of potential GST impact on business, proactive preparedness in the IT system enhancements and Supply Chain operations helped the Company to be GST compliant right from the GST roll-out date. The Company used this mega reform as an opportunity to upgrade the systems and also launched many initiatives such as providing training to trade partners and other stakeholders, thus, engaging with them to secure an effective GST compliant environment.
Your company is geared to deal with the challenges thrown up as a result of numerous amendments made by the Government viz. Implementation of E-Way Bill System, matching credit concepts, anti-profiteering provisions, etc. Dividend and Transfer to Reserves
In view of losses during the year, the Board of Directors has not recommended any dividend on the Equity as well as Preference Shares of the Company. Accordingly, there has been no transfer to general reserves.
Share Capital
The issued, subscribed and paid up Share Capital of the Company as on March 31, 2018, remains unchanged at Rs.224.25 million comprising of Rs.61.25 million equity share capital divided into 61,250,746 Equity Shares of Re.1 each and Rs.163.00 million preference share capital divided into 1,63,00,000, 0.5% Cumulative Non-Convertible Nonparticipation Redeemable Preference Shares of Rs.10 each. During the year under review, the Company has not issued any equity shares with differential rights/sweat equity shares under Rule 4 & Rule 8 of the Companies (Share Capital and Debentures) Rules, 2014.
Significant and material orders impacting the going concern status and company''s operations in future
During the year under review, no significant and material orders were passed by any regulator or court or tribunal which may impact the going concern status and your Company''s operations in future.
During the financial year 2011-12, a search operation was conducted by Income Tax Department in the premises of the Company and hence the Company re-filed the income tax returns for the Assessment Years ("AY") 2006-07 to 2012-13. During the financial year 2014-15, the Income Tax Department completed the assessment of the said years, disallowed certain expenses and issued demand of Rs.3,294.9 million (including interest) on various grounds. The Company preferred appeals before CIT (Appeals) and after several hearings in the matter and on the basis of facts of the matter, the appeals were decided in favour of the Company and the entire demand of Rs.3,294.9 million was cancelled. However, CIT (Appeals) made certain disallowances of Rs.60.2 million with respect to AY 2010-11 & AY 2011-12 against which the Company has filed appeals before the Income Tax Appellate Tribunal ("ITAT"). The Income Tax Department has also filed appeals before ITAT against the orders of CIT (Appeals). The appeals before ITAT are pending at present.
Further, during the financial year 2014-15, Serum Institute of India Pvt. Ltd. (along with its 3 associates), collectively holding around 4.12% of total issued share capital of the Company, filed a petition u/s 397 and 398 of the Companies Act, 1956 before the Hon''ble Company Law Board, New Delhi, which was dismissed by Hon''ble Company Law Board in January, 2016. The petitioners filed an appeal before Hon''ble Punjab and Haryana High Court, Chandigarh, which has also been dismissed as withdrawn by the Hon''ble High Court during February, 2018.
Report on Corporate Governance
Your company has always placed thrust on managing its affairs with diligence, transparency, responsibility and accountability. Your Directors support the broad principles of Corporate Governance and lays emphasis on its role to align and direct the actions of the Company in achieving its objectives. The report on Corporate Governance as stipulated under Regulation 34 read with Schedule V of SEBI (Listing Obligations & Disclosure Requirements) Regulations, 2015 ("SEBI LODR Regulations") for the year under review together with a certificate from the Practicing Company Secretary confirming compliance thereof is attached and forms part of the Annual Report.
Management Discussion and Analysis Report
Management Discussion and Analysis Report for the year under review, as required pursuant to Regulation 34 read with Schedule V of SEBI LODR Regulations, is presented in a separate section and forms an integral part of this Report. Subsidiaries, Associates and Joint Ventures
A. Subsidiaries
Your Company has 3 wholly owned subsidiary ("WOS") companies, viz. Radhika Heights Limited ("RHL"), Panacea Biotec (International) S.A., Switzerland ("PBS") and Rees Investments Limited, Islands of Guernsey ("Rees") and 7 indirect WOS companies, as under:
- Cabana Construction Private Limited, Cabana Structures Limited, Nirmala Buildwell Private Limited, Nirmala Organic Farms Resorts Private Limited, Radicura Infra Limited and Sunanda Infra Limited; all being WOS of RHL; and
- Panacea Biotec Germany GmbH ("PBGG"), the WOS of PBS. RHL inter-alia, owns a prime immovable property which is being used by the Company as its Corporate Office at New Delhi and land at Pataudi Road, Gurugram (along with its 4 WOSs). It has diversified its activities in construction and development of township as part of its growth plans. Accordingly, RHL along with its 4 WOS companies signed a term sheet with a developer for development of the integrated township on its land at Pataudi Road, Gurugram during the earlier year, however, a dispute had emerged among the parties and the matter is under arbitration. The Company holds 47,76,319 equity shares of Re.1 each in RHL with an investment of Rs.3,385.65 million as on March 31, 2018.
PBS is engaged in the business of trading of pharmaceutical products. The Company holds 6,000 equity shares of CHF 100 each with an investment of Rs.34.36 million as on March 31, 2018. PBGG, WOS of PBS is engaged in marketing of pharmaceutical products including the Company''s products in Germany.
Rees had its objects of inter-alia, making strategic investments in other entities. Since no further activities is envisaged in Rees, it has been decided to liquidate the same.
The Company was also having one subsidiary, viz. New Rise Healthcare Private Limited ("New Rise") until April 21, 2017. New Rise set-up a 224 bedded state-of-the-art multi super specialty hospital at Gurugram, Haryana. The hospital project could not be completed and commercialised due to non-availability of capital investment and was on hold. Your Company was holding 88.8% stake in New Rise with an investment of Rs.507.6 million therein, as on March 31, 2017. In April 2017, the Company acquired the remaining equity shares from the minority shareholders therein and subsequently sold the entire 100% equity stake to Narayana Hrudayalaya Ltd. for an enterprise value of Rs.1,800.00 million resulting into a loss of Rs.450.87 million. Consequently New Rise ceased to be subsidiary of the Company effective from April 21, 2017.
B. Joint Ventures and Associates
Your Company has 2 joint ventures, viz. Adveta Power Private Limited ("Adveta") and Chiron Panacea Vaccines Private Limited (Under Liquidation) ("CPV") and 1 associate company, viz PanEra Biotec Private Limited ("PanEra"). Adveta and PanEra have been considered as subsidiaries for the purpose of consolidation of accounts pursuant to the provisions of IND-AS.
Adveta: Adveta, the Company''s 50:50 joint venture with PanEra, was granted in-principle approval by Govt. of Arunachal Pradesh for allotment of two Power Projects of 80 MW and 75 MW in Arunachal Pradesh in financial year 2012
13. Adveta is in the process of taking preliminary steps in connection with the implementation of projects. However, no major investment is envisaged in this regard during the current financial year.
CPV: The voluntary winding up process of CPV is currently in progress.
PanEra: PanEra continued to meet requirements of bulk antigens for the manufacture of Hib and pentavalent vaccine by your Company. During the year under review, PanEra has achieved a net turnover of Rs.209.96 million as against Rs.302.12 million in previous financial year. PanEra has incurred a net loss of Rs.40.35 million as compared to a net loss of Rs.120.78 million in previous financial year.
With a view to inter-alia, streamline and consolidate the Company''s business operations, your Company has during the current financial year, consolidated the entire vaccine manufacturing activities including the activity of manufacturing of bulk vaccines and antigens of PanEra in the Company at its bulk vaccines manufacturing facility at Lalru, Punjab which was earlier leased out to PanEra.
Further during earlier year, PanEra has been granted in principle approval by Govt. of Himachal Pradesh for allotment of a hydro-power project of 4 MW in Himachal Pradesh. PanEra will be taking necessary steps in connection with the implementation of the project in due course of time. However, no major investment is envisaged in this regard during the current financial year.
A separate statement containing the salient features of financial statements of the company''s subsidiaries, joint ventures and associates, in the prescribed Form AOC-1, forms part of the Annual Report and hence not repeated here for the sake of brevity.
The annual financial statements and related detailed information of the subsidiary companies shall be made available to the shareholders of the holding and subsidiary companies seeking such information on all working days during business hours. The financial statements of the subsidiary companies shall also be kept open for inspection by any shareholder during working hours at the Company''s registered/corporate office and that of the respective subsidiary companies concerned.
The Company has formulated a Policy for determining material subsidiaries which may be accessed on the Company''s website at the link: https://www.panacea-biotec. com/statutory-policies Consolidated Financial Statements
The Consolidated Financial Statements of the Company and its subsidiaries, joint ventures and associates, prepared in terms of Section 129 of the Act, Regulation 33 of SEBI LODR
Regulations and in accordance with Ind AS 110 read with Ind AS 28 and 31 as specified in the Companies (Indian Accounting Standards) Rules, 2015, and provisions of Schedule III to the Act, are attached herewith and the same together with Auditors'' Report thereon, forms part of the Annual Report. Listing of Equity Shares
The Equity Shares of the Company continue to be listed on National Stock Exchange of India Limited ("NSE") and BSE Limited ("BSE"). The requisite annual listing fees for the financial year 2018-19 have been paid to these Exchanges. Public Deposits
During the year under review, your Company has not invited or accepted any deposits from the public/members pursuant to the provisions of Sections 73 and 76 of the Act read with Companies (Acceptance of Deposits) Rules, 2014.
Directors and Key Managerial Personnel
i) Cessation of Directors:
During the year under review, Mr. Ravinder Jain (DIN: 00010101) who was acting as Managing Director of the Company, departed for his heavenly abode on February
21, 2018. Further, Mr. O. P. Kelkar (DIN:00943362), an independent director of the Company, departed for his heavenly abode on July 21, 2018.
Your Directors place their sincere appreciation towards the invaluable contributions, guidance and support received from them during their tenure as Directors of the Company towards the progress of the Company and pray the almighty that the departed souls rest in peace.
ii) Elevation of Director:
During the year under review, the Board of Directors has, on the recommendation of Nomination & Remuneration Committee ("NRC"), elevated Dr. Rajesh Jain (DIN:00013053), the then Joint Managing Director of the Company to the position of Managing Director w.e.f. March 12, 2018, subject to the approval of shareholders, for his remaining tenure of appointment i.e. till March 31, 2019, on the existing terms and conditions and his office shall continue to be liable to retire by rotation.
iii) Appointment/Re-appointment of Executive Directors: During the year under review, the Board of Directors on the recommendation of NRC, has appointed Mrs. Sunanda Jain (DIN:03556647) as an additional director and Whole-time Director for a period of three years w.e.f. March 12, 2018, subject to the approval of shareholders.
During the current year, the Board of Directors has, on the recommendation of NRC, in its meeting held on May 30, 2018, re-appointed Mr. Sumit Jain as Whole-time Director of the Company for a period of three (3) years w.e.f. July 22, 2018, subject to approval of shareholders as his earlier term of office was up to July 21, 2018.
Further, the Board of Directors has, on the recommendation of NRC, in its meeting held on August 14, 2018, re-appointed Mr. Soshil Kumar Jain (DIN:00012812), Dr. Rajesh Jain (DIN:00013053), Mr. Sandeep Jain (DIN:00012973) and Mr. Ankesh Jain (DIN:03556647) as Chairman, Managing Director, Joint Managing Director and Whole time Director respectively for a period of three (3) years w.e.f. April 1, 2019, subject to approval of shareholders as their current term of office is up to March 31, 2019.
The terms and conditions for the appointment/reappointment of above directors are contained in the Explanatory Statement forming part of the notice of the ensuing Annual General Meeting ("AGM").
iv) Re-appointment of Independent Directors:
The first term of office of Mr. R. L. Narasimhan (DIN:00073873), Mr. N. N. Khamitkar (DIN:00017154) and Mr. K. M. Lal (DIN:00016166) as Independent Directors, will expire on March 31, 2019. The Board of Directors has, on the recommendation of NRC, in its meeting held on August 14, 2018, recommended their re-appointment as Independent Directors of the Company for a second term of five (5) consecutive years up to March 31, 2024, subject to approval of shareholders. The terms and conditions for their re-appointment are contained in the Explanatory Statement forming part of the notice of the ensuing AGM.
v) Retirement by Rotation:
In accordance with the provisions of Section 152 of the Act and Article 112 of the Articles of Association of the Company, Mr. Soshil Kumar Jain (DIN:00012812) and Mr. Ankesh Jain (DIN:03556647) directors of the Company are liable to retire by rotation. Being eligible, they have offered themselves for re-appointment as director at the ensuing AGM.
vi) Profile of Directors seeking appointment/re-appointment: The brief resume of the Directors seeking appointment/ re-appointment along with other details as stipulated under Regulation 36(3) of the SEBI LODR Regulations and Secretarial Standards issued by The Institute of Company Secretaries of India (ICSI), are provided in the Notice convening the AGM of the Company.
vii) Declaration of independence:
Your Company has received declarations from all the Independent Directors of the Company confirming that they meet the criteria of independence provided in Section 149(6) of the Act and Regulation 16 of the SEBI LODR Regulations and there has been no change in the circumstances which may affect their status as Independent Director during the year under review.
Your Directors recommend appointment/re-appointment of the above said directors in the ensuing AGM.
Apart from the above, there was no other change in the directors and Key Managerial Personnel (KMP) during the year under review.
Board Evaluation
In terms of the provisions of the Act and Regulation 19(4) of SEBI LODR Regulations, the Board has adopted a formal mechanism for evaluating its performance as well as that of its Committees and individual directors, including the Chairman of the Board. The exercise was carried out through a structured evaluation process covering various aspects such as Board composition & quality, strategic & risk management, board functioning, etc. which are briefly stated in the Corporate Governance Report, forming part of the Annual Report. Performance evaluation of independent directors was conducted by the Board of Directors excluding the director being evaluated on the criteria such as ethics and values, knowledge and proficiency, behavioral traits etc.
Board Meetings
During the year under review, five (5) Board Meetings were held on May 30, 2017, September 13, 2017, November 14, 2017, February 13, 2018 and March 12, 2018. The intervening gap between two Board Meetings was within the maximum period prescribed under the Act. The detailed information is furnished in the Corporate Governance Report, forming part of the Annual Report.
Audit Committee
The Audit Committee of the Board of Directors consists entirely of Independent Directors. The details of the composition and number of meetings of the Audit Committee are furnished in the Corporate Governance Report, forming part of the Annual Report. During the year, all the recommendations made by the Audit Committee were accepted by the Board.
Policy on Directors'' appointment & remuneration Pursuant to the provisions of Section 178(3) of the Act and Regulation 19(4) of SEBI LODR Regulations and as per the recommendations of NRC, the Board has adopted a policy for selection & appointment of Directors and Key Managerial Personnel of the Company and their remuneration. The components of remuneration policy are briefly stated in the Corporate Governance Report, forming part of the Annual Report.
Energy Conservation, Technology Absorption & Foreign Exchange
As required under Section 134 of the Act read with Rule 8 of the Companies (Accounts) Rules, 2014 ("Accounts Rules'''') the particulars regarding conservation of energy, technology absorption and foreign exchange earnings & outgo, are given in Annexure A hereto and forms part of this Report.
Extract of Annual Return
An extract of Annual Return in Form MGT-9 as on financial year ended on March 31, 2018 is attached as Annexure B hereto and forms part of this Report. The same is available on Company''s website at: https://www.panacea-biotec.com.
Related Party Transactions
As per the provisions of the Act and SEBI LODR Regulations, your Company has formulated a policy on Related Party Transactions which is available on Company''s website at: https://www.panacea-biotec.com/statutory-policies. The policy intends to ensure that proper reporting, approval and disclosure processes are in place for all transactions between the Company and the Related Parties.
This policy specifically deals with the review and approval of material related party transactions keeping in mind the potential or actual conflicts of interest that may arise because of entering into these transactions. All related party transactions are placed before the Audit Committee for review and approval. Wherever applicable, prior approval is obtained for related party transactions on a quarterly basis for transactions which are of repetitive nature and / or entered in the ordinary course of business and are at arm''s length basis. During the year, all related party transactions entered into were in the ordinary course of business and on an arm''s length basis. The Company has not entered into any material related party transactions, i.e. transactions exceeding 10% of the annual consolidated turnover as per the last audited financial statements. Suitable disclosures as required under Accounting Standard AS-18 have been made in the notes to the Financial Statements forming part of the Annual Report. Information on transactions with related parties pursuant to
Section 134(3)(h) of the Act read with Rule 8(2) of the Accounts Rules are given in the prescribed Form AOC-2 attached as Annexure C hereto and the same forms part of this Report. Particulars of Employees and Related disclosures
Disclosures pertaining to remuneration and other details as required under Section 197(12) of the Act read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 ("Managerial Personnel Rules") are provided in Annexure D hereto and the same forms part of this Report.
In terms of the provisions of Section 197(12) of the Act read with Rules 5(2) and 5(3) of the Managerial Personnel Rules, a statement showing the names and other particulars of the employees drawing remuneration in excess of the limits set out in the said Rules is provided in Annexure E hereto and the same forms part of this Report.
Auditors and Audit Reports:
i) Statutory Auditors and Audit Report:
Pursuant to the provisions of Section 139 of the Act and the rules framed thereunder, M/s. Walker Chandiok & Co. LLP, Chartered Accountants (Regn. No. 001076N/N500013), were appointed as statutory auditors of the Company for a period of five years to hold office from the conclusion of the 30th AGM of the Company held on September 25, 2014 till the conclusion of the 35th AGM (i.e. AGM to be held in financial year 2019-20 to approve financial statements for the financial year 2018-19), subject to ratification of their appointment by shareholders at every AGM.
However, in terms of Section 40 of the Companies (Amendment) Act, 2017 notified on May 07, 2018, the requirement for ratification of appointment of statutory auditors by shareholders at every AGM has been omitted and accordingly shareholders'' approval is not required for ratification of their appointment annually.
Consequently, M/s. Walker Chandiok & Co. LLP, Chartered Accountants, shall continue to be the statutory auditors of the Company till the conclusion of the 35th AGM, as approved by shareholders at 30th AGM held on September 25, 2014. However, as required under Section 142 of the Act, a proposal is put up for approval of members for authorising the Board of Directors of the Company to fix Auditors'' remuneration for the remaining tenure of the auditors, i.e. the period until the conclusion of 35th AGM of the Company. The members are requested to approve the same.
The Company has received a certificate from the auditors to the effect that they are not disqualified from continuing as Auditors of the Company in accordance with the provisions of Section 141 of the Act.
The Auditors have given the qualified opinion in their Audit Report. The management response to the qualified opinion/adverse remark/ emphasis of matters and observations/comments contained in the Auditors'' Report and Annexure thereto have been suitably given in the respective notes to the Financial Statements referred to therein.
Further, the qualified opinion/adverse remark/emphasis of matters as contained in the Auditors'' Report on the Standalone Financial Statements are also mentioned as qualified opinion/adverse remark/emphasis of matters
in the Auditors'' Report on the Consolidated Financial Statements in similar manner. The management responses thereto have been suitably given in the respective Notes to the Consolidated Financial Statements referred to therein.
The notes to accounts and other observations, if any, in the Auditors'' Report are self-explanatory and therefore, do not call for any further comments.
ii) Cost Accounts and Auditors:
The Company is required to maintain cost records as specified by the Central Government under Section 148(1) of the Act and accordingly, such accounts and records have been duly made and maintained by the Company in compliance with the provisions of the Act.
Pursuant to the provisions of Section 148 of the Act, M/s. GT & Co., Cost Accountants (Firm''s Registration Number: 000253), were appointed as the Cost Auditors to conduct the audit of the Company''s Cost Records for the financial year ended March 31, 2018 and the remuneration has been ratified by the shareholders in the 33rd AGM of the Company held on September 27, 2017.
The cost audit for the said period has been completed and the Cost Auditors Report will be submitted with the Central Government within the prescribed time. The Cost Audit Report for the financial year 2016-17 was filed on September 22, 2017.
Based on the recommendations of the Audit Committee, the Board of Directors has appointed M/s. GT & Co., Cost Accountants, as cost auditors of the Company for the financial year 2018-19 pursuant to the provisions of Section 148 of the Act. As required, the item for ratification of remuneration of cost auditor has been included in the notice of the ensuing AGM for shareholders'' approval.
iii) Secretarial Auditors and Secretarial Audit Report:
Pursuant to the provisions of Section 204 of the Act read with Rule 9 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014, the Board of Directors has appointed M/s. R&D Company Secretaries, Practicing Company Secretaries to conduct the Secretarial Audit of the Company for the financial year ended March 31, 2018. The Secretarial Audit Report for the said period is attached as Annexure F to this Report.
The management response to the observations contained in the Secretarial Audit Report are given below:
a) Company has two wholly owned foreign subsidiaries, viz. Rees Investments Limited, Islands of Guernsey and Panacea Biotec (International) S.A., Switzerland. In terms of guidelines issued by Reserve Bank of India on Overseas Direct Investment (ODI), Annual Performance Report (APR) has to be filed within the due date i.e. 30th June, 2017 which was extended till 31st December, 2017. The Company has filed APR on 16th March, 2018:
The Company is regular in filing APR within the stipulated time. However, APR for FY 2016-17 was inadvertently delayed due to some observations therein from the Authorised Dealer, the rectification whereof took some time.
b) During financial years 2012-13 and 2013-14, in view of absence of profits, total remuneration paid to the
Managing/Joint Managing and Whole-time Directors had exceeded the ceiling prescribed in Section II of Part II of Schedule XIII to the erstwhile Companies Act, 1956 by Rs.29.13 million for the said years. The Company has filed necessary applications for the approval of the aforesaid excess remuneration. Further, due to non-compliance to one of the conditions of Section II of Part II of Schedule V to the Companies Act, 2013, the remuneration amounting to Rs.2.62 million paid to a whole time director during the year ended 31st March, 2016 and remuneration amounting to Rs.43.01 million paid to six directors (Managing/ Joint Managing and Whole time Directors) during the year ended 31st March, 2017 required approval of the Central Government and the Company had filed the necessary applications in this regard. However, the Company''s applications for approval of the aforesaid excess remuneration have not been approved by the Central Government and consequently the Company is required to recover the excess amount thus paid for the said years, unless the recovery thereof is waived by the Central Government. The Company has also paid managerial remuneration amounting to Rs.41.62 million during the financial year ended 31st March, 2018 for which the Company required prior approval of the Central Government due to noncompliance to one of the conditions of Section II of Part II of Schedule V to the Companies Act, 2013. For a thorough reconsideration of the matter, the Company has preferred to submit new applications to the Central Government for waiver of recovery of excess remuneration paid in respect of aforesaid periods and is also in the process of completing the related procedural formalities. Pending the decision of the Central Government, the Company has recorded an amount of Rs.116.38 million as recoverable from such directors towards such excess remuneration paid.
The above observation in the Secretarial Audit Report is self-explanatory and therefore, does not call for any further comment.
Material changes and commitments affecting the financial position which have occurred between March 31, 2018 and date of the Report
Except as disclosed elsewhere in the Annual Report, there have been no material changes and commitments which can affect the financial position of the Company between the end of the financial year and the date of this Report.
As required under Section 134(3) of the Act, the Board of Directors inform the members that during the financial year, there have been no material changes, except as disclosed elsewhere in the Annual Report:
- in the nature of Company''s business,
- in the Company''s subsidiaries or in the nature of business carried out by them,
- in the classes of business in which the Company has an interest.
Secretarial Standards
The Directors state that applicable Secretarial Standards i.e. SS-1 and SS-2, relating to ''Meetings of the Board of Directors'' and ''General Meetings'', respectively have been duly followed by the Company.
Directors'' Responsibility Statement
The Directors hereby confirm that:
a) in the preparation of the annual financial statements for the financial year ended March 31, 2018, the applicable Accounting Standards have been followed along with proper explanation relating to material departures;
b) the directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at March 31, 2018, and of the loss of the Company for the year ended March 31, 2018;
c) the directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;
d) the directors have prepared the annual accounts on a going concern basis;
e) the directors have laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and are operating effectively; and
f) the directors have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.
Details in respect of frauds reported by auditors under Section 143(12)
During the year under review, there were no frauds reported by the auditors to the Audit Committee or the Board under Section 143(12) of the Act.
Particulars of loans, guarantees or investments The Company has made investments or extended loans/ guarantees to its wholly owned subsidiaries for their business purposes. The details of loans, guarantees and investments covered under the provisions of Section 186 of the Act, have been disclosed in the notes to the Financial Statements forming part of the Annual Report.
Risk Management
The Company has formulated a Risk Management Policy and monitors the risk management plan on a periodic basis. The Company has defined a structured approach to manage uncertainty and to make use of these in the decision making in business decisions and corporate functions.
The Company has regularly invested in insuring itself against unforeseen risks. The Company''s stocks and insurable assets like building, plant & machinery, computer equipment, office equipment, furniture & fixtures, lease hold improvements and upcoming projects have been adequately insured against major risks. The Company has also taken appropriate product liability insurance policies for conducting clinical trials and for insuring its products (manufactured & sold) with an extension of unnamed vendor liability and add on cover of public liability inclusive of pollution liability to cover the risk on account of claims, if any, filed against the Company. Internal Control System
Your Company has established a system of internal controls to ensure that assets are safeguarded and transactions are appropriately authorized, recorded and reported. The detailed explanation is provided in the Management Discussion and Analysis Report, forming part of this Report.
Vigil Mechanism
As required pursuant to the provisions of Section 177(9) of the Act read with Rule 7 of the Companies (Meetings of Board and its Powers) Rules, 2014 and Regulation 22 of SEBI LODR Regulations, your Company has adopted a Vigil Mechanism/ Whistle Blower Policy with a view to provide its employees an avenue to raise any sensitive concerns regarding any unethical behaviour or wrongful conduct and to provide adequate safeguards for protection from any victimization. This policy is available on the website of the Company and can be accessed at: https://www.panacea-biotec.com/statutory-policies. This Policy, inter-alia, provides a direct access to the Chairman of the Audit Committee.
Your Company hereby affirms that no director/employee has been denied access to the Chairman of the Audit Committee and that no complaints were received during the year. Corporate Social Responsibility
The provisions of Section 135 of the Act regarding Corporate Social Responsibility are not attracted to the Company as the Company does not fall under the threshold limit of net worth of Rs.500 Crore or turnover of Rs.1,000 Crore or net profit of Rs.5 Crore during the financial year. However, the Company has been, over the years, pursuing Corporate Social Responsibility by putting continuous efforts in the areas of health, education and patient awareness/assistance programs towards the development of happier and healthier society. Prevention of Sexual Harassment at Workplace The Company has in place a Prevention of Sexual Harassment Policy in line with the requirements of The Sexual Harassment of Women at the Work Place (Prevention, Prohibition and Redressal) Act, 2013. All employees (permanent, contractual, temporary, trainees) are covered under this policy.
Your company has complied with the provisions relating to constitution of Internal Complaints Committee under the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 for dealing with the complaint, if any, relating to sexual harassment of women at workplace. No case has been reported during the year under review.
Acknowledgements
Your Directors acknowledge with gratitude the co-operation and assistance received from the UN Agencies, Central Government, State Governments and all other Government agencies and encouragement they have extended to the Company. Your Directors also thank the shareholders, financial institutions, banks/ other lenders, customers, vendors and other business associates for their confidence in the Company and its management and look forward for their continuous support. The Board wishes to place on record its appreciation for the dedication and commitment of the employees at all levels which has continued to be our major strength.
For and on behalf of the Board
Place : New Delhi Soshil Kumar Jain
Dated : August14, 2018 Chairman
Mar 31, 2017
Directors'' Report
Dear Members,
The Directors are pleased to present the 33rd Annual Report on the business and operations of the Company together with the Audited Standalone and Consolidated Financial Statements and the Auditors'' Reports thereon for the financial year ended March 31, 2017.
Financial Results
The highlights of financial results for the financial year 2016-17 are as under:
(Rs. in million)
|
Particulars |
Standalone |
|
|
2016-17 |
2015-16# |
|
|
Revenue from operations (net) |
5,300.9 |
6,469.0 |
|
Other Income |
523.3 |
255.6 |
|
Total Income |
5,824.2 |
6,724.6 |
|
Earnings Before Interest, Tax, Depreciation & Amortization (EBITDA) |
1,209.1 |
1,380.7 |
|
Profit/ (Loss) before tax and exceptional items |
(462.4) |
(482.5) |
|
Exceptional items |
(375.4) |
496.5 |
|
Profit/(Loss) before Tax (PBT) |
(837.8) |
14.0 |
|
Profit/(Loss) after Tax (PAT) |
(862.5) |
8.7 |
# Previous year''s figures have been re-grouped/re-classified wherever necessary
Performance Highlights
During the year ended March 31, 2017, your Company has registered net revenue from operations of Rs.5,300.9 million as against Rs.6,469.0 million during the previous financial year. The net revenues from operations have mainly decreased due to lower sale of pentavalent vaccine Easyfive-TT to UNICEF/ PAHO, non-availability of IPV bulk leading to no sales of IPV vaccine, reduction in prices of products due to price control by NPPA, banning of the irrational FDCs by DCGI and expiry of excise duty holiday period at Baddi facilities.
The pharmaceutical formulations segment registered a turnover of Rs.3,575.5 million as against Rs.3,806.5 million during the previous financial year. The vaccines segment registered a revenue of Rs.1,634.2 million as against Rs.2,531.8 million during the previous financial year. The Research & Development segment earned revenue of Rs.91.2 million as against Rs.130.7 million during the previous financial year. The Company''s total export revenue was Rs.2,000.3 million (including R&D income of Rs.83.8 million) as compared to Rs.2,695.0 million (including R&D income of Rs.127.6 million) in the previous financial year.
The Company''s loss before tax and exceptional items has reduced to Rs.462.4 million as against Rs.482.5 million in the previous financial year. During the year, the Company has created impairment provision of Rs.450.9 million, which is included in the Exceptional Items, in respect of investment in New Rise Healthcare Private Limited on the basis of the net realized value upon sale thereof in April 2017.
In March, 2017, your Company has launched world''s first fully liquid whole cell pertussis (wP) based Hexavalent Combination vaccine, Easy SixTM for protecting children against six common preventable diseases, viz. Diphtheria,
Tetanus, Whooping Cough, Hepatitis B, Hib-meningitis & Polio. Earlier in December 2016, the Company launched world''s first fully liquid tetravalent vaccine, Easy four-TT for active primary immunization and booster dose against Diphtheria, Tetanus, Pertussis (DTwP) and Haemophilus Influenza Type B (Hib).
During the year, your Company has entered into long term agreement (LTA) with UNICEF for supply of pentavalent vaccine Easyfive-TT during calendar year 2017 and also received notification from PAHO for purchase of pentavalent vaccine Easyfive-TT in the event PAHO should have any requirements through December 31, 2019. Total value of this expected business from UN agencies is worth US$ 20.475 million.
During the year, your Company has also received USFDA approval for the Company''s Oncology Parenteral and Oral Solids Dosage formulation facilities at Baddi, Himachal Pradesh. With this, the Company can now export its oncology products to USA, after receiving product approval from USFDA. The Company has also received USFDA approval for its ANDA to market a generic version of Rizatriptan Benzoate Tablet, orally disintegrating, 5 mg and 10 mg. The Company plans to launch the product in current financial year. The current annual sale for Rizatriptan Benzoate Tablet, orally disintegrating, 5 mg and 10 mg in the US market is estimated to be around US$ 60 million.
During the year, your Company has introduced indigenously developed high quality antidiabetic drug, TENEPAN (Teneligliptin), for treatment of Type 2 Diabetes Mellitus (T2DM). This will add to the Company''s existing anti-diabetic portfolio. The Company''s flagship brand Glizid-M was awarded with the prestigious SILVER BRAND in Chronic Care Therapy by AWACS AIOCD in FY 2015-16. It is also ranked at 160th position amongst the top 200 brands in the Indian Pharma Industry. The Company has been selected amongst top fifty Innovators for the second consecutive year and received the Prestigious ''Clarivate Analytics India Innovation Award 2016'' from Thomson Reuters. Clarivate Analytics India Innovation Awards honors the most innovative academic institutions and commercial enterprises headquartered in India for their spirit of innovation in R&D as it relates to Indian Patent Publications. A detailed discussion on operations for the year ended March 31, 2017 is given in the Management Discussion and Analysis Report forming part of the Annual Report.
Credit Rating
During the year, the Credit Analysis & Research Ltd. (CARE) has upgraded credit rating with respect to the Company''s Bank Facilities and the same has improved from CARE B- (Single B Minus) to CARE B (Single B Plus) for Long Term Bank Facilities and for Short Term Bank Facilities, the rating has been reaffirmed as CARE A4 (A Four). Earlier, in March 2016, the Credit rating for Long Term Bank Facilities was improved from CARE D (Single D) to CARE B- (Single B-) and for Short Term Bank Facilities the same was improved from CARE D (Single D) to CARE A4 (A Four).
Dividend
In view of losses during the year, the Board of Directors has not recommended any dividend on the Equity as well as Preference Shares of the Company.
Share Capital and Net Worth
The issued, subscribed and paid up Share Capital of the Company as on March 31, 2017, remains unchanged at Rs.224.3 million comprising of Rs.61.3 million equity share capital divided into 61,250,746 Equity Shares of Re.1 each and Rs.163.0 million preference share capital divided into 1,63,00,000, 0.5% Cumulative Non-Convertible Non Participating Redeemable Preference Shares of Rs.10 each. During the year under review, the Company has not issued any equity shares with differential rights/sweat equity shares under Rule 4 & Rule 8 of the Companies (Share Capital and Debentures) Rules, 2014.
As at the end of the year under review, the net worth of the Company calculated as per section 2(57) of the Companies Act, 2013 ("the Act") has decreased to Rs.644.58 million from Rs.1,507.1 million as at the end of the previous financial year in view of losses during the year.
Significant and material orders impacting the going concern status and company''s operations in future
During the year under review, no significant and material orders were passed by any regulator or court or tribunal which may impact the going concern status and your Company''s operations in future.
During the financial year 2011-12, a search operation was conducted by Income Tax Department in the premises of the Company and hence the Company re-filed the income tax returns for the Assessment Years ("AY") 2006-07 to 2012-13. During the financial year 2014-15, the Income Tax Department completed the assessment of the said years, disallowed certain expenses and issued demand of Rs.3,294.9 million (including interest) on various grounds. The Company preferred appeals before CIT (Appeals) and after several hearings in the matter and on the basis of facts of the matter, the appeals were decided in favour of the Company and the entire demand of Rs.3,294.9 million was cancelled. However, CIT (Appeals) made certain disallowances of Rs.60.2 million with respect to AY 2010-11 & AY 2011-12 against which the Company has filed appeals before the Income Tax Appellate Tribunal ("ITAT"). The Income Tax Department has also filed appeals before ITAT against the orders of CIT (Appeals). The appeals before ITAT are pending at present.
Further, during the financial year 2014-15, Serum Institute of India Pvt. Ltd. (along with its 3 associates), collectively holding around 4.12% of total issued share capital of the Company, had filed a petition u/s 397 and 398 of the Companies Act, 1956 before the Hon''ble Company Law Board, New Delhi, which was dismissed by Hon''ble Company Law Board vide its order dated January 21, 2016. The petitioners have filed an appeal before Hon''ble Punjab and Haryana High Court, Chandigarh and the same is pending adjudication.
Report on Corporate Governance
Your company has always placed thrust on managing its affairs with diligence, transparency, responsibility and accountability. Your Directors support the broad principles of Corporate Governance and lays emphasis on its role to align and direct the actions of the Company in achieving its objectives. The report on Corporate Governance as stipulated under Regulation 34 read with Schedule V of SEBI (Listing Obligations & Disclosure Requirements) Regulations, 2015 ("SEBI Listing Regulations") for the year under review together with a certificate from the Practicing Company Secretary confirming compliance thereof is attached and forms part of the Annual Report.
Management Discussion and Analysis Report
Management Discussion and Analysis Report for the year under review, as required pursuant to Regulation 34 read with Schedule V of SEBI Listing Regulations, is presented in a separate section and forms an integral part of this Report. Information about the Subsidiaries/Associates/Joint Ventures
A. Subsidiaries
Your Company has 3 wholly owned subsidiary ("WOS") companies, viz. Radhika Heights Limited ("RHL"), Panacea Biotec (International) S.A., Switzerland ("PBS") and Rees Investments Limited, Islands of Guernsey ("Rees") and one subsidiary, viz. New Rise Healthcare Private Limited ("New Rise"). Your Company also has 7 indirect WOS companies, as under:
- Cabana Construction Private Limited, Cabana Structures Limited, Nirmala Buildwell Private Limited, Nirmala Organic Farms Resorts Private Limited, Radicura Infra Limited and Sunanda Infra Limited; all being WOS of RHL; and
- Panacea Biotec Germany GmbH ("PBGG"), the WOS of PBS.
RHL inter-alia, owns a prime immovable property which is being used by the Company as its Corporate Office at New Delhi and land at Pataudi Road, Gurugram (along with its 4 WOSs). It has diversified its activities in construction and development of township as part of its growth plans. Accordingly, RHL along with its 4 WOS companies signed a term sheet with a developer for development of the integrated township on its land at Pataudi Road, Gurugram during the earlier year, however, a dispute had emerged among the parties and the matter is under arbitration. The Company holds 47,76,319 equity shares of Re.1 each in RHL with an investment of Rs.3,385.6 million as on March 31, 2017. PBS is engaged in the business of trading of pharmaceutical products. The Company holds 6,000 equity shares of CHF 100 each with an investment of Rs.34.4 million as on March 31, 2017. PBGG, WOS of PBS is engaged in marketing of pharmaceutical products including the Company''s products in Germany.
Rees had its objects of, inter-alia, making strategic investments in other entities. It had earlier established its WOS, Kelisia Holdings Ltd. ("KHL") at Cyprus. Since no further activity was envisaged in KHL, it has been liquidated during the year w.e.f. January 4, 2017.
New Rise has set-up a 224 bedded state-of-the-art multi super-specialty hospital at Gurugram, Haryana. The hospital project could not be completed and commercialized due to non-availability of capital investment and was on hold. Your Company was holding 88.8% stake in New Rise with an investment of Rs.507.6 million therein, as on March 31, 2017. In April 2017, the Company acquired the remaining equity shares from the minority shareholders therein and subsequently sold the entire 100% equity stake to Narayana Hrudayalaya Ltd. for an enterprise value of Rs.1,800.0 million.
The Company has considered the net consideration realized in relation to the said transaction as recoverable amount of investment as at March 31, 2017 and consequently recorded an impairment provision of Rs.450.9 million which has been included in the Exceptional Items.
B. Joint Ventures and Associates
PanEra Biotec Private Limited ("PanEra"): PanEra, the Company''s associate company, is continuing to meet requirement of bulk antigens for the manufacture of Hib and pentavalent vaccine by your Company. During the year under review, PanEra has achieved a net turnover of Rs.302.1 million as against Rs.465.7 million in previous financial year. As a result, PanEra has incurred a net loss of Rs.1 21 .1 million as compared to a net profit of Rs.4.5 million in previous financial year. During the year, PanEra has been granted in-principle approval by Govt. of Himachal Pradesh for allotment of a hydro-power project of 4 MW in Himachal Pradesh. PanEra will be taking necessary steps in connection with the implementation of the project in due course of time. However, no major investment is envisaged in this regard during the current financial year. With a view to streamline and consolidate the Company''s business operations, avoid multiple taxes, avoid duplicity of efforts, reduce administrative costs etc., your Company has in-principally decided to consolidate the entire vaccine manufacturing activities including the activity of manufacturing of bulk vaccines and antigens of PanEra in the Company.
Chiron Panacea Vaccines Private Limited (Under Liquidation) ("CPV"): The voluntary winding up process of CPV is currently in progress.
Adveta Power Private Limited ("Adveta"): Adveta, the Company''s 50:50 joint venture with PanEra, was granted in-principle approval by Govt. of Arunachal Pradesh for allotment of two Power Projects of 80 MW and 75 MW in Arunachal Pradesh in financial year 2012-13. Adveta is in the process of taking preliminary steps in connection with the implementation of projects. However, no major investment is envisaged in this regard during the current financial year.
A separate statement containing the salient features of financial statements of subsidiaries, joint ventures and associates, in Form AOC-1, forms part of the Annual Report and hence not repeated here for the sake of brevity.
The annual financial statements and related detailed information of the subsidiary companies shall be made available to the shareholders of the holding and subsidiary companies seeking such information on all working days during business hours. The financial statements of the subsidiary companies shall also be kept open for inspection by any shareholder during working hours at the Company''s registered/corporate office and that of the respective subsidiary companies concerned.
The Company has formulated a Policy for determining material subsidiaries which may be accessed on the Company''s website at the link: http://panacea-biotec.com/partnerzone/ PolicyfordeterminingmaterialSubsidiary.pdf
Consolidated Financial Statements
The Consolidated Financial Statements of the Company and its subsidiaries, joint ventures and associates, prepared in terms of Section 129 of the Act and Regulation 33 of SEBI
Listing Regulations and in accordance with Accounting Standard AS-21 on ''Consolidated Financial Statements'' read with Accounting Standard AS-27 on ''Financial Reporting of Interest in Joint Ventures'' and Accounting Standard AS-23 on ''Accounting for Investments in Associates'', as issued by the Institute of Chartered Accountants of India and in accordance with the provisions of Schedule III to the Act, are attached herewith and the same together with Auditors'' Report thereon, forms part of the Annual Report.
Listing of Equity Shares
The Equity Shares of the Company continue to be listed on National Stock Exchange of India Limited ("NSE") and BSE Limited ("BSE"). The requisite annual listing fees for the financial year 2017-18 have been paid to these Exchanges.
Public Deposits
During the year under review, your Company has not invited or accepted any deposits from the public/ members pursuant to the provisions of Section 73 and 76 of the Act read with Companies (Acceptance of Deposits) Rules, 2014.
Directors and Key Managerial Personnel Effective from April 01, 2016, Mr. Ankesh Jain (DIN: 03556647) has been appointed as Whole-time Director designated as Director Sales & Marketing and Mr. Mukul Gupta (DIN: 00254597) has been appointed as Non-Executive Independent Director of the Company.
Your Company has received declarations from all the Independent Directors of the Company confirming that they meet with the criteria of independence provided in Section 149(6) of the Act and Regulation 16 of the SEBI Listing Regulations and there has been no change in the circumstances which may affect their status as Independent Director during the year under review.
Further, in accordance with Section 152 of the Act and Article 112 of the Articles of Association of the Company, Mr. Sandeep Jain (DIN: 00012973) and Mr. Sumit Jain (DIN: 00014236) directors of the Company are liable to retire by rotation. Being eligible, they have offered themselves for re-appointment as director at the ensuing AGM.
The brief resume of the Directors seeking re-appointment along with other details as stipulated under Regulation 36(3) of the SEBI Listing Regulations and Secretarial Standards issued by ICSI, are provided in the Notice convening the AGM of the Company.
The Board recommends re-appointment of the above said directors in the ensuing AGM.
There was no other change in the non-executive directors and other Key Managerial Personnel (KMP) during the year under review.
Board Meetings
During the year under review, four (4) Board Meetings were held on May 27, 2016, August 12, 2016, November 11, 2016 and February 14, 2017. The intervening gap between two Board Meetings was within the maximum period prescribed under the Act.
Audit Committee
The Audit Committee of the Board of Directors consists entirely of Independent Directors. The details of the composition and number of meetings of the Audit Committee are furnished in the Corporate Governance Report. During the year, all recommendations made by the Audit Committee were accepted by the Board.
Policy on Directors'' appointment & remuneration
Pursuant to the provisions of Section 178(3) of the Act and Regulation 19(4) of SEBI Listing Regulations and as per the recommendations of the Nomination and Remuneration Committee, the Board has adopted a policy for selection & appointment of Directors and Key Managerial Personnel of the Company and their remuneration. The components of remuneration policy are briefly stated in the Corporate Governance Report, forming part of the Annual Report. Board Evaluation
In terms of the provisions of the Act and Regulation 19(4) of SEBI Listing Regulations, the Board has adopted a formal mechanism for evaluating its performance as well as that of its Committees and individual directors, including the Chairman of the Board. The exercise was carried out through a structured evaluation process covering various aspects such as Board composition & quality, strategic & risk management, board functioning, etc. which are briefly stated in the Corporate Governance Report, forming part of the Annual Report. Performance evaluation of independent directors was conducted by the Board of Directors excluding the director being evaluated on the criteria such as ethics and values, knowledge and proficiency, behavioral traits etc.
Energy Conservation, Technology Absorption & Foreign Exchange
As required under Section 134 of the Act read with Rule 8 of the Companies (Accounts) Rules, 2014, the particulars regarding conservation of energy, technology absorption and foreign exchange earnings & outgo, are given in Annexure A hereto and forms part of this Report.
Extract of Annual Return
An extract of Annual Return in Form MGT-9 as on financial year ended on March 31, 2017 is attached as Annexure B hereto and forms part of this Report.
Related Party Transactions
As per the provisions of the Act and SEBI Listing Regulations, your Company has formulated a policy on Related Party Transactions which is also available on Company''s website at: http://www.panacea-biotec.com/partnerzone/ policyonrelatedpartytransactions.pdf. The policy intends to ensure that proper reporting, approval and disclosure processes are in place for all transactions between the Company and Related Parties.
This policy specifically deals with the review and approval of material related party transactions keeping in mind the potential or actual conflicts of interest that may arise because of entering into these transactions. All related party transactions are placed before the Audit Committee for review and approval. Wherever applicable, prior approval is obtained for related party transactions on a quarterly basis for transactions which are of repetitive nature and / or entered in the ordinary course of business and are at arm''s length basis. During the year, all related party transactions entered into were in the ordinary course of business and on an arm''s length basis. The Company has not entered into any material related party transactions, i.e. transactions exceeding 10% of the annual consolidated turnover as per the last audited financial statements. Suitable disclosures as required under Accounting Standard AS-18 have been made in the notes to the Financial Statements forming part of the Annual Report. Information on transactions with related parties pursuant to Section 134(3)(h) of the Act read with Rule 8(2) of the Companies (Accounts) Rules, 2014 are given in the prescribed Form AOC-2 attached as Annexure C and the same forms part of this Report.
Particulars of Employees and Related disclosures
Disclosures pertaining to remuneration and other details as required under Section 197(12) of the Act read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are provided in Annexure D and the same forms part of this Report.
In terms of the provisions of Section 197(12) of the Act read with Rules 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, a statement showing the names and other particulars of the employees drawing remuneration in excess of the limits set out in the said Rules is provided in Annexure E and the same forms part of this Report.
Statutory Auditors
Pursuant to the provisions of Section 139 of the Act and the rules framed there under, M/s. Walker Chandiok & Co. LLP, Chartered Accountants (Regn. No. 001076N/N500013), were appointed as statutory auditors of the Company for a period of five years to hold office from the conclusion of the 30th AGM of the Company held on September 25, 2014 till the conclusion of the 35th AGM, subject to ratification of their appointment by shareholders at every AGM.
The Company has received a certificate from the auditors to the effect that if the appointment is ratified, it would be in accordance with the provisions of Section 141 of the Act. Accordingly, based on the recommendations of the Audit Committee, the Board of Directors of the Company recommends the ratification of appointment of M/s. Walker Chandiok & Co. LLP, Chartered Accountants as Statutory Auditors of the Company from the conclusion of the forthcoming AGM till the conclusion of the next AGM. Auditors'' Report
The Auditors have not given any qualified opinion or made any reservation, adverse remark or disclaimer in their Audit Report.
The management response to the matters of emphasis and observations/comments contained in the Auditors ''Report and Annexure thereto have been suitably given in the respective Notes to the Financial Statements referred to therein.
Further, the Emphasis of Matters as contained in the Auditors'' Report on the Standalone Financial Statements are also mentioned as Emphasis of Matters in the Auditors'' Report on the Consolidated Financial Statements in similar manner. The management responses thereto have been suitably given in the respective Notes to the Consolidated Financial Statements referred to therein.
The notes to accounts and other observations, if any, in the Auditors'' Report are self-explanatory and therefore, do not call for any further comments.
Cost Auditors
Pursuant to the provisions of Section 148 of the Act, M/s. G.T. & Co., Cost Accountants (Firm''s Registration Number: 000253), were appointed as the Cost Auditors to conduct the audit of the Company''s Cost Records for the year ended March 31, 2017 and the remuneration has been ratified by the shareholders in the 32nd AGM of the Company held on September 28, 2016. The cost audit for the said period has been completed and the Cost Auditors Report will be submitted with the Central Government within the prescribed time. The Cost Audit Report for the financial year 2015-16 was filed on September 15, 2016.
Based on the recommendations of the Audit Committee, the Board of Directors has appointed M/s. G.T. & Co., Cost Accountants, as cost auditors of the Company for the financial year 2017-18 pursuant to the provisions of Section 148 of the Act. As required, the item for ratification of remuneration of cost auditor has been included in the notice of the ensuing AGM for shareholders'' approval.
Secretarial Audit
Pursuant to the provisions of Section 204 of the Act read with Rule 9 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014, M/s. R&D Company Secretaries, Practicing Company Secretaries conducted the Secretarial Audit of the Company for the financial year ended March 31, 2017. The Secretarial Audit Report for the said period is attached as Annexure F to this Report.
The management response to the observations contained in the Secretarial Audit Report are given below:
a) Delays in filing of ECB-2 (monthly return) as required to be filed in terms of Master Circular on External Commercial Borrowings and Trade Credits governed under the provisions of Foreign Exchange Management Act, 1999: The Company is regular in filing ECB-2 (monthly return) within the stipulated time. However, 3 returns were inadvertently delayed by one or two days only.
b) The Company has made application to Central Government in connection with Managerial remuneration paid to the Managing Director, Joint Managing Directors and Whole Time Directors exceeding the ceiling prescribed under the erstwhile Schedule XIII of the Companies Act, 1956 during the year 2012-13 and 2013-14. The Company has also filed application in connection with non-compliance to one of the condition of Part II of Section II of Schedule V to the Companies Act, 2013 in relation to Managerial remuneration paid during the financial year 2015-16. The Company has also filed application for Managerial remuneration paid during the financial year 2016-17. The Company''s applications for approval of the aforesaid remuneration have not been approved by the Central Government and in terms of the order of the Central Government, the Company is required to recover the excess amount thus paid for the said years unless the recovery thereof is waived by the Central Government:
In view of absence of profits during financial years 2012-13 and 2013-14, total remuneration paid to the Managing/Joint Managing and Whole time Directors had exceeded the ceiling prescribed in Section II of Part II of Schedule XIII to the Companies Act, 1956. Further, because of non-compliance to one of the conditions of Section II of Part II of Schedule V to the Companies Act, 2013, the remuneration paid to a whole time director during financial year 2015-16 and remuneration paid to Managing/Joint Managing and Whole time Directors during financial year 2016-17 required approval of the Central Government and the Company had filed the necessary applications in this regard. However, the Company''s applications for approval of the aforesaid excess remuneration have not been approved by the Central Government and consequently the Company is required to recover the excess amount thus paid for the said years unless the recovery thereof is waived by the Central Government. For a thorough reconsideration of the matter, the Company has filed/is in the process of filing applications with the Central Government for waiver of recovery of excess remuneration paid in respect of aforesaid financial years.
Material changes and commitments affecting the financial position which have occurred between March 31, 2017 and date of the Report
Except as disclosed elsewhere in the Annual Report, there have been no material changes and commitments which can affect the financial position of the Company between the end of the financial year and the date of this Report.
As required under Section 134(3) of the Act, the Board of Directors inform the members that during the financial year, there have been no material changes, except as disclosed elsewhere in the Annual Report:
- in the nature of Company''s business,
- in the Company''s subsidiaries or in the nature of business carried out by them,
- in the classes of business in which the Company has an interest.
Directors'' Responsibility Statement The Directors hereby confirm that:
a) in the preparation of the annual financial statements for the financial year ended March 31, 2017, the applicable Accounting Standards have been followed along with proper explanation relating to material departures;
b) the Directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at March 31, 2017, and of the loss of the Company for the year ended March 31, 2017;
c) the Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;
d) the Directors have prepared the annual accounts on a going concern basis;
e) the Directors have laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and are operating effectively; and
f) the Directors have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.
Particulars of loans, guarantees or investments
The details of loans, guarantees and investments covered under the provisions of Section 186 of the Act have been disclosed in the notes to the Financial Statements forming part of the Annual Report.
Risk Management
The Company has formulated a Risk Management Policy and monitors the risk management plan on a periodic basis. The Company has defined a structured approach to manage uncertainty and to make use of these in the decision making in business decisions and corporate functions.
The Company has regularly invested in insuring itself against unforeseen risks. The Company''s stocks and insurable assets like building, plant & machinery, computer equipments, office equipments, furniture & fixtures, lease hold improvements and upcoming projects have been adequately insured against major risks. The Company has also taken appropriate product liability insurance policies for conducting clinical trials and for insuring its products (manufactured & sold) with an extension of unnamed vendor liability and add on cover of public liability inclusive of pollution liability to cover the risk on account of claims, if any, filed against the Company. Internal Control System
Your Company has established a system of internal controls to ensure that assets are safeguarded and transactions are appropriately authorized, recorded and reported. The detailed explanation is provided in the Management Discussion and Analysis Report, forming part of this Report.
Vigil Mechanism
As required pursuant to the provisions of Section 177(9) of the Act read with Rule 7 of the Companies (Meetings of Board and its Powers) Rules, 2014 and Regulation 22 of SEBI Listing Regulations, your Company has adopted a Vigil Mechanism (Whistle Blower Policy) with a view to provide its employees an avenue to raise any sensitive concerns regarding any unethical behavior or wrongful conduct and to provide adequate safeguard for protection from any victimization. This policy is available on the website of the Company and can be accessed at: http://www.panacea-biotec.com/ partnerzone/VigilMecha nismWhsitleBlowerPolicy.pdf. This Policy inter-alia provides a direct access to the Chairman of the Audit Committee.
Your Company hereby affirms that no Director/employee has been denied access to the Chairman of the Audit Committee and that no complaints were received during the year. Corporate Social Responsibility
The provisions of Section 135 of the Act, regarding Corporate Social Responsibility are not attracted to the Company as the Company does not fall under the threshold limit of net worth of Rs.500 Crore or turnover of Rs.1,000 Crore or net profit of Rs.5 Crore during the financial year. However, the Company has been, over the years, pursuing Corporate Social Responsibility by putting continuous efforts in the areas of health, education and patient awareness/assistance programs towards the development of happier and healthier society. Prevention of Sexual Harassment at Workplace The Company has in place a Prevention of Sexual Harassment Policy in line with the requirements of The Sexual Harassment of Women at the Work Place (Prevention, Prohibition and Redressal) Act, 2013. All employees (permanent, contractual, temporary, trainees) are covered under this policy.
As per the requirements of The Sexual Harassment of Women at Workplace (Prevention, Prohibition & Redressal) Act, 2013, your Company has constituted Internal Complaints Committee (ICC) for dealing with the complaint, if any, relating to sexual harassment of women at workplace. No case has been reported during the year under review.
Acknowledgements
Your Directors acknowledge with gratitude the co-operation and assistance received from the UN Agencies, Central Government, State Governments and all other Government agencies and encouragement they have extended to the Company. Your Directors also thank the shareholders, financial institutions, banks/ other lenders, customers, vendors and other business associates for their confidence in the Company and its management and look forward for their continuous support. The Board wishes to place on record its appreciation for the dedication and commitment of your Company''s employees at all levels which has continued to be our major strength.
For and on behalf of the Board
Place : New Delhi Soshil Kumar Jain
Dated : May 30, 2017 Chairman
Mar 31, 2016
The Directors are pleased to present the 32nd Annual Report on the business and operations together with the Company''s audited financial statements and the auditors'' report thereon for the financial year ended March 31, 2016. The financial highlights for the year are given below:
Financial Results
(Rs. in millions)
|
Particulars |
March 31, 2016 |
March 31, 2015* |
|
Revenue from operations (net) |
6,469.0 |
6,792.0 |
|
Other Income |
255.6 |
280.5 |
|
Total Income |
6,724.6 |
7,072.5 |
|
Earnings Before Interest, Depreciation & Tax (EBITDA) |
1,380.7 |
955.7 |
|
Profit/ (Loss) before tax and exceptional items |
(482.5) |
(633.4) |
|
Exceptional items |
496.5 |
- |
|
Profit/(Loss) before Tax (PBT) |
14.0 |
(633.4) |
|
Provision for Taxation |
5.3 |
18.9 |
|
Profit/(Loss) after Tax (PAT) |
8.7 |
(652.3) |
|
Basic EPS (Rs.)* |
0.1 |
(10.6) |
|
Cash EPS (Rs)* |
11.8 |
0.1 |
- Face value Re.1 per share
# Previous year''s figures have been re-grouped/re-classified wherever necessary
Performance Highlights
Your Directors are pleased to inform that during the year, your Company has registered a growth of almost 45% in EBITDA of Rs.1,380.7 million as against Rs.955.7 million in the previous year. The overall losses before tax & exceptional items have also reduced from Rs.633.4 million to Rs.482.5 million due to overall improvement in operational performance. The profit after tax and exceptional items turned positive at Rs.8.7 million as against net loss of Rs.652.3 million during previous year.
During the year, your Company has earned net revenue from operations of Rs.6,469.0 million as against Rs.6,792.0 million during the corresponding previous financial year.
The pharmaceutical formulations segment registered a turnover of Rs.3,806.5 million as against Rs.3,790.7 million during the previous financial year. The vaccines segment registered a turnover of Rs.2,531.8 million as against Rs.2,763.0 million during the previous financial year. The Research & Development segment earned revenue of Rs.130.7 million as against Rs.238.3 million during the previous year.
During the year under review, your Company has continued to supply Easyfive-TT vaccine against long-term supply order received from UNICEF during FY2013-14 for supply of vaccines for the calendar years 2014 to 2016.
During the year 2015-16, the Company''s total export revenue was Rs.2,695.0 million (including R&D income of Rs.127.6 million) as compared to Rs.2,519.2 million (including R&D income of Rs.222.7 million) in the previous year.
Recently, the Company received Prestigious Intellectual Property & Science Award "Top 50 Indian Innovators 2015" from Thomson Reuters. Thomson Reuters India Innovation Awards honors the most innovative academic institutions and commercial enterprises headquartered in India for their spirit of innovation in R&D as it relates to Indian Patent Publications.
The Company''s flagship brand Glizid-M has been awarded with the prestigious SILVER BRAND in Chronic Care Therapy by AWACS AIOCD. It is also ranked at No. 123 amongst the top 150 brands in the Indian Pharma Industry.
During the year under review, the Company has introduced India''s first indigenously developed high quality Oncology product, CABAPAN (Cabazitaxel) Injection, for treatment of metastatic Castration Resistant Prostrate Cancer (mCRPC).
Further, recently, your Company introduced indigenously developed high quality anti-diabetic drug, TENEPAN (Teneligliptin), for treatment of Type 2 Diabetes Mellitus (T2DM).
A detailed discussion on operations for the year ended March 31, 2016 is given in the Management Discussion and Analysis Report forming part of the Annual Report.
Credit Rating
The Credit Analysis & Research Ltd. (CARE) has recently upgraded credit rating with respect to the Company''s Bank Facilities and the same has been improved from CARE B-(Single B Minus) to CARE B- (Single B Plus) for Long Term Bank Facilities and for Short Term Bank Facilities, the rating has been reaffirmed as CARE A4 (A Four). Earlier, the Credit rating for Long Term Bank Facilities was improved from CARE D (Single D) to CARE B- (Single B-) and for Short Term Bank Facilities the same was improved from CARE D (Single D) to CARE A4 (A Four).
Corporate Debt Restructuring Scheme (CDR Scheme)
During the previous financial year, the Company was sanctioned a Corporate Debt Restructuring ("CDR") scheme under the CDR mechanism of the Reserve Bank of India after attaining super-majority from its lender banks and the Company executed the Master Restructuring Agreement ("MRA") with all lenders banks except State Bank of Travancore ("SBT") on December 27, 2014, with cut-off date of October 01, 2013.
The implementation of CDR scheme has provided your Company requisite support and reflects the faith these institutions have in the current performance and the long-term business model of the Company.
Yours directors are pleased to inform that the Company is regular in making payments to banks and other Government departments towards principal installments and interest as and when they fall due.
During the year, SBT assigned the entire outstanding dues owed by the Company together with all underlying securities and guaranties, comprising of its Rupee term loan and sustainable working capital along with all accrued interest thereon, in favour of Edelweiss Asset Reconstruction Company Limited ("EARC"). The EARC has restructured the entire outstanding of Rs.1,649.5 million for an aggregate principal amount of Rs.1,153 million.
During the year, State Bank of Mysore has also absolutely assigned all the rights, title and interest in financial assistance granted to the Company, with all the underlying rights, benefits and obligations in favour of EARC. The company is finalizing the repayment terms with EARC and their final sanction is awaited.
Dividend
The Board of Directors has decided to continue to invest the internal accruals in the business of the Company and hence it has not recommended any dividend on the Equity as well as Preference Shares of the Company.
Share Capital and Net Worth
The issued, subscribed and paid up Share Capital of the Company as on March 31, 2016, remains unchanged at Rs.224.3 million comprising of Rs.61.3 million equity share capital divided into 61,250,746 Equity Shares of Re.1 each and Rs.163.0 million preference share capital divided into 1,63,00,000, 0.5% Cumulative Non-Convertible Non Participating Redeemable Preference Shares of Rs.10 each. During the year under review, the Company has not issued any equity shares with differential rights/sweat equity shares under Rule 4 & Rule 8 of the Companies (Share Capital and Debentures) Rules, 2014.
As at the end of year under review, the net worth of the Company calculated as per section 2(57) of the Companies Act, 2013 ("the Act") has improved to Rs.1,507.1 million from Rs.1,296.2 million as at the end of the previous financial year. Though the Company has registered a net profit of Rs.8.7 million during the year under review, the Company''s accumulated losses as at March 31, 2016 continue to remain more than 50% of its peak net worth during the immediately preceding four financial years, computed as per the provisions of SICA.
The Company has undertaken several measures to mitigate cash flow challenges, which include supply to UNICEF/other customers of pentavalent vaccine, certain strategic alliances with foreign collaborators for supply of products. Based on above measures and continuous efforts to improve the business, which have already resulted into improvement in financial performance and cash flows during the year under review, the Company believes that it would be able to generate sustainable cash flow, recover and recoup the erosion in its net worth through profitable operations, discharge its obligations as they fall due and continue as a going concern.
Transfer to Investor Education and Protection Fund
Pursuant to the provisions of Section 205A(5) of the Companies Act, 1956, the dividend for the year 2007-08, which remained unpaid or unclaimed for a period of 7 years, amounting to Rs.0.2 million has been transferred by the Company to the Central Government''s Investor Education and Protection Fund on November 30, 2015.
Significant and material orders impacting the going concern status and company''s operations in future
During the year under review, no significant and material orders were passed by any regulator or court or tribunal which may impact the going concern status and your Company''s operations in future.
During FY 2011-12, a search operation was conducted by Income Tax Department in the premises of the Company and hence the Company re-filed the income tax returns for the Assessment Years ("AY") 2006-07 to 2012-13. During the previous financial year, the Income Tax Department completed the assessment of the said years, disallowed certain expenses and issued demand of Rs.3,294.9 million (including interest) on various grounds. The Company preferred appeals before CIT (Appeals) and after several hearings in the matter and on the basis of facts of the matter, the appeals were decided in favour of the Company and the entire demand of Rs.3,294.9 million was cancelled. However, CIT (Appeals) made certain disallowances of Rs.60.2 million with respect to AY 2010-11 & AY 2011-12 against which the Company has filed appeals before the Income Tax Appellate Tribunal ("ITAT"). The Income Tax Department has also filed appeals before ITAT against the orders of CIT (Appeals). The appeals before ITAT are pending at present.
Further, during the year, Serum Institute of India Ltd. (along with its 3 associates), collectively holding around 4.12% of total issued share capital of the Company, filed a petition u/s 397 and 398 of the Companies Act, 1956 before the Hon''ble Company Law Board, New Delhi. Your Directors are pleased to inform that the said petition has been dismissed by Hon''ble Company Law Board vide its order dated January 21, 2016. The petitioners have filed an appeal before Hon''ble Punjab and Haryana High Court, Chandigarh and the same is pending adjudication.
Report on Corporate Governance
Your company has always placed thrust on managing its affairs with diligence, transparency, responsibility and accountability. Your Directors support the broad principles of Corporate Governance and lays emphasis on its role to align and direct the actions of the Company in achieving its objectives. The report on Corporate Governance as stipulated under Regulation 34 read with Schedule V of SEBI (Listing Obligations & Disclosure Requirements) Regulations, 2015 ("SEBI (LODR) Regulations") together with a certificate from the Practicing Company Secretary confirming compliance thereof is attached and forms part of the Annual report. Management Discussion & Analysis Report As required pursuant to Regulation 34 read with Schedule V of SEBI (LODR) Regulations, a detailed Management Discussion and Analysis Report is attached and forms part of the Annual Report.
Information about the Subsidiaries/Associates/Joint
Ventures
A. Subsidiaries
As on the date of this report, your Company has 3 wholly owned subsidiary ("WOS") companies, viz. Radhika Heights Limited, Panacea Biotec (International) S.A. and Rees Investments Limited; and one subsidiary, viz. NewRise Healthcare Private Limited.
Your Company also has 8 indirect WOS companies, as under:
- Cabana Construction Private Limited, Cabana Structures Limited, Nirmala Buildwell Private Limited, Nirmala Organic Farms Resorts Private Limited, Radicura Infra
Limited and Sunanda Infra Limited; all being WOS of Radhika Heights Limited;
- Panacea Biotec Germany GmbH, the WOS of Panacea Biotec (International) S.A.; and
- Kelisia Holdings Limited, the WOS of Rees Investments Limited, under liquidation.
The Company''s another erstwhile WOS, viz. Panacea Biotec GmbH, which was under liquidation as at the end of previous year, has officially been liquidated during the year under review.
Radhika Heights Limited ("RHL") inter-alia, owns a prime immovable property which is being used by the Company as its Corporate Office at New Delhi and land at Pataudi Road, Gurgaon (along with its 4 WOSs). It has diversified its activities in construction and development of township as part of its growth plans. Accordingly, RHL along with its 4 WOS companies signed a term sheet with a developer for development of the integrated township on its land at Pataudi Road, Gurgaon during the earlier year, however, a dispute had emerged among the parties and the matter is under arbitration. The Company holds 47,76,319 equity shares of Re.1 each in RHL with an investment of Rs.3,385.6 million as on March 31, 2016.
Panacea Biotec (International) S.A., Switzerland ("PBS"), is engaged in the business of trading of pharmaceutical products. The Company holds 6,000 equity shares of CHF 100 each with an investment of Rs.34.4 million as on March 31, 2016. Panacea Biotec Germany GmbH, WOS of PBS is, inter-alia, engaged in marketing of the Company''s products in Germany.
Rees investments Ltd., Islands of Guernsey (''Rees'') had its objects of, inter-alia, making strategic investments in other entities. it had earlier established its WOS Kelisia Holdings Ltd. at Cyprus. Since no further activity is envisaged in Kelisia Investments Ltd., it has been decided during the year to liquidate this company.
NewRise Healthcare Private Limited ("NewRise") has set-up a 224 bedded state-of-the-art multi super-specialty hospital at Gurgaon, Haryana. Your Company holds 87.4% stake in NewRise with an investment of Rs.497.8 million therein, as on March 31, 2016. The hospital project could not be completed and commercialised due to non-availability of capital investment and is on hold. The company is now exploring various options including collaboration for operations of the hospital and/or disposal of the Company''s stake in NewRise either in full or in part.
B. Joint Ventures and Associates
PanEra Biotec Private Limited ("PanEra"): PanEra, the Company''s associate company, is continuing to meet requirement of bulk antigens for the manufacture of Hib and pentavalent vaccine by your Company. During the year under review, PanEra has registered a growth of more than 205% and achieved a net turnover of Rs.465.7 million as against Rs.152.3 million during previous year. As a result, PanEra has achieved a net profit of Rs.4.5 million as compared to a loss of Rs.116.3 million in previous financial year.
Chiron Panacea Vaccines Private Limited (Under Liquidation) ("CPV"): CPV had discontinued its operations during the financial year 2012-13 pursuant to dissolution of joint venture and is currently in the process of liquidation under voluntary winding up.
Adveta Power Private Limited ("Adveta"), the Company''s 50:50 joint venture with PanEra, was granted in-principle approval by Govt. of Arunachal Pradesh for allotment of two Power Projects of 80 MW and 75 MW in Arunachal Pradesh in financial year 2012-13. Adveta is in the process of taking preliminary steps in connection with the implementation of projects. However, no major investment is envisaged in this regard during the current financial year.
Consolidated Financial Statements
The Consolidated Financial Statements of the Company and its subsidiaries, joint ventures and associates, prepared in terms of Section 129 of the Act and Regulation 33 of SEBI (LODR) Regulations and in accordance with Accounting Standard AS-21 on ''Consolidated Financial Statements'' read with Accounting Standard AS-27 on ''Financial Reporting of Interest in Joint Ventures'' and Accounting Standard AS-23 on ''Accounting for Investments in Associates'', as issued by the Institute of Chartered Accountants of India and in accordance with the provisions of Schedule III of the Act, are attached herewith and the same, together with Auditors'' Report thereon, forms part of the Annual Report.
A separate statement containing the salient features of financial statements of subsidiaries, joint ventures and associates, in Form AOC-1, which forms part of the Annual Report and hence not repeated here for the sake of brevity. The annual financial statements and related detailed information of the subsidiary companies shall be made available to the shareholders of the holding and subsidiary companies seeking such information on all working days during business hours. The financial statements of the subsidiary companies shall also be kept open for inspection by any shareholder during working hours at the Company''s registered/corporate office and that of the respective subsidiary companies concerned.
Listing of Equity Shares
The Equity Shares of the Company continue to be listed on National Stock Exchange of India Limited ("NSE") and Bombay Stock Exchange ("BSE"). The requisite annual listing fees have been paid to these Exchanges.
Public Deposits
During the year under review, your Company has not invited or accepted any deposits from the public/members pursuant to the provisions of Section 73 and 76 of the Act.
Directors and Key Managerial Personnel
During the year under review, Dr. A.N. Saksena (DIN: 00016107), who was acting as an independent director, resigned from the Board of Directors w.e.f. the close of business hours on August 20, 2015 due to his ill health and that of his wife. Later, Dr. A.N. Saksena also left for heavenly abode on January 22, 2016. Your Directors place their sincere appreciation towards the valuable contribution and support from Dr. A.N. Saksena during his tenure as a Director of the Company and pray the almighty that the departed soul rest in peace.
Further, pursuant to the provisions of Section 149 of the Act, Mrs. Manjula Upadhyay (DIN:07137968) was appointed as an Independent Director, not liable to retire by rotation, for a period of five years w.e.f. March 30, 2015. Her appointment was approved by shareholders in the 31st Annual General Meeting ("AGM") held on September 30, 2015.
Further, during the year under review, the Board of Directors appointed Mr. Ankesh Jain (DIN: 03556647) as an Additional Director and Whole-time Director designated as Director Sales & Marketing and Mr. Mukul Gupta (DIN: 00254597) as an Additional Director in the category of Non-Executive Independent Director of the Company, w.e.f. April 1, 2016. The said appointments as Whole-time Director and Independent Director were further confirmed by the shareholders in their Extra-ordinary General Meeting held on March 30, 2016. The terms and conditions of appointment of Independent Directors are as per Schedule IV of the Act.
Your Company has received declarations from all the Independent Directors of the Company confirming that they meet with the criteria of independence provided in Section 149(6) of the Act and Regulation 25 of the SEBI (LODR) Regulations and there has been no change in the circumstances which may affect their status as Independent Director during the year under review.
Further, in accordance with Section 152 of the Act and Article 112 of the Articles of Association of the Company, Mr. Ravinder Jain (DIN: 00010101) and Dr. Rajesh Jain (DIN: 00013053), directors of the Company are liable to retire by rotation. Being eligible, they have offered themselves for re-appointment as director at the ensuing AGM.
The brief resumes of the Directors who are to be re-appointed in the ensuing AGM, the nature of their expertise in specific functional areas, names of companies in which they have held directorships, committee memberships/chairmanships and their shareholding, etc. are furnished in Corporate Governance Report forming part of the Annual Report.
The Board recommends re-appointment of the above said directors in the ensuing AGM.
During the year under review, Mr. Devender Gupta was appointed as Chief Financial Officer and Head Information Technology of the Company w.e.f. May 29, 2015. Mr. Vinod Goel, Company Secretary of the Company was elevated as Group Chief Financial Officer and Head Legal & Company Secretary of the Company w.e.f. May 29, 2015.
Board Meetings
During the year under review, seven (7) Board Meetings were held on May 28, 2015 (Adjourned), May 30, 2015, July 17, 2015, August 13, 2015, November 06, 2015, February 12, 2016 and March 31, 2016. The intervening gap between two Board Meetings was within the maximum period prescribed under the Act.
Audit Committee
The Audit Committee of the Board of Directors consists entirely of Independent Directors. The details of the constitution, composition and number of meetings of the Audit Committee are furnished in the Corporate Governance Report. During the year, all recommendations made by the Audit Committee were accepted by the Board.
Policy on Directors'' appointment & remuneration
Pursuant to the provisions of Section 178(3) of the Act and Regulation 19(4) of SEBI (LODR) Regulations and as per the recommendations of the Nomination and Remuneration Committee, the Board has adopted a policy for selection & appointment of Directors and Key Managerial Personnel of the Company and their remuneration. The components of remuneration policy are briefly stated in the Corporate Governance Report, forming part of the Annual Report.
Board Evaluation
In terms of the provisions of the Act and Regulation 19(4) of SEBI (LODR) Regulations, the Board has adopted a formal mechanism for evaluating its performance as well as that of its Committees and individual directors, including the Chairman of the Board. The exercise was carried out through a structured evaluation process covering various aspects such as Board composition & quality, strategic & risk management, board functioning, etc.
Performance evaluation of independent directors was conducted by the Board of Directors excluding the director being evaluated on the criteria such as ethics and values, knowledge and proficiency, behavioral traits, etc.
Energy Conservation, Technology Absorption & Foreign Exchange
As required under Section 134 of the Act, read with Rule 8 of the Companies (Accounts) Rules, 2014, the particulars regarding conservation of energy, technology absorption and foreign exchange earnings & outgo, are given in Annexure A hereto and forms part of this Report.
Extract of Annual Return
In accordance with the provisions of section 134 of the Act, an extract of Annual Return in Form MGT-9 as on financial year ended on March 31, 2016 is attached as Annexure B hereto and forms part of this Report.
Related Party Transactions
As per the provisions of the Act and the SEBI (LODR) Regulations, your Company has formulated a policy on Related Party Transactions which is also available on Company''s website at http://www.panacea-biotec.com/statutorypolicies. The policy intends to ensure that proper reporting, approval and disclosure processes are in place for all transactions between the Company and Related Parties.
This policy specifically deals with the review and approval of material related party transactions keeping in mind the potential or actual conflicts of interest that may arise because of entering into these transactions. All related party transactions are placed before the Audit Committee for review and approval. Wherever applicable, prior approval is obtained for related party transactions on a quarterly basis for transactions which are of repetitive nature and / or entered in the ordinary course of business and are at arm''s length basis.
During the year, all the related party transactions entered into were on an arm''s length basis. The Company has not entered into any material related party transactions, i.e. transactions exceeding 10% of the annual consolidated turnover as per the last audited financial statements. Suitable disclosures as required under Accounting Standard AS-18 have been made in the notes to the Financial Statements forming part of the Annual Report.
Information on transactions with related parties pursuant to Section 134(3)(h) of the Act read with Rule 8(2) of the Companies (Accounts) Rules, 2014 are given in Annexure C in the prescribed Form AOC-2 and the same forms part of this Report.
Particulars of Employees and Related disclosures
Disclosures pertaining to remuneration and other details as required under Section 197(12) of the Act read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is provided in the Annexure D forming part of this Report.
In terms of the provisions of Section 197(12) of the Act read with Rules 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, a statement showing the names and other particulars of the employees drawing remuneration in excess of the limits set out in the said Rules is provided in Annexure E forming part of this Report.
Auditors
Pursuant to the provisions of Section 139 of the Act and the rules framed there under, M/s Walker Chandiok & Co. LLP, Chartered Accountants (Regn. No. 001076N/N500013), were appointed as statutory auditors of the Company for a period of five years to hold office from the conclusion of the 30th AGM of the Company held on September 25, 2014 till the conclusion of the 35th AGM, subject to ratification of their appointment at every AGM. Accordingly, the appointment of M/s Walker Chandiok & Co. LLP, Chartered Accountants, as statutory auditors of the Company, is placed for ratification by the shareholders. In this regard, the Company has received a certificate from the auditors to the effect that if the appointment is ratified, it would be in accordance with the provisions of Section 141 of the Act.
Auditors'' Report
The Auditors have not given any qualified opinion or made any reservation, adverse remark or disclaimer in their Audit Report.
The management response to the matters of emphasis and observations/comments contained in the Auditors'' Report and Annexure thereto, are given below:
i. Emphasis of Matter - Clause 9 of Auditors'' Report: Payment of managerial remuneration exceeding the limits prescribed under Section 198 and 309 read with Part II of Schedule XIII to the Companies, Act, 1956 by Rs.13.5 million and Rs.13.2 million in previous financial years ended March 31, 2014 and 2013 respectively:
The Company has incurred losses in the respective years mainly due to the delisting of company''s vaccine from WHO''s list of prequalified vaccines in the financial year 2011-12. The managerial personnel have already voluntarily reduced their salary by 30-53% in the referred years. The Company has taken various measures as explained elsewhere in this Report to regain its business. Further, the Company has already filed applications with Ministry of Corporate Affairs to obtain requisite approvals from Central Government in respect of such excess remuneration and the final outcome is pending.
ii. Emphasis of Matter - Clause 10 of Auditors'' Report: The Company incurred a net loss (before exceptional items) of Rs.487.8 million during the year ended March 31, 2016 and as of that date, the Company''s current liabilities exceeded its current assets by Rs.1,351.9 million. These conditions along with other matters as set forth in aforesaid note indicate the existence of a material uncertainty that may cast significant doubt about the Company''s ability to continue as a going concern:
The Company has undertaken several measures to mitigate the risk, which include supply to UNICEF/other customers of pentavalent vaccine, certain strategic alliances with foreign collaborators for supply of vaccines and pharma products including three collaboration agreements signed during the financial year 2014-15. Additionally, as explained in note 47 in the Notes to the Financial Statements, the Company has successfully executed the MRA with the lenders of the Company. Based on the above measures and continuous efforts to improve the business, which have already resulted into improvement in financial performance and cash flows during the year under review, the management believes that it would be able to generate sustainable cash flow, recover and recoup the erosion in its net worth through profitable operations and discharge its obligations as they fall due and continue as a going concern.
The Company is now regular in making payments to banks and other Government departments towards principal installments and interest as and when they fall due.
iii. Slight delay in deposition of tax with appropriate authority - Clause (vii)(a) of Annexure A to the Auditors'' Report:
There has been a slight delay in one case wherein Service tax amounting to Rs.53,893 with respect to royalty income could not be deposited in time due to delay in confirmation of exact amount receivable as royalty from the customer and hence this was deposited with a slight delay of 13 days along with interest of Rs.346 thereon.
Further, the Emphasis of Matters as contained in the Auditors'' Report on the Standalone Financial Statements (Clause No. 9 and 10) as referred above are also mentioned as Emphasis of Matters in the Auditors'' Report on the Consolidated Financial Statements (Clause Nos. 9 and 10) in similar manner. The management response thereto as given in point nos. i & ii above applies, mutatis mutandis, to the Emphasis of Matters contained in the Auditors'' Report on Consolidated Financial Statements.
The notes to accounts and other observations, if any, in the Auditors'' Report are self-explanatory and therefore, do not call for any further comments.
Cost Auditors
Pursuant to the provisions of Section 148 of the Act, M/s G.T. & Co., Cost Accountants (Firm''s Registration Number: 000253), were appointed as the Cost Auditors to conduct the audit of the Company''s Cost Records for the year ended March 31, 2016 and the remuneration has been ratified by the shareholders in the 31st AGM of the Company held on September 30, 2015.
The cost audit for the staid period has been completed and the Cost Auditors Report will be submitted with the Central Government within the prescribed time. The Cost Audit Report for the financial year 2014-15 was filed on September 21, 2015, well before the last date of filing, viz. September 30, 2015.
Based on the recommendations of the Audit Committee, the Board of Directors has appointed M/s G.T. & Co., Cost Accountants, as cost auditors of the Company for the financial year 2016-17 pursuant to the provisions of Section 148 of the Act. As required, the item for ratification of remuneration of cost auditor has been included in the notice of the ensuing AGM for shareholders'' approval.
Secretarial Audit
Pursuant to the provisions of Section 204 of the Act read with Rule 9 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014, M/s R&D Company Secretaries, Practicing Company Secretaries conducted the Secretarial Audit of the Company for the financial year ended March 31, 2016. The Secretarial Audit Report for the said period is attached as Annexure F to this Report.
As regards observation in the Secretarial Audit Report in respect of non-filing of e-form MR-2 for obtaining approval of Central Government relating to re-appointment of Mr. Sumit Jain as Whole Time Director on 22nd July, 2015: The Company is regular in filing various e-forms under the Act and the applicable e-form MR-1 and MGT-14 in respect of such re-appointment were filed within stipulated time. However, this e-form MR-2 was inadvertently delayed and subsequently, the said form has been filed on July 18, 2016 along with e-form CG-1 in respect of condemnation of delay.
Material changes and commitments affecting the financial position which have occurred between March 31, 2016 and date of the Report
Except as disclosed elsewhere in the Annual Report, there have been no material changes and commitments which can affect the financial position of the Company between the end of the financial year and the date of this Report.
As required under Section 134(3) of the Act, the Board of Directors inform the members that during the financial year, there have been no material changes, except as disclosed elsewhere in the Annual Report:
- in the nature of Company''s business,
- in the Company''s subsidiaries or in the nature of business carried out by them,
- in the classes of business in which the Company has an interest.
Directors'' Responsibility Statement
The Directors hereby confirm:
a) that in the preparation of the annual financial statements for the financial year ended March 31, 2016, the applicable Accounting Standards have been followed along with proper explanation relating to material departures;
b) that for the financial year ended March 31, 2016, such accounting policies as mentioned in the Notes to the financial statements have been applied consistently and judgments and estimates that are reasonable and prudent have been made so as to give a true and fair view of the state of affairs of the Company and of the profit and loss of the Company for the year ended March 31, 2016;
c) that proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;
d) that the annual accounts have been prepared on a going concern basis;
e) that proper internal financial controls were followed by the Company and that such internal financial controls are adequate and were operating effectively; and
f) that proper systems to ensure compliance with the provisions of all applicable laws were in place and that such systems were adequate and operating effectively.
Particulars of loans, guarantees or investments
The details of loans, guarantees and investments covered under the provisions of Section 186 of the Act are given in the notes to the Financial Statements forming part of the Annual Report.
Risk management
The Company has formulated a Risk Management Policy and monitors the risk management plan on a periodic basis. The Company has defined a structured approach to manage uncertainty and to make use of these in the decision making in business decisions and corporate functions.
The Company has regularly invested in insuring itself against unforeseen risks. The Company''s stocks and insurable assets like building, plant & machinery, computer equipments, office equipments, furniture & fixtures, lease hold improvements and upcoming projects have been adequately insured against major risks. The Company has also taken appropriate product liability insurance policies for conducting clinical trials and for insuring its products (manufactured & sold) with an extension of unnamed vendor liability and add on cover of public liability inclusive of pollution liability to cover the risk on account of claims, if any, filed against the Company.
Internal Control System
Your Company has established a system of internal controls to ensure that assets are safeguarded and transactions are appropriately authorized, recorded and reported. The detailed explanation is provided in the Management Discussion and Analysis Report, forming part of this Report.
Vigil Mechanism
As required pursuant to the provisions of Section 177(9) of the Act read with Rule 7 of the Companies (Meetings of Board and its Powers) Rules, 2014 and Regulation 22 of SEBI (LODR) Regulations, your Company has adopted a Vigil Mechanism (Whistle Blower Policy) with a view to provide its employees an avenue to raise any sensitive concerns regarding any unethical behavior or wrongful conduct and to provide adequate safeguard for protection from any victimization.
This policy is available on the website of the Company. This Policy inter-alia provides a direct access to the Chairman of the Audit Committee.
Your Company hereby affirms that no Director/employee has been denied access to the Chairman of the Audit Committee and that no complaints were received during the year.
Corporate Social Responsibility
The provisions of Section 135 of the Act, regarding Corporate Social Responsibility are not attracted to the Company as the Company does not fall under the threshold limit of net worth of Rs.500 crore or turnover of Rs.1,000 crore or a net profit of Rs.5 Crore during the financial year. However, the Company has been, over the years, pursuing Corporate Social Responsibility by putting continuous efforts in the areas of health, education and patient awareness/assistance programs towards the development of happier and healthier society.
Prevention of Sexual Harassment at Workplace
As per the requirement of The Sexual Harassment of Women at Workplace (Prevention, Prohibition & Redressal) Act, 2013 and Rules made there under, your Company has constituted Internal Complaints Committees (ICC) for dealing with the complaint, if any, relating to sexual harassment of women at workplace. During the year, no complaint was received by the said Committee.
Acknowledgements
Your Directors acknowledge with gratitude the co-operation and assistance received from the UN Agencies, Central Government, State Governments and all other Government agencies and encouragement they have extended to the Company. Your Directors also thank the shareholders, financial institutions, banks/ other lenders, customers, vendors and other business associates for their confidence in the Company and its management and look forward for their continuous support. The Board wishes to place on record its appreciation for the dedication and commitment of your Company''s employees at all levels which has continued to be our major strength.
For and on behalf of the Board
Dated: August 12, 2016 Soshil Kumar Jain
Place: New Delhi Chairman
Mar 31, 2015
Dear Members,
The Directors are pleased to present the 31st Annual Report on the
business and operations together with the Company''s audited financial
statements and the auditors'' report thereon for the financial year ended
March 31, 2015. The financial highlights for the year under review are
given below:
Financial Results
(Rs. in million)
Particulars March 31, March 31,
2015 2014#
Revenue from operations 6,792.0 4,975.7
Other Income 280.5 171.0
Total Income 7,072.5 5,146.7
Earning Before Interest,
Depreciation & Tax (EBITDA) 943.6 (922.3)
Profit/ (Loss) before tax and exceptional items (633.4) (2,974.4)
Exceptional items - 2,970.2
Profit/(Loss) before Tax (PBT) (633.4) (4.2)
Provision for Taxation 18.9 -
Profit/(Loss) after Tax (PAT) 652.3) (4.2)
Basic EPS (Rs.)* (10.7) (0.1)
Cash EPS (Rs)* 0.1 11.2
* Face value Re.1 per share
# Previous year''s figures have been re-grouped/re-classified wherever
necessary
Business Performance
During the year, your Company registered a growth of 36.5% with
turnover of Rs.6,792.0 million as against Rs.4,975.7 million during the
corresponding financial year. The vaccines segment registered a growth
of more than 115.9% with turnover of Rs.2,763.0 million as against
Rs.1,279.5 million during the previous financial year. The formulations
segment registered a growth of 7.6% with turnover of Rs.3,790.7 million
as against Rs.3,523.2 million during the previous financial year. The
Research & Development segment registered a growth of 37.7% with
turnover of Rs.238.3 million as against Rs.173.0 million during the
previous year. During the year, your Company registered positive
EBITDA of Rs.943.6 million as against the negative EBITDA of Rs.922.3
million in the previous financial year, with overall losses before tax &
exceptional items reduced significantly from Rs.2,974.4 million to
Rs.633.4 million.
During the year under review, your Company has continued to supply
Easyfive-TT Vaccines against long-term supply order received from UNICEF
during previous financial year, for supply of vaccines for the calendar
years 2014 to 2016. The Company has also won a national tender in
Philippines for supply of Easyfive-TT vaccine and an order from
Government of India for supply of Oral Polio Vaccines which have been
the leading key drivers in the improved performance of the Company
during the year under review. During the year, your Company has
entered into a strategic alliance with Canada''s largest pharma company,
Apotex Inc., for research, development, license and supply of two drug
delivery-based generic products in the US, Canada, Australia and New
Zealand markets and also entered into similar deal with US-based Rising
Pharmaceuticals Inc. for an oral controlled release product in the CNS
space. Similar collaboration has also been entered into with a leading
Indian pharma company with extensive global operations, for the
development and supply of a modified release immuno- suppressant generic
product for the US market. A detailed discussion on operations for the
year ended March 31, 2015 is given in the Management Discussion and
Analysis section forming part of the Annual Report.
Corporate Debt Restructuring Scheme (CDR Scheme)
As the members are aware, during previous financial year, the Company
had made a reference to the Corporate Debt Restructuring (CDR) Cell for
comprehensive restructuring of Company''s debts from consortium banks in
view of difficult financial situation mainly due to the delisting of
company''s vaccine from WHO''s list of pre-qualified vaccines in the
financial year 2011-12. The CDR Empowered Group ("CDR EG") in its
meeting held on September 9, 2014 has approved the CDR proposal and
issued provisional Letter of Approval (LOA) dated September 24, 2014
which was later on confirmed vide letter dated October 11, 2014.
Pursuant to the said LOA, the Company had executed a Master
Restructuring Agreement (MRA) with all the consortium banks (except
State Bank of Travancore ("SBT") which has given a negative mandate) on
December 27, 2014, with cut- of date of October 1, 2013. The MRA,
inter-alia, provides for waiver of certain existing obligations of the
Company, restructuring of repayment terms for principal and interest,
reduction in interest rates, conversion of outstanding interest amounts
to Working Capital/ Funded Interest Term Loans, pledge of promoters''
shareholding as additional security to lenders, promoters'' undertaking
to bring additional funds as promoters'' contribution, monitoring
oversight and certain restrictive covenants. The debt obligations,
including interest thereon, have been measured, classified and disclosed
in these financial statements in accordance with the MRA, as agreed by
seven out of nine lender banks. As on March 31, 2015, some of the terms
of CDR package were implemented and creation of security has been
completed partly and the balance was in process. The Company had
approached the banks for extension of time for implementation of few
conditions which was considered by the banks. The banks and CDR EG had
accepted few requests for modifications/ waivers and with the acceptance
of such modifications/ waivers, the CDR Scheme shall stand implemented
by all the banks accept S BT.
The SBT, which had given a negative mandate in the CDR scheme had sent
legal notices for recovery of its debts & winding up of the Company,
which have suitably been replied. Simultaneously, they have been
requested for reconsidering their decision. The CDR mechanism operates
on the principles of super majority of 75% of the creditors by value
and 60% of the creditors in number. The CDR Scheme has been approved
with the consent of all the banks except one forming such super
majority.
The implementation of CDR scheme gives your Company critical support to
tide over the present difficult financial situation and business
environment. The decision of the banks to consider and approve CDR
Scheme also reflects the faith these institutions have in the long term
business model of the Company.
Dividend
In view of the losses during the year, the Board of Directors did not
recommend any dividend on the Equity Shares of the Company.
Transfer of Amounts to Investor Education and Protection Fund
Pursuant to the provisions of Section 205A(5) of the Companies Act,
1956, the dividend for the year 2006-07, which remained unpaid or
unclaimed for a period of 7 years, amounting to Rs.0.2 million has been
transferred by the Company to the Central Government''s Investors
Education and Protection Fund on November 26, 2014. Similarly, the
dividend for the year 2007-08, which shall remain unpaid or unclaimed
for a period of 7 years, shall be transferred by the Company to the
Central Government''s Investors Education and Protection Fund by the due
date, i.e. November 25, 2015.
Details of significant and material orders impacting the going concern
status and company''s operations in future
During the year under review, no significant and material orders were
passed by any regulator or court or tribunal which may impact the going
concern status and your Company''s operations in future.
A search operation was conducted by Income Tax department in the
premises of the Company in January, 2012 and hence Company has fled the
income tax returns for the Assessment Year 2006-2007 to Assessment year
2012-2013. The Income Tax department has competed the Income Tax
assessment of said years and income tax demand of Rs.3,294.9 million
(including interest) has been raised on various grounds. The Company
has preferred appeals before the CIT (Appeals) against the Orders of
Income Tax department. Your directors are pleased to inform that after
several hearings in the matter and on the basis of facts of the matter,
the CIT (Appeals) has granted the relief to the Company from such
demand and the entire income tax demand of Rs.3,294.9 million stands
dismissed except certain disallowances made in Assessment year 2010- 11
and Assessment year 2011-12 pursuant to the Orders issued by CIT
(Appeals).
Share Capital and Net Worth
The issued, subscribed and paid up Share Capital of the Company as on
March 31, 2015, was Rs.224.3 million comprising of Rs.61.3 million
equity share capital divided into 61,250,746 Equity Shares of Re.1 each
and Rs.163.0 million preference share capital divided into 1,63,00,000,
0.5% Non- Convertible Cumulative Redeemable Preference Shares of Rs.10
each. During the year, the Company had issued and allotted 1,63,00,000
(One Crore Sixty Three Lac Only) 0.5% Non-Convertible Cumulative
Redeemable Preference Shares ("NCCRPS") of Rs.10 each at par by
converting the existing unsecured loan and/or fixed deposits (including
outstanding interest thereon) aggregating to Rs.163.0 million to some
of the promoters of the Company to meet the requirements of the
promoters'' contribution pursuant to the CDR Scheme approved by CDR EG.
During the year under review, the Company had not issued any equity
shares with differential rights/sweat equity shares under Rule 4 & Rule
8 of Companies (Share Capital and Debentures) Rules, 2014.
As the members are aware, in view of the fact that the Company''s
accumulated losses as at March 31, 2013 had resulted into erosion of
more than 50% of its peak net worth during the immediately preceding
four financial years (as computed as per the provisions of Sick
Industrial Companies (Special Provisions) Act, 1985 ("SICA")), the
Company had made necessary reference on November 22, 2013 to the Board
for Industrial and Financial Reconstruction (BIFR) pursuant to the
provisions of SICA. The Company''s accumulated losses as at March 31,
2015 continue to remain more than 50% of its peak net worth during the
immediately preceding four financial years, as computed as per the
provisions of SICA. As at the end of year under review, the net worth
of the Company calculated as per section 2(57) of the Companies Act,
2013 ("the Act") stood at Rs.1,296.2 million as compared to Rs.1,790.9
as at the end of the previous financial year.
Report on Corporate Governance
Your company has always placed thrust on managing its affairs with
diligence, transparency, responsibility and accountability. Your
Directors support the broad principles of Corporate Governance and lays
emphasis on its role to align and direct the actions of the Company in
achieving its objectives. The report on Corporate Governance as
stipulated under Clause 49 of the listing agreement entered with the
stock exchanges ("Listing Agreement") together with a certificate from
the Practicing Company Secretary confirming compliance is attached and
forms part of this Annual report.
Management Discussion & Analysis Report
As required pursuant to Clause 49 of the Listing Agreement with the
Stock Exchanges, a detailed Management Discussion and Analysis Report
is attached herewith and forms part of the Annual Report.
Information about the Subsidiaries / Associates/ Joint Ventures
A. Subsidiaries
As on the date of this report, your Company has 4 wholly owned
subsidiary (WOS) companies, viz. Radhika Heights Limited, Panacea
Biotec (International) S.A., Rees Investments Limited and Panacea
Biotec GmbH (under liquidation) and one subsidiary, viz. NewRise
Healthcare Private Limited. Your Company also has 8 indirect WOS
companies, as under:
Cabana Construction Private Limited, Radicura Infra Limited, Nirmala
Buildwell Private Limited, Sunanda Infra Limited, Cabana Structures
Limited and Nirmala Organic Farms Resorts Private Limited; all being
WOS of Radhika Heights Limited;
Panacea Biotec Germany GmbH, the WOS of Panacea Biotec (International)
S.A.; and Kelisia Holdings Limited, the WOS of Rees Investments
Limited. Radhika Heights Limited ("RHL") inter-alia, owns a prime
immovable property which is being used by the Company as its Corporate
Office at New Delhi and land at Pataudi Road, Gurgaon (along with its 5
WOSs). It has diversified its activities in construction and development
of township as part of its growth plans. Accordingly, RHL along with
its 5 WOS has signed a term sheet with a developer for development of
the integrated township on its land at Pataudi Road, Gurgaon, however,
a dispute has emerged among the parties and the matter is under
arbitration. The Company holds 47,76,319 equity shares in RHL with an
investment of Rs.3,385.6 million as on March 31, 2015.
Panacea Biotec (International) S.A., Switzerland (PBS), is engaged in
the business of trading of pharmaceutical products. The Company holds
6,000 equity shares of CHF 100 each with an investment of Rs.34.4
million as on March 31, 2015. Panacea Biotec Germany GmbH, WOS of PBS,
is engaged in marketing of the Company''s products in Germany. NewRise
Healthcare Private Limited ("NewRise") has set-up a 224 bedded
state-of-the-art multi super-specialty hospital at Gurgaon, Haryana. It
had planned to have the full-fedged operations during the year under
review and started hiring the required personnel to start operations
and also obtained the necessary licenses & permissions for such
operations. However, since it was requiring additional funds to start
the operations as well as to fund the initial losses and working
capital requirements but the funds were not available; it has decided
to put the operations of hospital on hold for the time being. The
efforts are also being made to dispose of the Company''s stake in NewRise
either in full or in part. During the year under review, NewRise had
issued and allotted 33,94,915 equity shares of Rs.10 each for cash at a
price of Rs.59 per share on May 28, 2014, aggregating Rs.200.3 million
against the share application money pending allotment as at the end of
previous financial year. The Company has also purchased 1,82,900 equity
shares in NewRise at an aggregate value of Rs.15.5 million pursuant to
the agreement entered into with other shareholders of NewRise during
previous financial year. Your Company holds 87.4% stake in NewRise with
an investment of Rs.497.8 million therein as on March, 2015.
During the year under review, the Company''s indirect subsidiary,
Kelisia Investment Holding AG (step down subsidiary of Rees Investments
Limited) has been liquidated effective as on October 7, 2014.
B. Joint Ventures and Associates
PanEra Biotec Private Limited ("PanEra"): PanEra, the Company''s
associate Company, is continuing to meet requirement of bulk antigens
for the manufacture of Hib and Pentavalent Vaccines by your Company.
During the year under review, PanEra has achieved a net turnover of
Rs.152.3 million as compared to Rs.391.8 million during previous year.
It has incurred a loss of Rs.116.3 million as compared to loss of
Rs.11.5 million in previous financial year. Chiron Panacea Vaccines
Private Limited (CPV) (Under Liquidation): CPV had discontinued its
operations during the financial year 2012-13 pursuant to dissolution of
joint venture and is currently in the process of voluntary winding up.
Adveta Power Private Limited ("Adveta"): Adveta the Company''s 50:50
joint venture with PanEra, has been granted in-principle approval by
Govt. of Arunachal Pradesh for allotment of two Power Projects of 80 MW
and 75 MW in Arunachal Pradesh in financial year 2012-13. Adveta is in
the process of taking preliminary steps in connection with the
implementation of projects. However, no major investment is envisaged
in this regard during the current financial year. Pursuant to the
provisions of Section 129, 134 and 136 of the Act read with rules
framed thereunder and pursuant to clause 41 of the Listing Agreement,
the Company had prepared consolidated financial statements of the
Company and its subsidiaries and a separate statement containing the
salient features of financial statements of subsidiaries, joint ventures
and associates, in Form AOC-1, which is forming part of the Annual
Report and hence not repeated here for the sake of brevity.
The annual financial statements and related detailed information of the
subsidiary companies shall be made available to the shareholders of the
holding and subsidiary companies seeking such information on all
working days during business hours. The financial statements of the
subsidiary companies shall also be kept open for inspection by any
shareholder/s during working hours at the Company''s
registered/corporate office and that of the respective subsidiary
companies concerned.
Consolidated Financial Statements
The consolidated financial statements of the Company and its
subsidiaries, joint ventures and associates, prepared in terms of
Section 129 of the Act and Clause 32 & 41 of the Listing Agreement and
in accordance with Accounting Standard 21 on ''Consolidated Financial
Statements'' read with Accounting Standard AS-27 on ''Financial Reporting
of Interest in Joint Ventures'' and Accounting Standard AS-23 on
''Accounting for Investments in Associates'', as issued by the Institute
of Chartered Accountants of India and in accordance with the provisions
of schedule III of the Act, are attached herewith and the same,
together with Auditors'' Report thereon, forms part of the Annual Report
of the Company.
Listing of Equity Shares
The Equity Shares of the Company continue to be listed on National
Stock Exchange of India Limited ("NSE") and Bombay Stock Exchange
("BSE"). The requisite annual listing fees have been paid to these
Exchanges.
Public Deposits
During the year under review, your Company has not invited or accepted
any deposits from the public/ members pursuant to the provisions of
Section 73 and 76 of the Act. Further, the Company had paid/adjusted
the outstanding balances of deposits from the Company''s Directors &
their relatives amounting to Rs.142.0 million as on March 31, 2014
along with interest thereon in compliance with the provisions of the
Act and the Companies (Acceptance of Deposits) Rules, 2014.
Directors and Key Managerial Personnel
During the year under review, Mr. Sunil Kapoor(DIN: 00029133) who was
earlier appointed as an independent director was not satisfying the
criteria of independent director as per the provisions of the revised
Clause 49 of the Listing Agreement effective from October 1, 2014 and
therefore resigned from the directorship of the Company w.e.f. August
4, 2014. The Board places its sincere appreciation towards the valuable
contribution received from Mr. Sunil Kapoor during his tenure as a
Director of the Company.
Further, pursuant to the provisions of Section 149 of the Act, Mr.
Raghava Lakshmi Narasimhan (DIN: 000738736), Mr. Namdeo Narayan
Khamitkar (DIN: 00017154), Mr. A.N. Saksena (DIN: 00016107) and Mr.
Krishna Murari Lal (DIN: 00016166) Independent Directors were appointed
as Independent Directors of the Company not liable to retire by
rotation for a period of five years i.e. till March 31, 2020, in the
30th Annual General Meeting held on September 25, 2014. The terms and
conditions of appointment of Independent Directors are as per Schedule
IV to the Act. Your Company has received declarations from all the
Independent Directors of the Company confirming that they meet with the
criteria of independence provided in Section 149(6) of the Act and
Clause 49 of the Listing Agreement and there has been no change in the
circumstances which may affect their status as Independent Director
during the year under review. Further, as required pursuant to the
provisions of Section 149 of the Act, Mr. Om Prakash Kelkar
(DIN:00943362) and Mrs. Manjula Upadhyay (DIN: 07137968) have been
appointed as Additional Directors of the Company in the category of
Independent Directors with effect from October 30, 2014 and March 30,
2015, respectively, to hold office upto the ensuing Annual General
Meeting.
Mr. Om Prakash Kelkar (DIN:00943362) was subsequently appointed by the
shareholders by passing resolution through Postal Ballot the result
whereof was declared on December 23, 2014, as an Independent Director
for a period of five years, as per the provisions of Section 149 of the
Act and Clause 49 of the Listing Agreement, not liable to retire by
rotation and shall hold such office for the period upto October 30, 2019.
Further, the Company has received a notice in writing along with
requisite deposit, from a member under Section 160 of the Act,
signifying his intention to propose candidature of Mrs. Manjula
Upadhyay for the office of Director of the Company. Your directors
recommend her appointment as an Independent Director in the ensuing
Annual General Meeting of the Company for a period of five years, as per
the provisions of the Act and Clause 49 of the Listing Agreement, not
liable to retire by rotation and to hold office for a period of five
years upto March 29, 2020.
Further, on the recommendation of Nomination & Remuneration Committee,
the Board of Directors of the Company had in its meeting held on July
17, 2015, re- appointed Mr. Sumit Jain (DIN: 00014236) as a Whole time
Director designated as Director Operations & Projects for a period of 3
years with effect from July 22, 2015, subject to the approval of
shareholders in their general meeting. The terms and conditions for his
re-appointment are contained in the explanatory statement forming part
of the notice of the ensuing Annual General Meeting.
Further, in accordance with Section 152 of the Act and Article 112 of
the Articles of Association of the Company, Mr. Soshil Kumar Jain (DIN:
00012812) & Mr. Sumit Jain (DIN: 00014236), directors of the Company
are also liable to retire by rotation. Being eligible, they have offered
themselves for re-appointment as director.
The brief resumes of the Directors who are to be appointed/
re-appointed in the ensuing Annual General Meeting, the nature of their
expertise in specific functional areas, names of companies in which they
have held directorships, committee memberships/chairmanships and their
shareholding, etc. are furnished in Corporate Governance Report forming
part of the Annual Report.
The Board recommends their appointment / re-appointment of the above
said directors in the ensuing Annual General Meeting.
During the year under review, Mr. Partha Sarathi De resigned from the
position of Chief Financial Offer of the Company with effect from
November 30, 2014. Mr. Devender Gupta has been appointed as Chief
Financial Offer and Head Information Technology of the Company with
effect from May 29, 2015. Mr. Vinod Goel, Company Secretary of the
Company has also been elevated as Group Chief Financial Offer and Head
Legal & Company Secretary of the Company with effect from May 29, 2015.
Board Meetings
During the year under review, six (6) Board Meetings were held on May
30, 2014, August 1, 2014, October 31, 2014, December 9, 2014, February
13, 2015 and March 30, 2015. The details pertaining to the attendance
are provided in the Corporate Governance Report. The intervening gap
between two Board Meetings was within the period prescribed under the
Act.
Audit Committee
The Audit Committee of the Board of Directors consists entirely of
Independent Directors. The details of the constitution, composition and
number of meetings of the Audit Committee are furnished in the
Corporate Governance Report. During the year, all recommendations made
by the Audit Committee were accepted by the Board.
Policy on Directors'' appointment & remuneration
Pursuant to the provisions Section 178(3) of the Act and Clause
49(IV)(B) of the Listing Agreement and as per the recommendations of
the Nomination and Remuneration Committee, the Board has adopted a
policy for selection & appointment of Directors and Key Managerial
Personnel of the Company and their remuneration. The components of
remuneration policy are briefly stated in the Corporate Governance
Report.
Board Evaluation
In terms of the provisions of the Act and Clause 49 of the Listing
Agreement, the Board had adopted a formal mechanism for evaluating its
performance as well as that of its Committees and individual Directors,
including the Chairman of the Board. The exercise was carried out
through a structured evaluation process covering various aspects such
as Board composition & quality, strategic & risk management, board
functioning, etc. Performance evaluation of Independent Directors was
conducted by the Board of Directors excluding the Director being
evaluated on the criteria such as ethics and values, knowledge and
proficiency, behavioural traits, etc.
Auditors
Pursuant to the provisions of Section 139 of the Act and the rules
framed thereunder, M/s. Walker Chandiok & Co. LLP, Chartered
Accountants (Regn. No. 001076N/N500013), were appointed as statutory
auditors of the Company for a period of five years to hold office from
the conclusion of the 30th Annual General Meeting ("AGM") of the Company
held on September 25, 2014 till the conclusion of the 35th AGM, subject
to ratification of their appointment at every AGM. Accordingly, the
appointment of M/s. Walker Chandiok & Co. LLP, Chartered Accountants,
as statutory auditors of the Company, is placed for ratification by the
shareholders. in this regard, the Company has received a certificate
from the auditors to the effect that if they are re-appointed, it would
be in accordance with the provisions of Section 141 of the Act.
Auditors'' Report
The management response to the matters of emphasis and observations/
comments contained in the Auditors'' Report and Annexure thereto, are
given below:
i. Amount of advance received as research fees from a customer
amounting to Rs.197.2 million which has been accounted for as income
from research and development: In Auditor''s opinion, the recognition of
such advances as income is not consistent with the revenue recognition
principles as prescribed under the Accounting Standard  9 (AS-9)
''Revenue Recognition''. Had the Company followed the principles of AS-9
with respect to these amounts, the revenue for the year ended March 31,
2015 would have been lower by Rs.197.2 million and the loss would have
been higher by Rs.197.2 million. Further, the reserves and surplus as
at that date would have been lower by Rs.197.2 million and current
liabilities as at that date would have been higher by Rs.197.2 million.
The Company has received Research & Development (R&D) fees from a
customer and such fees is non- refundable subject to certain
pre-conditions (as defend in the agreement) and most of the conditions
are being compiled by the Company. As the product is already available
in the domestic market, the management is reasonably certain of meeting
the remaining pre- conditions and therefore believes that the said fees
should be accounted for as income.
ii. Payment of managerial remuneration exceeding the limits prescribed
under Section 198 and 309 read with Part II of Schedule XIII to the
Companies, Act, 1956 by Rs.13.5 million and Rs.13.2 million in previous
financial years ended March 31, 2014 and 2013 respectively, (Emphasis of
Matter in the Auditors'' Report): The Company has incurred losses in the
respective years mainly due to the delisting of company''s vaccine from
WHO''s list of pre-qualified vaccines in the financial year 2011-12. The
Managerial Personnel have already voluntarily reduced their salary by
30-53% in the referred years. The Company has taken various measures as
explained elsewhere in this report to regain its business. Further,
the Company has already fled applications with Ministry of Corporate
Affairs to obtain requisite approvals from Central Government in respect
of such excess remuneration and requisite approvals are awaited.
iii. The Company has incurred a net loss of Rs.652.3 million during the
year ended March 31, 2015. Further as of that date, the Company''s
current liabilities exceeded its current assets by Rs.3,835.3 million.
These conditions along with other matters as set forth in aforesaid
note indicate the existence of a material uncertainty that may cast
significant doubt about the Company''s ability to continue as a going
concern. (Emphasis of Matter - clause 11 of Auditors Report):
The Company has undertaken several measures to mitigate this risk,
which include supply to UNICEF/other customers of pentavalent vaccine;
certain strategic alliances with foreign collaborators for supply of
vaccines and pharma products including 3 collaboration agreements
signed during the year under review. The Company has also successfully
executed the Master Restructuring Agreement (MRA) with the lenders of
the Company and has complied with the key conditions and successfully
implemented the MRA. Based on above measures and continuous efforts to
improve the business, the management believes that it would be able to
generate sustainable cash flow, recover and recoup the erosion in its
net worth through profitable operations, discharge its obligations as
they fall due and continue as a going concern.
Further, with regard to the Emphasis of Matters and observations
contained in the Auditors'' Report on the Consolidated Financial
Statements & the management''s explanations are given below:
i. The Auditors'' report on the financial statements of
Subsidiary/Associate Company viz. NewRise Healthcare Private Limited
and PanEra Biotec Private Limited, contains a qualification with respect
to non-receipt of confirmations from the foreign and domestic vendors:
The respective companies are in the process of reconciling these
balances with its vendors and the management is of the opinion that the
result of reconciliations will not have any material impact on the
consolidated financial statements of the Company.
ii. Unaudited Annual Accounts of the Subsidiary, Rees Investments
Limited: Though the Annual Accounts were duly finalized & signed by its
Board of Directors, the audit thereof could not be completed till the
date on which the Company''s consolidated accounts were finalized. Its
auditors have since completed their audit and given their audit report
on such accounts and there is no difference in the audited annual
accounts thereof.
iii. Slight delay in deposition of tax with appropriate authority in
one case: There has been a delay of 1 day in deposition of VAT of
Rs.2.3 million with concerned VAT authority at Kochi in the state of
Kerala due to last day being holiday in Kerala.
The notes to accounts and other observations, if any, in the Auditors''
Report are self-explanatory and therefore, do not call for any further
comments.
Cost Auditors
Pursuant to the provisions of Section 148 of the Act, M/s J.P. Gupta &
Associates, Cost Accountants, were appointed as the Cost Auditors to
conduct the audit of the Company''s Cost Records for the year ended
March 31, 2015 and the remuneration has been ratified by the
shareholders in the 30th Annual General Meeting of the Company held on
September 25, 2014.
The cost audit for the said period has been completed and the Cost
Auditors'' Report will be submitted with the Central Government within
the prescribed time.
Based on the recommendations of the Audit Committee, the Board of
Directors has appointed M/s G.T. & Co., Cost Accountants (Firm''s
Registration Number: 000253), (a firm formed by Mr. J.P. Gupta,
proprietor of the existing cost auditors, viz. M/s. J.P. Gupta &
Associates, Cost Accountants), as cost auditors of the Company for the
financial year 2015-16 pursuant to Section 148 of the Act. As required,
the resolution for ratification of remuneration of cost auditor has been
included in the notice of the AGM for shareholders'' approval. The Cost
Audit Report for the financial year 2013-14 was fled on September 12,
2014, well before the last date of fling being September 30, 2014.
Secretarial Audit
Pursuant to provisions of Section 204 of the Act read with Rule 9 of
the Companies (Appointment and Remuneration of Managerial Personnel)
Rules 2014, your Company engaged the services of M/s R&D Company
Secretaries, Practicing Company Secretaries, to conduct the Secretarial
Audit of the Company for the financial year ended March 31, 2015. The
Secretarial Audit Report (in Form MR-3) is attached as Annexure F to
this Report.
The Secretarial Audit Report contains observation in respect of excess
remuneration paid to Managing Director during the financial year 2014-15
and in this respect, the Company has decided to seek the approval of
Central Government pursuant to shareholders'' approval being sought in
the ensuing Annual General Meeting of the Company.
Material changes and commitments affecting the financial position of the
Company which have occurred between March 31, 2015 and date of the
Report Except as disclosed elsewhere in the Annual Report, there have
been no material changes and commitments which can affect the financial
position of the Company between the end of the financial year and the
date of report. As required under Section 134(3) of the Act, the Board
of Directors inform the members that during the financial year, there
have been no material changes, except as disclosed elsewhere in report:
in the nature of Company''s business, in the Company''s subsidiaries or
in the nature of business carried out by them, and in the classes of
business in which the Company has an interest.
Energy Conservation, Technology Absorption & Foreign Exchange
Particulars required pursuant to Section 134(3)(m) of the Act, read
with Rule 8(3) of the Companies (Accounts) Rules, 2014, regarding
conservation of energy, technology absorption and foreign exchange
earnings & outgo, are given in Annexure A hereto and forms part of this
Report.
Extract of Annual Return
In accordance with the provisions of section 134(3)(a) of the Act, the
extract of Annual Return in Form MGT-9 as on March 31, 2015 is attached
as Annexure B hereto and forms a part of this Report.
Directors'' Responsibility Statement
The Directors hereby confirm:
a) that in the preparation of the annual financial statements for the
financial year ended March 31, 2015 the applicable Accounting Standards
had been followed along with proper explanation relating to material
departures;
b) that for the financial year ended March 31, 2015, such accounting
policies as mentioned in the Notes to the financial statements have been
applied consistently and judgments and estimates that are reasonable
and prudent have been made so as to give a true and fair view of the
state of affairs of the Company and of the profit and loss of the Company
for the year ended March 31, 2015;
c) that proper and sufficient care has been taken for the maintenance of
adequate accounting records in accordance with the provisions of the
Act for safeguarding the assets of the Company and for preventing and
detecting fraud and other irregularities;
d) that the annual accounts have been prepared on a going concern
basis;
e) that proper internal financial controls were followed by the Company
and that such internal financial controls are adequate and were
operating effectively; and
f) that proper systems to ensure compliance with the provisions of all
applicable laws were in place and that such systems were adequate and
operating effectively.
Particulars of loans, guarantees or investments under Section 186 of
the Act
Details of loans, guarantees and investments covered under the
provisions of Section 186 of the Act are given in the notes to the
financial statements.
Risk management
The Company has formulated a Risk Management Policy and monitors the
risk management plan on a periodic basis. The Company has defend a
structured approach to manage uncertainty and to make use of these in
the decision making in all business decisions and corporate functions.
Insurance
Risk mitigation continues to be a key area of concern for the Company,
which has regularly invested in insuring itself against unforeseen
risks. The Company''s stocks and insurable assets like building, plant &
machinery, computer equipments, office equipments, furniture & fixtures,
lease hold improvements and upcoming projects have been adequately
insured against major risks. The Company has also taken appropriate
product liability insurance policies for conducting clinical trials and
for insuring its products (manufactured & sold) with an extension of
unnamed vendor liability and add on cover of public liability inclusive
of pollution liability to cover the risk on account of claims, if any,
fled against the Company.
Internal Control System
Your Company has established a system of internal controls to ensure
that assets are safeguarded and transactions are appropriately
authorised, recorded and reported. The Company''s internal control
system comprises internal audit carried out by independent firms of
Chartered Accountants and periodical review by the management. The
Audit Committee of the Board of Directors addresses significant issues
raised by both the Internal Auditors and the Statutory Auditors.
The Board has adopted the policies and procedures for ensuring the
orderly and efficient conduct of its business, including adherence to the
Company''s policies, the safeguarding of its assets, the prevention and
detection of frauds and errors, the accuracy and completeness of the
accounting records, and the timely preparation of reliable financial
disclosures.
The management believes that the overall internal control system is
dynamic and reflects the current requirements at all times, hence
ensuring that appropriate procedures and controls are in place. Your
Company is proactively identifying the areas for further improvement
which shall remain an ongoing process.
Vigil Mechanism/Whistle Blower Policy
Your Company has adopted a Whistle Blower Policy with a view to provide
its employees an avenue to raise any sensitive concerns regarding any
unethical behaviour or wrongful conduct and to provide adequate
safeguard for protection from any victimization.
Further, the Act and revised Clause 49 of the Listing Agreement
mandated every listed Company to establish a vigil mechanism,
accordingly the Company has amended the policy to align the same with
the provisions of Section 177(9) of the Act read with Rule 7 of the
Companies (Meetings of Board and its Powers) Rules, 2014 and Clause 49
of the Listing Agreement and the same is available on the website of
the Company. This Policy inter-alia provides a direct access to the
Chairman of the Audit Committee.
Your Company hereby affirms that no Director/ employee have been denied
access to the Chairman of the Audit Committee and that no complaints
were received during the year.
Corporate Social Responsibility
The provisions of Section 135 of the Act, regarding Corporate Social
Responsibility are not attracted to the Company as the Company does not
fall under the threshold limit of networth of Rs.500 crore or turnover
of Rs.1,000 crore or a net profit of Rs.5 crore during the financial
year. However, the Company has been, over the years, pursuing Corporate
Social Responsibility by putting continuous efforts in the areas of
health, education and patient awareness/assistance programs towards the
development of happier and healthier society.
Related Party Transactions
As per the provisions of the Act and the Listing Agreement, your
Company has formulated a Policy on Related Party Transactions which is
also available on Company''s website at
http://www.panacea-biotec.com/statutorypolicies. The Policy intends to
ensure that proper reporting, approval and disclosure processes are in
place for all transactions between the Company and Related Parties.
This Policy specifically deals with the review and approval of Material
Related Party Transactions keeping in mind the potential or actual
conflicts of interest that may arise because of entering into these
transactions. All Related Party Transactions are placed before the
Audit Committee for review and approval. Wherever applicable, prior
omnibus approval is obtained for related party transactions on a
quarterly basis for transactions which are of repetitive nature and /
or entered in the ordinary course of business and are at arm''s length
basis. During the year, all the related party transactions entered
into were on an arm''s length basis. The Company has not entered into
any material related party transactions, i.e. transactions exceeding
10% of the annual consolidated turnover as per the last audited
financial statements. Suitable disclosures as required under AS-18 have
been made in the notes to the financial statements.
Information on transactions with related parties pursuant to Section
134(3)(h) of the Act read with Rule 8(2) of the Companies (Accounts)
Rules, 2014 are given in Annexure C as per the prescribed Form AOC-2
and the same forms part of this report.
Particulars of Employees and Related disclosures
In terms of the provisions of Section 197(12) of the Act read with
Rules 5(2) and 5(3) of the Companies (Appointment and Remuneration of
Managerial Personnel) Rules, 2014, a statement showing the names and
other particulars of the employees drawing remuneration in excess of
the limits set out in the said Rules is provided in the Annexure D
forming part of the Annual Report.
Disclosures pertaining to remuneration and other details as required
under Section 197(12) of the Act read with Rule 5(1) of the Companies
(Appointment and Remuneration of Managerial Personnel) Rules, 2014 is
provided in the Annexure E forming part of the Annual Report.
Prevention of Sexual Harassment at Workplace
As per the requirement of The Sexual Harassment of Women at Workplace
(Prevention, Prohibition & Redressed) Act, 2013 (''Act'') and Rules made
thereunder, your Company has constituted Internal Complaints Committees
(ICC). During the year, one complaint was received and the same has
been satisfactorily resolved by the said Committee.
Acknowledgements
Your Directors acknowledge with gratitude the co-operation and
assistance received from the UN Agencies, Central Government, State
Governments and all other Government agencies and encouragement they
have extended to the Company. Your Directors also thank the
shareholders, Financial Institutions, Banks/ other lenders Customers,
Vendors and other business associates for their confidence in the
Company and its management and look forward for their continuous
support. The Board wishes to place on record its appreciation for the
dedication and commitment of your Company''s employees at all levels
which has continued to be our major strength.
For and on behalf of the Board
Dated: August 13,2015 Soshil Kumar Jain
Place: New Delhi Chairman
Mar 31, 2014
Dear Members,
The Directors are pleased to present the 30th Annual Report on
business and operations together with the audited financial statements
and the auditors'' report of your Company for the financial year ended
March 31, 2014. The financial highlights for the year under review are
given below:
Financial Results
(Rs. in million)
Particulars March 31, March 31,
2014 2013
Revenue from operations 5,030.3 5,959.2
Other Income 116.4 54.3
Total Income 5,146.7 6,013.5
Earning before Interest,
Depreciation & Tax (EBITDA) (922.3) (840.9)
Profit/ (Loss) before Tax and
exceptional items (2,974.4) (2,679.4)
Profit/(Loss) before Tax (PBT) (4.2) (2506.3)
Provision for Taxation - (205.0)
Profit/(Loss) after Tax (PAT ) (4.2) (2301.3)
Basic EPS (Rs.)* 0.07 (37.6)
Cash EPS (Rs)* 11.2 (23.9)
Book Value per share (Rs.)* (%) 91.7 91.6
* Face value Re.1 per share
Operating Results and Profits
During the year, your Company registered a turnover of Rs.4,671.4
million as against Rs.5,304.2 million during the corresponding financial
year.
The formulations segment registered turnover of Rs.3,392.9 million as
against Rs.3,581.3 million during the previous financial year. The
vaccines segment registered a turnover of Rs.1,278.9 million as against
Rs.1,722.9 million during the previous financial year, a decline of
27.4%. The decline was mainly on account of decline in institutional
business primarily on account of reduced supplies of oral polio vaccine
against tenders from Government of India and delisting of Easyfive
vaccines from the WHO''s list of prequalified vaccines for supply to
UNICEF and other UN Agencies in financial year 2011-12, which continued
to have a negative impact on current year''s sales.
Your Company pursued several corrective and preventive measures to
ensure the compliances with the WHO pre- qualification guidelines and
your directors are happy to report that inspite of all the challenges,
WHO has completed the evaluation process of pre-qualification (PQ) of
Pentavalent Vaccine (Easyfive-TT) and has now pre-qualified the said
vaccine for supply to UNICEF and UN Agencies w.e.f. 2nd October, 2013.
The Company has received long term award for supply of such vaccine to
UNICEF during the period 2014 to 2016 and has started supplying the
same during the year under review.
A detailed discussion on operations for the year ended March 31, 2014
is given in the Management Discussion and Analysis section forming part
of the Annual Report.
Dividend
In view of the losses during the year, the Board of Directors did not
recommend any dividend on the Equity Shares of the Company.
Transfer of Amounts to Investor Education and Protection Fund
Pursuant to the provisions of Section 205A(5) of the Companies Act,
1956, dividend for the year 2005-06, which remained unpaid or unclaimed
for a period of 7 years, amounting to Rs.0.2 million has been
transferred by the Company to the Central Government''s Investors
Education and Protection Fund during November, 2013.
Share Capital and Net Worth
The issued, subscribed and paid up Equity Share Capital of the Company
remains at Rs.61.3 million divided into 61,250,746 Equity Shares of
Re.1 each on 31.03.2014. The net worth of the Company stood at
Rs.5,622.9 million as compared to Rs.5,612.6 in previous year.
As the members are aware, the Company''s accumulated losses as at March
31, 2013 had resulted into erosion of more than fifty percent of its
peak net worth during the immediately preceding four financial years (as
computed as per the provisions of Sick Industrial Companies (Special
Provisions) Act, 1985) ("SICA"). The Company had made necessary
reference on November 22, 2013 to the Board for Industrial and
Financial Reconstruction (BIFR) pursuant to the provisions of SICA. The
Company''s accumulated losses as at March 31, 2014 continue to remain
more than 50% of its peak net worth during the immediately preceding
four financial years, as computed as per the provisions of SICA.
Report on Corporate Governance
Your company has always placed major thrust on managing its afairs with
diligence, transparency, responsibility and accountability. Your
Directors support the broad principles of Corporate Governance and lays
emphasis on its role to align and direct the actions of the Company in
achieving its objectives. The necessary report on Corporate Governance
as stipulated under Clause 49 of the Listing Agreement with the Stock
Exchanges, is attached herewith and forms part of this Annual Report.
Management Discussion & Analysis Report
As required pursuant to Clause 49 of the Listing Agreement with the
Stock Exchanges, a detailed Management Discussion and Analysis Report
is attached herewith and forms a part of the Annual Report.
Subsidiaries
The Company has 4 wholly owned subsidiaries (WOS), viz. Panacea Biotec
(International) S.A., Radhika Heights Ltd. (formerly known as Best On
Health Ltd.), Rees Investments Ltd. and Panacea Biotec GmbH (under
liquidation). NewRise Healthcare Pvt. Ltd. is also a subsidiary in
terms of Section 2(87) (ii) of the Companies Act, 2013.
The Company has 9 other indirect subsidiaries, as under:
Panacea Biotec Germany GmbH, the WOS of Panacea Biotec (International)
S.A.Cabana Constructions Ltd. (formerly known as Panacea Educational
Institute Pvt. Ltd.), Radicura Infra Ltd. (formerly known as Radicura &
Co. Ltd.), Nirmala Buildwell Pvt. Ltd. (formerly known as Panacea
Hospitality Services Pvt. Ltd.), Sunanda Infra Ltd. (formerly known as
Sunanda Steel Company Ltd.), Cabana Structures Ltd. (formerly known as
Best on Health Foods Ltd.) and Nirmala Organic Farms Resorts Pvt. Ltd.;
all being WOS of Radhika Heights Ltd.;
Kelisia Holdings Ltd., the WOS of Rees Investments Ltd.; and
Kelisia Investment Holding AG (under liquidation), being the step-down
WOS of Rees Investments Ltd.
Radhika Heights Limited ("RHL") inter-alia, owns a prime immovable
property being used by the Company as its Corporate Office at New Delhi
and land at Pataudi Road, Gurgaon (along with its 5 WOSs). It has a
plan for diversifcation in construction and development of township as
part of its future growth plans.
RHL had issued during the year under review, 28,74,159 equity shares of
Re.1 each at a price of Rs.1,170 per share, upon conversion of
7,211,666 0.5% Optionally Convertible Non-Cumulative Redeemable
Preference Shares of Re.1 each aggregating Rs.3,362.8 million. With
such allotment of equity shares, the Company now holds 47,76,319 equity
shares in RHL and the value of such investment as on 31st March, 2014
stands at Rs.3,385.6 million.
NewRise Healthcare Pvt. Ltd. ("NewRise") has set-up a 224 bedded
state-of-the-art multi super-specialty hospital at Gurgaon, Haryana. It
had planned to have the full-fedged operations during the year under
review and started hiring the required personnel to start operations.
It also obtained the necessary licenses & permissions for such
operations. However, since it was requiring additional funds to start
the operations as well as to fund the initial losses and working
capital requirements but the funds were not available, the management
has decided to put it on hold for the time being.
Further, NewRise has issued and allotted to the Company 33,94,915
equity shares of Rs.10 each for cash at a price of Rs.59 per share on
May 28, 2014, aggregating to Rs.200.3 million. During the year under
review, the Company has also entered into an agreement with other
shareholders of NewRise to acquire the remaining stake therein,
pursuant to which 1,82,900 shares have been purchased at an aggregate
value of Rs.15.5 million. The Company''s stake in NewRise has increased
from 75.2% to 87.4% as on 30.06.2014.
During the year under review, the Company''s WOS Panacea Biotec FZE was
liquidated on 18.06.2013. Further, the Company has disposed of its
entire shareholding in its erstwhile WOS, Lakshmi & Manager Holdings
Ltd. ("LMH") to a related party at its fair value of Rs.123.8 million.
Post such disposal, LMH and its WOS Trinidhi Finance Pvt. Ltd. and
subsidiary Best General Insurance Company Ltd. have ceased to be the
subsidiaries of the Company w.e.f. 25.01.2014.
As per the provisions of Section 212 of the Companies Act, 1956 your
Company is required to attach the Directors'' Report, Balance Sheet,
Profit and Loss Account and other information of the subsidiary
companies to its Balance Sheet. However, Ministry of Corporate Afairs,
Government of India, vide General Circular No. 2 and 3 dated 8th
February, 2011 and 21st February, 2011, respectively has granted a
general exemption from compliance with Section 212(8) of the Companies
Act, 1956 from attaching the Annual Accounts of subsidiaries in the
annual published accounts of the Company subject to fulfllment of
conditions stipulated in the circular. The Company has satisfed the
conditions stipulated in the circular and hence is entitled to the
exemption.
In compliance of the above said circulars, the Annual Accounts will be
made available upon request by any investor of the Company/ Subsidiary,
interested in obtaining the same. The annual accounts of the Subsidiary
companies will be kept for inspection by any investor at the Company''s
Corporate Office at B-1 Extn./G-3, Mohan Cooperative Industrial Estate,
Mathura Road, New Delhi  110044, India and at the Office of the
respective subsidiary companies during business hours of the respective
company. Further, the following information, for each subsidiary is
also being disclosed at some other place herein and forms part of the
Annual Report (a) Share Capital, (b) Reserves & Surplus, (c) Total
Assets, (d) Total Liabilities, (e) Details of investment (except in
case of investment in subsidiaries), (f) Turnover including other
income, (g) Profit/(Loss) before Tax, (h) Provision for Tax, (i)
Profit/(Loss) after Tax, and (j) Proposed Dividend, if any.
Further, as per the provisions of Section 212 of the Companies Act,
1956 a statement of the Company''s interest in the subsidiary companies
is attached herewith and forms part of the Annual Report.
Pursuant to Accounting Standard AS-21 issued by the Institute of
Chartered Accountants of India, Consolidated Financial Statements
presented by the Company include the financial statements of each of its
Subsidiaries.
Joint Ventures & Associates
PanEra Biotec Pvt. Ltd ("PanEra"): PanEra, the Company''s associate
company, is continuing to meet requirement of bulk vaccines and
antigens for the manufacture of Hepatitis B and Combination Vaccines by
your Company. During the year under review, it has achieved a net
turnover Rs.391.8 million as compared to Rs.175.9 million of previous
year. It has incurred a loss of Rs.11.5 million as compared to Profit
before tax of Rs.2.1 million during previous year.
Chiron Panacea Vaccines Pvt. Ltd. ("CPV"): CPV had discontinued its
operations during previous financial year pursuant to dissolution of
joint venture and is currently in the process of voluntary winding up.
Adveta Power Pvt. Ltd ("Adveta"): Adveta, the Company''s 50:50 joint
venture, with PanEra, has been granted in-principle approval by Govt.
of Arunachal Pradesh for allotment of two Power Projects of 80 MW and
75 MW in Arunachal Pradesh during previous financial year.
Consolidated Financial Statements
The consolidated financial statements of the Company and its
subsidiaries, joint ventures and associates, prepared in terms of
Section 129 of the Companies Act, 2013 and Clause 32 & 41 of the
Listing Agreement and in accordance with Accounting Standard 21 on
''Consolidated Financial Statements'' read with Accounting Standard AS-27
on ''Financial Reporting of Interest in Joint Ventures'' and Accounting
Standard AS-23 on ''Accounting for Investments in Associates'', as issued
by the Institute of Chartered Accountants of India, is attached
herewith and the same, together with Auditors'' Report thereon, forms
part of the Annual Report of the Company.
Listing of Equity Shares
The Equity Shares of the Company continue to be listed on NSE and BSE.
The requisite annual listing fees have been paid to these Exchanges.
Public Deposits
During the year under review, your Company has not invited or accepted
any deposits from the public pursuant to the provisions of Section 58A
of the Companies Act, 1956. However, the Company has continued to
accept deposits from the Company''s Directors, their relatives,
associates and the Company''s employees without inviting deposits from
them.
Due to the liquidity constraints, the Company could not service on time
the interest on the deposits for last two quarters of the year under
review. However, the major part of the dues has subsequently been paid
during current financial year.
Insurance
Risk mitigation continues to be a key area of concern for the Company,
which has regularly invested in insuring itself against unforeseen
risks. The Company''s stocks and insurable assets like building, plant &
machinery, computer equipments, Office equipments, furniture & fixtures,
lease hold improvements and upcoming projects have been adequately
insured against major risks. The Company has also taken appropriate
product liability insurance for conducting clinical trials and for
insuring its products (manufactured & sold) with an extension of
unnamed vendor liability and add on cover of public liability inclusive
of pollution liability to cover the risk on account of claims, if any,
fled against the Company.
Internal Control System
Your Company has established a robust system of internal controls to
ensure that assets are safeguarded and transactions are appropriately
authorized, recorded and reported. The Company''s internal control
system comprises internal audit carried out by independent firms of
Chartered Accountants and periodical review by the management. The
Audit Committee of the Board of Directors addresses significant issues
raised by both the Internal Auditors and the Statutory Auditors.
The Company believes that the overall internal control system is
dynamic and refects the current requirements at all times, hence
ensuring that appropriate procedures and controls are in place. Your
Company is proactively identifying the areas for further improvement
which shall remain an ongoing process.
Directors
The Board recommends appointment of the existing Independent Directors
viz. Mr. R.L. Narasimhan, Mr. N.N. Khamitkar, Dr. A.N. Saksena and
Mr. K.M. Lal as independent directors for a period of five years, as
per the provisions of the Companies Act,2013 and Clause 49 of the
Listing Agreement, not liable to retire by rotation and to hold office
for the period upto 31st March, 2019.
Mr. Sunil Kapoor who was an independent director appointed earlier as
per clause 49 of the listing agreement is not satisfying the criteria
of independent director as per the provision of the Companies Act, 2013
efective from 01.04.2014 and hence now regarded as non-independent
non-executive director.
Further, in accordance with section 152 of the Companies Act, 2013 and
Articles of Association of the Company, Mr. Soshil Kumar Jain, Director
of the Company is liable to retire by rotation. Being eligible, Mr.
Soshil Kumar Jain ofers himself for reappointment.
Approval of shareholders is also being sought for variation in terms of
appointment of Mr. Ravinder Jain, Managing Director and Dr. Rajesh Jain
& Mr. Sandeep Jain, Joint Managing Directors for making their Office
liable to retire by rotation. All other terms and conditions of their
appointment shall remain unchanged. In order to enable such change,
the relevant articles of Articles of Association are also proposed to
be amended by passing suitable resolution in the forthcoming Annual
General Meeting (AGM) of shareholders.
The brief resumes of the Directors who are to be re-appointed /
appointed, the nature of their expertise in Specific functional areas,
names of companies in which they have held directorships, committee
memberships/chairmanships, their shareholding, etc. are furnished in
Corporate Governance report forming part of the Annual Report.
The Board recommends their appointment / re-appointment of the above
said directors at the ensuing AGM.
Auditors
The term of Office of M/s. S.R. Batliboi & Co. LLP, as Statutory Auditors
of the Company will expire with the conclusion of forthcoming Annual
General Meeting of the Company. M/s. S.R. Batliboi & Co. LLP has been
Statutory Auditors of your Company since 2001. The Board of Directors
of the Company has, subject to approval of the Members, decided to make
a change in the Statutory Auditors. This change is in order to remain
at the forefront of good corporate governance and in recognition of
regulatory changes in India which has made rotation of auditors
mandatory after a period of 10 years.
As recommended by Audit Committee, the Board has proposed a resolution
at the forthcoming Annual General Meeting for appointment of M/s Walker
Chandiok & Co. LLP as Statutory Auditors of the Company in place of
M/s. S.R. Batliboi & Co. LLP, being the retiring Auditors (who have
shown their unwillingness for re-appointment) pursuant to Section 139
of the Companies Act, 2013 and forms part of the Notice. The Company
has received a letter from them to the efect that their appointment, if
made, shall be in accordance with the conditions laid down by section
139 of the Companies Act, 2013.
The Board also places on record its appreciation for the services
rendered by M/s. S.R. Batliboi & Co. LLP as the Statutory Auditors of
the Company.
Auditors'' Report
The management response to the matters of emphasis and observations/
comments contained in the Auditors Report and Annexure thereto, are
given below:
i. Payment of Managerial remuneration exceeding the limits prescribed
under Section 198 and 309 read with Part II of Schedule XIII to the
Companies, Act, 1956 by Rs.13.5 million and Rs.13.2 million in current
and previous financial years, respectively (Emphasis of Matter - clause
(a) of Auditors Report): The Company has incurred losses in the
respective years mainly due to the delisting of company''s vaccine from
WHO''s list of prequalified vaccines in the FY 2011-12. The Managerial
Personnel have already voluntarily reduced their salary by 30-53% in
the referred years. The Company has taken various measures as explained
elsewhere in this report to regain its business. Further, the Company
has already fled applications with Ministry of Corporate Afairs to
obtain requisite approvals from Central Government in respect to such
excess remuneration and requisite approvals are awaited.
ii. The existence of a material uncertainty that may cast significant
doubt about the Company''s ability to continue as a going concern
(Emphasis of Matter - clause (b) of Auditors Report): The Company has
undertaken several measures to mitigate the risk of going concern as
explained in Note 47 of the Financial Statements which include supply
to UNICEF/other customers of pentavalent vaccine, certain strategic
alliances with foreign collaborators for supply of vaccines and pharma
products, etc., comprehensive debt restructuring (CDR) proposal which
has already been admitted by CDR cell for further processing, launch of
its frst product Tacrolimus in USA in December, 2012 and fling of more
ANDAs with USFDA. Accordingly, the management is confdent that with the
above measures and continuous eforts to improve the business, the
Company would be able to generate sustainable cash fow, recover and
recoup the erosion in its net worth through Profitable operations,
discharge its short-term & long term liabilities and continue as a
going concern.
iii. Delay in payment of interest on borrowings, repayment of loan
installments and overdrawing in cash credit facilities (Clause (iii)(g)
and (xi) of the Annexure to the Auditors'' Report): The Company is
facing cash fow problems due to continuous losses resulting,
inter-alia, into delay in repayment of loan installments, payment of
interest on borrowings and overdrawing in cash credit facilities.
However, during the current year, the Company has paid part of interest
on borrowings from banks and public deposits. Moreover, the Company''s
proposal for CDR has already been admitted with CDR Cell and with the
approval of such proposal, a significant part of such installments would
be deferred as the Company would get a moratorium for such payments and
the penal interest accounted for in the books of accounts due to
delays/ defaults in payment of interest would also be reversed. The
Company is also actively pursuing further measures to strengthen the
financial position as explained in point (ii) above and note no. 47, 48
and 49 of the financial
statements and expects to overcome the situation in next 2-3 years.
iv. Slight delays in depositing statutory dues in a few cases of TDS,
service tax and wealth tax and non-deposit of custom duty dues (clause
(ix) of the Annexure to the Auditors'' Report): There was a delay of 1-7
days in 7 cases for deposit of TDS and the due amount has been
deposited with applicable interest of Rs.30,718. Similarly, there was a
delay of 147 days in deposit of wealth tax of Rs.3.8 million and the
due amount has been deposited along with interest of Rs.0.2 million on
May 27, 2014. The delay in deposition of service tax (payment on
reverse mechanism basis) was due to late receipt of invoices and/or
delay/non-payment to vendors. The Company has duly paid the due amount
of Rs.16.0 million along with applicable interest of Rs.1.9 million
within the stipulated period as per applicable laws. Further, the
pending amount of customs duty of Rs.20.7 million (including interest
upto 31st March, 2014) with respect to 2 expired advance licenses
(pending for export obligation of Easyfive vaccine on account of WHO
delisting thereof) has been paid subsequently in June/July, 2014 along
with applicable interest thereon amounting to Rs.0.5 million for the
period from 1st April, 2014 until the date of payment.
v. Accumulated losses at the end of the financial year being more than
50% of its net worth and incurring cash losses in the current and
immediately preceding financial year (clause (x) of the Annexure to the
Auditors'' Report): The Company has been continuously incurring cash
losses over the past few years which were mainly due to the delisting
of Company''s DTP based combination Vaccine by WHO from its list of
pre-qualified vaccines. Though the product has now been relisted, as
explained elsewhere in this report, the continuous losses have resulted
in accumulated losses and consequently erosion of more than 50% of its
peak net worth calculated as per the provisions of SICA. The Company
has already fled the necessary reference with BIFR on 22nd November,
2013. The Company has also taken various measures to recoup the erosion
in its net worth as explained in point (ii) above and note 47 of the
financial statements.
vi. Utilization of short-term borrowings and increase in current
liabilities amounting to Rs.3,851.0 million having been used for
long-term investment representing acquisition of fixed assets, funding
of losses and investment in subsidiaries companies (Clause (xvii) of
the Annexure to the Auditors'' Report): The Company has incurred cash
losses of Rs.3,107.6 million in last 3 financial years due to the
reasons mentioned elsewhere in this report. The Company has attempted
to raise long-term funds in the past but due to decline in turnover &
continuous losses, the Company could not arrange the same. Therefore,
in order to ensure continuity of business operations, the Company had
to temporarily use the short-term funds (in the form of increase in
short-term borrowings and current liabilities) for funding of losses
and other long-term investment representing acquisition of fixed assets
and investment in subsidiaries companies. With the improving financial
conditions as a result of relisting of pentavalent
vaccine and overall improvement in the economy & capital markets, the
Company is pursuing diferent options to raise long-term funds including
issue of securities, etc. The Company expects to overcome the situation
in near future.
Further, with regard to the matters of emphasis and observations
contained in the Auditors'' Report on the Consolidated Financial
Statement, the management''s explanations are given below:
Unaudited Annual Accounts of Subsidiary, Rees Investments Ltd.: Though
its Annual Accounts were prepared by its Board of Directors, the audit
thereof could not be completed till the date on which the Company''s
Consolidated Accounts were finalised. The audited annual accounts of
Rees Investments Ltd. were signed on June 5, 2014.
The notes to accounts and other observations, if any, in the Auditors''
Report are self-explanatory and therefore, do not call for any further
comments.
Cost Auditors
Pursuant to the provisions of Section 233B of the Companies Act, 1956,
M/s J.P. Gupta & Associates, Cost Accountants, have been appointed as
the Cost Auditors to conduct the audit of the Company''s Cost Records
for the year ended 31st March, 2014, with the approval of the Central
Government. The cost audit for the said period is under process and the
Company will submit the Cost Auditors'' Report to the Central Government
within the prescribed time.
Based on the recommendations of the Audit Committee, the Board of
Directors has re-appointed M/s J.P. Gupta & Associates, as cost
auditors of the Company for FY 2014-15 in pursuance of section 148 of
the Companies Act, 2013. As required, the resolution for ratifcation of
remuneration of cost auditor is included in the notice of the AGM for
shareholders'' approval.
The Cost Audit Report for the financial year 2012-13 was fled on
September 23, 2013, well before the last date of fling being September
30, 2013.
Disclosures under Section 217
Except as disclosed elsewhere in the Annual Report, there have been no
material changes and commitments which can afect the financial position
of the Company between the end of the financial year and the date of
report.
As required under Section 217(2) of the Companies Act, 1956, the Board
of Directors inform the members that during the financial year, there
have been no material changes, except as disclosed elsewhere in this
report:
In the nature of Company''s business,
In the Company''s subsidiaries or in the nature of business carried out
by them, in the classes of business in which the Company has an
interest.
Energy Conservation, Technology Absorption & Foreign Exchange
Particulars required under Section 217(1)(e) of the Companies Act,
1956, read with the Companies (Disclosure of Particulars in the Report
of Board of Directors) Rules, 1988, regarding conservation of energy,
technology absorption and foreign exchange earnings & outgo, are given
in Annexure A, forming part of this Report.
Directors'' Responsibility Statement
The Directors hereby confirm:
i) that in the preparation of the annual accounts, the applicable
accounting standards have been followed, along with proper explanation
relating to material departures;
ii) that the directors have selected such accounting policies and
applied them consistently and made judgments and estimates that are
reasonable and prudent so as to give a true and fair view of the state
of afairs of the Company at the end of the financial year and of the
Profit or loss of the Company for that period;
iii) that the directors have taken proper and sufcient care for the
maintenance of adequate accounting records in accordance with the
provisions of the Companies Act, 1956 for safeguarding the assets of
the Company and for preventing and detecting fraud and other
irregularities; and
iv) that the directors have prepared the annual accounts on a going
concern basis
Particulars of Employees
The particulars of employees as required to be disclosed in accordance
with the provisions of Section 217 (2A) of the Companies Act, 1956 and
the Companies (Particulars of Employees) Rules, 1975 as amended are
annexed to the Directors'' Report. However, as per the provisions of
Section 219 (1)(b)(iv) of the Companies Act, 1956 , the Report and
Accounts are being sent to all the Members of the Company excluding the
aforesaid information. Any member interested in obtaining such
particulars may write to the Company Secretary.
Acknowledgements
Your Directors acknowledge with gratitude the co-operation and
assistance received from the UN Agencies, Central Government, State
Governments and all other Government agencies and encouragement they
have extended to the Company. Your Directors also thank the
shareholders, Financial Institutions, Banks/ other lenders, customers,
vendors and other business associates for their confdence in the
Company and its management and look forward for their continuous
support. The Board wishes to place on record its appreciation for the
dedication and commitment of your Company''s employees at all levels
which has continued to be our major strength.
For and on behalf of the Board
Dated: 1st August, 2014 Soshil Kumar Jain
Place: New Delhi Chairman
Mar 31, 2013
Dear Members,
The Directors present the 29th Annual Report on business and
operations together with the audited fnancial statements and the
auditors'' report of your Company for the fnancial year ended March 31,
2013. The fnancial highlights for the year under review are given
below:
Financial Results
(Rs. in million)
Particulars March 31, March 31,
2013 2012
Revenue from Operations 5,959.2 7,005.8
Other Income 54.3 74.6
Total Income 6,013.5 7,080.4
Earning Before Interest,
Depreciation & Tax (EBITDA) (840.9) (939.1)
Proft/(Loss) before Tax (PBT) (2,506.3) (2,629.5)
Provision for Taxation (205.0) (551.6)
Proft/(Loss) after Tax (PAT) (2,301.3) (2,077.9)
Balance in Proft & Loss Account (359.7) 1,941.6
Basic EPS (Rs.)* (37.6) (33.9)
Cash EPS (Rs.)* (23.9) (21.6)
Book Value per Share (Rs.)* 91.6 132.5
* Face value Re.1/- per share
Operating Results and Profts
During the year ended March 31, 2013, your Company registered a net
turnover of Rs.5,304.2 million as against Rs.6,883.8 million during the
corresponding fnancial year.
The formulations segment registered a growth of 8.4% with a net
turnover of Rs.3,581.3 million as against Rs.3,304.3 million during the
previous fnancial year. The vaccines segment registered a net turnover
of Rs.1,722.9 million as against Rs.3,579.5 million during the previous
fnancial year, a decline of 52% mainly on account of delisting of its
vaccines from the WHO''s list of prequalifed vaccines for supply to
UNICEF and other UN Agencies in previous fnancial year, impacting the
performance negatively in the current fnancial year.
Since then, your Company has taken several corrective and preventive
measures to ensure compliance with the WHO pre- qualifcation
guidelines. During the period under review, the auditors from WHO and
UNICEF visited the vaccine facilities at Lalru (Punjab) and Baddi
(H.P.) in Feb-Mar 2013 with the objective of re-evaluation of the
acceptability in principle of combination vaccine (DTP-Hep B-Hib)
produced by Panacea Biotec for purchase by United Nations Agencies.
There were no critical observations and the Audit Team acknowledged the
continuing improvements that have been made in this regard. Your
Company is confdent that with the post audit activities, it will be
able to get re-listing of Pentavalent vaccine in the list of WHO
pre-qualifed vaccines in due course of time.
Your Company however, continues to focus on cost optimization and
efcient management of working capital. Panacea Biotec is constantly
striving to enhance its reputation as one of the India''s leading
research-based health management companies with established research,
manufacturing and marketing capabilities and is confdent of overcoming
the current adverse situation.
A detailed discussion on operations for the year ended March 31, 2013
is given in the Management Discussion and Analysis section forming part
of the Annual Report.
Dividend
In view of the losses during the year under review, the Board of
Directors did not recommend any dividend on the Equity Shares of the
Company.
Transfer of Amounts to Investor Education and Protection Fund
Pursuant to the provisions of Section 205A(5) of the Companies Act,
1956 ("the ActÂ), dividend for the year 2004-05, which remained unpaid
or unclaimed for a period of 7 years, amounting to Rs.0.2 million has
been transferred by the Company to the Central Government''s Investors
Education and Protection Fund.
Transfer to Reserves
In view of the current year losses incurred by the Company, no amount
has been transferred to the general reserves, pursuant to Companies
(Transfer of Profts to Reserves) Rules, 1975.
Share Capital and Net Worth
The Issued, Subscribed and Paid up Equity Share Capital of the Company
remains at Rs.61.3 million divided into 61,250,746 Equity Shares of
Re.1 each on 31.03.2013. The net worth of the Company has reduced to
Rs.5,612.6 million as compared to Rs.8,140.9 in previous year.
Since the Company''s accumulated losses had resulted into erosion of
more than ffty percent of its peak net worth during the immediately
preceding four fnancial years, the Company proposes to make necessary
reference to the Board for Industrial and Financial Reconstruction
(BIFR) in due course of time pursuant to the provisions of Sick
Industrial Companies (Special Provisions) Act, 1985
Report on Corporate Governance
An organization''s Corporate Governance philosophy is directly linked to
its excellence in performance. Keeping this important dictum in view,
your company has always placed major thrust on managing its afairs with
diligence, transparency, responsibility and accountability.
Your Directors support the broad principles of Corporate Governance and
lays strong emphasis on its role to align and direct the actions of the
Company in achieving its objectives.
The necessary report on Corporate Governance as stipulated under Clause
49 of the Listing Agreement with the Stock Exchanges, is attached
herewith and forms part of this Annual Report.
Management Discussion & Analysis Report
As required by Clause 49 of the Listing Agreement with the Stock
Exchanges, a detailed Management Discussion and Analysis Report is
attached herewith and forms a part of the Annual Report.
Subsidiaries
Driven by prudent operational strategy and aimed at facilitating ease
of functioning, the Company has put in place a network of Subsidiaries.
The Company has 6 wholly owned subsidiaries (WOS), viz. Best On Health
Ltd., Lakshmi & Manager Holdings Ltd., Panacea Biotec FZE, Panacea
Biotec GmbH, Rees Investments Ltd and Panacea Biotec (International)
S.A. (w.e.f. 1st April, 2012, previously step down WOS). NewRise
Healthcare Pvt. Ltd. is also a subsidiary in terms of Section
4(1)(b)(ii) of the Act.
The Company has 11 other subsidiaries in terms of Section 4(1) (c) of
the Act, as under:
Radicura & Co. Ltd., Panacea Hospitality Services Pvt. Ltd., Sunanda
Steel Company Ltd., Panacea Educational Institute Pvt. Ltd., Best on
Health Foods Ltd. and Nirmala Organic Farms & Resorts Pvt. Ltd. all
being WOS of Best On Health Ltd.
Trinidhi Finance Pvt. Ltd and Best General Insurance Company Ltd being
WOS and subsidiary respectively of Lakshmi & Manager Holdings Ltd.
Kelisia Holdings Ltd., the WOS of Rees Investments Ltd.;
Kelisia Investment Holding AG, being the step-down WOS of Rees
Investments Ltd.
Panacea Biotec Germany GmbH, the WOS of Panacea Biotec (International)
S.A.
As per the provisions of Section 212 of the Act, your Company is
required to attach the Directors'' Report, Balance Sheet, Proft and Loss
Account and other information of the subsidiary companies to its
Balance Sheet. However, Ministry of Corporate Afairs, Government of
India, vide General Circular No. 2 and 3 dated 8th February, 2011 and
21st February, 2011 respectively has granted a general exemption from
compliance with section 212(8) of the Act, from attaching the Annual
Accounts of subsidiaries in the annual published accounts of the
Company subject to fulfllment of conditions stipulated in the circular.
The Company has satisfed the conditions stipulated in the circular and
hence is entitled to the exemption.
In compliance of the above said circulars, the Annual Accounts will be
made available upon request by any investor of the Company/ Subsidiary,
interested in obtaining the same. The annual accounts of the Subsidiary
companies will be kept for inspection by any investor at the Company''s
Corporate Ofce at B-1 Extn./G-3, Mohan Cooperative Industrial Estate,
Mathura Road, New Delhi  110044, India and at the ofce of the
respective subsidiary companies during business hours of the respective
company. Further, the following information, for each subsidiary is
also being disclosed at some other place herein and forms part of the
Annual Report (a) Capital, (b) Reserves & Surplus, (c) Total Assets,
(d) Total Liabilities, (e) Details of investment (except in case of
investment in subsidiaries), (f) Turnover including other Income, (g)
Proft/Loss Before Tax, (h) Provision for Tax, (i) Proft After Tax and
(j) Proposed Dividend.
Further as per the provisions of Section 212 of the Act, a statement of
the Company''s interest in the subsidiary companies is attached herewith
and forms part of the Annual Report.
Pursuant to Accounting Standard AS-21 issued by the Institute of
Chartered Accountants of India, Consolidated Financial Statements
presented by the Company include the fnancial statements of each of its
Subsidiaries.
Joint Ventures & Associates
PanEra Biotec Pvt. Ltd: Your Company''s associate Company, PanEra Biotec
Pvt. Ltd. is continuing to meet requirement of bulk vaccines and
antigens for the manufacture of Hepatitis B and Combination Vaccines by
your Company. During the year under review, it has achieved a net
turnover and proft before tax of Rs.175.6 million and Rs.2.1 million
respectively.
Chiron Panacea Vaccines Pvt. Ltd. (CPV): During the year under review,
CPV achieved a turnover of Rs.325.7 million as compared to Rs.531.8
million during previous year During the year under review, the Joint
Venture partners have executed a Âdissolution of Joint Venture
Aggrement''. As per the dissolution Aggrement, Joint Venture has
discontinued its operations and the process of voluntarily winding up
has recently been initiated.
Adveta Power Pvt Ltd: The Company''s 50:50 joint venture Adveta Power
Pvt. Ltd with its associate PanEra Biotec Pvt. Ltd, incorporated with a
purpose to generate and distribute power or any other energy from
conventional / non-conventional energy sources on a commercial basis.
During the fnancial year, Adveta Power has been granted in-principle
approval by Govt. of Arunachal Pradesh for allotment of two Power
Projects of 80 MW and 75 MW in Arunachal Pradesh.
Consolidated Financial Statements
As required under clause 41 of the Listing Agreement with the stock
exchanges, a consolidated fnancial statement of the Company and its
subsidiaries, joint ventures and associates, as prepared in accordance
with the Accounting Standard AS-21 on ÂConsolidated Financial
Statements'' read with Accounting Standard AS-27 on ÂFinancial Reporting
of Interest in Joint Ventures'' and Accounting Standard AS-23 on
ÂAccounting for Investments in Associates'', as issued by the Institute
of Chartered Accountants of India, is attached herewith and the same,
together with Auditors'' Report thereon, forms part of the Annual Report
of the Company.
Listing of Equity Shares
The Equity Shares of the Company continue to be listed on NSE and BSE.
The requisite annual listing fees have been paid to these Exchanges.
Public Deposits
During the year under review, your Company has not invited or accepted
any deposits from the public pursuant to the provisions of Section 58A
of the Act and no amount of principal or interest was outstanding in
respect of deposits from the public as of the date of Balance Sheet.
However, during the year under review, the Company has continued to
accept deposits from the Company''s Directors, their relatives,
associates and the Company''s employees without inviting deposits from
them.
Insurance
Risk mitigation continues to be a key area of concern for the Company,
which has regularly invested in insuring itself against unforeseen
risks. The Company''s stocks and insurable assets like building, plant &
machinery, computer equipments, ofce equipments, furniture & fxtures,
lease hold improvements and upcoming projects have been adequately
insured against major risks. The Company has also taken appropriate
product liability insurance policies for conducting clinical trials and
for insuring its products (manufactured & sold) with an extension of
unnamed vendor liability and add on cover of public liability inclusive
of pollution liability to cover the risk on account of claims, if any,
fled against the Company.
Internal Control System
Your Company has established a robust system of internal controls to
ensure that assets are safeguarded and transactions are appropriately
authorized, recorded and reported.
The Company''s internal control system comprises internal audit carried
out by independent frms of Chartered Accountants and periodical review
by management. The Audit Committee of the Board addresses signifcant
issues raised by both, the Internal Auditors and the Statutory
Auditors.
The Company believes that the overall internal control system is
dynamic and refects the current requirements at all times, hence
ensuring that appropriate procedures and controls, in operating and
monitoring practices are in place.
Your Company is proactively identifying the areas for further
improvement which shall remain an ongoing process.
Directors
In accordance with the provisions of the Act and Articles of
Association of the Company, Mr. K.M. Lal, Dr. A.N. Saksena and Mr.
Sumit Jain, Directors of the Company are liable to retire by rotation
and being eligible, ofer themselves for re- appointment.
The brief resumes of the Directors who are to be re-appointed, the
nature of their expertise in specifc functional areas, names of
companies in which they have held directorships, committee
memberships/chairmanships, their shareholding, etc. are furnished in
Corporate Governance report forming part of the Annual Report.
The Board recommends their re-appointment at the ensuing Annual General
Meeting.
Auditors
M/s. S.R. Batliboi & Co. LLP, Chartered Accountants, Statutory Auditors
of your Company, will retire at the conclusion of the ensuing Annual
General Meeting and being eligible, ofer themselves for reappointment
as statutory auditors for the fnancial year 2013-14. The Company has
received a letter from them to the efect that their re-appointment, if
made, would be within the limit prescribed under section 224(1B) of the
Act and that they are not disqualifed for such re-appointment within
the meaning of Section 226 of the Act.
Based on the recommendation of the Audit Committee, the Board of
Directors of the Company proposes the re- appointment of M/s. S.R.
Batliboi & Co. LLP, Chartered Accountants, as the Statutory Auditors of
the Company.
Auditors'' Report
With regard to the matters of emphasis and observations contained in
the Auditors'' Report, the Management''s explanations are given below:
i. With regards to the managerial remuneration which has exceeded the
limits as specifed under section 198 and 309 read with Part II of
Schedule XIII of the Act by Rs.13.2 million on account of losses
incurred during the current year. The Company had adequate profts in
the past and thus it was paying remuneration to its managerial
personnel within the overall limits as specifed under the Act. However,
on account of the losses during the year under review, the managerial
remuneration exceeded the limit even after voluntary reduction in their
salary by managerial personnel in the range of 30%-53%. The Company has
already initiated necessary steps to obtain necessary approval from
Central Government in respect of protection/payment of such
remuneration.
ii. With regards to the delisting of Company''s DTP-based combination
and monovalent hepatitis B vaccines by World Health Organization (WHO)
from its list of pre- qualifed vaccines: During the year, the Auditors
from WHO and UNICEF visited the Company''s vaccine facilities at Lalru
(Punjab) and Baddi (H.P.) with the objective of re- evaluation of the
acceptability in principle of Pentavalent Vaccine (DTP-Hep B-Hib)
produced by Panacea Biotec for purchase by United Nations Agencies. The
Company has completed implementation of Corrective and Preventive
Action (CAPA) subsequent to the visit by WHO Auditors and also
submitted additional data pertaining to product''s stability studies to
WHO. The Company has a stock of Rs.324.6 millions and Rs.394.2 milions
of raw & packing material and fnished goods, respectively as at March
31, 2013 pertaining to these vaccines. Fixed assets relating to above
products cannot be quantifed separately. The Company is confdent that
with the post audit activities, it will be able to get re-listing of
Pentavalent vaccine in the list of WHO pre-qualifed vaccines in due
course and would do it''s best to use/sell/liquidate these stocks in
domestic and international markets.
iii. As regards to default in repayment of dues to banks amounting to
Rs.994 million during the year. These loans have been subsequently
rescheduled and the moratorium period of 1 year & 9 months have been
granted by the banks. The Company did not have any outstanding dues
towards any fnancial institution/banks or debentures as at the end of
year under review.
iv. As regards slight delay in deposition of undisputed statutory dues
in few cases: The auditors'' observation is self-explanatory as the
amount involved and the delay was not signifcant and delay was due to
normal operational difculties. The total amount of such dues (VAT) was
Rs.206,327 only and there was a delay of one day due to postal delays.
The Company had already deposited the said amount.
v. As regards cash loss incurred by the Company : The Company has
incurred cash loss in the current and immediately preceding fnancial
year due to the decline in turnover of vaccine segment by 51% in
current year and 57% in previous year mainly on account of unexpected
delisting of Company''s DTP-based combination vaccines by World Health
Organization (WHO) from its list of pre- qualifed vaccines and foreign
exchange loss due to depreciation of Indian Rupee. The Company has
taken several corrective and preventive actions to address these issues
efectively.
The notes to accounts and other observations, if any, in the Auditors''
Report are self-explanatory and therefore, do not call for any further
comments.
Cost Auditors
Pursuant to the provisions of Section 233B of the Act, M/s J.P. Gupta
& Associates, Cost Accountants, have been appointed as the Cost
Auditors to conduct the audit of the Company''s Cost Records for the
year ended 31st March, 2013, with the approval of the Central
Government. The cost audit for the said period is under process and the
Company will submit the Cost Auditors'' Report to the Central Government
within the prescribed time. They have also been appointed as the Cost
Auditors for the fnancial year 2013-14, with the approval of the
Central Government.
The Cost Audit Report for the fnancial year 2011-12 was fled on
December 11, 2012. The last date of fling of said report was February
28, 2013 in terms of General Circular No. 2/2013 of Ministry of
Corporate Afairs, Cost Audit Branch.
Disclosures Under Section 217 of the Act
Except as disclosed elsewhere in the report, there have been no
material changes and commitments which can afect the fnancial position
of the Company between the end of the fnancial year and the date of
report.
As required under Section 217(2) of the Act, the Board of Directors
inform the members that during the fnancial year, there have been no
material changes, except as disclosed elsewhere in this report:
in the nature of Company''s business,
in the Company''s subsidiaries or in the nature of business carried out
by them,
in the classes of business in which the Company has an interest.
Energy Conservation, Technology Absorption & Foreign Exchange
Particulars required under Section 217(1)(e) of the Act, read with the
Companies (Disclosure of Particulars in the Report of Board of
Directors) Rules, 1988, regarding conservation of energy, technology
absorption and foreign exchange earnings & outgo, are given in Annexure
A, forming part of this Report.
Directors'' Responsibility Statement
The Directors hereby confrm:
i) that in the preparation of the annual accounts, the applicable
accounting standards have been followed, along with proper explanation
relating to material departures;
ii) that the directors have selected such accounting policies and
applied them consistently and made judgments and estimates that are
reasonable and prudent so as to give a true and fair view of the state
of afairs of the Company at the end of the fnancial year and of the
proft or loss of the Company for that period;
iii) that the directors have taken proper and sufcient care for the
maintenance of adequate accounting records in accordance with the
provisions of the Act for safeguarding the assets of the Company and
for preventing and detecting fraud and other irregularities; and
iv) that the directors have prepared the annual accounts on a going
concern basis.
Particulars of Employees
The particulars of employees as required to be disclosed in accordance
with the provisions of Section 217 (2A) of the Act and the Companies
(Particulars of Employees) Rules, 1975 as amended are annexed to the
Directors'' Report. However, as per the provisions of Section 219
(1)(b)(iv) of the Companies Act, 1956 the Report and Accounts are being
sent to all the Members of the Company excluding the aforesaid
information. Any member interested in obtaining such particulars may
write to the Company Secretary.
Acknowledgements
Your Directors acknowledge with gratitude the co-operation and
assistance received from the UN Agencies, Central Government, State
Governments and all other Government agencies and encouragement they
have extended to the Company.
Your Directors also thank the shareholders, Financial Institutions,
Banks/ other lenders Customers, Vendors and other business associates
for their confdence in the Company and its management and look forward
for their continuous support.
The Board wishes to place on record its appreciation for the dedication
and commitment of your Company''s employees at all levels which has
continued to be our major strength.
For and on behalf of the Board
Dated: 8th August, 2013 Soshil Kumar Jain
Place: New Delhi Chairman
Mar 31, 2012
The Directors present the 28th Annual Report on business and
operations together with the audited financial statements and the
auditors'' report of your Company for the financial year ended March 31,
2012. The financial highlights for the year under review are given
below:
Financial Results
(Rs. in million)
Particulars For the For the
year ended year ended
March 31,12 March 31,11
Revenue from Operations 7,005.8 11,498.3
Other Income 74.6 156.8
Total Income 7,080.4 11,655.1
Earning Before Interest, Depreciation
& Tax (EBITDA) (939.1) 2,689.1
Profit/(Loss) before Tax (PBT) (2,629.5) 1,554.9
Provision for Taxation (551.6) (204.4)
Profit/(Loss) after Tax (PAT) (2,077.9) 1,350.5
Dividend proposed on Equity Shares - 45.9
Dividend Distribution Tax - 7.5
Transfer to General Reserve - 135.0
Balance in Profit & Loss Account 1,941.6 4,019.5
Basic EPS (Rs.)* (33.9) 21.4
Cash EPS (Rs.)* (21.6) 30.4
Book Value per Share (Rs.)* 132.5 103.9
Dividend per Equity Shares (%) - 75%
* Face value Re.1- per share
Operating Results and Profits
During the year ended March 31, 2012, the Company registered a net
turnover of Rs.6,883.8 million as against Rs.11,304.6 million during
the corresponding financial year.
The Formulations Segment registered a growth of 11.1% with a net
turnover of 3,304.3 million as against 2,972.3 million during the
previous financial year. The Vaccines Segment registered a decline of
57% with a net turnover of Rs.3,579.5 million as against Rs.8,332.3
million during the previous financial year mainly on account of
delisting of its vaccines from the WHO''s list of pre-qualified vaccines
for supply to UNICEF and other UN Agencies during the year, impacting
the performance negatively.
During the year under review, following a routine site audit, WHO has
delisted the company''s DTP based combination and monovalent Hepatitis B
vaccines from its list of pre-qualified vaccines on account of
deficiencies in quality management system. The company has taken
several corrective and preventive measures to ensure compliance with
the WHO pre-qualification guidelines and is confident that with these
corrective and preventive measures, the company will be able to get the
above said vaccines relisted in the list of WHO pre- qualified vaccines
in due course of time.
During the year under review, considering the series of changes made to
the vaccines formulation facility at New Delhi and WHO assessment that
further corrective measures need to be implemented, the company had
voluntarily withdrawn its oral polio vaccines from the WHO list of pre-
qualified vaccines. The National Regulatory Authority of India (NRA)
has since approved this facility and the Company has started
manufacturing vaccines for supplies to other than UN agencies.
Your Company however, continues to focus on sustaining growth in
emerging markets, cost optimization and efficient management of working
capital. These strategic initiatives are expected to fuel the Company''s
growth across its business operations.
A detailed discussion on operations for the year ended March 31, 2012
is given in the Management Discussion and Analysis section forming part
of the Annual Report.
Dividend
In view of the non-availability of profits during the year under
review, the Board of Directors has not recommended any dividend on the
Equity Shares of the Company.
Transfer of Amounts to Investor Education and Protection Fund
Pursuant to the provisions of Section 205A(5) of the Companies
Act,1956, dividend for the year 2003-04, which remained unpaid or
unclaimed for a period of 7 years, amounting to Rs.0.16 million has
been transferred by the Company to the Central Government''s Investors
Education and Protection Fund.
Transfer to Reserves
In view of the current year losses incurred by the Company, no amount
was transferred to the general reserves, pursuant to Companies
(Transfer of Profits to Reserves) Rules, 1975.
Share Capital
The Issued, Subscribed and Paid-up Equity Share Capital of the Company
stands at Rs.61.2 million divided into 61,250,746 Equity Shares of Re.1
each on 31.03.2012.
Revised Schedule VI
The Company was using pre-revised Schedule VI to the Companies Act,
1956, for preparation and presentation of its financial statements till
the year ended March 31, 2011. During the year ended March 31, 2012,
the revised Schedule VI notified under the Companies Act, 1956, has
become applicable to the Company. The Company has reclassified previous
year figures to conform to this year''s classification. The adoption of
revised Schedule VI does not impact recognition and measurement
principles followed for preparation of financial statements. However,
it significantly impacts presentation and disclosures made in the
financial statements, particularly presentation of Balance Sheet.
Report on Corporate Governance
Your Company strives to attain high standards of corporate governance
while interacting with all the stakeholders. The increasing diversity
of the investing community and the integrated nature of global capital
markets render corporate governance a vital issue for investors The
Company believes that timely disclosures, transparent accounting
policies and a strong independent Board go a long way in maintaining
good corporate governance, preserving shareholders trust and maximizing
long term corporate value. In pursuit of corporate goals, the Company
accords high importance to transparency, accountability and integrity
in its dealings. Our philosophy on Corporate Governance is driven
towards welfare of all the Stakeholders and the Board of Directors
remains committed towards this end.
The Board of Directors supports the broad principles of Corporate
Governance and lays strong emphasis on its role to align and direct the
actions of the Company in achieving its objectives.
The compliance report on Corporate Governance and a certificate
regarding compliance of the conditions of Corporate Governance, as
stipulated under Clause 49 of the Listing Agreement with the Stock
Exchanges, is attached herewith and forms part of this Annual Report.
Certificate from Managing Director and Chief Financial Officer,
inter-alia, confirming the correctness of the financial statements,
compliance with Company''s Code of Conduct, adequacy of the Internal
Control measures and reporting of matters to the Audit Committee in
terms of Clause 49 of the Listing Agreement with the Stock Exchanges,
is also enclosed as a part of the Annual Report.
Revaluation of Fixed Assets
The Company has revalued its land and buildings as at 1st April 2011,
at the fair values determined by an independent external valuer by
reference to market-based evidence based on active market prices
adjusted for any difference in the nature, location or condition of the
specific property. The revaluation has resulted in an increase in the
book value of land and building by Rs.3,946.5 million which has been
credited to revaluation reserve. In accordance with the option given in
the guidance note on accounting for depreciation in companies, the
Company has recouped depreciation on revaluation of these assets out of
revaluation reserve.
Management Discussion & Analysis Report
As required by Clause 49 of the Listing Agreement with the Stock
Exchanges, a detailed Management Discussion and Analysis Report forms a
part of the Annual Report.
Subsidiaries
The Company has 5 wholly owned subsidiaries (WOS), viz. Best On Health
Ltd., Lakshmi & Manager Holdings Ltd. (w.e.f. November 24, 2011),
Panacea Biotec FZE, Panacea Biotec GmbH and Rees Investments Ltd.
NewRise Healthcare Pvt. Ltd. is also a subsidiary in terms of Section
4(1)(b)(ii) of the Act.
The Company has 12 other subsidiaries in terms of Section 4(1)(c) of
the Act, as under:
- Radicura & Co. Ltd., Panacea Hospitality Services Pvt. Ltd.,
Sunanda Steel Company Ltd., Panacea Educational Institute Pvt. Ltd.,
Best on Health Foods Ltd. and Nirmala Organic Farms & Resorts Pvt.
Ltd., all being WOS of Best On Health Ltd.
- Trinidhi Finance Pvt. Ltd. and Best General Insurance Company Ltd.
both being indirect WOS through Lakshmi & Manager Holdings Ltd. w.e.f.
November 24, 2011.
- Kelisia Holdings Ltd., Cyprus, the WOS of Rees Investments Ltd.
- Kelisia Investment Holding AG, Switzerland, Panacea Biotec
(International) SA, Switzerland and Panacea Biotec Germany GmbH, all
being the step-down subsidiaries of Rees Investments Ltd.
During the year under review, the Company''s step-down WOS, Panacea
Biotec (Europe) AG, Switzerland was liquidated on December 15, 2011.
As per the provisions of Section 212 of the Companies Act, 1956, your
Company is required to attach the Directors'' Report, Balance Sheet,
Profit and Loss Account and other information of the subsidiary
companies to its Balance Sheet. However, Ministry of Corporate Affairs,
Government of India, vide General Circular No. 2 and 3 dated 8th
February, 2011 and 21st February, 2011 respectively has granted a
general exemption from compliance with section 212(8) of the Companies
Act, 1956, from attaching the Annual Accounts of subsidiaries in the
annual published accounts of the Company subject to fulfillment of
conditions stipulated in the circular. The Company has satisfied the
conditions stipulated in the circular and hence is entitled to the
exemption.
In compliance of the above said circular, the Annual Accounts will be
made available upon request by any investor of the Company/ Subsidiary,
interested in obtaining the same. The annual accounts of the Subsidiary
companies will be kept for inspection by any investor at the Company''s
Corporate Office at B-1 Extn./G-3, Mohan Co-operative Industrial
Estate, Mathura Road, New Delhi - 110044, India and at the office of
the respective Subsidiary companies during business hours of the
respective company. Further, the following information, in aggregate,
for each Subsidiary is also being disclosed at some other place herein
and forms part of the Annual Report (a) Capital, (b) Reserves &
Surplus, (c) Total Assets, (d) Total Liabilities, (e) Details of
investment (except in case of investment in subsidiaries), (f) Turnover
including other Income, (g) Profit/ Loss Before Tax, (h) Provision for
Tax, (i) Profit After Tax, and (j) Proposed Dividend.
Further as per the provisions of Section 212 of the Act, a statement of
the holding Company''s interest in the Subsidiary companies is attached
herewith and forms part of the Annual Report.
Pursuant to Accounting Standard AS-21 issued by the Institute of
Chartered Accountants of India, Consolidated Financial Statements
presented by the Company include the financial statements of each of
its Subsidiaries.
Joint Ventures & Associates
Panacea Biotec''s belief in collaborative growth makes it an ideal joint
venture partner for Indian and global companies. The Company has
nurtured several important JVs that enable it to strengthen its growth
fundamentals and to enhance its customer value.
Chiron Panacea Vaccines Pvt. Ltd.: The company''s joint venture Chiron
Panacea Vaccines Pvt. Ltd. (CPV) is marketing vaccines in the domestic
private market and achieved a turnover of Rs.531.8 million during the
year under review. CPV has a significant market share in the DTwP based
pediatric combination vaccine with Easyfour at 62% and Easyfive at 43%
market share as per the March 2012 report of multi-clients study
conducted by Frost & Sullivan.
Adveta Power Pvt. Ltd.: During the year under review, the Company has
formed a 50:50 joint venture company Adveta Power Pvt. Ltd. w.e.f. July
4, 2011, with its associate company PanEra Biotec Pvt. Ltd. being the
other partner with an object to engage in the business of power
generation mainly from renewable resources like Hydro, Solar and Wind.
During the year under review Company''s joint venture Cambridge
Biostability Ltd. liquidated on September 16, 2011.
PanEra Biotec Pvt. Ltd.: Your Company''s associate Company, PanEra
Biotec Pvt. Ltd. is continuing to meet requirement of bulk vaccines and
antigens for the manufacture of Hepatitis B and Combination Vaccines by
your Company. During the year under review, it has achieved a net
turnover and profit before tax of Rs.274.4 million and (Rs.107.9)
million as compared to Rs.721.8 million and Rs.236.1 million
respectively during last financial year.
Consolidated Financial Statements
As required under clause 41 of the Listing Agreement with the stock
exchanges, a consolidated financial statement of the Company and its
subsidiaries, joint ventures and associates, as prepared in accordance
with the Accounting Standard AS-21 on ''Consolidated Financial
Statements'' read with Accounting Standard AS-27 on ''Financial Reporting
of Interest in Joint Ventures'' and Accounting Standard AS-23 on
''Accounting for Investments in Associates'', as issued by the Institute
of Chartered Accountants of India, is attached herewith and the same,
together with Auditors'' Report thereon, forms part of the Annual Report
of the Company.
Listing of Equity Shares
The Equity Shares of the Company continue to be listed on NSE and BSE.
The requisite annual listing fees have been paid to these Exchanges.
Public Deposits
During the year under review, your Company has not invited or accepted
any deposits from the public pursuant to the provisions of Section 58A
of the Act and no amount of principal or interest was outstanding in
respect of deposits from the public as of the date of Balance Sheet.
However, during the year under review, the Company has continued to
accept deposits from the Company''s Directors, their relatives,
associates and the Company''s employees without inviting deposits from
them.
Insurance
Risk mitigation continues to be a key area of concern for the Company,
which has regularly invested in insuring itself against unforeseen
risks. The Company''s stocks and insurable assets like building, plant &
machinery, computer equipments, office equipments, furniture &
fixtures, lease hold improvements and upcoming projects have been
adequately insured against major risks. The Company has also taken
appropriate product liability insurance policies for conducting
clinical trials and for insuring its products (manufactured & sold)
with an extension of unnamed vendor liability and add on cover of
public liability inclusive of pollution liability to cover the risk on
account of claims, if any, filed against the Company.
Internal Control System
Your Company has established a robust system of internal controls to
ensure that assets are safeguarded and transactions are appropriately
authorized, recorded and reported.
The Company''s internal control system comprises internal audit carried
out by independent firms of Chartered Accountants and periodical review
by management. The Audit Committee of the Board addresses significant
issues raised by both, the Internal Auditors and the Statutory
Auditors.
The Company believes that the overall internal control system is
dynamic and reflects the current requirements at all times, hence
ensuring that appropriate procedures and controls, in operating and
monitoring practices are in place.
Your Company is proactively identifying the areas for further
improvement which shall remain an ongoing process.
Directors
In accordance with the provisions of the Act and Articles of
Association of the Company, Mr. Soshil Kumar Jain, Mr. N.N. Khamitkar
and Mr. Sunil Kapoor, Directors of the Company, are liable to retire by
rotation and being eligible, offer themselves for re-appointment.
The brief resumes of the Directors who are to be re-appointed, the
nature of their expertise in specific functional areas, names of
companies in which they have held directorships, committee
memberships/chairmanships, their shareholding, etc. are furnished in
the Corporate Governance Report, forming part of the Annual Report.
The Board recommends their re-appointment at the ensuing Annual General
Meeting.
Auditors
M/s. S.R. Batliboi & Co., Chartered Accountants, Statutory Auditors of
your Company, will retire at the conclusion of the ensuing Annual
General Meeting and being eligible; offer themselves for reappointment
as statutory auditors for the financial year 2012-13. The Company has
received a letter from them to the effect that their re-appointment, if
made, would be within the limit prescribed under section 224(1 B) of
the Act, and that they are not disqualified for such re-appointment
within the meaning of Section 226 of the Act.
Based on the recommendation of the Audit Committee, the Board of
Directors of the Company proposes the re- appointment of M/s. S.R.
Batliboi & Co., Chartered Accountants, as the Statutory Auditors of the
Company.
Auditors'' Report
With regard to the matters of emphasis and observations contained in
the Auditors'' Report, the Management''s explanations are given below:
- With regard to capitalization of expenditure on clinical trials for
the purpose of registration of Company''s products outside India, the
management believes that these products would be commercially viable
and there is no reason to believe that there is any uncertainty that
may lead to not securing registration for the products from the
regulatory authorities. An amount of Rs.186.5 million towards the above
said expenditure on clinical trials during the year ended March 31,
2012, has been capitalized.
- On account of the unexpected inadequacy of profits during the year
ended March 31, 2012, the managerial remuneration of Rs.65.9 million
has exceeded the limits prescribed under Section 198 and 309 read with
Part II of Schedule XIII of the Companies, Act, 1956. The Company had
adequate profits for past many years and thus was paying remuneration
to its managerial personnel within overall limits as specified under
the Act. However, in view of the losses incurred during the financial
year 2011-12, the managerial remuneration paid during that year
exceeded the limits prescribed under the Act. The company has initiated
steps to obtain approval from Central Government for the excess
remuneration paid.
- As regards the stock of raw material and finished goods inventories
of Rs.1,526.7 million and Rs.363.0 million, respectively, as at March
31, 2012, of the Company''s DTP based combination vaccines and oral
polio vaccines delisted by WHO from its list of pre-qualified vaccines,
the management is confident that with the corrective & preventive
measures being taken to ensure compliance with the WHO
pre-qualification guidelines,the Company will be able to get re-listing
of these vaccines in the WHO''s list of pre-qualified vaccines in due
course and these stock would be utilized/sold accordingly. Further as
fixed assets relating to above vaccines cannot be quantified
separately, hence, impact, if any, on such fixed assets cannot be
ascertained. Pending outcome of above measures, no adjustment has been
made to the financial statements.
Cost Auditors
Pursuant to the provisions of Section 233B of the Act, M/s J.P. Gupta
& Associates, Cost Accountants, have been appointed as the Cost
Auditors to conduct the audit of the Company''s Cost Records for the
year ended 31st March, 2012, with the approval of the Central
Government. The cost audit is under process and the Company will submit
the Cost Auditors'' Report to the Central Government in time. They have
also been appointed as the Cost Auditors for the financial year
2012-13, subject to the approval of Central Government.
Disclosures Under Section 217 of the Act
Except as disclosed elsewhere in the report, there have been no
material changes and commitments which can affect the financial
position of the Company between the end of the financial year and the
date of report.
As required under Section 217(2) of the Act, the Board of Directors
inform the members that during the financial year, there have been no
material changes, except as disclosed elsewhere in this report:
- in the nature of Company''s business,
- in the Company''s subsidiaries or in the nature of business carried
out by them,
- in the classes of business in which the Company has an interest.
Energy Conservation, Technology Absorption & Foreign Exchange
Particulars required under Section 217(1 )(e) of the Act, read with the
Companies (Disclosure of Particulars in the Report of Board of
Directors) Rules, 1988, regarding conservation of energy, technology
absorption and foreign exchange earnings & outgo, are given in Annexure
A, forming part of this Report.
Directors'' Responsibility Statement
The Directors hereby confirm:
i) that in the preparation of the annual accounts, the applicable
accounting standards have been followed, along with proper explanation
relating to material departures;
ii) that the directors have selected such accounting policies and
applied them consistently and made judgments and estimates that are
reasonable and prudent so as to give a true and fair view of the state
of affairs of the Company at the end of the financial year and of the
profit or loss of the Company for that period;
iii) that the directors have taken proper and sufficient care for the
maintenance of adequate accounting records in accordance with the
provisions of the Act for safeguarding the assets of the Company and
for preventing and detecting fraud and other irregularities; and
iv) that the directors have prepared the annual accounts on a going
concern basis.
Particulars of employees
The particulars of employees as required to be disclosed in accordance
with the provisions of Section 217(2A) of the Companies Act, 1956 and
the Companies (Particulars of Employees) Rules, 1975 as amended are
annexed to the Directors'' Report. However, as per the provisions of
Section 219 (1)(b)(iv) of the Companies Act, 1956 the Report and
Accounts are being sent to all the Members of the Company excluding the
aforesaid information. Any Member interested in obtaining such
particulars may write to the Company Secretary.
Acknowledgements
Your Directors acknowledge with gratitude the co-operation and
assistance received from the UN Agencies, Central Government, State
Governments and all other Government agencies and encouragement they
have extended to the Company.
Your Directors also thank the shareholders, Financial Institutions,
Banks/ other lenders Customers, Vendors and other business associates
for their confidence in the Company and its management and look forward
for their continuous support.
The Board wishes to place on record its appreciation for the dedication
and commitment of your Company''s employees at all levels which has
continued to be our major strength.
For and on behalf of the Board
New Delhi Soshil Kumar Jain
7th August, 2012 Chairman
Mar 31, 2011
Dear Shareowners,
Backed by strong credentials and expanding footprints, the Company has
reported excellent business and operational performance during the
fiscal 2010-11.
The Directors have pleasure in presenting here the 27th Annual Report
on the Company''s business and operations along with the audited
standalone and consolidated financial accounts and the auditors'' report
thereon for the financial year ended March 31, 2011. The financial
highlights for the year under review are given below:
Financial Results
(Rs.in million)
Particulars For the For the
year ended year ended
March 31,11 March 31,10
Net Turnover 11,304.6 8,843.7
Other Income 350.5 934.8
Total Income 11,655.1 9,778.5
Profit Before Interest, 2,648.7 1,582.5
Depreciation &Tax (EBITDA)
Financial Expenses 521.1 423.5
Depreciation 731.1 664.5
Profit before Tax (PBT) 1,554.9 1,181.0
Provision for Taxation (204.4) (380.6)
Profit after Tax (PAT) 1,350.5 800.4
Dividend proposed on Equity 45.9 16.7
Shares
Dividend Distribution Tax 7.5 2.8
Transfer to General Reserve 135.0 80.0
Balance in Profit & Loss Account 4,019.5 2,856.1
Basic EPS (Rs.)* 21.4 12.0
Cash EPS (Rs.)* 30.4 19.3
Book Value per Share (Rs.)* 103.9 104.2
Dividend per Equity Shares (%) 75% 25%
* Face value Re. 1/- per share
Operating Results and Profits
The exemplary performance of the Company is manifest in the numbers
posted for the year under review. During the year ended March 31,2011,
the Company registered a record net turnover of Rs.11,304.6 million as
against Rs.8,843.7 million during the corresponding previous financial
year, a spectacular growth of 27.8%.The Company registered EBITDA of
Rs.2,648.7 million as compared to Rs.1,582.5 million during the
corresponding previous financial year,a growth of 67.4%.
Likewise,thePBTand PATfortheyear under review have grown by 31.7% and
68.7% respectively and stood at Rs.1,554.9 million and Rs.1,350.5
million respectively, as compared to the PBT and PAT at Rs.1,181.0
million and Rs.800.4 million respectively in the previous fiscal.
This growth was recorded across our both business segments. The
Vaccines Segment grew by 29.3% and registered a net turnover of
Rs.8,332.3 million as against Rs.6,443.9 million during previous
financial year. The Formulations Segment registered a growth of 23.9%
with a net turnover of Rs.2,972.3 million as compared to Rs.2,398.8
million during the previous financial year.
Your Company strives to remain globally and regionally attractive to
customers and investors by continuing to focus on sustained growth,
cost optimization and efficient management of working capital.These
strategic initiatives are continually fueling the Company''s growth
across its business operations.
A detailed discussion on operations for the year ended March 31,2011 is
given in the Management Discussion and Analysis section.
Dividend
The Directors are pleased to recommend a dividend of 75% which
translates to Re.0.75 per equity share of the Company for the financial
year 2010-11 as against 25% dividend during last year.
The dividend on Equity Shares is placed before you for approval at the
ensuing Annual General Meeting and, if approved, will absorb an amount
of Rs.45.9 million (excluding dividend distribution tax).
The proposed Final Dividend will be paid to the members:
i) whose names appear on the Register of Members of the Company as on
24th September, 2011; and
ii) whose names appear as beneficial owners as at the close of business
on 20th September, 2011 as per details to be furnished by the National
Securities Depository Limited and Central Depository Services (India)
Limited.
Transfer of Amounts to Investor Education and Protection Fund
Pursuant to the provisions of Section 205A(5) of the Companies Act,
1956 ("the Act"), dividend for the year 2002-03, which remained unpaid
or unclaimed for a period of 7 years, amounting to Rs.0.16 million has
been transferred by the Company to the Central Government''s Investors
Education and Protection Fund.
Transfer to Reserves
An amount of Rs.135.0 million is proposed to be transferred to the
general reserves of the Company out of the profits of the Company for
the year.
Buyback of Shares
During the year under review, the Company commenced its Buy-back offer
on 21 st July,2010 for purchase of not more than 5,592,000 Equity
Shares at a maximum price of Rs.229 per share from its existing
shareholders from the open market through Stock Exchanges. The Company
bought back the entire 5,592,000 Equity Shares at an average price of
Rs.196.39 per share by utilising an amount of Rs.1,098.2 million under
such Buy-back offer.The said Buy-back offer closed on 15th October,
2010.
Share Capital
The Issued, Subscribed and Paid-up Equity Share Capital of the Company
after extinguishment of shares bought back under the above referred
Buy-back offer has been reduced to Rs.61.3 million divided into
61,250,746 Equity Shares of Re.1 each on 31.03.2011 as against Rs.66.8
million divided into 66,842,746 Equity Shares of Re.1 each on
31.03.2010.
Foreign Currency Convertible Bonds (FCCBs)
During the year under review, outstanding Zero Coupon Convertible Bonds
(Tranche 2) with Nominal Value of USD 36.8 million which were due for
redemption on Maturity Date i.e., 14th February, 2011, have been
redeemed in full at the redemption price as perthe terms and conditions
of the Bonds. Consequently,Tranche 2 Bonds have been extinguished and
no bonds remain outstanding.
Credit Rating
During the year under review, CARE has revised the ratings assigned to
the Company with respect to the various bank facilities availed by the
Company and assigned ''CARE A-''(Single A Minus) to Long-term Bank
Facilities,''PR2 ''(PR Two Plus) to the Long-term/Short-term Bank
Facilities and''PR1''(PR one) to the CP/Shortterm NCD (within working
capital limits from the Banks).
Implementation of IFRS/IND-AS
As a part of the exercise for preparing for implementation of
IFRS/IND-AS earlier scheduled to be implemented by the Ministry of
Corporate Affairs (MCA), Government of India w.e.f. 1st April, 2011 for
convergence of Indian Accounting Standards with International Financial
Reporting Standards (IFRS), the Company has carried out fair valuation
of its Fixed Assets as on 01.04.2010. Your Directors are pleased to
inform that the fair value of the Company''s fixed assets has been
arrived at Rs.8,330.2 million as against the written down value (WDV)
of Rs.5,034.1 million as on that date. However, as a prudent accounting
policy, the revaluation of fixed assets in its books of accounts has
not been considered. Moreover, as the implementation of IFRS/IND-AS has
now been postponed by MCA and is now proposed to be effective w.e.f.
1st April, 2012, the fair valuation of fixed assets will be carried out
at appropriate time in future in order to take effect of fair valuation
thereof into the books of accounts.
Report on Corporate Governance
An organization''s Corporate Governance philosophy is directly linked to
its excellence in performance. Keeping this important dictum in view,
your Company has always placed major thrust on managing its affairs
with diligence, transparency, responsibility and accountability.
The Company is committed to adopting and adhering to the best corporate
governance practices recognized globally. The Company understands and
respects its fiduciary role and responsibility towards stakeholders and
the society at large and strives hard to serve their interests,
resulting in creation of value and wealth for all stakeholders at all
times.
The compliance report on Corporate Governance and a certificate
regarding compliance of the conditions of Corporate Governance, as
stipulated under Clause 49 of the Listing Agreement with the Stock
Exchanges,is attached herewith and forms part of this Annual Report.
Certificate from Managing Director and Chief Financial Officer,
inter-alia,confirming the correctness of the financial statements,
compliance with Company''s Code of Conduct,adequacy of the Internal
Control measures and reporting of matters to the Audit Committee in
terms of Clause 49 of the Listing Agreement with the Stock Exchanges,
is also enclosed as a part of the Annual Report.
Management Discussion & Analysis Report
As required by Clause 49 of the Listing Agreement with the Stock
Exchanges, a detailed Management Discussion and Analysis Report forms a
part of the Annual Report.
Subsidiaries
Driven by prudent operational stratagem and aimed at facilitating ease
of functioning, the Company has put in place a network of Subsidiaries.
The Company has 4 wholly owned subsidiaries (WOS), viz. Best On Health
Ltd., Panacea Biotec FZE, Panacea Biotec GmbH and Rees Investments Ltd.
NewRise Healthcare Private Limited (formerly known as Umkal Medical
Institute Pvt. Ltd.) is also a subsidiary in terms of Section
4(1)(b)(ii) of the Act.The Company has 11 other subsidiaries in terms
of Section 4(1)(c) of the Act,as under:
Radicura & Co. Ltd., Panacea Hospitality Services Pvt. Ltd., Sunanda
Steel Company Ltd., Panacea Educational Institute Pvt. Ltd., Best on
Health Foods Limited (w.e.f. 6th December,2010)and Nirmala Organic
Farms & Resorts Pvt. Ltd. (formerly known as Sugandh Agri. Development
Pvt. Ltd.) (w.e.f. 22nd February, 2011),all being WOS of Best On
Health Ltd.;
Kelisia Holdings Ltd., Cyprus, the WOS of Rees Investments Ltd.; and
Kelisia Investment Holding AG,Switzerland,Panacea Biotec
(International) SA, Switzerland, Panacea Biotec (Europe) AG,
Switzerland and Panacea Biotec Germany GmbH, all being the step-down
subsidiaries of Rees Investments Ltd.
During the current financial year, the Company''s WOS Panacea Biotec
Inc. has been wound up.
As per the provisions of Section 212 of the Act,your Company is
required to attach the Directors''Report, Balance Sheet, Profit and Loss
Account and other information of the subsidiary companies to its
Balance Sheet. However, Ministry of Corporate Affairs, Government of
India has, vide its General Circular No. 2 and 3 dated 8th February,
2011 and 21st February, 2011 respectively, granted a general exemption
from compliance with section 212(8) of the Act, from attaching the
Annual Accounts of subsidiaries in the annual published accounts of the
Company subject to fulfillment of conditions stipulated in the
circulars.
In compliance of the above said circular, the Annual Accounts will be
made available upon request by any investor of the Company/ Subsidiary,
interested in obtaining the same. The annual accounts of the Subsidiary
companies will also be kept for inspection by any investor at the
Company''s Corporate Office at B-1 Extn./G-3, Mohan Cooperative
Industrial Estate, Mathura Road, New Delhi - 110 044, India and at the
office of the respective Subsidiary companies during business hours of
the respective company and shall also be available on the Company''s
website www.panaceabiotec.com. Further, the following information, in
aggregate, for each Subsidiary is being disclosed at some other place
herein and forms part of the Annual Report (a) Capital, (b) Reserves &
Surplus, (c) Total Assets, (d) Total Liabilities, (e) Details of
investment (except in case of investment in subsidiaries), (f) Turnover
including other Income, (g) Profit/Loss Before Tax, (h) Provision for
Tax, (i) Profit AfterTax,and (j) Proposed Dividend.
Further as per the provisions of Section 212 of the Act, a statement of
the holding Company''s interest in the Subsidiary companies is attached
herewith and forms part of the Annual Report.
However, pursuant to Accounting Standard AS-21 issued by the Institute
of Chartered Accountants of India, Consolidated Financial Statements
presented by the Company include the financial statements of each of
its Subsidiaries.
Joint Venture
Chiron Panacea Vaccines Pvt. Ltd.
Panacea Biotec''s strong legacy of growth and excellence makes it an
ideal Joint Venture partner for Indian and global companies.The Company
has nurtured several important JVs that enable it to strengthen its
growth fundamentals and to enhance its customer value.
During the year under review, your Company''s Joint Venture Company (JV
Company), Chiron Panacea Vaccines Pvt. Ltd. ("CPV"), has grown its
business in DTwP based Pediatric combination vaccines, Polio and Flu
franchisee by 24% over last year in spite of intense competitive price
pressure within the pediatric vaccine market and has a significant
market share in the DTwP-Hib combination vaccines, IPV vaccines and
Trivalent Flu vaccines.
CPV has retained its customers by offering value added services by
introducing novel concept of pre-booking for flu vaccines and flu
protection clinic and arranging for international speakers, thereby
creating awareness and benefit of a flu vaccination.
CPV has also lead a partnering program with the Pediatricians on the
World Polio Day through various activities conducted across the Country
like CME''s, creating awareness on synergestic role of IPV OPV in polio
eradication, vaccination camp, with a drive to protect maximum children
against Polio.lt has also carried out a Trust campaign to re-emphasise
the role of Easyrange vaccines in the Hib segment over past five years.
CPVcontinuestohavea strong portfolio of innovative pediatric vaccines
and enjoy its significant position at market place. CPV achieved a
turnover of Rs.555.4 million and net profit of Rs.21.2 million during
the year under review and commands a significant market share in the
pediatric combination vaccines segment in India.
Associates
Your Company''s associate Company, PanEra Biotec Pvt. Ltd. is
continuing to meet requirement of bulk vaccines and antigens for the
manufacture of Hepatitis B and Combination Vaccines by your Company.
During the year under review, it has achieved a net turnover and profit
after tax of Rs.721.7 million and Rs.236.1 million recording a
spectacular growth of 18.4% & 31.6% respectively.The Company''s another
Associate Company, Lakshmi & Manager Holdings Ltd. is mainly engaged in
the business of making investments.
Consolidated Financial Statements
As required under clause 41 of the Listing Agreement with the stock
exchanges, a consolidated financial statement of the Company and its
subsidiaries, joint ventures and associates, as prepared in accordance
with the Accounting Standard AS-21 on ''Consolidated Financial
Statements'' read with Accounting Standard AS-27 on ''Financial Reporting
of Interest in Joint Ventures'' and Accounting Standard AS-23 on
''Accounting for Investments in Associates'', as issued by the Institute
of Chartered Accountants of India, is attached herewith and the same,
together with Auditors''Report thereon, forms part of the Annual Report
of the Company.
Listing of Equity Shares / Bonds
The Equity Shares of the Company continue to be listed on NSE and
BSE.The Foreign Currency Convertible Bonds (FCCBs) were listed at
Singapore Stock Exchange (SGX) till their Maturity Date i.e., 14th
February, 2011 only. The requisite annual listing fees have been paid
to these Exchanges.
Public Deposits
During the year under review, your Company has not invited or accepted
any deposits from the public pursuant to the provisions
ofSection58Aofthe Act and no amount of principal or interest was
outstanding in respect of deposits from the public as on the date of
Balance Sheet. However,during the year under review, the Company has
continued to accept deposits from the Company''s Directors, their
relatives, associates and the Company''s employees without inviting
deposits from them.
Insurance
Risk mitigation continues to be a key area of concern for the Company,
which has regularly invested in insuring itself against unforeseen
risks. The Company''s Stocks and insurable assets like Building, Plant &
Machinery, Computer Equipments, Office Equipments, Furniture &
Fixtures, Lease Hold Improvements and upcoming projects have been
adequately insured against major risks.The Company has also taken
appropriate product liability insurance policies for conducting
clinical trials and for insuring its products (manufactured & sold)
with an extension of unnamed vendor liability and add on cover of
Public liability inclusive of pollution liability to cover the risk on
account of claims, if any, filed against the Company.
Internal Control System
The Company has devised a strong Internal Control System through its
extensive experience that ensures control over various functions in its
business.
The Company has a well placed, proper and adequate Internal Control
System, which ensures that all assets are protected against loss from
unauthorized use and all transactions are recorded and reported
correctly.The Company''s internal control system comprises internal
audit carried out by independent firms of Chartered Accountants and
periodical review by management. The Audit Committee of the Board
addresses significant issues raised by both, the Internal Auditors and
the Statutory Auditors.
Directors
During the year under review, Mr. Gurmeet Singh ceased to be the
director of the company, w.e.f. 25th September, 2010. The Board places
on its record its appreciation for valuable services rendered by him as
a Director during his tenure of more than 14 years.
Mr. Soshil Kumar Jain, Mr. Ravinder Jain, Dr. Rajesh Jain and Mr.
Sandeep Jain were re-appointed by the Board as Chairman, Managing
Director, Joint Managing Director and Joint Managing Director
respectively for a period of five years from 01.04.2011, subject to the
approval of Shareholders in the forthcoming general meeting.
In accordance with the provisions of the Act and Articles of
Association of the Company, Dr. A.N. Saksena, Mr. Sumit Jain, Director
Operations & Projects and Mr. R.L. Narasimhan, Directors of the
Company, are liable to retire by rotation and being eligible, offer
themselves for re-appointment.
The brief resumes of the Directors who are to be re-appointed, the
nature of their expertise in specific functional areas, names of
companies in which they have held directorships,committee
memberships/chairmanships, their shareholding, etc. are furnished in
the explanatory statement to the notice of the ensuing Annual General
Meeting.
The Board recommends their re-appointment at the ensuing Annual General
Meeting.
Auditors
M/s. S.R. Batliboi & Co., Chartered Accountants, Statutory Auditors of
your Company, will retire at the conclusion of the ensuing Annual
General Meeting and being eligible, offer themselves for reappointment
as statutory auditors for the financial year 2011-12.The Company has
received a letter from them to the effect that their re-appointment, if
made, would be within the limits prescribed under section 224(1 B) of
the Act,and that they are not disqualified for such re-appointment
within the meaning of Section 226 of the Act.
Based on the recommendation of the Audit Committee, the Board of
Directors of the Company proposes the re- appointment of M/s. S.R.
Batliboi & Co., Chartered Accountants, as the Statutory Auditors of the
Company.
Auditors''Report
With regard to the matters of emphasis and observations contained in
the Auditors'' Report, the Management''s explanations are given below:
Capitalization of expenditure on clinical trials amounting toRs.67.2
million for the year ended March 31,2011 for the purpose of
registration of Company''s products in US and/ or Europe.The expenditure
is not towards basic research and therefore no new chemical entity
comes into being. Basic Research is conducted by the Company in its
own R&D Centres but such developmental work is performed through
external agencies (CROs). Safety profile of the basic molecule is well
established in several countries in Europe and in India and the
products are being marketed successfully in several countries. There is
no experience to suggest that the studies conducted by CROs on behalf
of the Company would lead to or make it difficult for the Company to
obtain regulatory approvals in US and/or Europe. The management
believes that these products would be commercially viable and there is
no reason to believe that there is any uncertainty that may lead to not
securing registration for the products from regulatory authorities in
US and/or Europe.
Payment of managerial remuneration of approx. Rs.38.2 million during
financial year 2008-09,in excess of the limits prescribed under Section
198 and 309 read with Part II of Schedule XIII to the Act, without
obtaining approval of Central Government:The Company had adequate
profits for past many years and thus was paying remuneration to its
managerial personnel within overall limits as specified
undertheAct.However,in view of the losses incurred during the financial
year 2008-09, the managerial remuneration paid during that year
exceeded the limits prescribed under the Act. The Company has sought
approval of the Central Government for such remuneration. While the
approvals in respect of remuneration to Dr. Rajesh Jain and
Mr.SandeepJainJointManaging Directors of the Company, were received in
full during financial year 2009-10, the requisite approvals permitting
waiver of recovery of excess remuneration paid to Mr.Soshil
KumarJain,Chairman and Mr. Ravinder Jain, Managing Director have been
received vide letters dated 20th May, 2011.
Slight delay in deposition of Income Tax in few cases: Only three
instances occurred during the financial year in which there was slight
delay in deposition of Income Tax. Further, the amount involved was
not significant and the said delays were due to normal operational
difficulties.The total amount of such Income Tax was Rs.34,689/- only
and the Company has already deposited the said amount.
Cost Auditors
Pursuant to the provisions of Section 233B of the Act, M/s J.P. Gupta
& Associates, Cost Accountants, have been appointed as the Cost
Auditors to conduct the audit of the Company''s Cost Records in respect
of formulations for the year ended 31 st March, 2011, with the approval
of the Central Government.The cost audit is under process and the
Company will submit the Cost Auditors'' Report to the Central Government
in time.They have also been appointed by the Board as the Cost Auditors
for the financial year 2011-12.
Disclosures Under Section 217 of the Act
Except as disclosed elsewhere in the report, there have been no
material changes and commitments which can affect the financial
position of the Company between the end of the financial year and the
date of report.
As required under Section 217(2) of the Act, the Board of Directors
inform the members that during the financial year, there have been no
material changes, except as disclosed elsewhere in this report:
in the nature of Company''s business,
in the Company''s subsidiaries or in the nature of business carried out
by them,
in the classes of business in which the Company has an
interest.
Energy Conservation, Technology Absorption & Foreign Exchange
Particulars required under Section 217(1)(e) of the Act, read with the
Companies (Disclosure of Particulars in the Report of Board of
Directors) Rules, 1988, regarding conservation of energy, technology
absorption and foreign exchange earnings &outgo,are given in Annexure
A, forming part of this Report.
Particulars of Employees
Particulars of employees as required under Section 217(2A) of the Act,
read with the Companies (Particulars of Employees) Rules, 1975 as
amended,are given in Annexure B,forming part of this Report.
Directors'' Responsibility Statement
The Directors hereby confirm:
i) that in the preparation of the annual accounts, the applicable
accounting standards have been followed, along with proper explanation
relating to material departures;
ii) that the directors have selected such accounting policies and
applied them consistently and made judgments and estimates that are
reasonable and prudent so as to give a true and fair view of the state
of affairs of the Company at the end of the financial year and of the
profit or loss of the Company for that period;
iii) that the directors have taken proper and sufficient care for the
maintenance of adequate accounting records in accordance with the
provisions of the Act for safeguarding the assets of the Company and
for preventing and detecting fraud and other irregularities; and
iv) that the directors have prepared the annual accounts on a going
concern basis.
Acknowledgements
Your Directors acknowledge with gratitude the co-operation and
assistance received from the UN Agencies, Central Government, State
Governments and all other Government agencies and encouragement they
have extended to the Company.
Your Directors also thank the shareholders, Financial
lnstitutions,Banks/other lenders,Customers,Vendors and other business
associates for their confidence in the Company and its management and
look forward for their continuous support.
The Board wishes to place on record its appreciation for the dedication
and commitment of your Company''s employees at all levels which has
continued to be our major strength.
Forand on behalf of the Board
New Delhi Soshil Kumar Jain
27th July, 2011 Chairman
Mar 31, 2010
Backed by strong credentials and expanding footprints, the Company has
reported excellent business and operational performance during the
fiscal 2009-10.
Your Directors have pleasure in presenting here the 26th Annual Report
on business and operations, along with the audited standalone and
consolidated financial accounts and the auditors report thereon for
the financial year ended March 31, 2010. The financial highlights for
the year under review are given below:
FINANCIAL RESULTS
(Rs. in million)
Particulars For the For the
year ended year ended
March 31,2010 March 31,2010
NetTurnover 8,843.7 7,734.2
Other Income 934.9 259.7
Total Income 9,778.6 7,993.9
Profit before Interest,
Depreciation, Exceptional
items &Tax (EBITDA) 1,506.0 2,444.6
Financial Expenses 423.4 347.4
Depreciation 664.5 705.1
Unrealized Foreign Exchange
Fluctuation Loss - 1,750.7
Profit/(Loss) before
Exceptional items &Tax 1,180.8 (639.5)
Exceptional Item - 284.2
Profit/(Loss) before Tax (PBT) 1,180.8 (923.7)
Provision for Taxation (380.6) (233.2)
Profit/(Loss) after Tax (PAT) 800.2 (690.5)
Dividend proposed on
Equity Shares - 16.7
Tax on Dividend - 2.8
Transfer to General Reserve 80.0 -
Balance in Profit & Loss Account 2,855.8 2,155.2
Basic EPS (Rs.)* 12.0 (10.3)
Cash EPS (Rs.)* 31.1 30.0
BookValue per Share (Rs.)* 104.2 92.1
Dividend per Equity Shares (Rs.) 0.25 -
* Face value Re. 1/- per share
OPERATING RESULTS AND PROFITS
The exemplary performance of the Company is manifest in the numbers
posted for the year under review. During the year ended March 31, 2010,
the Company registered a record net turnover of Rs.8,843.7 million as
against Rs.7,734.2 million during the corresponding previous financial
year, a growth of 14%. The
Company registered EBITDA of Rs.1,506.0 million as compared to
Rs.2,444.6 million during the corresponding previous financial year.
The PBT and PAT for the year under review grew to stand at Rs.1,180.8
million and Rs.800.2 million respectively, as compared to the negative
PBT and PAT at Rs.923.7 million and Rs.690.5 million respectively in
the previous fiscal.
This growth was recorded across our business segments, with the
domestic pharmaceutical formulations segment growing by 14%. The
Formulations Segment registered net turnover of Rs.2,398.8 million as
compared to Rs.2,262.3 million during the previous financial year. The
Vaccines Segment grew by 18% and registered net turnover of Rs.6,443.9
million as against Rs.5,470.2 million during previous financial year.
Your Company strives to remain globally and regionally attractive to
customers and investors by continuing to focus on sustained growth,
cost optimization and efficient management of working capital. These
strategic initiatives are continually fueling the Companys growth
across its business operations.
A detailed discussion on operations for the year ended March 31, 2010
is given in the Management Discussion and Analysis section.
DIVIDEND
The Directors are pleased to recommend a dividend of Re.0.25 (25%) per
share on Equity Share Capital of the Company for the financial year
2009-10.
The Company has made a provision for dividend in the books of accounts
on the Equity Share Capital as at the date of the Board Meeting for
approval of Financial Statements. The Company is obliged to pay
dividend to those bond holders who convert their bonds into Equity
Shares after approval of the financial statements by the Board of
Directors and upto the book closure date for dividend purposes.
Incremental dividend, if any, and dividend distribution tax thereon
will be paid out of the balance available in the Profit & Loss Account.
The dividend on Equity Shares is placed before you for approval at the
ensuing Annual General Meeting and, if approved, will absorb an amount
of Rs.16.7 million. However, the amount of dividend on Equity Shares
may increase in case any bonds are converted into Equity Shares before
the book closure date. On the other hand, such amount may also decrease
due to buyback of Equity Shares, if any, in terms of the proposed
scheme of buyback before the book closure date.
Pursuant to the provisions of Section 205A(5) of the Companies Act,
1956 ("the Act"), dividend for the year 2001-02, which remained unpaid
or unclaimed for a period of 7 years, amounting to Rs.122,880 has been
transferred by the Company to the Central Governments Investors
Education and Protection Fund.
TRANSFERTO RESERVES
An amount of Rs.80.0 million is proposed to be transferred to the
general reserves of the Company out of the profits of the Company for
the year.
SHARE CAPITAL
The Issued & Subscribed Equity Share Capital of the Company remained
unchanged at Rs.66.8 million, consisting of 66,842,746 Equity Shares of
Re.1 each.
During the year under review, 149,000 forfeited Equity Shares of the
Company, which were earlier re-issued and held in the name of the
Companys employees as nominees/trustees, were sold during the year in
the open market for Rs.29.9 million, out of which Rs.29.8 million has
been credited in the Securities Premium Account. As a result, the
paid-up Equity Share Capital of the Company stands increased from 66.7
million to Rs.66.8 million, consisting of 66,842,746 Equity Shares of
Re.1 each.
BUYBACK OF SHARES
In a strategic measure, as approved by the shareholders, the Company
has decided to purchase its Equity Shares upto 5,592,000 Equity Shares
at a price not exceeding Rs.229 per share, with the total aggregate
amount to be expended not to exceed Rs. 1,280.6 million, from the
existing holders of Equity Shares other than the Promoters, Persons who
are in control of the Company and Promoter Group, through the
methodology of Open market purchases through stock exchanges using the
electronic trading facilities of the Bombay Stock Exchange Limited
("BSE") and the National Stock Exchange of India Limited ("NSE").
The exemption from SEBI under regulation 4(2) read with regulation 3(1
)(l) of SEBI (Substantial Acquisition & Takeover) Regulations, 1997 has
been obtained. The Buyback is slated to commence w.e.f. 21 st July,
2010.
FOREX IMPACT
As per advice of its Bankers, the Company signed two derivative
documents dated 24th October, 2007 and 21 st January, 2008 with an
exposure of US$ 4.0 million and US$ 3.0 million per month, and which
are expiring in October, 2010 and January, 2011 respectively.
The advice given and the representations made by the Bank have turned
out to be not correct with the result the Company suffered a direct
loss of Rs. 730.7 Million during the year. The cumulative losses till
the end of the year under review have been Rs.1,226.1 million, which
have further increased to Rs.1,365.5 million till 30th June, 2010.
In addition to the said direct losses, the Company has also suffered
consequential losses on account of interest accrued on actual losses,
additional interest charged by Banks on FCNR B Loans and non-hedging of
future obligations including for imports, etc., and other consequential
losses, which are being quantified.
As there seems to have been more than meets the eye, the matter is
being investigated and once the investigations are complete, the
company will take up the matter with the bank to see how the losses
suffered by the Company can be made good, and if so advised, the
Company may take such other steps in this behalf as are considered
appropriate.
But for the above direct losses during the year, and in the
circumstances aforesaid, the Company has earned a Profit afterTax of
Rs.801.8 million during the fiscal 2010. Had the Company not been a
victim of the derivatives, the net worth of the Company would have been
increased by Rs.1,226.1 million as at 31st March, 2010.
REPORT ON CORPORATE GOVERNANCE
An organizations Corporate Governance philosophy is directly linked to
its excellence in performance. Keeping this important dictum in view,
your Company has always placed major thrust on managing its affairs
with diligence, transparency, responsibility and accountability.
The Company is committed to adopting and adhering to the best corporate
governance practices recognized globally.The Company understands and
respects its fiduciary role and responsibility towards stakeholders and
the society at large, and strives hard to serve their interests,
resulting in creation of value and wealth for all stakeholders at all
times.
The compliance report on Corporate Governance and a certificate from
M/s. Dass Gupta & Associates, Chartered Accountants regarding
compliance of the conditions of Corporate Governance, as stipulated
under Clause 49 of the Listing Agreement with the Stock Exchanges, is
attached herewith and forms part of this Annual Report.
Certificate from Managing Director and Chief Financial Officer, inter-
alia, confirming the correctness of the financial statements,
compliance with Companys Code of Conduct, adequacy of the Internal
Control measures and reporting of matters to the Audit Committee in
terms of Clause 49 of the Listing Agreement with the Stock Exchanges,
is also enclosed as a part of the Annual Report.
MANAGEMENT DISCUSSION & ANALYSIS REPORT
As required by Clause 49 of the Listing Agreement with the Stock
Exchanges, a detailed Management Discussion and Analysis Report forms a
part of the Annual Report.
SUBSIDIARIES
Driven by prudent operational stratagem and aimed at facilitating ease
of functioning, the Company has put in place a network of Subsidiaries.
The Company, as on March 31, 2010, had 5 wholly owned subsidiaries
(WOS), viz. Best On Health Ltd., Panacea Biotec Inc., Panacea Biotec
FZE, Panacea Biotec GmbH and Rees Investments Ltd. Umkal Medical
Institute Pvt. Ltd. is also a subsidiary in terms of
Section 4(1 )(b)(ii) of the Act. The Company has 8 other subsidiaries
in terms of Section 4(1 )(c) of the Act, as under:
- Radicura & Co. Ltd., Panacea Hospitality Services Pvt. Ltd., Sunanda
Steel Company Ltd. & Panacea Educational Institute Pvt. Ltd., all being
WOS of Best On Health Ltd.;
- Kelisia Holdings Limited, Cyprus, the WOS of Rees Investment Limited;
and
- Kelisia Investment Holding AG, Switzerland, Panacea Biotec
(International) SA, Switzerland and Panacea Biotec (Europe) AG, all
being the step-down subsidiaries of Rees Investments Ltd.
In terms of the approval granted by the Central Government under
Section 212(8) of the Act, copies of the Balance Sheet, Profit and Loss
Account and Reports of the Board of Directors and Auditors of the
subsisting Subsidiaries have not been attached with the Balance Sheet
of the Company. However, these documents will be made available upon
request by any investor of the Company/ Subsidiary, interested in
obtaining the same. The annual accounts of the Subsidiary companies
will be kept for inspection by any investor at the Companys Corporate
Office at B-1 Extn./G-3, Mohan Co- operative Industrial Estate, Mathura
Road, New Delhi - 110044, India and at the office of the respective
Subsidiary companies during business hours of the respective company.
However, pursuant to Accounting Standard AS-21 issued by the Institute
of Chartered Accountants of India, Consolidated Financial Statements
presented by the Company include the financial statements of each of
its Subsidiaries. The Financial Statements of each Subsidiary shall
also be available on the Companys website www.panaceabiotec.com.
As required, pursuant to the provisions of Section 212 of the Act, a
statement of the holding companys interest in the Subsidiary companies
is attached herewith and forms part of the Annual Report. The following
information, in aggregate, for each Subsidiary is also being disclosed
(a) capital, (b) reserves & surplus, (c) total assets, (d) total
liabilities, (e) details of investment (except in case of investment in
subsidiaries), (f) turnover including other income, (g) profit/loss
before tax, (h) provision for tax, (i) profit after tax, and (j)
proposed dividend. The said information is given at some other place
herein and forms part of the Annual Report.
JOINTVENTURES
Chiron Panacea Vaccines Pvt. Ltd.
Panacea Biotecs strong legacy of growth and excellence makes it an
ideal Joint Venture partner for Indian and global companies. The
Company has nurtured several important JVs that enable it to strengthen
its growth fundamentals and to enhance its customer value.
During the year under review, your Companys Joint Venture Company (JV
Company), Chiron Panacea Vaccines Pvt. Ltd. ("CPV"), has grown its
business by 4% as compared to the previous financial year in spite of
intense competitive price pressure within the pediatric combination
vaccine market.
CPV has retained its position of having most satisfied customers by
offering value added products and services by introducing combination
vaccines in pre-filled syringes, and through introduction of Luer Lok
syringes, which help prevent needle stick injury and are safe for
vaccine administration and newer medical education initiatives in
developing the overall vaccine market.
During the year, the polio franchise of CPV gained momentum, with
Polprotec attaining significant market share in spite of not having the
first mover advantage.
CPV continues to have a strong portfolio of innovative pediatric
vaccines and enjoys its significant position at market place. CPV
achieved a turnover of Rs.559.2 million and net profit of Rs.33.4
million during the year under review and commands a significant market
share in the pediatric combination vaccines segment in India.
Cambridge Biostability Ltd.
The Companys another JV Company, Cambridge Biostability Ltd. (CBL), a
U.K-based company in which Panacea Biotec acquired 10% stake and also
given a convertible loan of £ 1.5 million in previous years, has gone
into creditors voluntary liquidation proceedings, during the year
under review, due to its adverse financial position. The insolvency
Administrator is in the process of deciding the quantum and timing of
distribution of returns to stakeholders, including Panacea Biotec.
ASSOCIATES
Your Companys associate Company, PanEra Biotec Pvt. Ltd. is continuing
to meet requirement of bulk vaccines and antigens for the manufacture
of Hepatitis B and Combination Vaccines by your Company. The Companys
another Associate Company, Lakshmi & Manager Holdings Ltd. is mainly
engaged in the business of making investments.
CONSOLIDATED FINANCIAL STATEMENTS
As required underclause 41 of the Listing Agreement with the stock
exchanges, a consolidated financial statement of the Company and its
subsidiaries, joint ventures and associates, as prepared in accordance
with the Accounting Standard AS-21 onÂConsolidated Financial
Statements read with Accounting Standard AS-27 on ÂFinancial Reporting
of Interest in Joint Venturesand Accounting Standard AS-23 on
ÂAccounting for Investments in Associates, as issued by the Institute
of Chartered Accountants of India, is attached herewith and the same,
together with Auditors Report thereon, forms part of the Annual Report
of the Company.
LISTING OF EQUITY SHARES / BONDS
The Equity Shares of the Company continue to be listed on NSE and BSE
and the Foreign Currency Convertible Bonds (FCCBs) are listed at
Singapore Stock Exchange.The requisite annual listing fees have been
paid to these Exchanges.
PUBLIC DEPOSITS
During the year under review, your Company has not invited or accepted
any deposits from the public pursuant to the provisions of
Section 58A of the Act and no amount of principal or interest was
outstanding in respect of deposits from the public as of the date of
Balance Sheet. However, during the year under review, the Company has
continued to accept deposits from the Companys Directors, their
relatives, associates and the Companys employees without inviting
deposits from them.
INSURANCE
Risk mitigation continues to be a key area of concern for the Company,
which has regularly invested in insuring itself against unforeseen
risks. The Companys properties and insurable assets like building,
plant & machinery, stocks and upcoming projects have been adequately
insured against major risks.The Company has also taken appropriate
product liability insurance policies for conducting clinical trials and
for insuring its products (manufactured & sold) with an add-on cover of
pollution liability and limited unnamed vendor extension liability to
cover the riskon account of claims, if any, filed against the Company.
INTERNAL CONTROL SYSTEM
The Company has devised a strong Internal Control System through its
extensive experience that ensures control over various functions in its
business.
The Company has a well placed, proper and adequate Internal Control
System, which ensures that all assets are protected against loss from
unauthorized use and all transactions are recorded and reported
correctly. The Companys internal control system comprises internal
audit carried out by independent firms of Chartered Accountants and
periodical review by management.The Audit Committee of the Board
addresses significant issues raised by both, the internal Auditors and
the Statutory Auditors.
DIRECTORS
There was no change in the composition of the Board of Directors of the
Company during the year under review.
In accordance with the provisions of the Act and Articles of
Association of the Company, Mr. Soshil Kumar Jain, Mr. Gurmeet Singh
and Mr. K.M. Lal, Directors of the Company, are liable to retire by
rotation and being eligible, offer themselves for re-appointment.
The brief resumes of the Directors who are to be re-appointed, the
nature of their expertise in specific functional areas, names of
companies in which they have held directorships, committee
memberships/chairmanships, their shareholding, etc. are furnished in
the explanatory statement to the notice of the ensuing Annual General
Meeting.
The Board recommends their re-appointment at the ensuing Annual General
Meeting.
AUDITORS
M/s. S.R. Batliboi & Co., Chartered Accountants, Statutory Auditors of
your Company, will retire at the conclusion of the ensuing Annual
General Meeting and being eligible, offer themselves for re-
appointment as statutory auditors for the financial year 2010-11.
The Company has received a letter dated May 5,2010 from them to the
effect that their re-appointment, if made, would be within the limit
prescribed under section 224(1 B) of the Act, and that they are not
disqualified for such re-appointment within the meaning of Section 226
of the Act.
Based on the recommendation of the Audit Committee, the Board of
Directors of the Company proposes the re-appointment of M/s. S.R.
Batliboi &Co., Chartered Accountants, as the Statutory Auditors of the
Company.
AUDITORSREPORT
With regard to the matters of emphasis and observations contained in
the AuditorsReport, the Managements explanations are given below:
- Non-provision of proportionate premium on redemption of ÂUS$ 50
Million Zero Coupon Convertible Bonds due 2011 amounting to Rs.565
million: The Board of Directors are of the opinion that the bonds are
redeemable only if there is no conversion of bonds earlier, the
probability of which cannot be presently ascertained. Hence, the
payment of premium on redemption is contingent in nature, the outcome
of which is dependent upon uncertain future events.Therefore, the same
has been disclosed as a contingent liability. Moreover, in case of
redemption, the redemption premium will be offset against the
Securities Premium Account, thus having no impact on the Profit and
Loss Account.
- Capitalization of expenditure on clinical trials amounting to Rs.32.1
million for the year ended March 31, 2010 for the purpose of
registration of Companys products in US and/or Europe: The expenditure
is not towards basic research and therefore no New Chemical Entity
comes into being. Basic Research is conducted by the Company in its own
R&D Centres but such developmental work is performed through external
agencies (CROs). Safety profile of the basic molecule is well
established in several countries in Europe and in India and the
products are being marketed successfully in several countries. There
is no experience to suggest that the studies conducted by CROs on
behalf of the Company would lead to or make it difficult for the
Company to obtain regulatory approvals in US and/or Europe.The
management believes that these products would be commercially viable
and there is no reason to believe that there is any uncertainty that
may lead to not securing registration for the products from regulatory
authorities in US and/or Europe.
- Payment of managerial remuneration of approx. Rs.38.17 million during
financial year 2008-09, in excess of the limits prescribed under
Section 198 and 309 read with Part II of Schedule XIII to the Act,
without obtaining approval of Central Government: The Company had
adequate profits for past many years and thus was paying remuneration
to its managerial personnel within overall limits as specified under
the Act. However, in view of the losses incurred during the financial
year 2008-09, the managerial remuneration paid during that year
exceeded the limits prescribed under the Act. While the
approvals from Central Government to the extent of Rs.14.6 million of
excess remuneration in respect of Dr. Rajesh Jain and Mr. Sandeep Jain,
Joint Managing Directors, have been received, the requisite approvals
for balance amount of excess remuneration of Rs.23.6 million in respect
of Mr. Soshil Kumar Jain, Chairman and Mr. Ravinder Jain, Managing
Director are awaited.
- Slight delay in deposition of Value Added Tax (VAT)in few cases: The
amount involved was not significant and the said delays were due to
normal operational difficulties and that too for a maximum period of 4
days from the due date. The total amount of such VAT was Rs.5,530,132
only, and the Company has already deposited the said amount.
Further, with regard to the matters of emphasis and observations
contained in the AuditorsReport on the Consolidated Financial
Statement, the Managements explanations are given below:
- Unaudited Annual Accounts of Subsidiary, Panacea Biotec GmbH,
Germany: Though the Annual Accounts of Panacea Biotec GmbH were
prepared by its Board of Directors, the audit thereof could not be
completed till the date on which the Companys Accounts were finalised.
COST AUDITORS
Pursuant to the provisions of Section 233B of the Act, M/s J.P Gupta &
Associates, Cost Accountants, have been appointed as the Cost Auditors
to conduct the audit of the Companys Cost Records in respect of
formulations for the year ended 31 st March, 2010, with the approval of
the Central Government. The cost audit is under process and the Company
will submit the Cost Auditors Report to the Central Government in
time.They have also been appointed by the Board as the Cost Auditors
for the financial year 2010-11, subject to the approval of Central
Government.
DISCLOSURES UNDER SECTION 217 OF THE ACT
Except as disclosed elsewhere in the report, there have been no
material changes and commitments which can affect the financial
position of the Company between the end of the financial yearand the
date of report.
As required under Section 217(2) of the Act, the Board of Directors
inform the members that during the financial year, there have been no
material changes, except as disclosed elsewhere in this report:
- in the nature of Companys business,
- in the Companys subsidiaries or in the nature of business carried
out by them,
- in the classes of business in which the Company has an interest.
ENERGY CONSERVATION, TECHNOLOGY ABSORPTION & FOREIGN EXCHANGE
Particulars required under Section 217(1)(e) of the Act, read with the
Companies (Disclosure of Particulars in the Report of Board of
Directors) Rules, 1988, regarding conservation of energy, technology
absorption and foreign exchange earnings & outgo, are given in Annexure
A, forming part of this Report.
INFORMATION REGARDING EMPLOYEES
The information required to be furnished under section 217(2A)ofthe
Act, read with Companies (Particulars of Employees) Rules, 1975 as
amended,the names and other particulars of employees covered under
these Rules are set out in Annexure B, forming part of this Report.
DIRECTORSRESPONSIBILITY STATEMENT The Directors hereby confirm:
i) that in the preparation of the annual accounts, the applicable
accounting standards had been followed, along with proper explanation
relating to material departures;
ii) that the directors had selected such accounting policies and
applied them consistently and made judgments and estimates that are
reasonable and prudent so as to give a true and fair view of the state
of affairs of the Company at the end of the financial year and of the
profit or loss of the Company for that period;
iii) that the directors had taken proper and sufficient care for the
maintenance of adequate accounting records in accordance with the
provisions of the Act for safeguarding the assets of the Company and
for preventing and detecting fraud and other irregularities; and
iv) that the directors had prepared the annual accounts on a going
concern basis.
ACKNOWLEDGEMENTS
Your Directors place on record their gratitude to the UN Agencies,
Central Government, State Governments and all other Government agencies
for the assistance, co-operation and encouragement they have extended
to the Company.
Your Directors also take this opportunity to extend a special thanks to
the medical fraternity and patients for their continued co- operation,
patronage and trust reposed in the Company and its products.
Your Directors also greatly appreciate the commitment and dedication of
all the employees at all levels, that has contributed to the growth and
success of the Company. We also thank all our customers, strategic
partners, business associates, Banks, financial institutions and our
shareholders for their assistance, co-operation and encouragement to
the Company during the year.
For and on behalf of the Board
New Delhi Soshil Kumar Jain
20th July, 2010 Chairman
Mar 31, 2009
We are pleased to present the 25th Annual Report on business and
operations together with the audited fnancial statements and the
auditors report of your Company for the financial year ended March 31,
2009. The fnancial highlights for the year under review are given
below:
Financial Results (Rs. in million)
Particulars For the For the
year ended year ended
March 31, 09 March 31, 08
Net Turnover 7,734.2 8,304.4
Other Income 259.7 371.7
Total Income 7,993.9 8,676.1
Proft before Interest, 2,444.6 2,177.6
Depreciation, Exceptional
items & Tax (EBITDA)
Depreciation 705.1 430.0
Financial Expenses 347.4 150.1
Unrealised Foreign 1,750.7 40.5
Exchange Fluctuation Loss
Proft/(Loss) before (639.5) 1,903.9
Exceptional items & Tax
Exceptional item 284.2 -
Profit/(Loss) before Tax (PBT) (923.7) 1,903.9
Provision for Taxation (233.2) 572.2
Proft/ (Loss) after Tax (PAT) (690.5) 1,331.7
Dividend Paid/Proposed - 66.7
on Equity Shares
Tax on Dividend - 11.3
Transfer to General Reserve - 133.1
Balance in Proft & Loss 2,155.2 2,845.7
Account
Basic EPS (Rs.)* (10.3) 20.1
Cash EPS (Rs.)* 30.0 27.0
Book Value per Share (Rs.)* 92.1 104.3
Dividend per Equity Share (Rs.) - 1.0
* Face value Re.1/- per share
Operations Review
During the year ended March 31, 2009, the Company registered net
turnover of Rs.7,734.2 million as against Rs.8,304.4 million during the
corresponding fnancial year. The Company registered EBITDA of
Rs.2,444.6 million as compared to Rs.2,177.6 million during the
corresponding previous fnancial year, registering a growth of 12%. The
PBT and PAT for the year under review turned negative at Rs.923.7
million and Rs.690.5 million respectively as compared to profits of
Rs.1,903.9 million and Rs.1,331.7 million respectively inter-alia, on
account of drastic reduction of exchange rate of Indian Rupee vis-a-vis
US dollar from Rs.40.11 per dollar as on 31.03.2008 to Rs.50.72 per
dollar as at 31.03.2009, provisioning of unrealized foreign exchange
loss of Rs.1,702.6 million on open forward contracts for the unexpired
period of contracts and provisioning of Rs.168.0 million on account of
permanent diminution of investment (representing 10% stake) in
Cambridge Biostability Ltd. (CBL) and of Rs.116.2 million as doubtful
on account of Convertible Loan and interest accrued thereon due from
CBL.
In terms of revised AS-11, the Company has opted for change in
accounting policy in respect of foreign exchange fuctuation difference
relating to translation of long term foreign currency monetary
liabilities. Consequently foreign exchange fuctuation gain of Rs.131.7
million up to March 31, 2008 and foreign exchange fuctuation loss of
Rs.994.7 million during the year under review, has been adjusted to the
cost of depreciable asset or transferred to the Foreign Currency
Monetary Item Translation Difference Account, depending upon nature of
utilization. This has resulted into reduction in losses during the year
by Rs.850.1 million.
Nevertheless, the Company was still able to earn operating proft of
Rs.1,244.6 million during fnancial year 2008-09 as against Rs.1,836.7
million during the corresponding previous fnancial year.
Your Company continues to focus on sustaining growth in emerging
markets, cost optimization and effcient management of working capital.
A detailed discussion on operations for the year ended 31st March, 2009
is given in the Management Discussion and Analysis section.
Dividend
In view of non-availability of profts during the year under review, the
Board of Directors has not recommended any dividend on the Equity
Shares of the Company.
Share Capital
During the year under review, the Issued Equity Share Capital of the
Company remained unchanged at Rs.66.8 million consisting of 66,842,746
Equity Shares of Re.1 each.
Corporate Governance
The Company has duly complied with the provisions of the Corporate
Governance Code as prescribed under Clause 49 of the listing agreement
with the Stock Exchanges. A separate section on Corporate Governance
Report along with a certifcate from M/s. Dass Gupta & Associates,
Chartered Accountants confrming the level of compliance is annexed and
forms a part of the Directors Report.
Management Discussion & Analysis
As required by Clause 49 of the Listing Agreement with the Stock
Exchanges, a detailed Management Discussion and Analysis Report forms
part of the Annual Report.
Subsidiaries
The Company, as on March 31, 2009, has 5 wholly owned subsidiaries
(WOS), viz. Best On Health Ltd., Panacea Biotec, Inc., Panacea Biotec
FZE, Panacea Biotec GmbH and Rees Investments Ltd. and a subsidiary,
viz Umkal Medical Institute Pvt. Ltd., in terms of Section 4(1)(b)(ii)
of the Companies Act, 1956. Besides, Radicura & Co. Ltd., Panacea
Hospitality Services Pvt. Ltd., Sunanda Steel Company Ltd. & Panacea
Educational Institute Pvt. Ltd. are the WOS of Best On Health Ltd.;
Kelisia Holdings Limited, Cyprus is the WOS of Rees Investments Ltd.
and Kelisia Investment Holdings AG, Switzerland & Panacea Biotec
(International) SA, Switzerland are step-down subsidiaries of Rees
Investments Ltd. In terms of Section 4(1)(c) of the Companies Act,
1956, these 7 companies are the subsidiaries of the Company.
In terms of the approval granted by the Central Government under
Section 212(8) of the Companies Act, 1956, copies of the Balance Sheet,
Proft and Loss Account and Reports of the Board of Directors and
Auditors of the Subsidiaries have not been attached with the Balance
Sheet of the Company. However, these documents will be made available
upon request by any investor of the Company/ subsidiary, interested in
obtaining the same. As directed by the Central Government, the fnancial
data of the subsidiaries has been furnished elsewhere in the Annual
Report. The annual accounts of the subsidiary companies will be kept
for inspection by any investor at the Companys Corporate Offce at B-1
Extn./G-3, Mohan Co-operative Industrial Estate, Mathura Road, New
Delhi - 110044, India and at the offce of the respective subsidiary
companies during business hours of the Company.
Joint Ventures
Chiron Panacea Vaccines Pvt. Ltd. - During the year under review, your
Companys Joint Venture Company (JV Company), Chiron Panacea Vaccines
Pvt. Ltd. (ÂCPVÂ), set-up for marketing of innovative combination and
other vaccines in India has launched Hepatitis A vaccine HAVpur, a new
generation vaccine with virosome technology in collaboration with Berna
Biotech Ltd., Switzerland and the Companys Injectable Polio Vaccine
ÂPolProtec and monohib Vaccine (novoHib) in the Indian market. With
these launches, CPV has a strong portfolio of innovative paediatric
vaccines and in short span has taken signifcant position at market
place. CPV achieved a turnover of Rs.538.4 million and net proft of
Rs.41.6 million during the year under review. CPV continues to maintain
a signifcant market share in the pediatric combination vaccines segment
in India.
Cambridge Biostability Ltd. - The Companys another JV Company,
Cambridge Biostability Ltd. (CBL), a U.K. based Company, in which the
Company acquired 10% stake and also lent a Convertible Loan of £ 1.5
million during earlier years, has gone into Creditors Voluntary
Liquidation proceedings during current fscal, due to its adverse
fnancial position.
Associates
Your Companys Associate Company, PanEra Biotec Pvt. Ltd. is continuing
to meet requirement of bulk vaccines and antigen for the manufacture of
Hepatitis B and Combination Vaccines by your Company. PanEra has become
a specialised company focused on bulk manufacture of vaccines and plans
to venture into new product and technologies.
During the year under review, the Companys associate frm, viz. M/s
Lakshmi & The Manager, in which the Company had invested Rs.40.0
million (40% share), has been taken over by a newly formed company,
Lakshmi & Manager Holdings Limited. As a result of takeover of the said
frm, the Company has been allotted Equity Shares for an amount of
Rs.41.3 million in the said company.
Consolidated Financial Statements
As required under clause 41 of the Listing Agreement with the stock
exchanges, a consolidated fnancial statement of the Company and its
subsidiaries joint venture and associates, as prepared in accordance
with the Accounting Standard AS-21 on ÂConsolidated Financial
Statements read with Accounting Standard AS-27 on ÂFinancial Reporting
of Interest in Joint Ventures and Accounting Standard AS-23 on
ÂAccounting for Investments in Associates, as issued by the Institute
of Chartered Accountants of India, is attached herewith and the same
together with Auditors Report thereon forms part of the Annual Report
of the Company.
Listing of Equity Shares / Bonds
The Equity Shares of the Company continue to be listed on National
Stock Exchange of India Ltd. (NSE) and Bombay Stock Exchange Ltd.
(BSE). The Foreign Currency Convertible Bonds (FCCBs) are listed at
Singapore Stock Exchange. The annual listing fees for the year 2009-10
have been paid to these Exchanges.
Public Deposits
During the year under review, your Company has not invited or accepted
any deposits from the public pursuant to the provisions of Section 58A
of the Companies Act, 1956 and no amount of principal or interest was
outstanding in respect of deposits from the public as of the date of
Balance Sheet. However, during the year under review, the Company has
continued to accept deposits from the Companys Directors, their
relatives, associates and the Companys employees without inviting
deposits from them.
Insurance
The Companys properties and insurable assets like building, plant &
machinery, stocks and upcoming projects have been adequately insured,
against major risks. The Company has also taken appropriate product
liability insurance policies for conducting clinical trials and for
insuring its products (manufactured & sold) with an add on cover of
pollution liability and limited unnamed vendor extension liability to
cover the risk on account of claims, if any, fled against the company.
Internal Control System
The Company has a sound Internal Control System, which ensures that all
assets are protected against loss from unauthorized use and all
transactions are recorded and reported correctly. The internal control
systems are further supplemented by internal audit carried out by
independent frms of Chartered Accountants and periodical review by
management. The Audit Committee of the Board addresses signifcant
issues raised by both, the internal Auditors and the Statutory
Auditors.
Directors
There was no change in the composition of the Board of Directors of the
Company during the year under review.
In accordance with the provisions of the Companies Act, 1956 and
Articles of Association of the Company,
Mr. R. L. Narsimhan, Mr. N. N. Khamitkar and Mr. Sunil Kapoor,
Directors of the Company, are liable to retire by rotation and being
eligible, offer themselves for re-appointment.
A brief resume, expertise, shareholding in the Company and details of
other directorships of these directors as stipulated under clause 49 of
the Listing Agreement with the Stock Exchange forms part of the Notice
of ensuing Annual General Meeting.
The Board recommends the appointment of Mr. R. L. Narsimhan, Mr. N. N.
Khamitkar and Mr. Sunil Kapoor.
Auditors
As per the provisions of the Companies Act, 1956, M/s. S.R. Batliboi &
Co., Chartered Accountants, hold offce as Statutory Auditors of your
Company till the conclusion of the ensuing Annual General Meeting and
have shown their willingness to be re-appointed as the Auditors of the
Company.
Based on the recommendation of the Audit Committee, the Board of
Directors of the Company proposes the re-appointment of M/s. S.R.
Batliboi & Co., Chartered Accountants, as the Auditors of the Company.
Further, as required under Section 224(1B) of the Companies Act, 1956,
they have confrmed that the said appointment, if made, will be within
the limits as prescribed under the provisions thereof.
Auditors Report
With regard to the matters of emphasis and observations contained in
the Auditors Report, managements explanations are given below:
a. Non-provision of proportionate premium on redemption of ÂUS$ 50
million Zero Coupon Convertible Bonds due 2011 amounting to
Rs.470,992,269: The Board of directors are of the opinion that since
the bonds are redeemable only if there is no conversion of bonds
earlier, the probability of which cannot be presently ascertained,
hence, the payment of premium on redemption is contingent in nature,
the outcome of which is dependent upon uncertain future events.
Therefore, the same has been disclosed as a contingent liability.
Moreover, in case of redemption, the redemption premium will be offset
against the Securities Premium Account, thus having no impact on the
Proft & Loss Accounts.
b. Capitalization of expenditure on clinical trials amounting to
Rs.123,978,449 for the purpose of registration of Companys products in
US and/or Europe: The expenditure is not towards basic research and
there is no experience to suggest that the studies conducted by CRO on
behalf of the Company would lead to or make it difficult for the
Company to obtain regulatory approval. Hence, the management believes
that these products would be commercially viable and there is no reason
to believe that there is any uncertainty that may lead to not securing
registration for the products from regulatory authorities in US and/or
Europe.
c. Payment of managerial remuneration of approximately Rs.38,169,706
for the current year in excess of limits prescribed as per Part II of
Schedule XIII to the Companies Act, 1956, without Central Government
approval: The Company had adequate profts for past many years and thus
has been paying remuneration to its managerial personnel as per
shareholders approval within overall limits as specifed under the
Companies Act, 1956. However, since in view of the reasons explained
elsewhere in this Report the Company has incurred losses during the
year under review, the managerial remuneration paid during the year
amounting to Rs.63,035,463 exceeded the limits prescribed under the Act
by Rs. 38,169,706. The Company has sought approval of the Central
Government for protection of such remuneration.
d. Slight delay in deposition of Value Added Tax (VAT), Employees
State Insurance (ESI) and Service Tax in few cases: The amount involved
was not signifcant and the said delays were due to normal operational
diffculties. The total amount of such VAT, ESI and Service Tax was
Rs.2,163,478, Rs.379,832 and Rs.436,256, respectively only and the
Company had already deposited the said amount. Interest amounting to
Rs.447,675 was also paid in respect of delay in payment of Service Tax
for the delayed period.
Further, with regard to the matter of emphasis and observation
contained in the Auditors Report on the Consolidated Financial
Statement as regards Unaudited Annual Accounts of Subsidiaries -
Panacea Biotec GmbH, Germany, Kelisia Investment Holdings AG,
Switzerland and Panacea Biotec (International) SA, Switzerland, though
the Annual Accounts of these subsidiaries were prepared by their
respective Board of Directors but the audit thereof could not be
completed till the date on which the Companys Accounts were fnalised.
The audit exercise had since been completed and there is no change in
the assets, revenues and cash fows thereof.
The notes to the accounts and other observations, if any, in the
Auditors Report are self-explanatory and, therefore, do not call for
any further comments.
Cost Auditors
Pursuant to the provisions of Section 233B of the Companies Act, 1956,
M/s J.P. Gupta & Associates, Cost Accountants, have been appointed as
the Cost Auditors to conduct the audit of the Companys Cost Records in
respect of formulations for the year ended 31st March, 2009 with the
approval of the Central Government. The cost audit is under process and
the Company will submit the Cost Auditors Report to the Central
Government in time. M/s J.P. Gupta & Associates, have also been
appointed by the Board as the Cost Auditors for the fnancial year
2009-10 subject to the approval of Central Government.
Disclosures under Section 217 of the Companies Act, 1956
Except as disclosed elsewhere in the report, there have been no
material changes and commitments, which can affect the fnancial
position of the Company between the end of fnancial year and the date
of report.
As required under Section 217(2) of the Companies Act, 1956, the Board
of Directors inform the members that during the fnancial year there has
been no material changes, except as disclosed elsewhere in this report:
- in the nature of Companys business,
- in the Companys subsidiaries or in the nature of business carried
out by them,
- in the classes of business in which the Company has an interest.
Energy Conservation, Technology Absorption & Foreign Exchange
Particulars required under Section 217(1)(e) of the Companies Act,
1956, read with the Companies (Disclosure of Particulars in the Report
of Board of Directors) Rules, 1988, regarding conservation of energy,
technology absorption and foreign exchange earnings & outgo, is given
in Annexure A, forming part of this Report.
Information regarding Employees
The information required to be furnished under section 217(2A) of the
Companies Act, 1956, read with Companies (Particulars of Employees)
Rules,1975 as amended, the names and other particulars of employees
covered under these Rules are set out in Annexure B, forming part of
this Report.
Directors Responsibility Statement
The Directors hereby confirm:
i. that in the preparation of the annual accounts, the applicable
accounting standards had been followed along with proper explanation
relating to material departures;
ii. that the directors had selected such accounting policies and
applied them consistently and made judgments and estimates that are
reasonable and prudent so as to give a true and fair view of the state
of affairs of the Company at the end of the financial year and of the
profit or loss of the Company for that period;
iii. that the directors had taken proper and suffcient care for the
maintenance of adequate accounting records in accordance with the
provisions of the Companies Act, 1956 for safeguarding the assets of
the Company and for preventing and detecting fraud and other
irregularities; and
iv. that the directors had prepared the annual accounts on a going
concern basis.
Acknowledgments
Your Directors take this opportunity to express sincere thanks to the
medical fraternity and patients for their continued co-operation,
patronage and trust reposed on the Company and its products. The
Directors place on record their gratitude to the government, other
statutory bodies, our strategic partners, business associates, banks,
financial institutions and shareholders for their assistance,
co-operation and encouragement they extended to the Company.
Your Directors also place on record their sincere appreciation for
signifcant contribution made by the employees at all levels through
their dedication, hard work and commitment and look forward to their
continued support and unstinting efforts in ensuring an excellent all
round operational performance. It is this unity of purpose that breeds
success and your Directors look forward to receiving similar support
and encouragement from the larger Panacea family in the years ahead.
For and on behalf of the Board
New Delhi Soshil Kumar Jain
30th July, 2009 Chairman
Mar 31, 2008
We are pleased to present the 24th Annual Report on business and
operations together with the audited financial statements and the
auditors report of your Company for the financial year ended March
31,2008.The financial highlights for the year under review are given
below:
Performance Highlights
(Rs.in million)
Particulars For the For the
year ended year ended
March 31,08 March 31,07
Turnover (Net) 8,304.4 8,315.5
Other Income 331.2 299.6
Total Income 8,635,7 8,615.1
Profit before Interest, 2,484.8 2,616.6
Depreciations Tax
Financial Expenses 150.1 170.5
Depreciation 430.0 355.1
Profit before Tax 1,904.7 2,091.0
Provision for Taxation 573.0 622.9
Profit after Tax 1,331.7 1,468.1
Surplus b/f from the 1,725.2 649.2
previous year
Profit available for 3,056.9 2,117.3
appropriation
Appropriations:
Dividend Paid/Proposed
- On Equity Shares 66.7 65.7
- On Preference Shares - 20.4
Tax on Dividend 11.3 14.0
Transfer to Capital - 145.2
Redemption Reserve
Transfer to General 133.1 146.8
Reserve
Balance in Profit & 2,845.7 1,725.2
Loss Account
Basic EPS (Rs.)* 20.1 23.7
Cash EPS (Rs.)* 26.6 29.5
Book Value per Share (Rs.)* 104.3 81.9
Dividend on Equity Shares 100% 100%
Per Equity Share of Re. 1/-
Operations Review
The total income during the year under review was Rs.8,304.4 million as
against Rs.8,315.5 million in the previous year.The Company has earned
net profit after tax of Rs.1,331.7 million for the year ended March
31,2008 as against Rs.1,468.1 million for the year ended March 31,2007.
A detailed discussion on operations for the year ended 31st March 2008
is given in the Management Discussion and Analysis section.
Appropriations
Dividend: Continuing with the trend of rewarding its shareholders and
simultaneously keeping in view the requirement of funds for the
operations and future growth of the Company, your Directors are pleased
to recommend a dividend of 100% on Equity Share Capital of the Company
for the financial year ended 31st March, 2008.
The Company has made a provision for dividend in the books of accounts
after considering the application for conversions received, if any, as
at the date of the Board Meeting for approval of Financial Statements.
The Company is obliged to pay dividend to those bond holders who
convert their bonds into Equity Shares after approval of the financial
statements by the Board of Directors and upto the book closure date for
dividend purposes. Incremental dividend, if any and dividend
distribution tax thereon will be paid out of the balance available in
the Profit & Loss Account.
The dividend on Equity Shares is placed before you for approval at the
ensuing Annual General Meeting and if approved, will absorb an amount
of Rs.66.7 million. However, the amount of dividend on Equity Shares
may increase in case any bonds are converted into Equity Shares before
the book closure date.
Transfer to General Reserve: We propose to transfer Rs.133.2 million to
the General Reserve. An amount of Rs.2,845.7 million is proposed to be
retained in the Profit and Loss Account.
Share Capital
During the year under review, the Equity Share Capital has increased to
Rs.66.8 million as on 31st March, 2008 as a result of allotment of
24,688 and 987,554 Equity Shares of Re.1/- each at a premium of
Rs.356.57 per share, on 17th May 2007 and 31st October 2007,
respectively, upon conversion of Zero Coupon Foreign Currency
Convertible Bonds (Tranche 2) (FCCBs).
Utilisation of FCCBs proceeds
As per the requirements of FEMA guidelines, out of the net proceeds of
the bond issue amounting to US$ 96.9 million, balance amount of US$4.0
million was remaining parked overseas in Fixed Deposits as at the end
of previous financial year in foreign currency account with State Bank
of India, London.The said amount has been remitted to India and
utilized during the year under review for capital expenditure. With
this, now the Company has fully uitilized the issue proceeds of Foreign
Currency Convertible Bonds. Following are the details of utilization of
amount during the year:
(Rs.in million)
Particulars Current Previous
Year Year
Capital expenditure 188.2 1,495.7
Overseas investment - 168.1
Repayment of loans and - 2,497.7
general corporate purpose
Issue expenses - 136.2
Total 188.2 4,297.6
Report on Corporate Governance
Your Company strives to attain high standards of corporate governance
while interacting with all the stakeholders. The Company has duly
complied with the provisions of the Corporate Governance Code as
prescribed under Clause 49 of the listing agreement with the stock
exchanges. A separate section on Corporate Governance Report along with
a certificate from the Chartered Accountants confirming the level of
compliance is annexed and forms a part of the Directors Report.
Management Discussion & Analysis Report
As required by Clause 49 of the Listing Agreement with the Stock
Exchanges, a detailed Management Discussion and Analysis Report forms
part of the Annual Report.
Joint Ventures and Subsidiaries
Your Companys Joint Venture Company (JV Company), Chiron Panacea
Vaccines Pvt. Ltd. ("CPV"), was incorporated in fiscal 2005 in India
with Chiron Vaccines Holding Srl., Italy (now Novartis Vaccines and
Diagnostics), a division of Novartis, worlds fifth largest vaccines
manufacturer, for marketing of innovative combination and other
vaccines in India.The Company has invested Rs.23.0 million in CPV for a
50% equity stake. CPV has launched Hepatitis A vaccine HAVpur, a new
generation vaccine with virosome technology in collaboration with Berna
Biotech Ltd., Switzerland. CPV has also launched the Companys
Injectable Polio Vaccine"PolProtec" in the Indian market and plans to
launch novoHib (mono Hib) vaccine in the current financial year. CPV
achieved a turnover of Rs.459.9 million and net profit of Rs.35.3
million during the year under review. CPV now commands an estimated
market share of around 45% in the pediatric combination vaccines
segment in India.
The Companys another JV Company, Cambridge Biostability Ltd.(CBL),a
U.K.based Company,which is progressing further on development of
thermostable vaccines applying CBLs patented Stable Liquid
Technology over the Companys existing range of vaccines.The Company
has around 10% stake in CBL and has invested an amount of Rs.207.8
million (£ 2.4 million) therein including Rs.39.8 million (£ 0.5
million) given during the year as loan convertible into ordinary
shares.The Company has further given a loan of Rs.79.8 million (£1
million) during the current financial year on similar terms.
Your Companys associate Company, PanEra Biotec Pvt. Ltd. (formerly
known as Panheber Biotec Pvt. Ltd.) ("PanEra"), set-up in joint venture
with M/s. Heber Biotec S.A.,Cuba,an arm of the world renowned
bio-technology research facility. Center for Genetic Engineering and
Biotechnology, is continuing to meet requirement of bulk vaccines and
antigen for the manufacture of Hepatitis B and Combination Vaccines by
your Company. Due to strategic reasons, Heber Biotec has withdrawn
itself from the joint venture and transferred its entire stake in
Panheber to the promoter-directors of the Company. As a result and
consequent upon the extinction of Joint Venture, PanEra has become an
associate company w.e.f. 21.11.07 and has changed its name to PanEra
Biotec Private Limited w.e.f. 2nd July 2008.
The Companys wholly-owned subsidiary (WOS) namely Best On Health Ltd.
("BOH"), which owns a prime immovable property being used by the
Company as its Corporate Office, has charted out a plan for
diversification in related health management space as part of its
future growth plans.The Company has invested Rs.1,813.9 million in BOH
including Rs. 1,791.0 million as 0.5% optionally convertible Non
Cumulative Preference Shares invested during the year, to finance its
foray into healthcare industry.The Company has further invested
Rs.200.0 million during the current financial year on similar terms.
Due to strategic reasons, during the year under review, the Company has
sold its entire stake in another WOS, Radicura & Co. Ltd. to BOH and
the same has now become WOS of BOH. Further, during the year under
review, your Company invested an amount of Rs.0.7 million towards
acquisition of 100% stake in Panacea Educational Institute Private
Limited, Panacea Hospitality Services Private Limited and Sunanda Steel
Company Ltd. However, due to strategic reasons, the Company has sold
its entire stake in these WOS to BOH and as such these WOS companies
have become WOS of BOH.
Further, with a view to perform the activities relating to registration
and marketing of the Companys patented products worldwide, during the
year under review, your Company had set-up a WOS namely Panacea Biotec
FZE in UAE and remitted an amount of Rs.5.47 million (AED 500,000)
towards its capital contribution, during the current financial year.
During the current financial year, your Company had also remitted an
amount of Rs.1.58 million (Euro 25,000) for setting-up another WOS in
Germany, namely Panacea Biotec GmbH, with a view to perform activities
relating to registration of the Companys products in European Union.
Your Company is expanding its portfolio by entering the fast growing
healthcare sector and has entered into collaboration with Umkal group
to set-up a multi super-specialty hospital with the modern equipments
in the National Capital Region of Delhi at Gurgaon. Your Company has
invested an amount of Rs.56.4 million as a 20% payment towards
application & allotment money for acquiring 75.2 % stake in Umkal
Medical Institute Private Limited, during the current financial year.
With your Companys leadership in providing innovative medical
therapies and Umkals long term experience in providing specialized
healthcare, the collaboration would be unique and one of its kind.
During the current financial year, a wholly owned subsidiary of the
Company, Panacea Biotec Inc., US has been incorporated with its main
objects of, inter-alia, research, development, manufacture, register,
market, distribute, import and export pharmaceutical and biological
products etc. in United States.
During the year under review, the Company has also invested Rs.40.0
million with a 40% share in a partnership firm viz. M/s Lakshmi and The
Manager with an object of investing/purchasing land, stocks, etc. The
said firm has been taken over by a newly formed company, Lakshmi &
Manager Holdings Limited with effect from 1st July, 2008. As a result
of takeover of the said firm, the Company has been allotted 41,257,126
Equity Shares of Re.1 each aggregating Rs.41.26 million in Lakshmi &
Manager Holdings Limited.
The Ministry of Corporate Affairs, Government of India, has vide its
letter no 47/480/2008 CL-III dated 7th July, 2008, granted the approval
to the Company for not attaching the Annual Reports of the subsidiary
companies with the Annual Report of the Company for the financial year
ended 31st March, 2008.The members, if they desire, may write to the
Company Secretary at the Companys Corporate Office at B-1 Extn./G-3,
Mohan Co-operative Industrial Estate, Mathura Road, New Delhi - 110044,
India, to obtain the copies of the Annual Report of the subsidiary
companies.
Consolidated Financial Statements
As stipulated in clause 41 of the Listing Agreement with the stock
exchanges, the consolidated financial statements have been prepared by
the Company in accordance with the Accounting Standard AS-21 on
Consolidated Financial Statements read with Accounting Standard AS-27
on Financial Reporting of Interest in Joint Ventures and Accounting
Standard AS-23 on Accounting for Investments in Associates, as issued
by the Institute of Chartered Accountants of India. The Consolidated
Financial Statements of the Company includes therein Consolidated
Audited Annual Accounts for the year ended 31st March, 2008 of its
Wholly Owned Subsidiary (WOS), Best On Health Ltd. (by consolidating
its Annual Accounts with those of its WOS, viz. Radicura & Co. Ltd,
Panacea Educational Institute Pvt. Ltd., Panacea Hospitality Services
Pvt. Ltd.
and Sunanda Steel Company Ltd.); the Audited Annual Accounts for the
year ended 31st March, 2008 of the JV Company, Chiron Panacea Vaccines
Private Limited; the Audited Annual Accounts for the year ended 31st
December, 2007 of another JV Company, Cambridge Biostability Ltd.; the
Audited Annual Accounts for the year ended 31st March, 2008 of its
associate company, Panheber Biotec Private Limited (now known as PanEra
Biotec Pvt. Ltd.) and the Audited Accounts for the period ended 31st
March, 2008 of its associate Lakshmi &The Manager.The audited
consolidated financial statements together with Auditors Report
thereon form part of the Annual Report of the Company.
Listing of Equity Shares / Bonds
The Equity Shares of the Company are listed in India on the National
Stock Exchange (NSE) and Bombay Stock Exchange (BSE). Listing Fees for
the financial year 2008-09 has been paid to these Stock Exchanges.
The Foreign Currency Convertible Bonds are listed at Singapore Stock
Exchange.
Public Deposits
During the year under review, your Company has not invited or accepted
any deposits from the public pursuant to the provisions of Section
58Aofthe Companies Act, 1956 and no amount of principal or interest was
outstanding in respect of deposits from the public as of the date of
Balance Sheet. However, during the year under review, the Company has
continued to accept deposits from the Companys Directors, their
relatives, associates and the Companys employees without inviting
deposits from them.
insurance
All properties and insurable assets of the Company like building, plant
& machinery, stocks and upcoming projects have been adequately insured,
wherever necessary.The Company has also taken product liability
insurance policies for conducting clinical trials and for insuring its
products (manufactured & sold) with an add on cover of pollution
liability and limited unnamed vendor extension liability to cover the
risk on account of claims, if any, filed against the company.
Directors
Mr. M.L. Kalra, Director of the Company demised on 6th January, 2008.
He was appointed as a non- executive Director of the Company in July
2001 and has contributed to the growth of the Company in his position
as Director and member of various Committees of the Board of Directors
of the Company. The Board wishes to accord its sincere appreciation
for the valuable services and support rendered by him during his tenure
as a Director of the Company.
Mr. Rajesh Jain, the Joint Managing Director of your Company has been
ranked amongst the top 40 global, most influential persons who would
determine the future course of pharmaceutical industry by an
internationally reputed organization, World Pharmaceutical Frontiers.
It is a matter of great pride and honour for the medical fraternity,
members and employees of the Company to see the name of Mr. Rajesh Jain
in the selection. Your Directors wish to place on record their
appreciation for the able guidance, vision and motivation extended by
Mr. Rajesh Jain as the Joint Managing Director of the Company.
In accordance with the provisions of the Companies Act, 1956, Mr.
Soshil Kumar Jain, Mr. Sumit Jain and Dr. A.N.Saksena, Directors of the
Company, are liable to retire by rotation and being eligible, offer
themselves for re-appointment.
Statutory Auditors
As per the provisions of the Companies Act, 1956, M/s. S.R. Batliboi &
Co., Chartered Accountants, hold office as Statutory Auditors of your
Company till the conclusion of the ensuing Annual General Meeting and
have shown their willingness to be re-appointed as the Auditors of the
Company.
Your Company has received the Certificate from M/s. S.R. Batliboi &
Co., Chartered Accountants, as required under Section 224(1 B) of the
Companies Act, 1956, to the effect that their re-appointment, if made,
will be within the limits as prescribed under the provisions thereof.
Your Directors recommend their re- appointment as the Auditors of the
Company for the financial year 2008-09.
Auditors Observations
As regards the Auditors observation in their report regarding
non-provision of proportionate premium on redemption of US $ 50
million Zero Coupon Convertible Bonds due 2011 amounting to
Rs.243,706,599,the directors are of the opinion that the bonds are
redeemable only if there is no conversion of bonds earlier, the
likelihood of which cannot be ascertained presently. Hence, the payment
of premium on redemption is contingent in nature, the outcome of which
is dependent upon uncertain future events.Therefore,same has been
disclosed as a contingent liability.
As regards the Auditors observation in their report regarding
capitalization of expenditure on clinical trials amounting to Rs.
185,575,387 for the purpose of registration of Companys products in US
and/or Europe, the management believes that these products would be
commercially viable and there is no reason to believe that there is any
uncertainty that may lead to not securing registration for the products
from regulatory authorities in US and/or Europe.
As regards the Auditors observation in their report regarding slight
delay in deposition of tax deducted at source in few cases, where
amount involved was not significant, the said delays were due to normal
operational difficulties. The total amount of such tax deducted at
source was Rs.1,310,138 only and the Company had deposited the said
amount along with applicable interest thereon amounting to Rs.31,718
for such delayed period.
The notes to the accounts and other observations, if any, in the
Auditors Report are self-explanatory and, therefore, do not call for
any further comments.
Cost Auditors
In terms of the provisions of Section 233B of the Companies Act, 1956,
M/s J.P.Gupta & Associates, Cost Accountants, have been appointed as
the Cost Auditors to conduct the audit of the Companys Cost Records in
respect of formulations for the year ended 31st March, 2008 with the
approval of the Central Govemment. They have also been appointed as the
Cost Auditors for the financial year 2008-09 subject to the approval of
Central Government.
Disclosures under Section 217 of the Companies Act 1956
Except as disclosed elsewhere in the report, there have been no
material changes and commitments, which can affect the financial
position of the Company between the end of financial year and the date
of report.
As required under Section 217(2) of the Companies Act, 1956, the Board
of Directors inform the members that during the financial year there
has been no material changes, except as disclosed elsewhere in this
report:
in the nature of Companys business, in the Companys subsidiaries or
in the nature of business carried out by them, in the classes of
business in which the Company has an interest. Energy
Conservation,Technology Absorption & Foreign Exchange
Particulars required under Section 217(1)(e) of the Companies Act,
1956, read with the Companies (Disclosure of Particulars in the Report
of Board of Directors) Rules, 1988, regarding conservation of energy,
technology absorption and foreign exchange earnings & outgo, is given
in Annexure A, forming part of this Report.
Information regarding Employees
The information required to be furnished under section 217(2A) of the
Companies Act, 1956, read with Companies (Particulars of Employees)
Rules, 1975 as amended, the names and other particulars of employees
covered under these Rules are set out in Annexure B, forming part of
this Report.
Directors Responsibility Statement
The Directors hereby confirm:
i. that in the preparation of the annual accounts, the applicable
accounting standards had been followed along with proper explanation
relating to material departures;
ii. that the directors had selected such accounting policies and
applied them consistently and made judgments and estimates that are
reasonable and prudent so as to give a true and fair view of the state
of affairs of the Company at the end of the financial year and of the
profit or loss of the Company for that period;
iii. that the directors had taken proper and sufficient care for the
maintenance of adequate accounting records in accordance with the
provisions of the Companies Act, 1956 for safeguarding the assets of
the Company and for preventing and detecting fraud and other
irregularities; and
iv. that the directors had prepared the annual accounts on a going
concern basis.
Acknowledgments
Your Directors place on record their sincere appreciation for
significant contribution made by the employees at all levels through
their dedication, hard work and commitment and look forward to their
continued support. Your Directors also take this opportunity to express
sincere thanks to the medical fraternity and patients for their
continued co-operation, patronage and trust reposed on the Company and
its products.
Your Directors also wish to place on record their appreciation and
acknowledge with gratitude the support and co-operation extended by
banks, financial institutions, government and shareholders and look
forward to having the same support in all our future endeavors.
For and on behalf of the Board
New Delhi Soshil Kumar Jain
28th July,2008 Chairman
Mar 31, 2007
The Directors of your Company have pleasure in presenting the 23rd
Annual Report together with the Audited Annual Accounts of the Company
for the year ended 31st March, 2007 and Auditors' Report thereon.
Performance Review
The Company's performance during the year under review, is summarized
below:
(Rs. in Million)
Particulars For the year ended For the year ended
March 31, 2007 March 31, 2006
Gross Turnover 8,397.9 5,479.7
Other Income 299.6 70.9
Total Income 8,615.1 5,434.5
Profit before Interest,
Depreciations Tax 2,616.6 1,319.9
Financial Expenses 170.5 133.3
Profit before Depreciation & Tax 2,446.1 1,186.6
Depreciation 355.1 182.2
Profit before Tax &
Prior Period expenses 2,091.0 1,004.4
Prior period expenses - 2.3
Profit before Tax 2,091.0 1,002.1
Provision for Taxation 622.9 392.7
Profit after Tax 1,468.1 609.4
Appropriations:
Dividend Paid/Proposed
- On Equity Shares 65.7 57.1
- On Preference Shares 20.4 40.7
Tax on Dividend 14.0 13.7
Transfer to Capital Redemption Reserve 145.2 -
Transfer to General Reserve 146.8 60.9
Basic EPS after prior period
expenses (Rs.)* 23.7 9.9
Cash EPS (Rs.)* 29.5 13.1
Book Value per Share (Rs.)* 81.9 27.9
Dividend on Equity Shares 100% 100%
* Per Equity Share of Re. 1/-
Share Capital
During the year under review, the Equity Share Capital has increased to
Rs.65.8 million as on 31st March, 2007 as a result of allotment of
8,604,904 Equity Shares of Re.1/- each upon conversion of 550 Foreign
Currency Convertible Bonds (FCCBs) aggregating US$55 million.
The Equity Share Capital has further increased to Rs.65.9 million
consequent upon issue of 24,688 Equity Shares upon conversion of FCCBs
on 17th May, 2007.
As per the terms of issue of 90,434,914-4.5% Non-Convertible Redeemable
Preference Shares (Series III) of Rs.10/- each issued to Chervil South
East Asia Pte Ltd., the Company had redeemed the entire Preference
Share Capital during the year under review.
Dividend
As per the terms of issue of above said Preference Shares, the dividend
@ 4.5% for the financial year ended 31 st March, 2007 amounting to
Rs.20.4 million, has been paid as Interim Dividend on pro-rata time
basis till the date of redemption, as declared by the Board on 29th
November, 2006. As such no further dividend is payable on Preference
Shares for the Financial Year ended 31st March, 2007.
Further, continuing with the trend of rewarding its shareholders and
simultaneously keeping in view the requirement of funds for the
operations and growth of the Company, your Directors are pleased to
recommend a dividend of 100% on Equity Share Capital of the Company for
the Financial Year ended 31st March, 2007.
The Company has made a provision for dividend in the books of account
after considering the application for conversions received as at the
date of the Board Meeting for approval of Financial Statements.The
Company is obliged to pay dividend to those bond holders who convert
their bonds into Equity Shares after approval by the Board of the
financial statements and upto the book closure date for dividend
purposes. Incremental dividend, if any and Dividend Distribution Tax
thereon will be paid out of the balance available in the Profit & Loss
Account.
The dividend as above on the Equity and Preference Shares is placed
before you for your approval at the ensuing Annual General Meeting and
if approved, will absorb an amount of Rs.20.4 million and Rs.65.7
million, respectively. However, the amount of dividend on Equity Shares
may increase in case any bonds are converted into Equity Shares before
the book closure date.
Issue of Shares upon Conversion of FCCBs
Bondholders in respect of 231 Tranche 1 Foreign Currency Convertible
Bonds (FCCBs) for USD 23.1 million exercised their rights of conversion
and 3,690,312 Equity Shares of Re.1/- each at a premium of Rs.275.30
per share were allotted to them on 9th October, 2006.The Company served
Mandatory Conversion Notice dated 6th October, 2006 on the Bondholders
of outstanding 269 Tranche 1 Bonds and 4,297,372 Equity Shares of
Re.1/- each at a premium of Rs.275.30 per share were allotted to them
on 26th October, 2006 upon conversion of the said Bonds. Further, 3
Bondholders in respect of 50 Tranche 2 Bonds also exercised their
rights of conversion and 617,220 Equity Shares of Re.1/-each at a
premium of Rs.356.57 per share were allotted on 26th October, 2006 upon
conversion of the said Bonds.
Further, subsequent to 31st March, 2007, 1 bondholder in respect of
Tranche 2 FCCBs for USD 0.2 million opted for conversion and 24,688
Equity Shares of Re.1/- each at a premium of Rs.356.57 per share were
allotted to them upon conversion on 17th May, 2007.
Utilisation of FCCBs proceeds
As per the requirements of FEMA guidelines, the net proceeds of US$
96.9 million, after payment of fees and expenses of lead manager and
international legal advisor, was parked overseas and placed in fixed
deposits with State Bank of India in London. The requisite amount has
been remitted to India upon conversion of FCCBs into Equity Shares and
also as per the requirement of funds for meeting capital expenditure on
various projects from time to time. An amount of £ 1.94 million has
been utilized for investment in joint venture abroad.
The details of utilization of proceeds from issue of FCCBs as on 31st
March, 2007, are as under:
Particulars Amount
(Rs. in Million)
Capital expenditure 1,495.7
Investment in Joint Venture - 168.1
Cambridge Biostability Limited
Loan payment and general 2,497.7
corporate purposes*
Issue expenses 136.1
Total 4,297.6
* Out of the funds remitted to India upon conversion of FCCBs
Further, out of the proceeds of the bond issue, US$4.0 million
(Rs.173.8 million) were lying in Fixed Deposits as at March 31,2007 in
foreign currency with State Bank of India, London, which has been
remitted to India and utilized during the current financial year.
Report on Corporate Governance
As required pursuant to Clause 49 of the Listing Agreement with Stock
Exchanges, a report on Corporate Governance is provided in the Annual
Report. As required pursuant to Section 292A of the Companies Act,
1956, the details of composition of Audit Committee are given in such
report.
Management Discussion & Analysis Report
As required by Clause 49 of the Listing Agreement with the Stock
Exchanges, a detailed Management Discussion and Analysis Report forms
part of the Annual Report.
Joint Ventures and Subsidiaries
The Company's Joint Venture Company ("JV Company"), Panheber Biotec
Pvt. Ltd. ("Panheber"), in joint venture with M/s. Heber Biotec S.A.,
Cuba, an arm of the world renowned bio-technology research facility,
Center for Genetic Engineering and Biotechnology (CIGB), is meeting
requirement of Recombinant Hepatitis B Bulk Vaccine and Antigen for the
manufacture of Hepatitis B and combination vaccines by your Company.
WHO pre-qualification for the Recombinant Hepatitis B Vaccine has been
received during the year under review.The Company has started supplying
Hepatitis B Vaccines to UNICEF for its global requirements.The process
for WHO pre-qualification for Combination Vaccines is at an advanced
stage of approval and the approval is expected during the current
financial year. Due to strategic reasons, Heber Biotec has offered to
sell its stake in Panheber and the Company is actively evaluating the
offer.
The Company's another JV Company, viz. Chiron Panacea Vaccines Pvt.
Ltd. ("Chiron Panacea"), in joint venture with world's 5th largest
Vaccine group, viz. Chiron Corporation (now Novartis Vaccines), which
began its operations in Jan'05 by way of marketing and distribution of
Combination & other Vaccines in India, has made available innovative
pediatric vaccines to reduce the burden of various diseases in the
country. Chiron Panacea achieved a turnover of Rs.422.4 million (up by
100%) and net profit of Rs.61.83 million (an increase of more than 6
times) during the year under review. Chiron Panacea now commands around
35% market share in the paediatric combination vaccines segment in
India.
During the year under review, the Company entered into a joint venture
and made investment of Rs.168.07 million (£1.94 million) for acquiring
10% of the share capital in Cambridge Biostability Ltd. (CBL), a U.K.
based Company.The Company has an existing collaboration with CBL for
developing thermostable vaccines applying CBL's patented'Stable Liquid
Technology' over the Company's combination vaccines. CBL was formed in
1998 in England & Wales and has a R&D facility in Cambridge, which is
developing its technology for applications in developing countries,
Biodefence and multivalent vaccines for sale in developed countries.
CBL's technology is being tested on the Company's pentavalent vaccine
which is undergoing clinical trials in U.K.The strategic investment in
CBL gives Panacea Biotec more insight into CBL's proprietary
technology, its ongoing development and application in other vaccines
and fields.
The Company's wholly-owned subsidiary namely Radicura & Co. Ltd.
("Radicura"), which was engaged in trading and distribution of
pharmaceutical products, has discontinued its operations due to
non-economical size of operations, during the last fiscal. Another
wholly-owned subsidiary of the Company namely Best On Health Ltd.
("Best On Health") which owns a prime immovable property in close
proximity of the Company's erstwhile Corporate Office, has made
available to your Company a larger premise for its Corporate Office.
Best On Health is in the process of charting out a plan for
diversification in related health management space as part of its
future growth plans.
Consolidated Financial Statements
As required pursuant to Clause 41 of the Listing Agreement with Stock
Exchanges, the Consolidated Financial Statements of the Company
(including therein Audited Annual Accounts for the year ended 31st
March, 2007 of its subsidiaries, viz. Radicura and Best On Health and
its JV Company, Panheber and the Unaudited Financial Statements for the
year ended 31 st March, 2007 of the JV Company, Chiron Panacea and
Audited Annual Accounts for the year ended 31st December, 2006 of
another JV Company, Cambridge) are attached with the Annual Accounts of
the Company.These statements have been prepared in compliance with the
requirements of Accounting Standard 21 on `Consolidated Financial
Statements' and Accounting Standard 27 on `Financial Reporting of
Interest in Joint Ventures'.
The Auditors of the Company have also given their report on the
Consolidated Financial Statements.
Listing of Equity Shares/Bonds
The Equity Shares of the Company are listed on the National Stock
Exchange (NSE) and Bombay Stock Exchange (BSE). Listing Fees for the
financial year 2007- 08 has been paid to these Stock Exchanges.
The Foreign Currency Convertible Bonds are listed at Singapore Stock
Exchange.
Public Deposits
During the year under review, your Company has not invited or accepted
any deposits from the public pursuant to the provisions of Section 58A
of the Companies Act, 1956 and no amount of principal or interest was
outstanding in respect of deposits from the public as of the date of
Balance Sheet. However, during the year under review, the Company has
continued to accept deposits from the Company's Directors, their
relatives, associates and the Company's employees without inviting
deposits from them.
Insurance
All properties and insurable assets of the Company, including Building,
Plant & Machinery and Stocks have been adequately insured, wherever
necessary.The Company also has a product liability insurance policy
(including Clinical Trials) to cover the risk on account of claims, if
any, filed against the Company.
Directors
Mr.Sunil Anand and Mr.Ashwani Jain have, vide their letters dated 15th
June, 2006 and 17th July, 2006, tendered resignation from office as
Whole-time Director and director on the Board.Their resignation were
accepted by the Board w.e.f. 16th June, 2006 and 29th September, 2006,
respectively and they have ceased to be Directors on the Board w.e.f.
the said dates.The Board places on record its appreciation for their
services and support rendered by them during their tenure of services
with the Company.
In accordance with the provisions of the Companies Act, 1956, Mr. Mr.
Kalra, Mr. K.M. Lal and Mr. Gurmeet Singh, Directors of the Company,
are liable to retire by rotation and being eligible, offer themselves
for re-appointment.
Statutory Auditors
As per the provisions of the Companies Act, 1956, M/s. S.R. Batliboi &
Co., Chartered Accountants, hold office as Statutory Auditors of your
Company till the conclusion of the ensuing Annual General Meeting and
have shown their willingness to be re-appointed as the Auditors of the
Company.
The Company has received the Certificate from M/s. S.R. Batliboi & Co.,
Chartered Accountants, as required under Section 224(1B) of the
Companies Act, 1956, to the effect that their re-appointment, if made,
will be within the limits as prescribed under the provisions thereof.
Your Directors recommend their re-appointment as the Auditors of the
Company for the financial year 2006-07.
Auditors' Observations
As regards the Auditors'observation in their reports regarding
non-provision of proportionate premium on redemption of US$ 50 million
Zero Coupon Convertible Bonds due 2011 amounting to Rs.159,623,752, the
directors are of the opinion that the bonds are redeemable only if
there is no conversion of bonds earlier, the likelihood of which cannot
be ascertained presently. Hence the payment of premium on redemption is
contingent in nature, the outcome of which is dependent upon uncertain
future events.Therefore same has been disclosed as a contingent
liability.
As regards the Auditors'observation in their reports regarding
commission payable to Directors amounting to Rs.185,049,736, which is
pending approval of shareholders, the matter is proposed to be placed
for the approval of shareholders in the ensuing Annual General Meeting
and the directors are confident of getting the shareholder's approval.
As regards the Auditors'observation in their reports regarding
capitalization of expenditure on clinical trials amounting to
Rs.91,557,518 for the purpose of registration of Company's product in
US and/or Europe, the management believes that these products would be
commercially viable and there is no reason to believe that there is any
uncertainty that may lead to not securing registration for the products
from regulatory authorities in US and/or Europe.
As regards the Auditors'observation in their reports regarding
non-furnishing of information in respect of its suppliers which may
fall under "The Micro, Small and Medium Enterprises Development Act,
2006" which was promulgated in October 2006, the Company has initiated
the process of identification of such suppliers. But in view of large
number of suppliers and paucity of time after promulgation of law, the
Company does not have sufficient information to comply with the
disclosure requirements prescribed under the said Act. However, the
directors are of the opinion that liability of interest on overdue
payments, if any to such suppliers will not be material.
As regards the Auditors'observation in their report regarding slight
delay in deposit of tax deducted at source in few cases, where amount
involved was not significant, the said delays were due to operational
difficulties and the amount was deposited together with applicable
interest thereon for such delayed period.
As regards the Auditors'observation in the CARO Report regarding
undisputed dues in respect of Central Sales Tax of Rs.121.7 million
(including accrued interest of Rs.28.1 million) outstanding at the year
end for a period of more than 6 months from the date they became
payable, the amount has been provided in the books on the principle of
conservatism for inter-state sales to United Nations Organization. Even
though the amount has been provided in the books, the same has not been
paid as the management believes that it may be an inadvertent omission
while drafting and implementing the law.The sale to UNO was exempt
until 31st March, 2005 and has been notified to be exempt from 13th
May, 2005 and the Govt. of India would not change its stand on a treaty
in respect of supplies to UNO and that too for a short period of 42
days.
The Company is pursuing the matter with lawyers and has been advised
that the inadvertent omission of notification should not preside over
the intention of law - which would mean that the sales to UNO which
enjoyed exemption prior to the enactment of law and the status of which
was restored after a gap of 42 days should continue to do so during the
intervening period. Moreover, the Central Government has vide its
powers u/s 8(5) of the Central Sales Tax Act, issued a notification
dated 10th April, 1972, as per which no tax under this Act shall be
payable in respect of any inter-state sale of goods to UNICEF,
provided that UNICEF furnishes a Certificate confirming that the said
goods have been purchased by it.The Company has obtained the said
Certificate and submitted to the concerned authorities.The directors
are confident that the issue will be resolved during the current
financial year.
As regards the Auditors' observation in their report on the
Consolidated Financial Statements regarding Unaudited Financial
Statements of Chiron Panacea, the said Company has confirmed that as it
is having foreign directors on its Board, the meeting of the Board of
Directors for approving its Annual Accounts, could not be held
earlier.The Annual Accounts have now been audited and approved by its
Board of Directors in its meeting held on 15th June, 2007, with no
change therein.
The notes to the accounts and other observations, if any, in the
Auditors'Report are self-explanatory and, therefore, do not call for
any further comments.
Cost Auditors
In terms of the provisions of Section 233B of the Companies Act, 1956,
M/s J.P. Gupta & Associates, Cost Accountants, have been appointed as
the Cost Auditors to conduct the audit of the Company's Cost Records in
respect of formulations for the year ended 31st March, 2007 with the
approval of the Central Government.They have also been appointed as the
Cost Auditors for the financial year 2007-08 subject to the approval of
Central Government.
Disclosures under Section 217 of the Companies Act, 1956
Except as disclosed elsewhere in the report, there have been no
material changes and commitments, which can affect the financial
position of the Company between the end of financial year and the date
of report.
As required under Section 217(2) of the Companies Act, 1956, the Board
of Directors inform the members that during the financial year there
has been no material changes:
* in the nature of Company's business,
* in the Company's subsidiaries or in the nature of business carried
out by them, except those stated in this report,
* in the classes of business in which the Company has an interest.
Energy Conservation,Technology Absorption & Foreign Exchange
Information as required under Section 217(1)(e) of the Companies Act,
1956, read with the Companies (Disclosure of Particulars in the Report
of Board of Directors) Rules, 1988, regarding conservation of energy,
technology absorption and foreign exchange earnings & outgo, is given
in Annexure A, forming part of this Report.
Information regarding Employees
As required by the provisions of Section 217(2A) of the Companies Act,
1956, read with Companies (Particulars of Employees) Rules, 1975 as
amended, the names and other particulars of employees covered under
these Rules are set out in Annexure B, forming part of this Report.
Directors' Responsibility Statement
The Directors hereby confirm:
i) that in the preparation of the annual accounts, the applicable
accounting standards had been followed along with proper explanation
relating to material departures;
ii) that the directors had selected such accounting policies and
applied them consistently and made judgments and estimates that are
reasonable and prudent so as to give a true and fair view of the state
of affairs of the Company at the end of the financial year and of the
profit or loss of the Company for that period;
iii) that the directors had taken proper and sufficient care for the
maintenance of adequate accounting records in accordance with the
provisions of the Companies Act, 1956 for safeguarding the assets of
the Company and for preventing and detecting fraud and other
irregularities; and
iv) that the directors had prepared the annual accounts on a going
concern basis.
Acknowledgments
The Directors acknowledge with gratitude the co-operation and
assistance received from the Central and the State Government
Authorities, Banks, Financial Institutions and other lenders.
Government Agencies, International Health Organisations and business
associates.The Directors also place on record their deep sense of
appreciation to the employees, who are committed to high standards &
ethics, excellence in performance, professionalism, commendable team
work and have thrived in a challenging environment.
The Directors also take this opportunity to express sincere thanks to
the medical fraternity and patients for their continued co-operation,
patronage and trust reposed on the Company and its products. Finally,
the Directors wish to express gratitude to the Shareholders as well as
Foreign Institutional Investors for their firm support and trust in the
Company and its management.The Board looks forward to having continued
support of all concerned in endeavour to help people lead healthier
lives in the years to come.
For and on behalf of the Board
New Delhi Soshil Kumar Jain
24th July, 2007 Chairman
Annexure to the Directors' Report
Annexure A
Statement of particulars pursuant to the Companies (Disclosure of
Particulars in the Report of Board of Directors) Rules, 1988.
I. Conservation of Energy
1. Energy Conservation measures taken
The Company has continued its policy of giving priority to energy
conservation measures including regular review of energy consumption
and effective control on utilization of energy.The Company had devised
its production lines and other facilities keeping in view the objective
of minimum energy losses.
The following are a few of the energy conservation measures implemented
during the year under review:
Fuel consumption in Boiler is closely monitored and pressure is reduced
with a view to conserve the fuel.
Temperature control system for the cooling tower fans On/Off installed
at Lalru.
CFL lamps are installed in place of FTL in non-critical areas.
Electronic chokes are installed in all tube lights.
Electronic energy saver device provided in the lighting circuit in
production areas.
Automatic Power factor correction device fitted to total power supply.
Variable frequency drives have been provided to AHUs, Chillers, VAV
system for HVAC & Fume hood exhaust blowers at Mohali.
High efficiency motors, CFL lamps, metal halide lamps have been
installed at Mohali with a view to reduce power consumption.
Provided variable frequency drives to AHUs and high efficiency motors,
CFL lamps, metal halide lamps at Baddi.
Reduced boiler and air compressors working pressure at Baddi.
2. Additional Investments/Proposals, if any, for reduction of Energy
Consumption
Continuous efforts are being made to further reduce expenditure on
power & fuel in the times to come.The Company plans to convert all
lights to T8 in a phased manner and a new 300 CFM air compressor is
propsed to be installed at the Vaccine Formulation plant at New Delhi
with energy efficiency motor with variable frequency drive for energy
conservation.
A detailed Energy Audit was conducted during the year at its plants at
Baddi.Though the Company has already implemented several energy
conservation projects resulting in substantial energy savings, the
energy audit report has identified and suggested several proposals with
an annual energy saving potential of Rs.1.9 million based on the
present energy cost. The Company has already implemented the majority
of such proposals and plans to implement the remaining proposals at the
earliest possible.
3. Impact of measures taken and impact on cost of production of goods
The energy conservation measures indicated above have resulted into
considerable reduction in energy cost thereby reducing the cost of
production of goods.
II. Technology Absorption
Form for disclosure of particulars with respect to Technology
Absorption
Research & Development (R&D) ,
1. Specific areas in which R&D carried out by the Company
The Research is being pursued by the Company, inter-alia, in the
following areas:
- Development of Value added Drug Delivery Products
- Identification and development of lead compounds from plant sources
- Development of novel vaccines including recombinant anthrax vaccine
and cell culture based Japanese Encephalitis (JE),etc.
- Development of breakthrough vaccines like thermostable pentavalent
vaccine which would eliminate the need for cold chain
- Development of small & big molecules (new chemical entities & new
biological entities).
- Development of a peptide-based technology for alopecia (hair loss)
management
- Advanced Drug Delivery Research
2. Benefits derived as a result of above R&D
- Novel drug delivery products
- Competitively priced products
- Improved product quality leading to customer satisfaction
- Waste minimisation
- Safe and environment friendly processes
- Grant of Product/Process Patents
- Import substitution leading to lower cost of goods
- Enhanced global presence
- Export of Quality Products
- Development of new innovative injectable combination vaccines.
3. Future plan of Action
The Company will focus its Research & Development activities for
growing the top & bottom lines of the Company, inter-alia, in the
following areas:
- Drug Discovery Research
- Advanced Drug Delivery Research
- Bio-pharmaceuticals Research for development of novel preventive &
therapeutic vaccines, therapeutic fully human monoclonal antibodies and
therapeutic peptides.
- Development of thermostabilised vaccines in collaboration with
Cambridge Biostability, U.K.
- Natural Products Research
- Chemical Research & Development
- Development of Recombinant, Polysaccharide & Cell culture based
Vaccines and combination Vaccines.
4. Expenditure on R & D
(Rs. in Million)
2006-07 2005-06
a) Capital 567.05 252.3
b) Revenue 505.01 291.5
c) Total 1,072.06 543.8
d) Total R&D expenditure 12.9% 10.1%
as a percentage of net sales
Technology absorption, adaptation and Innovation
1. Efforts, in brief, made towards technology adaptation and
innovation :
The Company has in-house R&D Centres for developing new products and
technologies. It has developed indigenous technologies in respect of
the products manufactured by it. Further, in-licensing arrangements
have been made for technologies and development of (a) Japanese
Encephalitis (JE) Vaccine, (b) Tetravalent Dengue Virus Vaccine and (c)
peptide based product for generation of hair follicles and hair growth
during the previous financial year.Technology for JE Vaccine has been
successfully transferred and our scientists are currently working at
site for development/upscaling of the process.Technology successfully
transferred and appropriate chimeric strains of Dengue Virus Serotypes
revived.The hair growth peptide has been synthesized. The data
relating to physical/chemical and its efficacy (in animals) has been
generated as per the regulatory requirements.
2. Benefit derived as a result of the above efforts, e.g., product
improvement, cost reduction, product development, import substitution,
etc. :
Competitive products, Product quality improvement, Product Development,
Import Substitution and development of innovative combination vaccines.
With in-licensing arrangements, the Company will be able to
commercialise these products in domestic and international markets
thereby contributing to its top & bottom lines.
3. In case of imported technology (imported durini the last 5 years
reckoned from the beginning of the financial year),following
information may be furnished:
a) Technology imported
1. Technology for use of peptide based products for generation of hair
follicles and hair growth. 2.Tetravalent Dengue Virus Vaccine.
b) Year of import :
1. 2004-05 (Peptide). 2.2006-07 (Dengue Vaccine).
c) Has technology been fully absorbed : No
d) If not fully absorbed, areas where this has not taken place, reasons
thereof and future plan(s) of action :
The technologies are being worked upon at the Company's
Biopharmaceutical Research Centre, Arrangements are also made to
conduct pre-clinical toxicology as a part of drug development.
III. Foreign Exchange Earnings and Outgo
1. Activities relating to exports
The Company is exporting its branded pharmaceutical formulations in CIS
countries, South East Asia Region and countries in Eastern Europe and
African Region.The Company is also supplying Oral Polio Vaccines to
various countries through UNICEF against its global tenders.Today the
Company's products are available to people in over 35 countries across
the globe.
During the year under review, the export turnover has increased to
Rs.6,674.5 million (including deemed exports of Rs.5,065.8 million) as
against Rs.4,126.9 million (including deemed exports of Rs.3,693.9
million) registering a phenomenal growth of more than 61% as compared
to the previous financial year.
During the year under review, the export sales of formulations
increased by 56% to Rs.258.3 million (including deemed exports of
Rs.1.8 million) from Rs.165.7 million (including deemed exports of Rs.
nil) during fiscal 2006.The exports to most of the countries where
Company has presence, have shown excellent growth.
The Company also achieved an export turnover of Rs.1,352.2 million by
way of supplies of Oral Polio Vaccines to various countries including
Abidjan, Afghanistan, Angola, Bangladesh, Cameroon, Chad, Congo,
Ethiopia, Indonesia, Kenya, Myanmar, Nepal, Nigeria, Somalia,
Sudan,Turkey and Uganda through UNICEF against its global tenders,as
against Rs.267.3 million during the previous year, achieving an
excellent growth of more than 400%.
2. Initiatives taken to increase export
With a view to increase opportunities, the efforts on international
marketing have been intensified. The Company has been adopting a
strategy of increasing its international brand image and is rapidly
expanding to reach out to more and more countries. It has also obtained
brand registration for more than 60 different brands in different
countries and is actively exploring opportunities for launching as well
as licensing out some of its patented products for
manufacture/marketing in developed countries in Europe, North America
and Latin America.
During the year under review, the Company has completely turnaround its
operations, systems and processes for International Marketing.
Further, in order to expand its export turnover of pharmaceutical
formulations, the Company is focusing on Nephrology range, Willgo, Xeed
and other patented products across all the markets and is shifting from
Distribution driven model to "Promotion orientation" in key markets.The
Company has also enhanced filings in all key and supportive markets
with maximal emphasis on Brazil, South Africa and Turkey.
3. Development of new export markets for products and Export Plans
The Company is poised to make inroads in international markets by
increasing its market share in operating markets and establishing its
ground work in new potential markets.
The Company commenced exports in new markets and marked its presence in
countries like Mongolia, Philippines, Republic of Sparska and
Madagascar.
Agreements have been signed with several parties in newer markets and
product registration documents have been submitted.
Your company is also rigorously engaged in registration activities in
new markets like Brazil, Mexico, South Africa, Bosnia, Mauritius, Costa
Rica, Malaysia, Myanmar, etc.
The Company is in the process of launching its key patented products in
the developed markets of Europe and US.The Company has been permitted
by German regulatory authority BfArM to initiate Phase-III clinical
trials for its two leading products WillGo and Sitcom. The Company plans
to file the registration dossiers for other products Panimun Bioral,
Pangraf and Mycept during the current financial year and expects the
commercial launch in FY'09.
4. Total foreign exchange earned and used
(Rs. in Million)
2006-07 2005-06
Foreign Exchange Earned
F.O.B. value of Exports 6,653.5 4,206.1
(including deemed export of
Rs.5,066 million (Previous
Year Rs.3,787 million))
R&D Technology Services 7.8 13.9
Interest on Exchange Earners'
Foreign Currency Deposits 155.2 28.1
Total 6,816.5 4,248.1
Foreign Exchange Used
Import of Raw Materials &
Packing Materials 3,481.1 2,095.9
Import of Capital Goods
Machinery & Spares 525.9 198.9
Patents,Trade marks &
Product registration 44.5 14.4
Know-how Fee - 6.8
Interest 47.8 30.1
Professional & Consultation fees 9.9 9.8
Expenditure on issue of Foreign
Currency Convertible Bonds - 139.0
Other Expenses 66.5 50.3
Total 4,175.7 2,545.2
For and on behalf of the Board
New Delhi Soshil Kumar Jain
24th July, 2007 Chairman
Mar 31, 2006
The Directors of your Company have pleasure in presenting the 22nd
Annual Report together with the Audited Annual Accounts of the Company
forthe year ended 31st March, 2006 and Auditors' Report thereon.
Performance Review
The Company's performance during the year under review, is summarized
below:
(Rs. in Million)
Particulars For the year ended For the year ended
31st March, 2006 31st March, 2005
Gross Turnover 5,479.7 3,357.6
Other Income 70.9 54.5
Total Income 5,434.5 3,309.9
Profit before Interest, Depreciations Tax 1,319.9 721.4
Financial Expenses 133.3 114.1
Profit before Depreciation & Tax 1,186.6 607.3
Depreciation 182.2 162.5
Profit before Tax & Extra-ordinary Items/
Prior Period expenses 1,004.4 444.8
Extra-ordinary Items/Prior period expenses 2.3 15.4
Profit before Tax 1,002.1 429.4
Provision for Taxation 392.7 128.7
Profit after Tax 609.4 300.7
Appropriations:
Dividend Paid/Proposed
- On Equity Shares 57.1 85.6
- On Preference Shares 40.7 43.9
Tax on Dividend 13.7 17.8
Transfer to Capital Redemption Reserve - 53.8
Transfer to/(from) Debenture
Redemption Reserve - (13.3)
Transfer to General Reserve 60.9 100.0
Basic EPS after Extra-ordinary Item (Rs.)* 9.9 4.4
Cash EPS (Rs.)* 13.1 7.3
Book Value (Rs.)* 27.9 21.6
Dividend on Equity Shares 100% 150%
* Per Equity Share of Re. 1/-
Share Capital
During the year under review, there has been no change in the share
capital except that the Company had re-issued 1,49,000 Equity Shares
which were forfeited earlier for non-payment of allotment money. The
re-issued shares are held in the name of employees in trust for
facilitating sale thereof through stock exchanges on behalf of the
Company.
Dividend
As per the terms of issue of 9,04,34,914 - 4.5% Non-Convertible
Redeemable Cumulative Preference Shares (Series III) of Rs.10/- each
issued to Chervil South East Asia Pte Ltd, the dividend @ 4.5% for the
financial year ended 31 st March, 2006 has been paid as Interim
Dividend as declared by the Board on 25th March, 2006. As such no
further dividend is payable on Preference Shares for the Financial Year
ended 31st March, 2006.
Further, continuing with the trend of rewarding its shareholders and
simultaneously keeping in view the requirement of funds for the
operations and growth of the Company, your Directors are pleased to
recommend a dividend of 100% on Equity Share Capital of the Company for
the Financial Year ended 31st March, 2006.
The dividend as above on the Equity and Preference Shares is placed
before you for your approval at the ensuing Annual General Meeting and
if approved, will absorb an amount of Rs.57.1 million and Rs.40.7
million, respectively.
Foreign Currency Convertible Bonds
During the year under review, your Company has successfully raised
funds by way of issue of Foreign Currency Convertible Bonds (FCCBs)
worth US$100 million (Rs.4,462.5 million) comprising of US$ 50 million
4.5% Convertible Bonds due 2011 (Tranche 1) and US$ 50 million Zero
Coupon Convertible Bonds due 201 1 (Tranche 2) for its future expansion
in India and offshore. The issue opened on 8th February, 2006 and
closed on 13th February, 2006 with an overwhelming response from
investors outside India. The Bonds are listed at the Singapore Stock
Exchange.
The Tranche 1 & Tranche 2 Bonds are convertible into fully paid Equity
Shares of Re. 1/- each of the Company, at any time after August 13,
2006 and February 13, 2007 respectively. Unless previously converted,
redeemed or repurchased and cancelled, the bonds will be redeemed on
February 14, 2011.
As per the requirements of FEMA guidelines, the net proceeds of US$
96.9 million, after payment of fees and expenses of lead manager and
international legal advisor, was parked overseas and placed in fixed
deposits with State Bank of India in London. The requisite amount is
being remitted to India as per the requirement of funds for meeting
capital expenditure on various projects from time to time.
The details of utilization of issue proceeds as on 31st March, 2006 is
as under :
Particulars Amount
(US$ Million)
Funds raised by issue of FCCBs 100.0
Issue related Expenses 3.1
Amount used for Capital Expenditure 3.3
Balance in Current Account with
State Bank of India and UTI Bank, New Delhi in INR 0.2
Fixed Deposits with SBI, London 93.4
The funds lying in bank accounts in India and abroad are proposed to be
utilized over a period of time as per the objects of issue mentioned in
the Offering Circular issued at the time of the FCCB issue.
Credit Rating
During the previous year, your Company was assigned "P1" (pronounced "P
One") rating by CRISIL for its Commercial Paper Programme of Rs. 1,650
million vide their letter dated 3rd June, 2004. This rating indicates
that the degree of safety with regard to the timely payment of interest
and principal on the instrument is very strong. However, the Company
did not opt for renewal of credit rating due to the change in its
funding strategy.
Report on Corporate Governance
As required pursuant to Clause 49 of the Listing Agreement with Stock
Exchanges, a report on Corporate Governance is provided in the Annual
Report. As required pursuant to Section 292A of the Companies Act,
1956, the details of composition of Audit Committee are given in such
report.
Management Discussion & Analysis Report
As required by Clause 49 of the Listing Agreement with the Stock
Exchanges, a detailed Management Discussion and Analysis Report forms
part of the Annual Report.
Joint Ventures and Subsidiaries
The Company's Joint Venture Company ("JV Company"), Panheber Biotec
Pvt. Ltd. ("Panheber"), jointly with M/s. Heber Biotec S.A., Cuba, an
arm of the world renowned bio-technology research facility, Center for
Genetic Engineering and Biotechnology (CIGB), is meeting requirement of
Recombinant Hepatitis B Bulk Vaccine and Antigen for the manufacture of
Hepatitis B and combination vaccines of your Company. WHO
pre-qualification for Recombinant Hepatitis B Vaccine has been received
recently. This pre-qualification would generate avenues for supply of
Recombinant Hepatitis B Vaccine to the UNICEF for the letter's global
needs.
Another JV Company, viz. Chiron Panacea Vaccines Pvt. Ltd. ("Chiron
Panacea"), in joint venture with world's 5th largest Vaccine group,
viz. Chiron Corporation, which began its operations in January, 2005 by
way of marketing and distribution of Combination & other Vaccines in
India, has made available innovative paediatric vaccines to reduce the
burden of various diseases in the country. Chiron Panacea became
profitable in its first full year of operations and now commands 18%
market share in the paediatric combination vaccines segment in India.
Chiron Corporation was taken over by Novartis on April 20, 2006.
The Company's wholly-owned subsidiary namely Radicura & Co. Ltd.
("Radicura"), which was engaged in trading and distribution of
pharmaceutical products, has, during the current fiscal, discontinued
its operations due to non-economical size of operations. Another
wholly-owned subsidiary of the Company namely Best On Health Ltd.
("Best On Health") which owns a prime immovable property in close
proximity of the Company's erstwhile Corporate Office, has made
available to your Company a larger premise for its Corporate Office.
Consolidated Financial Statements
As required pursuant to Clause 41 of the Listing Agreement with Stock
Exchanges, the Consolidated Financial Statements of the Company
(including therein Audited Annual Accounts for the year ended 31st
March, 2006 of its subsidiaries, viz. Radicura and Best On Health and
its JV Company, Panheber and the Unaudited Financial Statements for the
year ended 31 st March, 2006 of the JV Company, Chiron Panacea) are
attached with the Annual Accounts of the Company. These statements have
been prepared in compliance with the requirements of Accounting
Standard 21 on `Consolidated Financial Statements' and Accounting
Standard 27 on `Financial Reporting of Interest in Joint Ventures'.
The Auditors of the Company have also given their report on the
Consolidated Financial Statements.
Listing of Equity Shares
The Equity Shares of the Company are listed on the National Stock
Exchange (NSE) and the Bombay Stock Exchange, Mumbai (BSE). Listing
Fees for the financial year 2006-07 has been paid to these Stock
Exchanges.
As approved by the shareholders in the Annual General Meeting of the
Company held on 20th September, 2003, applications were made for
approval for delisting of the Equity Shares of the Company with the
Stock Exchanges at Delhi, Kolkata, Chennai & Ludhiana, as per the SEBI
(Delisting of Securities) Guidelines, 2003. The Stock Exchanges at
Chennai, Delhi and Ludhiana approved the delisting of Equity Shares in
the previous financial year. The delisting approval from the Stock
Exchange at Kolkata was received during the year under review vide
their letter dated 29th August, 2005.
Public Deposits
During the year under review, your Company has not invited or accepted
any deposits from the public pursuant to the provisions of Section 58A
of the Companies Act, 1956 and no amount of principal or interest was
outstanding in respect of deposits from the public as of the date of
balance sheet. However, during the year under review, the Company
continued to accept deposits from the Company's Directors, their
relatives, associates and the Company's employees without inviting
deposits from them.
Insurance
All properties and insurable assets of the Company, including Building,
Plant & Machinery and Stocks have been adequately insured, wherever
necessary. The Company also has a product liability insurance policy to
cover the risk on account of claims, if any, filed against the Company.
Directors
Mr. K.M. Lal, a retired IAS officer, was appointed as an additional
Director w.e.f. 28th April, 2005 and was subsequently appointed as
Director liable to retire by rotation in the Shareholders' Annual
General Meeting held on 20th August, 2005. Dr. A.M. Saksena, a retired
IRAS officer, was appointed as an additional Director w.e.f. 22nd
December, 2005. As per the provisions of section 260 of the Companies
Act, 1956, he holds the office until the date of the ensuing Annual
General Meeting and is proposed to be appointed as Director liable to
retire by rotation in the said meeting.
Mr. Soshil Kumar Jain, Mr. Ravinder Jain, Mr. Rajesh Jain, Mr. Sandeep
Jain, Mr. Ashwani Jain and Mr. Sunil Anand were re-appointed as
Whole-time Director designated as Chairman, Managing Director, Joint
Managing Director, Joint Managing Director, Whole-time Director
designated as Director (Materials Management) and Whole-time Director
designated as Director (Finance), respectively for a period of 5 years
w.e.f. 1st April, 2006, subject to the approval of shareholders in the
forthcoming general meeting.
However, Mr. Sunil Anand and Mr. Ashwani Jain have, vide their letters
dated 15th June, 2006 and 17th July, 2006, respectively, tendered
resignation from office as Whole-time Director and director on the
Board. Their resignation were accepted by the Board w.e.f. 16th June,
2006 and 29th September, 2006, respectively. The Board places on
record its appreciation for the services and support rendered by them
during their tenure of services as' Whole-time Director of the Company.
In accordance with the provisions of Companies Act, 1956, Mr. N.N.
Khamitkar, Mr. R.L. Narasimhan and Mr. Sunil Kapoor, Directors of the
Company, are liable to retire by rotation and being eligible offer
themselves for re-appointment.
Statutory Auditors
As per the provisions of the Companies Act, 1956, M/s. S.R. Batliboi &
Co., Chartered Accountants, hold office as Statutory Auditors of your
Company till the conclusion of the ensuing Annual General Meeting and
have shown their willingness to be re-appointed as the Auditors of the
Company.
The Company has received the Certificate from M/s. S.R.Batliboi & Co.,
Chartered Accountants, as required under Section 224(1B) of the
Companies Act, 1956, to the effect that their re-appointment, if made,
will be within the limits as prescribed under the provisions thereof.
Your Directors recommend their re-appointment as the Auditors of the
Company for the financial year 2005-06.
As regards the Auditors' observation in their report regarding slight
delay in deposit of tax deducted at source in few cases, where amount
involved was not significant, the said delays were due to operational
difficulties and the amount was deposited together with applicable
interest thereon for such delayed period.
As regards the Auditors' observation in the CARO Report regarding
undisputed dues in respect of Central Sales Tax of Rs.93.63 million
outstanding at the year end for a period of more than 6 months from the
date they became payable, the amount has been provided in the books on
the principle of conservatism for inter- state sales to United Nations
Organization. Even though the amount has been provided in the books,
the same has not been paid as the management believes that it may be an
inadvertent omission while drafting and implementing the law. The sale
to UN was exempt until 31st March, 2005 and has been notified to be
exempt from 13th May, 2005 and the Govt. of India would not change its
stand on a treaty in respect of supplies to UN and that too for a short
period of 42 days.
The Company is pursuing the matter with lawyers and has been advised
that the inadvertent omission of notification should not preside over
the intention of law which would mean that the sales to UN which
enjoyed exemption prior to the enactment of law and the status of which
was restored after a gap of 42 days should continue to do so during the
intervening period. The management plans to take necessary steps to get
the issue resolved.
As regards the Auditors' observation in their report on the
Consolidated Financial Statements regarding Unaudited Financial
Statements of Chiron Panacea, the said Company has confirmed that as it
is having foreign directors on its Board, the meeting of the Board of
Directors for approving its Annual Accounts, could not be held earlier.
The Annual Accounts have now been audited and approved by its Board of
Directors in its meeting held on 13th June, 2006.
The notes to the accounts and other observations in the Auditors'
Report are self-explanatory and, therefore, do not call for any further
comments.
Cost Auditors
In terms of the provisions of Section 233B of the Companies Act, 1956,
M/s J.R Gupta & Associates, Cost Accountants, have been appointed as
the Cost Auditors to conduct the audit of the Company's Cost Records in
respect of formulations for the year ended 31st March, 2006 with the
approval of the Central Government. They have also been appointed as
the Cost Auditors for the financial year 2006-07 subject to the
approval of Central Government.
Disclosures under Section 217 of the Companies Act, 1956
Except as disclosed elsewhere in the report, there have been no
material changes and commitments, which can affect the financial
position of the Company between the end of financial year and the date
of report.
As required under Section 217(2) of the Companies Act, 1956, the Board
of Directors inform the members that during the financial year there
has been no change:
* in the nature of Company's business,
* in the Company's subsidiaries or in the nature of business carried
out by them, except those stated in this report.
* in the classes of business in which the Company has an interest.
Energy Conservation, Technology Absorption & Foreign Exchange
Information as required under Section 217(1)(e) of the Companies Act,
1956, read with the Companies (Disclosure of Particulars in the Report
of Board of Directors) Rules, 1988, regarding conservation of energy,
technology absorption and foreign exchange earnings & outgo, is given
in Annexure A, forming part of this Report.
Information regarding Employees
As required by the provisions of Section 217(2A) of the Companies Act,
1956, read with Companies (Particulars of Employees) Rules, 1975 as
amended, the names and other particulars of employees covered under
these Rules are set out in Annexure B, forming part of this Report.
Directors' Responsibility Statement
The Directors hereby confirm:
i) that in the preparation of the annual accounts, the applicable
accounting standards had been followed along with proper explanation
relating to material departures;
ii) that the directors had selected such accounting policies and
applied them consistently and made judgments and estimates that are
reasonable and prudent so as to give a true and fair view of the state
of affairs of the Company at the end of the financial year and of the
profit or loss of the Company for that period;
iii) that the directors had taken proper and sufficient care for the
maintenance of adequate accounting records in accordance with the
provisions of the Companies Act, 1956 for safeguarding the assets of
the Company and for preventing and detecting fraud and other
irregularities; and
iv) that the directors had prepared the annual accounts on a going
concern basis.
Acknowledgments
The Directors express sincere thanks to Banks, Financial Institutions,
Government Agencies, International Health Organisations and business
associates for their continued assistance, support and co-operation and
also to the members of medical profession for their efforts to provide
high quality ethical therapeutic products within India and abroad. The
Directors also place on record their deep sense of appreciation to
the employees, who are committed to high standards & ethics, excellence
in performance, professionalism, commendable team work and have thrived
in a challenging environment.
The Directors also take this opportunity to express sincere thanks to
the medical fraternity and patients for their continued co-operation,
patronage and trust reposed on the Company and its products. Finally,
the Directors wish to express gratitude to the Shareholders as well as
Foreign Institutional Investors for their firm support and trust in the
Company and its management. The Board looks forward to having
continued support of all concerned in its endeavour to help people lead
healthier lives in the years to come. Your Directors shall always
continue to work "In Support of Life".
For and on behalf of the Board
New Delhi Soshil Kumar Jain
20th July, 2006 Chairman
Statement of particulars pursuant to the Companies
(Disclosure of Particulars in the Report of Board of Directors) Rules,
1988.
I. Conservation of Energy
1. Energy Conservation measures taken
The Company continues its policy of priority to energy conservation
measures including regular review of energy consumption and effective
control on utilization of energy. The Company had devised its
production lines and other facilities keeping in view the objective of
minimum energy losses. The following are a few of the energy
conservation measures implemented during the year under review:
* Installation of VFD control system in Chemistry labs at all locations
for auto adjustment of CFM for optimum energy operations and minimizing
load on Airconditioning system, thus ensuring efficient working of
fuming hoods and vapour free environment in the lab conforming to
international standards.
* All utility equipments installed at all locations have PLC controls
to optimize operations with respect to electrical load.
* In the administrative blocks, all rooms have been provided with
individual water cooled roof mounted cassette units for air
conditioning which use 10-15% less energy.
* Electronic chokes and CFL lights have been installed at all locations
to conserve power.
Apart from the above said measures, the following other measures were
implemented in past few years to achieve energy conservation and
thereby savings in energy cost:
* Installation of Energy saving system at its Plant at New Delhi,
thereby saving energy cost on lighting load.
* Implementation of System for Utilization of reject RO water for
cooling towers at its plant at New Delhi, to eliminate the use of soft
water and minimize scaling problems in various utilities.
* Corrective & preventive action were taken for avoiding energy loss on
account of frequent breakdown of compressors KF-4, motors, expansion
valves, lube oils, filters, dryers, refrigerant, gas leakages, and
other parts of the old cold room at its plant at New Delhi, resulting
into a saving of around 500 units per day, i.e. saving around Rs. 1
million per annum.
* Centrifugal Lube Oil filters installed on Diesel Generators (DG) sets
to save the cost of lube oils and filters in running DG sets.
* Variable Frequency Drive (VFD) installed on Air Handling Units (AHU).
* Compact Fluorescent Lamps (CFL)/high lux tube rods (36W) are being
used instead of 40W (normal) tube rods, thereby saving electricity all
over its plants and offices in India.
* High efficiency motors are used resulting in consumption of less
power than normal motor rating of the same capacity.
* Condensate steam recovery system has been installed.
* Process for recycling of vial washing machine purified water
installed.
* Hot water system installed for controlling relative humidity.
* Critical Air Handling Units (AHUs) converted from air-cooled system
to water based cooling system thereby conserving energy.
* Water flow circulation adjusted in cooling tower thereby conserving
energy.
* Pipelines modified with a view to save the frictional losses of pipe
lines and bends.
2. Additional Investments/Proposals, if any, for reduction of Energy
Consumption
Continuous efforts are being made to further reduce expenditure on
power & fuel in the times to come.
3. Impact of measures taken and impact on cost of production of goods
The energy conservation measures indicated above have resulted into
reduction in total energy cost.
II. Technology Absorption
FORM B
Form for disclosure of particulars with respect to Technology
Absorption
Research & Development (R&D)
1. Specific areas in which R&D carried out by the Company
The Research is being pursued by the Company, inter-alia, in the
following areas:
- Advanced Drug Delivery Research
- Natural Products Research
- Chemicals Research
- Pharmacology Research
- Analytical Research
- Bio-analytical Research
- Packaging Research
- Biopharmaceutical Research
- Drug Discovery Research (Small Molecules)
- Vaccines Development
2. Benefits derived as a result of above R&D
- Novel drug delivery products
- Competitively priced products
- Improved product quality leading to customer satisfaction
- Waste minimisation
- Safe and environment friendly processes
- Grant of Indian as well as Global Patents
- Import substitution leading to lower cost of goods
- Enhanced global presence
- Export of Quality Products
- Development of new innovative injectable combination vaccines.
3. Future plan of Action
The Company will focus its Research & Development activities for
growing its top & bottom lines, inter-alia, in the following areas:
- Drug Discovery Research
- Advanced Drug Delivery Research
- Biopharmaceuticals Research
- Thermo-stabilization of vaccines in collaboration with Cambridge
Biostability, U.K.
- Natural Products Research
- Chemical Research & Development
- Development of various Vaccines.
4. Expenditure on R& D
(Rs. in Million)
2005-06 2004-05
a) Capital 252.3 84.1
b) Revenue (Recurring) 237.9 115.4
c) Total 490.2 199.5
d) Total R&D expenditure as a
percentage of total turnover 9.1% 6.1%
Technology absorption, adaptation and Innovation
1. Efforts, in brief, made towards technology adaptation and innovation
The Company has in-house R&D Centres for developing new products and
technologies. It has developed indigenous technologies in respect of
the products manufactured by it. Further, in-licensing arrangements
have been made for technologies and development of (a) Japanese
Encephalitis (JE) Vaccine and, (b) peptide based product for generation
of hair follicles and hair growth. Technology for JE vaccine has been
successfully transferred and our scientists are currently working at
site for the development/upscaling of the process. The hair growth
peptide has been synthesized. The data relating to physical/chemical
and its efficacy (in animals) has been generated as per the regulatory
requirements.
2. Benefit derived as a result of the above efforts, e.g., product
improvement, cost reduction, product development, import substitution,
etc.
Competitive products, Product quality improvement, Product Development,
Import Substitution and development of innovative combination vaccines.
With in-licensing arrangements, the Company will be able to
commercialise these products in domestic and international markets
thereby contributing to top & bottom lines.
3. In case of imported technology (imported during the last 5 years
reckoned from the beginning of the financial year), following
information may be furnished:
a) Technology imported :
Technology for use of peptide based products for generation of hair
follicles and hair growth.
b) Year of import : 2004-05
c) Has technology been fully absorbed : No
d) If not fully absorbed, areas where this has not taken place, reasons
thereof and future plan(s) of action :
The technology is being worked upon at the Company's Biopharmaceutical
Research Centre. Arrangements are also made on contractual basis to
conduct pre-clinical toxicology as a part of drug development.
III. Foreign Exchange Earnings and Outgo
1. Activities relating to exports
The Company has continued to be enthused by opportunities ahead in the
international branded products market and its efforts on the brand
building have continued to show positive results. During the year under
review, the export turnover has increased to Rs.4,146.0 million
(including deemed exports of Rs.3,693.9 million) as against Rs.2,309.8
million (including deemed exports of Rs.2,140.8 million) registering a
phenomenal growth of more than 79% as compared to the previous
financial year.
2. Initiatives taken to increase export
With a view to increasing revenues from export markets, the Company has
broadened its global presence by exporting products to countries like
Afganistan, Angola, Somalia, Mauritius, South Africa, Nepal, Maldives,
Sudan, Yemen and Seychelles etc. besides carving a niche in its
existing export markets in CIS, African, Middle East and Asian
Sub-continent region. Various new products were also registered in the
countries of interest to increase the volume of exports business.
During the year under review, the Company has for the first time, made
supplies of Oral Polio Vaccines to various countries including
Afghanistan, Angola, Ethiopia, Maldives, Nepal, Somalia and Yemen
through UNICEF against their global tenders and achieved a turnover of
Rs.267.3 million by export of vaccines to these markets.
3. Development of new export markets for products and Export Plans
In order to expand its marketing base in more countries, the Company
has exported its products to new markets and intends to make marketing
& distribution alliance with buyers in these countries. The Company is
also planning to introduce other branded formulations and herbal
products in the developed as well as developing markets.
The Company is targeting Latin American countries as these countries
have vast potential for Panimun Bioral (Cyclosporine). The registration
is under process in Brazil and the export thereof will commence
immediately after its registration. With the commissioning of new
formulation facility set-up at Baddi in compliance with the regulatory
requirements of USFDA, MHRA, MCC (South Africa), WHO and other
regulatory agencies of the world, your Company will be filing for
registration of more products in due course in Latin American & other
markets.
The registration of additional products in pharmaceuticals in various
countries and penetration in new markets will create scope for
additional volume of business, which will further strengthen your
Company's export revenues in the coming years. Further, the recent WHO
Pre-qualification for Recombinant Hepatitis B Vaccine will generate
avenues for supply of Hepatitis B Vaccine to the UNICEF forthe letter's
global needs.
4. Total foreign exchange earned and used (Rs. in Million)
2005-06 2004-05
Foreign Exchange Earned
F.O.B. value of Exports (including deemed export
of Rs.3,693.9 million
(Previous Year Rs.2,140.8 million)) 4,112.5 2,277.4
R & D Technology Services 13.9 7.4
Interest on Exchange Earners' Foreign Currency
Deposits 28.1 -
Total 4,154.5 2,284.8
Foreign Exchange Used
Import of Raw Materials & Packing Materials 2,095.9 1,436.8
Import of Capital Goods 198.9 43.8
Patents, Trade marks & Product registration 14.4 10.8
Know-how Fee 6.8 0.4
Interest 30.1 32.5
Professional & Consultation fees 9.8 3.2
Expenditure on issue of Foreign Currency
Convertible Bonds 139.0 -
Other Expenses 50.3 26.6
Total 2,545.2 1,554.1
For and on behalf of the Board
New Delhi Soshil Kumar Jain
20th July, 2006 Chairman
Mar 31, 2005
The Directors of your Company have pleasure in presenting the 21st
Annual Report together with the Audited Annual Accounts of the Company
for the year ended 31st March, 2005 and Auditors' Report thereon.
Performance Review
The Company's performance during the year under review, is summarized
below:
(Rs. in Million)
Particulars For the For the
year ended year ended
31st March, 31st March,
2005 2004
Gross Turnover 3,357.63 2,721.46
Other Income 54.50 19.17
Total Income 3,412.13 2,740.63
Profit before Interest, Depreciation & Tax 721.36 424.25
Financial Expenses 114.10 88.01
Profit before Depreciation & Tax 607.26 336.24
Depreciation 162.45 118.68
Profit before Tax & Extra-ordinary Items 444.81 217.56
Extra-ordinary Loss due to fire & flood 15.46 -
Profit before Tax 429.35 217.56
Provision for Taxation 128.69 53.08
Profit after Tax 300.66 164.48
Appropriations:
Dividend-Paid/Proposed
- On Equity Shares 85.61 57.08
- On Preference Shares 43.91 8.20
Dividend Distribution Tax 17.75 8.36
Transfer to Capital Redemption Reserve 53.47 -
Transfer to/(from) Debenture Redemption Reserve (13.33) (13.33)
Transfer to General Reserve 100.00 100.00
EPS (Rs.)* 4.40 2.72
Cash EPS (Rs.)* 7.25 4.80
Book Value per Share (Rs.)* 23.97 20.14
Dividend on Equity Shares 150% 100%
* Per Equity Share of Re.1/- each
Share Capital
During the year under review, the Company has redeemed 53,46,500 - 12%
Redeemable Cumulative Preference Shares (Series-II) of Rs.10/- each
aggregating Rs.53.46 million as per details given below:
* 11,35,300 Shares redeemed on 16th April, 2004.
* 14,20,320 Shares redeemed on 16th July, 2004,
* 4,60,160 Shares redeemed on 30th July, 2004 and
* 23,30,720 Shares redeemed on 19th February, 2005.
Dividend
As declared by the Board on 15th April, 2004, in respect of 11,35,300 -
12% Redeemable Cumulative Preference Shares (Series II) (RCPS-II)
redeemed on 16th April, 2004, dividend @ 12% p.a. for the period from 1
st April, 2004 till the date of redemption, has been paid on 16th
April, 2004. Further, as declared by the Board on 29th January, 2005,
in respect of balance RCPS II, dividend @ 12% (pro-rata) for the
financial year ended 31st March, 2005 till the respective dates of
redemption, has been paid on 19th February, 2005. Moreover, as per the
terms of issue of 9,04,34,914 - 4.5% Non-Convertible Redeemable
Preference Shares (Series III) of Rs.10/-each issued to Chervil South
East Asia Pte Ltd, the dividend @ 4.5% for the financial year ended
31st March, 2005, has been paid as Interim Dividend as declared by the
Board on 25th March, 2005. As such no further dividend is payable in
respect of Preference Shares for the Financial Year ended 31st March,
2005.
Further, continuing with the trend of rewarding its shareholders and in
view of the excellent financial performance during the year under
review, your Directors are pleased to recommend a dividend of 150% on
Equity Share Capital of the Company for the Financial Year ended 31st
March, 2005.
The dividend as above on the Equity and Preference Shares is placed
before you for your approval at the ensuing Annual General Meeting and
if approved, will absorb an amount of Rs.85.61 million and Rs.43.91
million, respectively.
Credit Rating
During the year under review, your Company has been assigned "P1"
(pronounced "P" one) rating by CRISIL for the Commercial Paper
Programme of Rs. 1,650 million vide their letter dated 3rd June, 2004.
This rating indicates that the degree of safety with regard to the
timely payment of interest and principal on the instrument is very
strong.
The assignment of high rating has allowed the Company to borrow working
capital funds at much lower rates as compared to the rate of interest
on earlier borrowings, resulting into savings in financial expenses in
the year under review.
Report on Corporate Governance
As required pursuant to Clause 49 of the Listing Agreement with Stock
Exchanges, a report on Corporate Governance is provided in the Annual
Report.
Management Discussion & Analysis Report
As required by Clause 49 of the Listing Agreement with the Stock
Exchanges, a detailed Management Discussion and Analysis Report forms
part of the Annual Report.
Joint Ventures & Subsidiaries
As you are aware, your Company has set-up a Joint Venture Company viz.
Panheber Biotec Pvt. Ltd., in joint venture with M/s. Heber Biotec
S.A., Cuba, an arm of the world renowned bio-technology research
facility, Center for Genetic Engineering and Biotechnology (CIGB), for
production of bulk drug substance of Recombinant Hepatitis B Vaccine.
The JV company is meeting the requirement of Recombinant Hepatitis B
Bulk Vaccine and Antigen for the manufacture of Hepatitis B and
Combination Vaccines by your Company. The process for WHO
pre-qualification for Vaccine Plant is at an advanced stage and their
approval is expected during the current financial year. The said
pre-qualification would generate avenues for supply of the said
vaccines to UNICEF for the latter's global needs.
During the year under review, your Company has set-up another Joint
Venture Company, viz. Chiron Panacea Vaccines Pvt. Ltd., in joint
venture with world's 5th largest Vaccine group, viz. Chiron
Corporation, U.K, currently having number of vaccines, including
pediatric, travel, flu and novel vaccines in its basket. This Joint
Venture Company has already started its operations by way of marketing
and distribution of combination and other Vaccines (other than Oral
Polio Vaccines) in India and has made available in India, innovative
vaccines to reduce the burden of various diseases in the country in the
area of pediatric infectious diseases.
The Company's wholly-owned subsidiary narrfely Radicura & Co. Ltd., has
been engaged in the trading and distribution of pharmaceutical
products. The another wholly-owned subsidiary of the Company namely
Best On Health Ltd. which owns a prime immovable property in close
proximity of the Company's erstwhile corporate office, has enabled the
Company to have its Corporate Office in a much bigger premises and meet
its increased space requirements for the purpose.
Consolidated Financial Statements
As required pursuant to Clause 49 of the Listing Agreement with Stock
Exchanges, the Consolidated Financial Statements of the Company
(including therein Audited Annual Accounts as at 31st March, 2005 of
its subsidiaries, viz. Radicura & Co. Ltd. and Best On Health Ltd.,
Unaudited Financial Statements for the year ended 31st March, 2005 of
its Joint Venture Company, Panheber Biotec Pvt. Ltd. and Unaudited
Financial Statements for the period from 30th July, 2004 to 31st March,
2005 of another Joint Venture Company, viz. Chiron Panacea Vaccines
Pvt. Ltd.) are attached with the Annual Accounts of the Company. These
statements have been prepared in compliance with the requirements of
Accounting Standard 21 on `Consolidated Financial Statements' and
Accounting Standard 27 on `Financial Reporting of Interest in Joint
Ventures'.
The Auditors of the Company have also given their report on the
Consolidated Financial Statements. As regards the Auditors'
observation in their report regarding Unaudited Financial Statements of
Joint Venture Companies, the said Companies have confirmed that as they
are having foreign directors on their Board, the meetings of the Board
of Directors for approving their respective Annual Accounts, could not
be held till the finalisation of Annual Accounts of Panacea Biotec.
Delisting of Equity Shares
As approved by the shareholders in their Annual General Meeting held on
20th September, 2003, the applications were made for approval for
delisting of Equity Shares from the Stock Exchanges at Delhi, Kolkata,
Chennai & Ludhiana, after complying with the SEBI (Delisting of
Securities) Guidelines, 2003. The Stock Exchanges at Chennai, Delhi and
Ludhiana had approved the delisting of Equity Shares w.e.f. 21st June,
2004, 12th July, 2004 and 2nd August, 2004 respectively. The delisting
approval from the Stock Exchange at Kolkata is awaited.
The Equity Shares of the Company shall continue to be listed oh the
National Stock Exchange (NSE) and the Stock Exchange at Mumbai (BSE).
Listing Fees for the financial year 2005-06 has been paid to these
Stock Exchanges.
Public Deposits
During the year under review, your Company has not invited or accepted
any deposits from the public pursuant to the provisions of Section 58A
of the Companies Act, 1956 and no amount of principal or interest was
outstanding in respect of deposits from the public as of the date of
balance sheet. However, during the year under review, the Company had
continued to accept deposits from the Company's Directors, their
relatives, associates and the Company's employees without inviting
deposits from them.
Directors
Shri K.M. Lal, a retired IAS officer, has been appointed as additional
Director w.e.f. 28th April, 2005. As per the provisions of Section 260
of the Companies Act, 1956, he holds the office till the date of the
ensuing Annual General Meeting and is proposed to be appointed as
Director liable to retire by rotation in the said Meeting.
In accordance with the provisions of Companies Act, 1956, Shri M.L
Kalra, Shri Gurmeet Singh, Shri Soshil Kumar Jain and Shri Rajesh Jain,
Directors of the Company, are liable to retire by rotation and being
eligible offer-themselves for re-appointment.
Directors' Responsibility Statement
The Directors hereby confirm:
i) that in the preparation of the annual accounts, the applicable
accounting standards had been followed along with proper explanation
relating to material departures;
ii) that the directors had selected such accounting policies and
applied them consistently and made judgments and estimates that are
reasonable and prudent so as to give a true and fair view of the state
of affairs of the Company at the end of the financial year and of the
profit or loss of the Company for that period;
iii) that the directors had taken proper and sufficient care for the
maintenance of adequate accounting records in accordance with the
provisions of the Companies Act, 1956 for safeguarding the assets of
the Company and for preventing and detecting fraud and other
irregularities; and
iv) that the directors had prepared the annual accounts on a going
concern basis.
Statutory Auditors
As per the provisions of the Companies Act, 1956, M/s. S. R. Batliboi &
Co., Chartered Accountants, hold office as Statutory Auditors of your
Company till the conclusion of the ensuing Annual General Meeting and
have shown their willingness to be re-appointed as the Auditors of the
Company.
The Company has received the Certificate from M/s. S. R. Batliboi &
Co., Chartered Accountants, as required under Section 224(16) of the
Companies Act, 1956, to the effect that their re-appointment, if made,
will be within the limits as prescribed under the provisions thereof.
Your Directors recommend their re-appointment as the Auditors of the
Company for the financial year 2005-06.
The notes to the accounts and other observations in the Auditors'
Report are self-explanatory and, therefore, do not call for any further
comments.
Cost Auditors
In terms of the provisions of Section 233B of the Companies Act, 1956,
M/s J.P. Gupta & Associates, Cost Accountants, have been appointed as
the Cost Auditors to conduct the audit of the Company's Cost Records in
respect of formulations for the year ended 31st March, 2005 with the
approval of the Central Government. They have also been appointed as
the Cost Auditors for the financial year 2005-06 subject to the
approval of Central Government.
Disclosures under Section 217(2)
There have been no material changes and commitments, which can affect
the financial position of the Company between the end of financial year
and the date of report. As required under Section 217(2) of the
Companies Act, 1956, the Board of Directors inform the members that
during the financial year there has been no change:
* in the nature of Company's business,
* in the Company's subsidiaries, except those stated in this report or
in the nature of business carried out by them.
* in the classes of business in which the Company has an interest.
During the year, the Company incurred a loss of Rs.14.74 million (net
of insurance claims) on account of loss of stock due to fire at its
Central Warehouse in Delhi during May, 2004 and loss of Rs.0.72 million
(net of insurance claims) due to flood at its manufacturing facility at
Lalru in Punjab during August, 2004.
Energy Conservation, Technology Absorption & Foreign Exchange
Information as required under Section 217(1)(e) of the Companies Act,
1956, read with the Companies (Disclosure of Particulars in the Report
of Board of Directors) Rules, 1988, regarding conservation of energy,
technology absorption and foreign exchange earnings & outgo, is given
in Annexure A forming part of this Report.
Information regarding Employees
As required by the provisions of Section 217(2A) of the Companies Act,
1956, read with Companies (Particulars of Employees) Rules, 1975 as
amended, the names and other particulars of employees covered under
these Rules are set out in Annexure B, forming part of this Report.
Acknowledgments
The Directors express sincere thanks to banks, financial institutions.
Government agencies, international health organisations and business
associates for their continued assistance, support and co-operation and
also to the members of medical profession for their efforts to provide
high quality ethical therapeutic products within India and abroad. The
Directors also place on record their deep sense of appreciation to all
the employees of Panacea Biotec, who are committed to high standards &
ethics, excellence in performance, exemplary professionalism,
commendable team work and have thrived in a challenging environment.
The Directors also take this opportunity to express sincere thanks to
the medical fraternity and patients for their continued co-operation,
patronage and trust reposed on the Company and its products. Finally,
the Directors wish to express gratitude to the Equity as well as
Preference Shareholders for their firm support and trust in the Company
and its management. We look forward to having continued support of all
concerned in our endeavour to help people lead healthier lives in the
years to come. Your Directors shall always continue to work "In Support
of Life".
For and on behalf of the Board
New Delhi Soshil Kumar Jain
31st May, 2005 Chairman
ANNEXURE A
Statement of particulars pursuant to the Companies (Disclosure of
Particulars in the Report of Board of Directors) Rules, 1988,
I. Conservation of Energy
1. Energy Conservation measures taken
The Company continues its policy of priority to energy conservation
measures including regular review of energy consumption and effective
control on utilization of energy. The Company had devised its
production lines keeping in view the objective of minimum energy
losses. Some of the major energy conservation measures implemented
during the year under review are as follows:
* Installation of energy saving system at its Pharmaceuticals
Formulation facility in New Delhi, thereby saving energy cost on
lighting load.
* Implementation of system for utilization of reject RO water for
cooling towers at its Pharmaceuticals Formulation facility in New
Delhi, to eliminate the use of soft water, and minimize scaling
problems in various utilities.
* Corrective & preventive action were taken for avoiding energy loss on
account of frequent breakdown of compressors KF-4, motors, expansion
valves, lube oils, filters, dryers, refrigerant, gas leakages, and
other parts of the old cold room at its Vaccines Formulation facility
in New Delhi, resulting into a saving of around 500 units per day, i.e.
saving around Rs.1 million per annum.
Apart from the above said measures, the following other measures were
implemented in past few years to achieve energy conservation and
thereby savings in energy cost:
* Centrifugal Lube Oil filters installed on Diesel Generators (DG) sets
to save the cost of lube oils and filters in running DG sets.
* Variable Frequency Drive (VFD) installed on Air Handling Units (AHU).
* Compact Fluorescent Lamps (CFL)/high lux tube rods (36W) are being
used instead of 40W (normal) tube rods, thereby saving electricity all
over its manufacturing facilities and offices in India.
* High efficiency motors are used resulting in consumption of less
power than normal motor rating of the same capacity.
* Condensate steam recovery system has been installed.
* Process for recycling of vial washing machine purified water
installed.
* Hot water system installed for controlling relative humidity.
* Critical Air Handling Units (AHUs) converted from air-cooled system
to water based cooling system thereby conserving energy.
* Water flow circulation adjusted in cooling tower thereby conserving
energy.
* Pipelines modified with a view to save the frictional losses of pipe
lines and bends.
2. Additional Investments/Proposals, if any, for reduction of Energy
Conservation
Continuous efforts are being made to further reduce expenditure on
power & fuel in the times to come.
3. Impact of measures taken and impact on cost of production of goods
The energy conservation measures indicated above have resulted into
considerable reduction in energy cost thereby reducing the cost of
production of goods.
II. Technology Absorption
FORM B
Form for disclosure of particulars with respect to Technology
Absorption
Research & Development (R&D)
1. Specific areas in which R&D carried out by the Company
The Research is being pursued by the Company, inter-alia, in the
following areas:
- Advanced Drug Delivery Research
- Natural Products R&D
- Chemicals Research & Development
- Pharmacology Research & Development
- Analytical Research and Development
- Bio-analytical Research
- Packaging R&D
- Development of various Recombinant, Polysaccharide, Cell Culture
based and Combination Vaccines.
2. Benefits derived as a result of above R&D
- Novel drug delivery products
- Competitively priced products
- Improved product quality leading to customer satisfaction
- Waste minimisation
- Safe and environment friendly processes
- Grant of Product/Process Patents
- Import substitution leading to lower costs
- Enhanced global presence
- Export of Quality Products Development of innovative Vaccines & other
products
3. Future Plan of Action
The Company will focus its Research & Development activities
inter-alia, in the following areas, for improving the revenues of the
Company:
- Drug Discovery Research
- Advanced Drug Delivery Research
- Bio-pharmaceuticals Research
- Stabilization of Vaccines in collaboration with Cambridge
Biostability, U.K.
- Natural Products Research
- Chemical Research & Development
- Development of various Recombinant, Polysaccharide, Cell Culture
based and Combination Vaccines
4. Expenditure on R & D (Rs. in Million)
2004-05 2003-04
a) Capital Expenditure 84.14 47.32
b) Revenue Expenditure (excluding Depreciation) 115.42 100.92
c) Total Expenditure 199.56 148.24
d) Total R&D Expenditure as a percentage
of net sales 6.14% 5.68%
ANNEXURE TO THE DIRECTORS' REPORT
Technology absorption, adaptation and Innovation
1. Efforts, in brief, made towards technology adaptation and
innovation :
The Company has in-house R&D Centres for developing new products &
technologies and has developed indigenous technologies in respect of
products being manufactured by it.
During the year, in-licensing arrangements have been made for
technologies and development of Japanese Encephalitis (JE) Vaccine and
for use of peptide based product for generation of hair follicles and
hair growth.
Technology for JE vaccine has been successfully transferred and our
scientists are currently working at site for the development/upscaling
of the process.
2. Benefits derived as a result of the above efforts, e.g., product
improvement, cost reduction, product development, import substitution,
etc. :
Competitive products. Product quality improvement, Product development.
Import substitution and development of innovative Combination Vaccines.
The in-licensing arrangement will enable the Company to commercialise
the products in domestic & international markets thereby contributing
to its future growth.
3. In case of imported technology (imported during the last 5 years
reckoned from the beginning of the financial year), following
information may be furnished:
a) Technology imported :
Technology for use of peptide based product for generation of hair
follicles and hair growth.
b) Year of import : 2004-05
c) Has technology been fully absorbed : No
d) If not fully absorbed, areas where this has not taken place, reasons
thereof and future plan(s) of action
The technology is to be worked upon at the Company's upcoming
Bio-Pharmaceutical Research Centre, Meanwhile arrangements on
contractual basis are being made for development of purified synthetic
materials so as to prepare a suitable preparation to conduct
pre-clinical toxicology as a part of drug development.
III. Foreign Exchange Earnings and Outgo
1. Activities relating to exports
The Company has continued to be enthused by opportunities ahead in the
international branded products market and its efforts on brand building
have continued to show positive results. During the year under review,
the export turnover has increased to Rs.2,288 million (including deemed
export of Rs.2,141 million) as against Rs.1,623 million (including
deemed export of Rs.1,473 million) registering a growth of more than
40% as compared to the previous financial year.
2. Initiatives taken to increase export
With a view to increase revenues from export markets, the Company has
broadened its global presence by exporting products to new countries
like West Indies, Yemen Uzbekistan, China etc. besides carving a niche
in the existing countries in CIS, African, Middle East and Asian
Sub-continent region. The Company has also started the process of
exporting its herbal/natural range of products to various countries.
3. Development of new export markets for products and Export Plans
In order to expand its marketing base in
more and more countries, the Company
intends to make marketing & distribution
alliance with buyers in newer countries. The
Company is also planning to introduce
other branded formulations in the overseas
market besides getting its Natural and Herbal
products registered in the existing as well as in
new countries.
The Company is also targeting Latin American countries as having vast
potential and the registration of Panimun Bioral (Cyclosporine) is
under process in Brazil. With the commissioning of new formulation
facility being set-up at Baddi in compliance with the regulatory
requirements of USFDA, MHRA, MCC (South Africa), WHO and other
regulatory agencies of the world, at Baddi, your Company will be filing
for registration of more products in due course in Latin American &
other markets.
The registration of additional products in pharmaceuticals and vaccines
segment in various countries and penetration in new markets will create
scope for additional volume of business, which will further strengthen
the Company's export revenues in the coming years.
4. Total foreign exchange earned and used (Rs. in Million)
2004-05 2003-04
Foreign Exchange Earned
F.O.B. value of Exports (including deemed export of 2,277.44 1,615.53
Rs.2,141 million (Previous Year Rs. 1,473 million))
R&D Technology Services 7.37 6.44
Total 2,284.81 1,621.97
Foreign Exchange Used
Import of Raw Materials & Packing Materials 1,436.84 1,107.67
Import of Capital Goods Machinery & Spares 43.78 20.74
Patents, Trade Marks & Product Registration 10.77 15.17
Interest 32.50 32.78
Professional & Consultation Fees 3.43 26.46
Other Expenses 26.60 23.99
Total 1,553.92 1,226.81
For and on behalf of the Board
New Delhi Soshil Kumar Jain
31st May, 2005 Chairman
Mar 31, 2004
The Directors of your Company have pleasure in presenting the Twentieth
Annual Report together with the Audited Annual Accounts of the Company
for the year ended 31st March, 2004 and Auditors'Report thereon.
Performance
The Company's performance during the year under review, is summarized
below:
(Rs. in Million)
Particulars For the For the
year ended year ended
31st March, 31st March,
2004 2003
Gross Sales 2,715 2,839
Other Income 26 29
Total Income 2,741 2,868
Profit before Interest, Depreciation & Tax 424 551
Financial Expenses 88 119
Profit before Depreciation & Tax 336 432
Depreciation 119 96
Profit before Tax 217 336
Provision for Taxation 53 122
Profit after Tax 164 214
Appropriations:
Dividend Paid/Proposed
- On Equity Shares 57 57
- On Preference Shares 8 7
Tax on Dividend 8 8
Transfer to Capital
Redemption Reserve - 10
Transfer to/(from) Debenture Redemption Reserve (13) (13)
Transfer to General Reserve 100 100
Earnings per Share (EPS) (Rs.)* 2.72 3.62
Book Value per Share (Rs.)* 20.18 18.25
Dividend on Equity Shares 100% 100%
* Per Equity Share of Re. 1/-
During the year under review, as approved by the Shareholders in their
Extra-ordinary General Meeting held on 2nd March, 2004, the Authorised
Share Capital of your Company was increased from Rs.225 million to
Rs.1,225 million, with a view to replace high cost debts, augment funds
for meeting capital expenditure for setting up production facilities
for various dosage forms, viz. tablets, capsules, syrups & ointments
at Baddi, Himachal Pradesh and for other long term funds requirement.
The Issued Capital has increased by Rs.904 million by way of allotment
of 9,04,34,914 - 4.5% Non-Convertible Redeemable Preference Shares
(Series III) of Rs.10/- each, issued to Chervil South East Asia Pte
Ltd, Singapore (an affiliate of Credit Suisse Group, Zurich) on private
placement basis, for meeting capital expenditure for the proposed
project at Baddi, Himachal Pradesh, long term working capital and other
funds requirements of the Company.
The Preference Share Capital was reduced by Rs.11.35 million by way of
redemption of 11,35,300 - 12% Redeemable Cumulative Preference Shares
(Series-II) of Rs.10/- each redeemed on 16th April, 2004.
Dividend
In respect of 11,35,300 - 12% Cumulative Redeemable Preference Shares
(Series II) redeemed on 16th April, 2004, the cumulative dividend @ 12%
p.a. for the period from 1st April, 2003 till the date of redemption,
has been paid on 16th April, 2004, as declared by the Board on 15th
April, 2004. Further, as per the terms of issue of 9,04,34,914 - 4.5%
Non-Convertible Redeemable Preference Shares (Series III) of Rs.10/-
each to Chervil South East Asia Pte Ltd, the dividend @4.5% (pro-rata)
for the financial year ended 31st March, 2004 has been paid by way of
Interim Dividend as declared by the Board on 26th March, 2004. As such
no further dividend is to be paid on the said Preference Shares for the
Financial Year ended 31st March, 2004.
Further, your Directors have recommended a dividend of 12% in respect
of 42,11,200 - 12% Redeemable Cumulative Preference Shares (Series II),
for the financial year ended 31st March, 2004.
The Directors are also pleased to recommend a dividend of 100% on
Equity Share Capital of the Company for the financial year ended 31st
March, 2004.
The dividend as above on the Equity and Preference Shares is placed
before you for your approval at the ensuing Annual General Meeting and
if approved, will absorb an amount of Rs.57.08 million and Rs.8.20
million, respectively.
Credit Rating
The Directors are pleased to inform that your Company has been assigned
"P1" (pronounced "P" one) rating by CRISIL for the Commercial Paper
Programme of Rs.1650 million vide their letter dated 3rd June, 2004.
This rating indicates that the degree of safety with regard to the
timely payment of interest and principal on the instrument is very
strong. The assignment of high rating will allow the Company to borrow
working capital funds at much lower rates as compared to the rate of
interest on present borrowings, resulting into savings in financial
expenses in the current financial year.
Report on Corporate Governance
As required pursuant to Clause 49 of the Listing Agreement with Stock
Exchanges, a report on Corporate Governance is provided in the Annual
Report.
Management Discussion & Analysis
As required by Clause 49 of the Listing Agreement with the Stock
Exchanges, a detailed Management Discussion and Analysis Report forms
part of the Annual Report.
Joint Ventures and Subsidiaries
As you are aware, your Company had set-up Joint Venture Company viz.
Panheber Biotec Pvt. Ltd., in joint venture with M/s. Heber Biotec
S.A., Cuba, an arm of the world renowned bio-technology research
facility. Center for Genetic Engineering and Biotechnology (CIGB), for
bulk (raw material) production of Recombinant Hepatitis B Vaccine. The
commercial production of Recombinant Hepatitis B Bulk Vaccine and
Antigen has commenced during the year under review.
The Company's subsidiaries namely Radicura & Co. Ltd., an existing
profit-making Company engaged in the trading and distribution of
pharmaceutical products. The another wholly-owned subsidiary of the
Company namely Best On Health Ltd. which owns a prime immovable
property in close proximity of the Company's erstwhile corporate
office, has enabled the Company to have its Corporate Office in a much
bigger premises.
The Company's overseas wholly owned subsidiary Company, viz. Tayonics
Ltd, Isle of Man, U.K. has been wound up during the year under review
and necessary certificate from concerned authorities obtained on 4th
July, 2003.
The Company has decided to set-up a Joint Venture Company, viz. Chiron
Panacea Vaccines Pvt Ltd, to formulate, market and distribute
combination and other Vaccines (other than Oral Polio Vaccines) in
India, with Chiron Corporation, U.K. an internationally renowned
multi-dimensional company with businesses in bio-pharmaceuticals,
vaccines and blood testing which currently offers more than 30
vaccines, including pediatric, travel, flu and novel vaccines. This
Joint Venture Company will make available in India, innovative vaccines
to reduce the burden of various diseases in the country in the area of
pediatric infectious diseases.
Consolidated Financial Statements
As required pursuant to Accounting Standard 21 on Standard 27 on
`Financial Reporting of Interest in Joint Ventures', the Consolidated
Financial Statements of the Company (including therein Audited Annual
Accounts as at 31st March, 2004 of its subsidiaries, viz. Radicura &
Co. Ltd. and Best On Health Ltd. and Joint Venture Company, viz.
Panheber Biotec Pvt. Ltd.) are attached with the Annual Accounts of the
Company.
The Auditors of the Company had also given their report on the
Consolidated Financial Statements.
Delisting of Equity Shares
As you are aware, in view of the facts that the Company's Equity Shares
are being mostly traded at the Stock Exchange, Mumbai (BSE) and the
National Stock Exchange (NSE) and these two stock exchanges have become
the favourite of the investors all over India due to their all India
presence and increased liquidity and trading at other stock exchanges
was nil/negligible, the approval of the shareholders was obtained in
the last annual general meeting, for the proposal for delisting of
Equity Shares from one or more of the Stock Exchanges at Delhi,
Kolkata, Chennai & Ludhiana.
Pursuant to the applications made by the Company for delisting from the
said stock exchanges, the Stock Exchange at Chennai had approved the
delisting of Equity Shares w.e.f 21st June, 2004. The approval from the
Stock Exchanges at Delhi, Ludhiana and Kolkota is expected in due
course while the procedural formalities for the same have been complied
with.
The Equity Shares of the Company shall continue to be listed on BSE &
NSE.
Public Deposits
During the year under review, your Company has not invited or accepted
any deposits from the public pursuant to the provisions of Section 58A
of the Companies Act, 1956 and no amount of principal or interest was
outstanding in respect of deposits from the public as of the date of
balance sheet. However, during the year under review, the Company had
accepted deposits from the Company's Directors, their relatives,
associates and the Company's employees without inviting deposits from
them.
Directors
Dr. G.K. Vishwakarma, Director of the Company demised on 24th March,
2004. The Board wishes to accord its sincere appreciation for the
valuable services and support rendered by him during his tenure as a
Director of the Company.
In accordance with the provisions of Companies Act, 1956, Mr. Sunil
Kapoor, Mr. R.L. Narasimhan, Mr. N.N. Khamitkar and Mr. C.C. Bhagat,
Directors of the Company, are liable to retire by rotation and being
eligible offer themselves for re-appointment.
Directors' Responsibility Statement
The Directors hereby confirm:
i) that in the preparation of the annual accounts, the applicable
accounting standards had been followed along with proper explanation
relating to material departures;
ii) that the directors had selected such accounting policies and
applied them consistently and made judgments and estimates that are
reasonable and prudent so as to give a true and fair view of the state
of affairs of the Company at the end of the financial year and of the
profit or loss of the Company for that period;
iii) that the directors had taken proper and sufficient care for the
maintenance of adequate accounting records in accordance with the
provisions of the Companies Act, 1956 for safeguarding the assets of
the Company and for preventing and detecting fraud and other
irregularities; and
iv) that the directors had prepared the annual accounts on a going
concern basis.
Statutory Auditors
As per the provisions of the Companies Act, 1956, M/s. S. R. Batliboi &
Co., Chartered Accountants, hold office as Statutory Auditors of your
Company till the conclusion of the ensuing Annual General Meeting and
had shown their willingness to be re-appointed as the Auditors of the
Company.
The Company has received the Certificate from M/s. S. R. Batliboi &
Co., Chartered Accountants, as required under Section 224(1B) of the
Companies Act, 1956, to the effect that their re-appointment, if made,
will be within the limits as prescribed under the provisions thereof.
Your Directors recommend their re-appointment as the Auditors of the
Company for the financial year 2004-05.
The notes to the accounts and the observations in the Auditors' Report
are self-explanatory and, therefore, do not call for any further
comments.
Cost Auditors
In terms of the provisions of Section 233B of the Companies Act, 1956,
M/s J.P. Gupta & Associates, Cost Accountants, have been appointed as
the Cost Auditors to conduct the audit of the Company's Cost Records in
respect of formulations for the year ended 31st March, 2004 with the
approval of the Central Government. They have also been appointed as
the Cost Auditors for the financial year 2004-05 subject to the
approval of Central Government.
Disclosures under Section 217(2)
There have been no material changes and commitments, which can affect
the financial position of the Company between the end of financial year
and the date of report except that some stock costing around Rs.51
million was damaged due to fire in the Company's Cold Room at Central
Warehouse at Delhi in May '2004. The insurance claim for the loss has
been filed with the Insurance Company and an interim relief of Rs.10
million has been received from them pending final settlement of claim.
As required under Section 217(2) of the Companies Act, 1956, the Board
of Directors inform the members that during the financial year there
has been no change:
* in the nature of Company's business,
* in the Company's subsidiaries, except those stated in this report or
in the nature of business carried out by them.
* in the classes of business in which the Company has an interest.
Energy Conservation, Technology Absorption & Foreign Exchange
Information as required under Section 217(1)(e) of the Companies Act,
1956, read with the Companies (Disclosure of Particulars in the Report
of Board of Directors) Rules, 1988, regarding conservation of energy,
technology absorption and foreign exchange earnings & outgo, is given
in Annexure A forming part of this Report.
Information regarding Employees
As required by the provisions of Section 217(2A) of the Companies Act,
1956, read with Companies (Particulars of Employees) Rules, 1975 as
amended, the names and other particulars of employees covered under
these Rules are set out in Annexure B, forming part of this Report.
Acknowledgments
The Directors place on record their deep sense of appreciation to all
Panacea employees, who are committed to strong work ethics, excellence
in performance, exemplary professionalism, commendable team work and
have thrived in a challenging environment. The Directors are grateful
to Banks, Financial Institutions, Government agencies and business
associates for their continued assistance, support and co-operation and
also to the members of medical profession for their efforts to provide
high quality ethical therapeutic products within India and abroad.
The Directors also take this opportunity to express sincere thanks to
the medical fraternity and patients for their continued co-operation,
patronage and trust reposed on us. Finally, the Directors wish to
express gratitude to the Equity as well as Preference Shareholders for
their unwavering trust and support. We look forward to having continued
support of all concerned in our endeavour to help people lead healthier
lives in the years to come.
For and on behalf of the Board
New Delhi Soshil Kumar Jain
30th day of June, 2004 Chairman
ANNEXURE TO THE DIRECTORS' REPORT
ANNEXURE A
Statement of particulars pursuant to the Companies (Disclosure of
Particulars in the Report of Board of Directors) Rules, 1988.
I. ENERGY CONSERVATION
A. Energy Conservation measures taken
The Company accords highest priority to energy conservation and has
devised its production lines keeping in view the objective of minimum
energy losses. The Company has, inter-alia, taken following energy
conservation measures:
* Installation of Centrifugal Lube Oil filters on Diesel Generators
(DG) sets to save the cost of lube oils and filters in running DG sets.
* Installation of Variable Frequency Drive (VFD) on Air Handling Units
(AHU) for energy conservation.
* Use of Compact Fluorescent Lamps (CFL)/high lux tube rods (36W)
instead of 40W (normal) tube rods, thereby saving electricity all over
its plants and offices in India.
* Use of high efficiency motors resulting in consumption of less power
than normal motor rating of the same capacity.
* Installation of condensate steam recovery system thereby saving
energy.
* Process for recycling of vial washing machine purified water
installed.
* Installation of hot water system for controlling relative humidity.
* Conversion of critical Air Handling Units (AHUs) from air-cooled
system to water based cooling system thereby conserving energy.
* Adjustments in water flow circulation in cooling tower.
* Modification in pipelines with a view to save the frictional losses
of pipe lines and bends.
B. Proposal/Investments for reduction of Energy Conservation
* HT power supply connection with a provision of automatic power
correction is under installation at its plant at Badarpur, New Delhi,
which will save lot of energy cost particularly at the time when
consumption is low.
* Steps a re also being taken to reduce lighting energy load by 25%
over a period of time.
C. Impact of measures taken and impact on cost of production of goods
The energy conservation measures taken from time to time results in
considerable reduction of energy costs and thereby reducing the cost of
production of goods.
II. Technology Absorption
FORM B
Form for disclosure of particulars with respect to Technology
Absorption Research & Development (R&D)
1. Specific areas in which R& D carried out by the Company:
The Research is being pursued by the Company, inter-alia, in the
following areas:
- Formulation Research and Development
- Natural Products R&D
- Chemical Research & Development
- Analytical Research and Development
- Bio-analytical Research
- Pharmacology Research
- Advanced Drug Delivery Research
2. Benefits derived as a result of above R&D:
- Novel drug delivery products
- Competitively advanced products
- Improved product quality
- Waste minimisation
- Safe and environment friendly processes
- Grant of Product/Process Patents
- Import substitution
- Enhanced global presence
- Export Quality Products
- Taste masking of bitter products.
3. Future plan of Action:
The Company will focus its Research & Development activities for
achieving the results, inter-alia, in the following areas:
- Formulation Research & Development
- Chemical Research & Development
- Advanced Drug Delivery Research
- Natural Products Research
4. Expenditure on R & D during 2003-04 (Rs in Million)
2003-2004 2002-2003
Capital 47.32 28.67
Revenue 100.92 76.14
Total 148.24 104.81
Total R&D expenditure as a percentage of
total turnover 5.46% 3.69%
Technology absorption, adaptation and Innovation
1. Efforts, in brief, made towards technology adaptation and
innovation :
Technical collaboration for manufacture of vaccines
2. Benefits derived as a result of the above efforts :
- Competitive products
- Product Improvement
- Product Development
- Import Substitution
3. In case of imported technology (imported during the last five years
reckoned from the beginning of the financial year), following
information may be furnished.
a. Technology imported N.A
b. Year of import N.A
c. Has technology been fully absorbed N.A
d. If not fully absorbed, areas where this has not taken N.A
place, reasons thereof and future plan(s) of action
FOREIGN EXCHANGE EARNINGS AND OUTGO
1. Activities relating to exports
The Company has identified exports as the major thrust area of
operation and its efforts on the export front have shown positive
results. During the year under review, the export turnover (including
the deemed exports of Rs. 1,473 million) were to the tune of Rs.1,616
million as against Rs.1,505 million (including deemed export of
Rs.1,381 million) recording a growth of 7.38% as compared to the
financial year 2002-03.
2. Initiatives taken to increase export
The Company has started the process of exporting its herbal/natural
range of products to various countries. Further, with a view to
enhance its presence in export markets, the Company has obtained
registration for its formulation as well as OTC products in existing
markets as well as new markets, e.g. West Indies, Thailand and
Uzbekistan.
The registration of additional products of the Company for
pharmaceuticals and vaccines in various countries has created scope for
additional volume of exports.
3. Development of new export markets for products
The Company has broadened its global presence by exporting products to
new countries like Cambodia, Myanmar, Bangladesh, Malaysia, Thailand
and Fiji, etc. Further, in order to expand its marketing base in more
and more countries, your Company intends to make marketing &
distribution alliance with buyers in newer countries. In present
countries of export, your Company is planning to add number of
additional products to its basket and also exploring marketing
opportunities for its herbal and natural range of products in the
existing as well as new countries.
4. Total foreign exchange earned and used
(Rs. in Million)
2003-04 2002-03
Earnings 1,621.97 1,516.39
Outgo 1,226.81 1,705.45
For and on behalf of the Board
New Delhi, SOSHIL KUMAR JAIN
30th June, 2004 Chairman
Mar 31, 2003
The Directors of your Company have pleasure in presenting the
Nineteenth Annual Report together with the Audited Annual Accounts of
the Company for the year ended 31st March, 2003 and Auditors' Report
thereon.
Performance Review
Your Directors are pleased to inform that your Company has continued
its trend of steady and consistent growth over the years. The Company's
performance during the year under review, is summarized below:
(Rs. in Million)
Particulars For the For the
year ended year ended
31st March, 2003 31st March, 2002
Gross Sales 2,839 2,833
Other Income 29 24
Total Income 2,868 2,857
Profit before Interest,
Depreciation & Tax 551 589
Financial Expenses 119 117
Profit before Depreciation & Tax 433 472
Depreciation 96 65
Profit before Tax 336 406
Provision for Taxation 122 157
Profit after Tax 214 249
Appropriation:
Dividend Paid/Proposed
- On Equity Shares 57 57
- On Preference Shares 7 8
Tax on Dividend 8 1
Transfer to Capital
Redemption Reserve 10 5
Transfer to/(from) Debenture
Redemption Reserve (13) -
Transfer to General Reserve 100 100
Earnings per Share (EPS) (Rs.)* 3.62 4.22
Book Value per Share (Rs.)* 18.25 16.00
Dividend on Equity Shares (%) 100 100
-Per Equity Share of Re.1/-
Share Capital
During the year under review, 7,50,000 - 12% Redeemable Preference
Shares (RCPS) of Rs.10/- each aggregating Rs.7.5 Million (issued to
Industrial Development Bank of India during 1998) and 2,00,000 - 12%
RCPS aggregating Rs. 2 million (issued to directors & their relatives)
were redeemed during the year.
Further, as approved by the shareholders of the Company in their
Extra-ordinary General Meeting held on 28th December, 2002, Equity
Share of Rs.10/- each in the Company has been sub-divided into 10
Equity Shares of Re.1/- each and 11th February, 2003 was fixed as the
Record Date for the exchange of existing Equity Shares into sub-divided
Equity Shares of Re.1/- each. In respect of Shares held in electronic
form, the new Shares had been credited to the Shareholders' respective
Accounts through depository system and in respect of shares held in
physical form, new Share Certificates had been sent to all those
shareholders who had surrendered their old Share Certificates to the
Company.
Dividend
In respect of 12% Redeemable ;
Cumulative Preference Shares issued to IDBI and redeemed on 20th April,
2002, the Dividend i forthefinancialyearended31st March, 2003, has been
paid by way of Interim Dividend (pro- rata) at the rate of 12%, as
declared by the Board in its meetings held on 27th June, 2002 and as
such no further Dividend has been recommended on such Shares as final
Dividend. Further, your Directors have recommended a Dividend of 12% on
the 12% Redeemable Cumulative Preference Shares (Series II), for the
financial year ended 31st March, 2003.
Your Directors are also pleased to recommend a Dividend of 100% (Re. V-
per Equity Share of Re. V- each) on the Equity Share Capital of the
Company for the financial year ended 31st March, 2003.
The Dividend as above on the Equity and Preference Shares, is placed
before you for your approval at the ensuing Annual General Meeting and,
if approved, will absorb an amount of Rs.57.08 Million and Rs.6.62
Million, respectively.
Consolidated Financial Statements
As required pursuant to Accounting Standard 21 on 'Consolidated
Financial Statements' and Accounting
Standard 27 on 'Financial Reporting of Interest in Joint Ventures', the
Consolidated Financial Statements of the Company (including therein
Audited Annual Accounts as at 31st March, 2003 of its subsidiaries,
viz. Radicura & Co. Ltd. and Best On Health Ltd. and Joint Venture
Company, viz. Panheber Biotec Pvt. Ltd. and the Audited Financial
Statements as at 31st December, 2002 of the overseas subsidiary, viz.
Tayonics Ltd.) are attached with the Annual Accounts of the Company.
The Auditors of the Company had also given their report on the
Consolidated Financial Statements.
Energy Conservation, Technology Absorption & Foreign Exchange
Information as required under Section 217(1)(e) of the Companies Act,
1956, read with the Companies (Disclosure of Particulars in the Report
of Board of Directors) Rules, 1988, regarding conservation of energy,
technology absorption and foreign exchange earnings & outgo, is given
in Annexure A, forming part of this Report.
Public Deposits
During the year under review, your Company has not invited or accepted
any deposits from the public pursuant to the provisions of Section 58A
of the Companies Act, 1956 and no amount of principal or interest was
outstanding in respect of deposits from the public as of the date of
balance sheet. However, during the year under review, the Company had
accepted deposits from the Company's Directors, their relatives,
associates and the Company's employees without inviting deposits from
them.
Information pursuant to Section 217(2A)
As required by the provisions of Section 217(2A) of the Companies Act,
1956, read with Companies (Particulars of Employees) Rules, 1975 as
amended, the names and other particulars of employees covered under
these Rules are set out in Annexure B, forming part of this Report.
Report on Corporate Governance
As required pursuant to Clause 49 of the Listing Agreement with Stock
Exchanges, a report on Corporate
Governance is annexed herewith as Annexure 'C', forming part of this
Report.
Directors
Mr. Sunil Anand had been appointed as additional Director and
Whole-time Director designated as Director (Finance) w.e.f. 24th April,
2003. As per the provisions of the Companies Act, 1956, he holds office
till the date of the ensuing Annual General Meeting and is proposed to
be appointed as Director liable to retire by rotation with the approval
of the members in the forthcoming Annual General Meeting. The approval
of members is also sought for his appointment as Whole- time Director
designated as Director (Finance) of the Company,
Mr. S.N. Hassija, Director of the Company demised on 4th June, 2002.
Further, in view of his other occupations, Mr. Gurmeet Singh had
resigned from his office as Whole- time Director designated as Director
(Logistics) of the Company w.e.f. 26th October, 2002, however, he
continues to act as Director of the Company. Further, Dr. Amarjit
Singh, Director (R&D and QA) had also resigned from the Directorship on
the Board w.e.f. 30th April, 2003. The Board wishes to record its
sincere appreciation of the valuable services and support rendered by
Mr. S.N. Hassija during their tenure as Director and also by Mr.
Gurmeet Singh and Dr. Amarjit Singh during their tenure as Whole-time
Directors of the Company.
In accordance with the provisions of the Companies Act, 1956, Mr.
Rajesh Jain, Mr. Ravinder Jain, Mr. Sandeep Jain and Mr. Ashwani Jain,
Directors, are liable to retire by rotation and being eligible, offer
themselves for re-appointment.
Directors' Responsibility Statement
The Directors hereby confirm:
i) that in the preparation of the annual accounts, the applicable
accounting standards had been followed along with proper explanation
relating to material departures;
ii) that the directors had selected such accounting policies and
applied them consistently and made judgments and estimates that are
reasonable and prudent so as to give a true and fair view of the state
of affairs of the Company at the end of the financial year and of the
profit or loss of the Company for that period;
iii) that the directors had taken proper and sufficient care for the
maintenance of adequate accounting records in accordance with the
provisions of the Companies Act, 1956 for safeguarding the assets of
the Company and for preventing and detecting fraud and other
irregularities; and
iv) that the directors had prepared the annual accounts on a going
concern basis.
Auditors
As per the provisions of the Companies Act, 1956, M/s. S. R. Batliboi
& Co., Chartered Accountants, hold office as Statutory Auditors of your
Company till the conclusion of the ensuing Annual General Meeting and
had shown their willingness to be re-appointed as the Auditors of the
Company. Your Company has received the Certificate from
M/s. S. R. Batliboi &Co., Chartered Accountants, as required under
Section 224(1 B) of the Companies Act, 1956, to the effect that their
re-appointment, if made, will be within the limits as prescribed under
the provisions thereof. Your Directors recommend their re-appointment
as the Auditors of the Company for the financial year 2003-04.
The notes to the accounts and the observations in the Auditors' Report
are self-explanatory and, therefore, do not call for any further
comments.
Cost Auditors
In terms of the provisions of Section 233Bofthe Companies Act, 1956,
M/s J.R Gupta & Associates, Cost Accountants, have been appointed as
the Cost Auditors to conduct the audit of the Company's Cost Records in
respect of formulations for the year ended 31st March, 2003 with the
approval of the Central Government. They have also been appointed as
the Cost Auditors for the financial year 2003- 2004 and the approval of
Central Government for such appointment had been obtained.
Dematerialisation of Shares
The Company's Equity Shares are covered under compulsory demat w.e.f.
October 30, 2000 and the same is included in the Depository System with
ISIN No. INE922B01023. Your Company has been among the few top most
companies in which the maximum number of Shares have been
dematerialised. In fact more than 97% of the Company's total Equity
Shares have already been dematerialised till date.
The members who have not yet get their Equity Shares dematerialised,
are requested to contact any of the Depository Participants in their
vicinity for getting their Equity shares dematerialised. In case any
clarification is needed in that regard, the Company Secretary may be
contacted in person or by communication addressed at the Corporate
Office of the Company.
Acknowledgments
Your Directors acknowledge with gratitude the commitment and dedication
of the employees at all levels, that has contributed to the growth and
success of the Company. Your Directors owe special thanks to all the
shareholders of the Company, for their continued support during the
year under review. The Directors would also like to thank the other
stakeholders viz. Banks, Financial Institutions, Government Agencies
and business associates, for their continued assistance, support and
co-operation extended to the Company and also to the members of the
medical profession, for their efforts to provide high quality ethical
therapeutic products within India and abroad. Your Directors also take
this opportunity to record their appreciation for all those who
contributed to the success of your Company and look forward to their
continued support in the years to come.
Statement of particulars pursuant to the Companies (Disclosure of
Particulars in the Report of Board of Directors) Rules, 1988.
FORMA
ENERGY CONSERVATION
The Company accords highest priority to energy conservation and has
devised its production lines keeping in view the objective of minimum
energy losses. The Company also maximises the use of CFL lamps in the
offices and other premises in order to reduce the consumption of
electricity. The employees of the Company have also been oriented to
accord priority to energy conservation, at all times and places.
FORM B
Form for disclosure of particulars with respect to Technology
Absorption
Research & Development (R&D)
1. Specific areas in which R&D carried out by the Company:
The Research is being pursued by the Company, inter-alia, in the
following areas :
- Pharmaceutical Formulations
- Natural Products
- Vaccines
- Bio-technological Products
- Advanced Drug Delivery System Bulk Drug and Drug Intermediates.
2. Benefits derived as a result of above R&D:
Novel drug delivery products
- Competitively advanced products Improved product quality
- Waste minimisation
- Safe and environmental friendly processes
- Grant of Product/process patents Import substitution
- Enhanced global presence
- Export Quality products
- Taste masking of bitter products.
3. Future plan of Action :
The Company's R & D division will focus on achieving the results in the
following areas :
- Analytical Research
Formulations Research & Development
- Chemicals Research
Natural Products Research
- Viral Vaccine Research Pharmacology Research Isolation of lead
compounds from herbs
4. Expenditure on R & D during 2002-03
(Rs. in Million)
2002-2003 2001-2002
Capital 28.67 20.00
Revenue 76.14 68.27
Total 1,04.81 88.27
Total R&D expenditure as a
percentage of total turnover 3.69% 3.12%
FOREIGN EXCHANGE EARNINGS AND OUTGO
1. Activities relating to exports
The Company is a registered Trading House and has identified Exports as
the major thrust area of its operations. It has acquired the status of
a major drug export unit for both branded and generic products, carving
a niche in the CIS, African, Latin American, Middle East and Asian
sub-continent countries and the emphasis has been on entrenching the
presence in the markets where product registrations have been
completed.
The company has achieved an export turnover of Rs.1,505 million during
2002-03 as against Rs.1,830 million during previous year.
The Company has got the Product Registration for more than 60 different
products in different countries and is exploring the opportunities for
licensing some of its patented products for marketing/manufacture
abroad,
2. Total foreign exchange earned and used
(Rs. in Million)
2002-2003 2001-2002
Earnings 1,504.88 1,830.40
Outgo 1,705.45 1,629.42
For and on behalf of the Board
New Delhi SOSHIL KUMAR JAIN
31st day of July, 2003 Chairman
Mar 31, 2002
The Directors of your Company have pleasure in presenting the
Eighteenth Annual Report together with the Audited Annual Accounts of
the Company for the year ended 31st March, 2002 and Auditors' Report
thereon.
Performance Review
Your Directors are pleased to inform that your Company has continued
its trend of steady and consistent growth over the years and has
achieved new heights during the year under review.
(Rs. in Lacs)
Particulars For the year ended For the year ended
31st March, 2002 31st March, 2001
Sales 28,331.69 22,711.06
Other Income 241.62 750.17
Total Income 28,573.31 23,461.23
Profit before Interest, Depreciation
& Tax 5,887.58 6,048.93
Financial Expenses 1,171.69 1,200.18
Profit before Depreciation & Tax 4,715.89 4,848.75
Depreciation 652.00 587.83
Profit before Tax 4,063.89 4,260.92
Provision for Taxation 1,570.88 1,973.08
Prof it after Tax 2,493.01 2,287.84
Appropriation:
Dividend Paid/Proposed - On Equity Shares 570.77 570.77
- On Preference Shares 76.67 92.77
Tax on Dividend 7.82 68.12
Transfer to Capital Redemption Reserve 50.00 320.35
Transfer to Debenture Redemption Reserve - 100.00
Transfer to General Reserve 1,000.00 1,000.00
Earnings per Share (EPS) (Rs.) 42.20 38.28
Book Value per Share (Rs.) 160.03 132.19
Dividend on Equity Shares (%) 100 100
Share Capital
During the year under review, out of the 12% Redeemable Preference
Shares (RCPS) of Rs. 10/- each issued and allotted to Industrial
Development Bank of India, 5,00,000 RCPS aggregating Rs. 50 Lacs were
redeemed as per the terms of their issue. Further, the balance
7,50,000 RCPS aggregating Rs. 75 Lacs had also been redeemed on 20th
April, 2002.
Dividend
Your Directors are pleased to recommend a Dividend of 100% i. e. Rs.
10/- per Share on the Equity Share Capital of the Company for the
financial year ended 31st March, 2002. The Dividend on the Redeemable
Cumulative Preference Shares, for the financial year ended 31st March,
2002, has been paid byway of Interim Dividend (pro-rata) at the rate of
5.50% and 6.50% as declared by the Board in its meetings held on 13th
May, 2001 and 8th March, 2002 respectively and as such no further
Dividend has been recommended on such Shares as final Dividend. The
Dividend as above on the Equity and Preference Shares, is placed before
you for your approval at the ensuing Annual General Meeting and, if
approved, will absorb an amount of Rs. 570.77 Lacs and Rs. 76.67 Lacs,
respectively.
Management Discussion and Analysis
As required by Clause 49 of the Listing Agreement with the Stock
Exchanges, the relevant information is given below:
a) Pharmaceutical Market
The Indian Pharmaceutical industry has been a highly competitive yet
fast growing industry. The growth in the last few years has been
between 9% and 10% which is similar to the global pharma situation.
In 2001, the domestic pharmaceutical market registered a growth of
10,6% in value and 9,9% in volume (Source: ORG). There has been a
minimal effect of prices in driving growth. Of the 10.6% growth, less
than 1% was contributed by price increase, Most of the growth has come
from increase in sales of existing products and the launch of new
products.
Some of the challenges faced by the Pharma companies are - competition
amongst them and development of products with improved efficacy and
safety for patients. Increasingly stringent regulatory requirements
and cost-constraints are building up additional pressures. To remain
competitive in such a scenario, your Company is continuously following
the strategy to introduce products of international quality coupled
with affordability by the patients.
As a result your Company today enjoys a commanding position amongst the
pharmaceutical Companies in India having registered a growth of more
than 28% during the year under review and has been ranked as the 52nd
largest pharmaceutical company in India. (Source: ORG Annual Report
Apr 01-March 02), As per the latest ORG Survey, the Company has
secured the 49th rank in March 02, which reflects a dynamic and highly
progressive trend.
One of the major threats emerging in the pharmaceutical market is the
increasing shift towards substitution by rapid proliferation of a new
category, "generic generics", which is changing the dynamics of the
market in terms of pricing and product promotion. However, the medical
community has faith in the quality of your Companys products and they
attach a lot of value to the medical information provided to them by
the sales force. The management is making every effort to ensure that
generic drugs have least impact on the performance of the Company.
b) Goals, Objectives, and Strategies
Goals represent longer-term aspirations or visions; objectives flow
from these goals and represent measurable, attainable shorter-term
targets. Strategies are the actions implemented by management to
achieve its goals and objectives. The Companys long-term goals and
objectives include:
* Becoming a leading Healthcare Company, establishing therapeutic
leadership through novel therapies and education.
* To be globally present as a Healthcare Company.
* Investing on Research and Development; manufacturing facilities with
FDA norms and sustained marketing.
c) Sales & Profit growth
The year under review had been another year of excellent performance
for your Company with Sales turnover of Rs. 28,332 Lacs as against Rs.
22,711 Lacs in the previous year, recording a growth of 24.75 per cent
over the previous year.
This sales growth has been achieved amidst cut throat competition in
the pharmaceutical market in India and abroad. The total sales of
branded formulations has been Rs. 8,914 Lacs during 2001-02 as against
Rs. 9,051 Lacs during the previous year. The total sales of vaccines
during the year has been increased to Rs. 19,418 Lacs as against Rs.
14,048 Lacs during the previous year thus recording a growth of more
than 38.23 per cent over the previous year.
The Companys products are being well accepted by the medical
fraternity and enjoy excellent market share in their therapeutic
segments. Barring few, there has been substantial growth in the sales
of almost all the products of the Company during the year under review
as compared to the previous year.
As per retail store audit of ORG (MAT Mar 02), two brands of your
company are featuring among Top 300 ranks. Nimulid stands at 72nd rank
and Glizid-M at 185th rank. Besides this, top 10 brands of your
Company viz. Nimulid, Nimulid MD, Nimulid DS, Nimulid Suspension,
Alphadol, Alphadol-C, Glizid, Glizid-40, Glizid-M & Livoluk are among
top three brands in their respective categories. The products launched
during the previous year - Giro for Anaerobic and Gl Infections and
Alphadol-C, for Osteoporosis have been well accepted in the market and
performing well. While Alphadol-C enjoys the 2nd position among the
products in its category, Giro is placed at 5th position (Source: ORG
MAT Mar 02).
In the last one year your Company has launched 10 new products in pain
management, anti-diabetics and anti-bacterials. The products Dolib MD,
Nimulid Nugel, Nimulid MR and Nimulid-SP fall in the pain management
segment. In the ever increasing diabetic care segment Glizid-MR,
Betaglim & Rosimet were launched successfully. Mygat and Voxin feature
in the highly potential Antibacterial segments. As perthe initial
market reports, all the above products are doing well and it is
expected that these and other new products proposed to be launched in
the coming years will give a significant boost to the growth of the
Company.
There are plans on the anvil to launch new products in other important
therapeutic areas, viz. Anti-asthmatics, Anti-arthritic,
Anti-diabetics, Anti-osteoporotic segments, besides specialities, viz.
Gynaecology and Gastroenterology segments.
The Company also plans to venture into combination Vaccines, which is a
huge unexploited segment in India till date. A number of other `value
added vaccines are proposed to be launched in the market over the next
few years in order to enhance our market share significantly.
Enivac-Tetra, a vaccine for diphtheria, pertusis, tetanus and hepatitis
B, is in the pipeline and is expected to be launched soon. The Company
is also obtaining regulatory approvals for a Japanese encephalitis
vaccine. By virtue of all the above initiatives, the sales and
profitability of your Company is expected to increase substantially and
continuously in the years to come.
National/International Conferences - The Company regularly participates
in the national/international conferences in order to expose its
product range to the medical fraternity all over the country/world.
This will have a direct impact on improved sales & profitability. The
company participated in the following conferences during last one year:
i) Conference of Research Society for the study of Diabetes in India
(RSSDI) at Chandigarh, November 2001 (National Conference for
Diabetics)
ii) Indian Orthopaedic Association Conference (IOACON) at Ahmedabad,
December 2001
iii) 53rd Indian Pharmaceutical Congress at New Delhi, December 2001.
iv) 7th Congress of Asian Society of Transplantation at New Delhi,
March 2002.
v) National Conference of Chest Physicians (NCCP) at Bikaner, April
2002.
Improved Net Profits
Though the Company has recorded a sales growth of 24.75% during the
year as compared to previous year, in view of reduction of other income
and the increase in the prices of some raw materials, the profit before
tax for the year has marginally reduced by 4.62% to Rs. 4,064 Lacs as
against Rs. 4,261 Lacs in the previous year. However, the net profit
aftertax has increased to Rs. 2,493 Lacs as against Rs. 2,288 Lacs in
the previous year thus recording a growth of 8.97%.
With higher retained profits, the Net worth of the Company has improved
to Rs. 9,134 Lacs from Rs. 7,545 Lacs as at the end of previous year,
thus giving a book value per share of Rs. 160.03 as against Rs. 132.19
last year.
The liquidity position has remained comfortable throughout the year.
With most of the fixed assets creation financed out of cash accruals,
the debt-equity ratio of the Company improved further and is currently
at negligible level of 0.30, thus leaving sufficient leverage in the
hands of the Company to raise long-term debt for any future expansions.
Medium Term Trends - Aggressive marketing strategy of positioning our
products to fill specific therapeutic gaps has led to a vastly improved
financial performance of the Company. Over the medium term of five
years, sales have recorded a compounded annual growth rate of more than
21 per cent compared to the industry average of about 17 percent.
Profits have been improving both at the gross and net levels and net
profits have also recorded a compounded average growth rate of more
than 24 per cent in the last five years. Although a relatively young
company, the Companys profitability has been consistently above
industry average and favourably matches the profitability of the best
known companies in the industry.
d) Domestic Sales
In order to improve customer focus and to re-orient the marketing
activities according to the strategic needs of different products in
different therapeutic groups, your Companys portfolio of products has
been reclassified into different business units-Primary Care, Secondary
Care and Critical Care. Further, to create the Companys strong
presence in various therapeutic segments, the marketing activities in
Secondary Care Division have further been classified into Pain
Management, DIACAR, Multi Care and New Initiatives Divisions.
Moreover, in order to ensure quick and continuous availability of
Companys products at all retail outlets throughout the country, your
Company had extended the chain of its Branch Offices and own depots as
well as C& F agents in all key regions throughout the country. The
Company has its branch offices/Depots at Delhi, Mumbai, Kolkata,
Chennai, Bangalore, Hyderabad, Kochi, Ranchi, Patna and Indore besides
having C&F Agents in almost all the States in India.
The branch offices, depots and C&F Agents are well connected with the
Corporate office/Central Warehouse with the help of the latest
communication facilities. The Company has been able to manage a very
good balance between demand and supply through daily data transfer.
The Company had also arranged business meets with its stockists in
different states in order to bring our business partners close to us
and to create a long lasting bond with them.
e) Exports
The Company has identified Exports as the major thrust area of
operation and the Companys efforts on the export front have shown
positive results. The export turnover of the Company has reached to a
record level of Rs. 18,453 Lacs during the year under review
registering a growth of more than 69.83% as compared to the previous
year export of Rs. 10,865 Lacs. With a view to facilitate the
exports, the Liaisoning/Representative Offices are operational in
Russia, Turkmenistan and Yugoslavia. Your Company intends to increase
its global brand portfolio and marketing in the coming years with focus
on brands. To add value to the global image of your Company as a
leading Indian Healthcare Company, it has aggressively participated in
major world congresses of Transplant & Nephrology Societies in
Argentina, Austria and Singapore; European Dialysis and Transplantation
Congress in Vienna and world congresses of Pain Management in Moscow,
Belgrade and Nigeria, It also participated in International Conference
in Geieva for displaying the range of Nutraceuticals and Dietary
Supplement products.
In order to achieve long-term goals of higher revenue generation and
margins through exports, the Company has got the Product Registration
for more than 60 different products in different countries and is
exploring the opportunities for licensing some of its patented products
for manufacture/marketing in developed countries in Europe, North
America, etc.
With the help of all the above steps being taken by the Company, your
Directors believe that your Company would soon be reckoned amongst the
top few Indian healthcare companies on the international scenario.
f) Manufacturing Operations
The investment made by your Company in its existing facilities for
Vaccines and Pharmaceutical Production in New Delhi has reaped huge
benefits. The modernisation/Upgradation and investment in plant and
machinery has enabled your company to obtain cGMP Certification as per
WHO guidelines and accreditation by WHO for vaccine plant for
procurement by UNICEF. The pharmaceutical dosage forms facility and
vaccines plant are also having cGMP accredition.
The capacities continued to be optimally utilised at the manufacturing
sites.
Formulations Production Facility at Lalru: With a view to commercially
exploit the new products being made available by the Research and
Development facility of the Company, the production facility is now
coming up fast at Lalru and would be matching the international
standards. High value products would be produced at Lalru both for the
domestic and export markets. Production facilities for liquids orals
and capsules (phase-1) have already been commissioned. The production
facilities for other products and categories are at various stages of
completion and would be made operational as per the future needs. The
facilities being set up are with high degree of automation along with
closed system manufacturing techniques as per latest international
standards acceptable worldwide.
Hepatitis B Production Facility: The Companys backward integration of
setting-up Hepatitis B bulk virus production facility with the Cuban
technology at Lalru is ready for production. This facility is spread
over 40 acres of land and is located in the sylvan non-polluting clean
surroundings in the industrial belt of Punjab at Lalru. The project
has been located, designed, constructed, adapted and maintained to suit
production of Hepatitis B recombinant vaccine following current Good
Manufacturing Practices (cGMPs) prescribed by WHO and the USFDA. It
would undoubtedly prove to be the best not only in India but in the
world. The commercial production is expected to start in Aug/Sept.,
2002.
g) Quality Assurance
Your Directors believe that the Quality can only be achieved by having
a highly qualified, techno-innovative and dedicated team, best,
quality material and best machinery and equipments.
Quality can never be an after thought or an accident. It is an outcome
of a conscious and deliberate effort. The adherence to strict standards
equivalent to or excelling prescribed international standards has been
your Companys philosophy In order to build quality products, your
Company has scouted for and studied the state of art manufacturing
processes world-wide and has installed the globally best available
equipments and machinery in our plants.
h) Internal Audit and Control
Your Companys internal control systems and procedures are adequate and
commensurate with the size of operations. Standard Operating Manuals
have been prepared and modified suitably to match the needs with the
change. The internal control system lays down policies, authorisation
and approval procedures. M/s. S. K. Badjatya & Co., Chartered
Accountants, are acting as the Internal Auditors of the Company. Post
audit reviews are carried out to ensure that audit recommendations have
been implemented.
The Audit Committee of the Board of Directors comprising of three
non-whole time Directors viz. Mr. R. L. Narasimhan, Mr. N. N.
Khamitkar and Mr. Sunil Kapoor, reviews Internal Audit Reports and the
adequacy of the Internal Controls.
i) Safety, Health and Environmental Protection
Your Company continues to fulfil its responsibilities towards safety,
health and environment protection at the manufacturing sites. All the
plants at the manufacturing sites are operated by fulfilling all safety
norms.
An Effluent Treatment Plant has been set up and a "Green Belt" has been
developed and maintained at the manufacturing site at Lalru to prevent
adverse environmental impact on the community.
In order to further develop the awareness among the Companys employees
about the importance of safety in day-to-day life in general and work
in particular, Safety Day was celebrated on 8th March 2002 in the
Vaccine Plant at Lalru. The main events were Safety Day Pledge &
Inter-departmental Quiz on safety.
j) Personnel
Your Company had 1,622 employees as on 31st March, 2002 as against
1,252 employees as on 31st March, 2001. The number of employees has
been increased in view of the Companys increased activities and the
strategy of marketing in a more focussed manner.
Employee Relations - Good employee relations is the hallmark of Panacea
Biotec culture. Your Directors believe that our people are the most
important and valuable assets for the Company. It would always be the
endeavour of your company to employ and maintain competent workers at
all the positions in the Company and in order to achieve the said
objective, the employees are trained and developed on a continuous
basis for improvement in their skills and performance.
Staff Buses - The employees at Lalru were already being provided the
benefit of staff bus service, by the company Nowthis facility has also
been extended to the employees at Head Office for commuting to and from
the office. Canteen - Canteen facilities are being provided to the
employees of the Company at subsidised rates. The food is hygienic,
sumptuous and nutritious. It has been the endeavor of the company to
provide a balanced diet to its employees.
Mediclaim - Your Company has taken Group Mediclaim Policy from Oriental
Insurance Co. Ltd., for the benefit of all the Companys employees
(except employees under ESI Scheme who are already getting medical
facilities under ESI Act) & their dependants.
Group Personal Accident Insurance - Your Company has also taken Group
Personal Accident Policy from Oriental Insurance Co, Ltd. so that in
case of the unfortunate accidental death of any of its employees, his
family members can get timely financial support. Moreover, as a
gesture of goodwill, the Company is also providing additional financial
support from time to time to the family members of its deceased
employees.
k) Corporate Communication
Everyone in the organization needs to have a `sense of belonging to
the organization. This is a big motivational force for the employees
and can be developed by timely appraisal, appreciation, challenging
tasks, good leadership, constant communication with Corporate Office
and regular flow of information. More a sales person is motivated,
better is his work in the field; he can interact and convince the
customer of the companys products and services in a much effective
manner. This in turn translates into better relationships with the
customer and higher revenues for the company.
Learning Perspective, Companys in-house newsletter was developed in
January, 2001 to ensure constant two-way communication with the field
personnel. The newsletter has been able to instill this vital `Sense of
Belonging among sales force and bring them all closer to each other
and to Corporate Office, Learning Perspective consists of information
regarding achievements of the field Panaceans, conferences, symposia,
seminars and other events being held all over India, Besides, it has
been successful in instilling a competitive spirit among the Panaceans
through job related contests, which are published in the newsletter.
Learning Perspective is also available online and can be viewed on the
corporate web-site www.panacea-biotec.com.
l) Drug Policy
The Government has recently announced a new Drug Policy which will be
the basis for the amendment of the Drug Price Control Order, 1995, The
major changes as per the policy have been-
a) Overall ceiling on profitability removed,
b) The National Pharmaceuticals Pricing Authority (NPPA) has been
authorised to exempt formulations which cost a consumer less than Rs.
2/- as a daily cost of treatment.
c) Price Control would be imposed on bulk drugs with annual sales
exceeding Rs. 25 Crore and where a single brand enjoyed a market share
of 50% or more or where a single brand has market share of 90% or more
with turnover between Rs. 10 to 25 Crores.
While the policy appears to be moving in the right direction at a macro
level, the impact can be assessed only after the new list of products
which remain under price control is announced. Presently none of the
products of your Company is under price control, nor it is expected
that any of the products would come under its purview as per the latest
changes in the drug policy.
m) Cautionary Note
Certain statements in the "Management Discussion and Analysis" section
may be forward looking and are stated as per requirement of applicable
laws and regulations. The actual results may be affected by many
factors which could be different from what the Directors/Management
envisage in terms of future performance and outlook.
Research and Development
The Companys state-of-the-art 20,000 sq. ft. ultra modern Research and
Development Centre at Lalru, Punjab, which has already been approved by
the Department of Scientific & Industrial Research DST, Ministry of
Science & Technology, Government of India, matches with the best
laboratories in the world. The research conducted in the Lalru labs has
led to successful filing and grant of product patents world wide in
nine different categories.
The present scenario of fast developing pharmaceutical world demands
updated information on each and every issue of companys interest, so
as to plan the research accordingly and get into pace with global
pharmaceutical development that will keep the Company ahead in time to
come. To meet this, your company has set up a Scientific and Regulatory
Information Centre (SRIC) at Mohali, Punjab. The basic objective of the
SRIC is acquisition & development of scientific and regulatory
knowledge for R&D, so that the R&D innovations and products meet the
international standards. The process of information procurement &
knowledge management at SRIC will further help in reducing the time and
cost incurred in Research & Development.
The Company is also entering into collaboration with national and
international laboratories to fund research in the areas of genomics
research, to identify new drug targets and for developing new molecules
and drugs primarily in the area of diabetes and asthma.
The efforts are on to take the investment in R&D to the tune of 15% of
the turnover by 2004, up from 3-4 per cent at present. Your Company
has been successful in bringing global research & development
activities in India. It will participate in project of the renowned
international pharma Company Solvay Pharmaceuticals, Netherlands for
carrying out research in India for development of Novel Drug Delivery
Systems. After successful completion of the research, the Company would
be receiving royalty on sale made by Solvay throughout the world.
The research activities currently being carried out are in the
following areas:
Formulations Research and Development for carrying out development of
new and latest technology in conventional and novel formulations and
development of Novel Drug Delivery Systems and areas of interest
include biologicals, pain management drugs, anti-diabetics,
osteoporosis drugs, drugs for cure of tuberculosis and
immunosuppresants used in organ transplantation.
Analytical Research for development of analytical procedures for
finished products and raw materials using modern analytical techniques
with special emphasis on impurity profiling and degradation products.
Bioanalytical Research for development of analytical procedures for
quantitation of drugs & metabolites in Biological Matrices,
Chemicals Research for development and scale-up of chemical processes
for synthesis of drug molecules and synthesis of impurities and
degradation products and areas of interest include novel NSAIDs,
hypoglycemics and anti-infectives.
Natural Products Research for isolation and standardization of raw
materials and identification of active ingredients and areas of
interest include anti-hemorrhoids, anti-asthmatic, anti-migraine and
anti-tubercular natural products.
Drug Delivery Research for development of Novel Drug Delivery Systems
including mucoadhesive dosage forms, osmotically controlled delivery
systems, sustained release matrix dosage forms, aerosols, transdermals,
self-emulsifying microemulsion delivery systems and niosomes and
liposomes.
Pharmacology & Toxicology Research for testing the efficacy, acute and
sub-acute toxicity studies of formulations developed in-house using
various animal models.
Research in Vaccines & Biotechnology for development of newer vaccines
viz. DPT Hepatitis B, Japanese encphalitis, Haemophilius Influenza Type
B, Pneumoccal vaccine, Cocktail vaccine, newer adjuvants and r-DNA
products.
Clinical Research for co-ordinating clinical trials in medical research
institutes/hospitals, bioavalilability and pharmacodynamic studies on
various Research Products of the Company.
Molecular Biology Research being set-up for genomics and proteomics
research program primarily focused on the above mentioned disease areas
with the emphasis on discovery of genetic influence in the drug
response and development of deep insight in genome discoveries to
identify new drug targets and drug interventions.
Technological Collaborations and tie-ups for Research & Development
Your Company has collaborated with some of the premier research
institutes of the country, including All India Institute of Medical
Sciences, New Delhi, Maulana Azad Medical College, New Delhi and Post
Graduate Institute of Medical Education and Research, Chandigarh, for
carrying out clinical/pharmacological research on the products
developed.
Your Company has also collaborated with National Research Development
Corporation, New Delhi for (a) commercial development of the know-how
for an improved formulation (Nimesulide based) for Ocular delivery
using nanotechnology developed by University of Delhi, and (b)
licensing & commercialisation of the know-how and a process for
Targetted Gene/Drug Delivery System for Criggler-Nassar Syndrome or
Type III Jaundice. The company plans to commercialise the technologies
and launch advanced products based on such technology at the earliest
The Company has also entered into an agreement with Biotechnology
Consortium of India (BCI) to manufacture and market the anti-anthrax
vaccine developed by JNU. The vaccine is different from drugs such as
Ciprofloxacir currently being used in the treatment of anthrax. While
the Ciprofloxacin is administered after a person has contactec anthrax,
the vaccine develops immunity in the human bod} to protect from the
infection of anthrax bacillus.
Ongoing Research Projects
The Companys ongoing research projects include:
- Development of combination products of a Novel NSAIC and
Anti-allergic Medication,
- Standardisation of Natural Product Bioavailability enhancer.
- Taste masking of Bitter products such as anti-malarials antibiotics
for oral use.
- Scale up of mucoadhesive buccal dosage form.
- Topical gel formulation for natural anti-infective drug.
- Injectable formulation of Nimesulide.
- Multi-step process for making Gliclazide molecule.
- Topical ointment and cream of a natural product for Haemorrhoids.
Research Patents Granted
Your Company has been granted patents on novel research; methodology
and has published findings in national as well as international
journals. With these patents, your Company is ready to face post GATT
scenario. Some of the patents granted includes those in respect of:
- Pharmaceutical composition comprising cyclosporine.
- Targeted vesicular constructs for cyto protection and treatment of h.
pylori.
- Anti-allergy anti-inflammatory composition.
- Parenteral water-miscible non intensely colorec injectable
composition of non-steroidal anti-inflammatory drugs.
- Pharmaceutical compositions containing at least one NSAID having
increased bioavailability.
- Antispasmodic and antinflammatory composition and a process for the
manufacture thereof.
- Therapeutic anti-inflammatory and analgesic composition containing
nimesulide for use transdermally and a process for the manufacture
thereof.
- Therapeutic injectable analgesic composition containing nimesulide
and a process for the manufacture thereof.
New Products Research
Your Companys therapeutic focus has been in developing new products in
the therapies including analgesics/anti-inflammatory, anti-diabetics,
immuno-suppressants, antibiotics, anti-tuberculosis drugs, anti-obesity
drugs, anti-asthmatics and G.I. prokinetics. The new product research
is focused towards the highly regulated markets of US, Europe,
Australia, Japan, South Africa besides the domestic markets in India.
The Company has filed for eight product license applications, besides
various herbal products as dietary supplements. The Company is looking
at the market of Dietary Supplements with specific focus on
anti-migraine, anti-piles, hepatoprotective, immunomodulators and
hypoglycemic agents.
Information Technology
The utilisation of information technology and latest means of
communications has now become the lifeline for every business entity.
Organsiations capable of sharing knowledge efficiently and effectively
can only create sustainable competitive advantage. Accordingly, the
Company has spent heavily in the informaton technology and the
communication facilities.
With a view to have closer interaction and co-ordination in its
activities, the Companys corporate office and factories have
been/being linked together, with V-SAT connections. The intranet
connectivity has been established within its offices/factories at
different locations and the Internet facilities are being used
extensively to ensure speedy communication with the C&F Agents/Depots,
major Stockists and various operational locations throughout the
country. Your company has integrated an ERP Software for entire
functioning of the company and plans are on the anvil to implement the
international ERP Software.
It will further enhance the knowledge base available to each Panacean,
enable faster scanning and monitoring of the external environment, and
improve both the employees and the organizations knowledge of best
practices and relevant leading-edge technologies.
Your Company visualises that in few years from now knowledge will be
created, stored, disseminated and accessed without any apparent complex
interfaces and accordingly, your Company has undertaken an Information
Technology venture hosting a portal "Best on Health", which is on the
verge of launch with a concept of total health care, addressing to all
needs of medical fraternity.
Social Responsibility
Maintaining its responsibility to the community, your company conducted
several free Health Camps throughout the year 2001-02 in the disease
areas of Diabetes (free sugar tests and consultation), Osteoporosis
(free Bone Mineral Density tests and consultation) and Hepatitis B
(Immunization Camps).
Further, as a gesture of compassion towards the social cause, your
Company had also donated Hepatitis B Vaccines & other life saving
medicines to the Charitable Hospitals and Dispensaries. It also
arranged medical facilities for the Companys pooremployees and
theirfamily members in case of acute diseases.
Joint Ventures & Subsidiaries
As you are aware, during 1999-2000 your Company had formed a Joint
Venture Company namely Panheber Biotec Pvt. Ltd., with M/s. Heber
Biotec S. A., Cuba, an arm of the world renowned biotechnology research
facility, Center for Genetic Engineering and Biotechnology (CIGB). This
joint venture company would spearhead Panacea Biotecs entry into bulk
(raw material) production of Recombinant Hepatitis B Vaccine and
Erythropoetin. The trial production of bulk raw material of Recombinant
Hepatitis B Vaccine has already been made and the commercial production
is likely to commence during August/Sept., 2002.
The Companys subsidiary namely Radicura & Co. Ltd., an existing
profit-making Company engaged in the trading and distribution of
pharmaceutical products, has made available its existing trading
strengths to the Company besides allowing us a ready outlet for sale.
The Companys another subsidiary, viz. Jiva Life Sciences Ltd.
{Formerly Maxwell Impex (India) Ltd.} which owns a prime immovable
property in close proximity to the existing Corporate Office of the
Company, had greatly helped Panacea Biotec Ltd. in housing its expanded
corporate operations. Some of the Companys departments viz. Finance,
Secretarial, HRD, Materials Management and I. T departments have
already been re-located at the said property and other departments
including Accounts, Money Management cell, etc. would be re-located
shortly.
The Companys wholly owned subsidiary Company in U.K. viz. Tayonics
Ltd. at Isle of Men, U.K. is yet to commence the business activities.
Consolidated Financial Statements
As required pursuant to Accounting Standard 21 on `Consolidated
Financial Statements and Accounting Standard 27 on `Financial
Reporting of Interest in Joint Ventures, the Consolidated Financial
Statements of the Company (including therein Audited Annual Accounts as
at 31st March, 2002 of its subsidiaries, viz. Radicura & Co. Ltd. and
Jiva Life Sciences Ltd. and Joint Venture Company, viz. Panheber
Biotec Ltd. and the Unaudited Financial Statements as at 31st December,
2001 of the overseas subsidiary, viz, Tayonics Ltd.) are attached with
the Annual Accounts of the Company.
The Auditors of the Company had also given their report on the
Consolidated Financial Statements. As regards the Auditors remarks
therein regarding Unaudited Financial Statements of Tayonics Ltd., your
Directors would like to submit that though the Annual Accounts of
Tayonics Ltd. were already finalised and audited at U.K., however,
since they were not physically available at the time of finalisation of
Consolidated Accounts, the unaudited accounts were considered by the
Auditors, However, there was no difference in the figures of unaudited
and audited financial statements of Tayonics Ltd, and accordingly, as
required by section 212 of the Act, the Audited Financial Accounts of
Tayonics Ltd. are being attached herewith alongwith the Annual
Accounts of the Company.
Energy Conservation, Technology Absorption & Foreign Exchange
Information as required under Section 217(1)(e) of the Companies Act,
1956, read with the Companies (Disclosure of Particulars in the Report
of Board of Directors) Rules, 1988, regarding conservation of energy,
technology absorption and foreign exchange earnings & outgo, is given
in Annexure A, forming part of this Report.
Public Deposits
During the year under review, your Company has not invited or accepted
any deposits from the public pursuant to the provisions of Section 58A
of the Companies Act, 1956 and no amount of principal or interest was
outstanding in respect of deposits from the public as of the date of
balance sheet. However, during the year under review, the Company had
accepted deposits from the Companys Directors, their relatives,
associates and the Companys employees without inviting deposits from
them.
Information pursuant to Section 217(2A)
As required by the provisions of Section 217(2A) of the Companies Act,
1956, read with Companies (Particulars of Employees) Rules, 1975 as
amended, the names and other particulars of employees covered under
these Rules are set out in Annexure B, forming part of this Report.
Report on Corporate Governance
As required pursuant to Clause 49 of the Listing Agreement with Stock
Exchanges, a report on Corporate Governance is annexed herewith as
Annexure `C, forming part of this Report.
Directors
With a view to comply with the SEBI Guidelines on Corporate Governance
and broad base the Board of Directors of your Company, Mr. S. N.
Hassija, Mr. M. L. Kalra and Mr. C. C. Bhagat were appointed as
additional Directors w. e. f. 14th July, 2001 and were later appointed
in the Annual General Meeting of the Members of the Company held on
28th August, 2001, as Directors liable to retire by rotation.
Further, Dr. G. K. Vishwakarma was also appointed as additional
Director of the Company w. e. f. 13th September, 2001. As per the
provisions of the Companies Act, 1956, he holds office till the date of
the ensuing Annual General Meeting and is proposed to be appointed as
Director liable to retire by rotation with the approval of the members
in the forthcoming Annual General Meeting.
However, with profound grief and sorrow, your Directors wish to inform
you about the sad demise of Mr. S. N. Hassija on 4th June, 2002, The
Board wishes to record its sincere appreciation of the valuable
guidance and support rendered by Mr. S. N. Hassija during his tenure as
a Director of the Company.
In accordance with the provisions of the Companies Act, 1956, Shri
Gurmeet Singh, Dr. Amarjit Singh and Shri Soshil Kumar Jain, Directors,
retire by rotation and being eligible, offer themselves for
re-appointment.
Directors Responsibility Statement
The Directors hereby confirm:
i) that in the preparation of the annual accounts, the applicable
accounting standards had been followed along with proper explanation
relating to material departures;
ii) that the directors had selected such accounting policies and
applied them consistently and 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 at the end of the financial year and of the
prof it or loss of the Company for that period;
iii) that the directors had taken proper and sufficient care for the
maintenance of adequate accounting records in accordance with the
provisions of the Companies Act, 1956 for safeguarding the assets of
the Company and for preventing and detecting fraud and other
irregularities;
and
iv) that the directors had prepared the annual accounts on a going
concern basis.
Auditors
As per the provisions of the Companies Act, 1956, M/s. S. R. Batliboi &
Associates, Chartered Accountants, hold office as Statutory Auditors of
your Company till the conclusion of the ensuing Annual General Meeting.
However, they have shown their unwillingness for their re-appointment
as the auditors of the Company for the financial year ended 31st March,
2003. In their place, their associate firm, viz. M/s. S. R. Batliboi &
Co., Chartered Accountants, had shown their willingness to be appointed
as the Auditors of the Company. Your Company has received the
Certificate from M/s. S. R. Batliboi & Co., Chartered Accountants, as
required under Section 224(1 B) of the Companies Act, 1956, to the
effect that their appointment, if made, will be within the limits as
prescribed under the provisions thereof. Your Directors recommend their
appointment as the Auditors of the Company for the financial year
2002-03.
The notes to the accounts and the observations in the Auditors Report
are self-explanatory and, therefore, do not call for any further
comments.
Cost Auditors
In terms of the provisions of Section 233B of the Companies Act, 1956,
M/s J. R Gupta & Associates, Cost Accountants, have been appointed as
the Cost Auditors to conduct the audit of the Companys Cost Records in
respect of pharmaceutical formulations for the year ended 31st March,
2002 with the approval of the Central Government. They have also been
appointed as the Cost Auditors for the year ended 31st March, 2003
subject to the approval of Central Government.
Dematerialisation of Shares
The Companys Equity Shares are covered under compulsory demat w. e. f.
October 30, 2000 and the same have been admitted in the Depository
System with ISIN No. INE922B01015. Your Company has been among the few
top most companies in which the maximum number of Shares have been
dematerialised. In fact more than 97% of the Companys total Equity
Shares have already been dematerialised till date.
Those members who have not yet get their Equity Shares Dematerialised,
are requested to contact any of the Depository Participants in their
vicinity for getting their Equity shares dematerialised. In case any
clarification is needed in that regard, the Company Secretary may be
contacted in person or by communication addressed at the Head Office of
the Company.
Acknowledgements
Your Directors place on record their deep appreciation of the
assistance, support and co-operation extended by the Banks, Financial
Institutions, Government Agencies, Customers and Suppliers during the
year under review. Your Directors owe special thanks to all the
shareholders of the Company for their continued support during the
year. Your Directors also express their appreciation for the sincere
and dedicated services rendered by the Companys employees which has
enabled the Company to achieve various goals as brought out in this
report.
ANNEXURE
Statement of particulars pursuant to the Companies (Disclosure of
Particulars in the Report of Board of Directors) Rules, 1988.
FORM A
ENERGY CONSERVATION
Energy is one of the important resources which is essential for
industrial development of any country. Your company believes that by
conversing energy, the company is helping in the industrialisation of
the country. Accordingly, the Company accords highest priority to the
energy conversation. The company has so devised its production lines
which results in minimum energy losses. The employees of the Company
have also been oriented to accord priority to energy conversation, at
all times and places.
Form for disclosure of particulars with respect to Technology
Absorption.
Research & Development (R&D)
1. Specific areas in which R&D carried out by the Company:
The Research is being pursued by the Company in the following areas:
- Pharmaceutical Formulations
- Natural Products
- Vaccines
- Bio-technological Products.
- Advanced Drug Delivery System.
- Bulk Drug and Drug Intermediates.
2. Benefits derived as a result of above R&D:
- Novel drug delivery products.
- Competitively advanced products.
- Improved product quality
- Waste minimisation
- Safe and environmental friendly processes
- Grant of Product/process patents
- Import substitution
- Enhanced global presence
- Export Quality products
3. Future plan of Action:
The Companys R&D division will focus on achieving the results in
following areas:
- Analytical Research
- Formulations Research & Development
- Chemicals Research
- Natural Products Research
- Viral Vaccine Research
- Pharmacology Research
- Research in the areas of Genomics and Proteomics
1. Expenditure on R& D during 2001-02
(Rs. in Lacs)
2001-2002 2000-2001
Capital 200.03 243.70
Revenue 682.67 398.68
Total 882.70 642.38
Total R&D expenditure as a percentage
of total turnover 3.12% 2.83%
Technology absorption, adaptation and Innovation
1. Efforts, in brief, made towards technology adaptation and innovation
Technical collaboration for manufacture of vaccines
2. Benefits derived as a result of the above efforts
- Competetive products
- Product Improvement
- Product Development
- Import Substitution
3. In case of imported technology (imported during the last five years
reckoned from the beginning of the financial year), following
information may be furnished.
a. Technology imported
b. Year of import
c. Has technology been fully absorbed
d. If not fully absorbed, areas where this has not taken place, reasons
thereof and future plan(s) of action
Technical collaboration for manufacture, maintenance and marketing of
vaccines.
1995-96, 1996-97 & 1997-98 Fully absorbed
N. A.
FOREIGN EXCHANGE EARNINGS AND OUTGO
1. Activities relating to exports
The Company has identified Exports as the major thrust area of
operation and has acquired the status of a major drug export unit for
both branded and generic products, carving a niche in the CIS, African,
Middle East and Asian sub-continent countries and the emphasis has been
on entrenching the presence in the markets where product registrations
have been on entrenching the presence in the markets where product
registrations have been completed.
The company has achieved an export turnover of Rs. 18,453 Lacs during
2001-02 as against Rs. 10,865 Lacs during previous year.
The Liaisoning/Representative Offices have been set-up in Russia,
Turkmenistan, Yugoslavia and Tanzania and the Companys wholly owned
Subsidiary Company set-up at U.K. with the objective of import-export
of pharmaceutical, technologies and other products, has also commenced
its operations.
The Company has got the Product Registration for more than 60 different
products in different countries and is exploring the opportunities for
licensing some of its patented products for manufacture abroad.
2. Total foreign exchange earned and used
(Rs. in Lacs)
Current Previous
Year Year
Earnings 18,303.96 11,069.18
Outgo 16,294.18 9,872.83
For and on behalf of the Board
New Delhi SOSHIL KUMAR JAIN
27th day of June, 2002 Chairman
Mar 31, 2001
The Directors of the Company have pleasure in presenting the
Seventeenth Annual Report together with the Audited Annual Accounts of
the Company for the year ended 31ST March, 2001 and Auditors' Report
thereon.
PERFORMANCE REVIEW
The Directors are pleased to inform that the Company has continued
its trend of steady and consistent growth over the years.
SHARE CAPITAL
During the year under review, out of the 12% Redeemable Preference
Shares (RCPS) of Rs. 10/- each issued and allotted to Industrial
Development Bank of India, 25,00,000 RCPS aggregating Rs. 25.00 million
were redeemed as per the terms of their issue. Further, out of the
Preference Shares issued and allotted to Directors and their relatives,
7,03,500 Preference Shares aggregating Rs. 7.04 million were also
redeemed during the year under review.
DIVIDEND
The Directors are pleased to recommend a Dividend of 100% i.e. Rs. 10/-
per Share on the Equity Share Capital of the Company for the financial
year ended 31ST March, 2001.
The Dividend on the Redeemable Cumulative Preference Shares has been
paid by way of Interim Dividends (Pro-rata at the rate of 5.50% and
6.50% as declared by the Board in its meeting held on 13th May, 2000
and 14th July, 2001, respectively and as such no further Dividend has
been recommended on the Preference Share Capital as final Dividend for
the financial year ended 31ST March, 2001.
The Dividend as above on the Equity and Preference Shares, is placed
before you for the approval at the ensuing Annual General Meeting and,
if approved, will absorb an amount of Rs. 57.08 million and Rs. 9.28
million, respectively.
SALES & PROFIT GROWTH
The Company has recorded another year of spectacular performance
during 2000-01 with total income rising to Rs. 2,361.80 million from
Rs. 1,946.51 million in the previous year, recording more than 21 per
cent growth over the previous year.
This sales growth has been achieved amidst cut throat competition in
the pharmaceutical market in India and abroad. Both the branded
formulations and Vaccines segments have recorded significant increases
in sales during the year. The total sales of branded formulations has
been Rs. 905.07 million during 2000-01 as against Rs. 626.63 million
during the previous year recording a growth of more than 40% over the
previous year. The total sales of vaccines during the year has also
been increased to Rs. 1,404.77 million as against Rs. 1,317.16 million
during the previous year, thus recording a growth of more than 6 per
cent.
IMPROVED PROFITS
The Profit before tax for the year has jumped more than 29 per cent to
Rs. 426.46 million as against Rs. 329.34 million in the previous year.
However, in view of the additional provision for income tax amounting
to Rs. 40.87 million for earlier year, the net profit after tax has been
reduced to Rs. 228.78 million as against Rs. 259.34 million for the
previous year. As a result of such additional provision for income
tax, the Earning Per Share has also come down to Rs. 38.28 as against
Rs. 43.83 for the previous year. Had this additional provision for
income tax for the previous year not been made during the year under
review, the net profit for the year would have been Rs. 269.65 million
thus recording a growth of more than 23% over the adjusted profit after
tax for the previous year after adjusting said provision.
Achievement of this level of profits gives to the Directors all the
more satisfaction in view of the fact that during 2000-01, the company
has continued to invest in Research & Development, market development
and brand building which are expected to yield results over a longer
period.
With higher retained profits, the Net worth of the Company has improved
to Rs. 754.50 million from Rs. 603.19 million as at the end of previous
year, thus giving a Book Value per share of Rs. 132.19 as against
Rs. 105.68 last year.
The liquidity position of the Company has remained comfortable
throughout the year. With most of the fixed assets creation financed
out of cash accruals, the debt equity ratio of the Company improved
further and is currently at negligible level of 0.14, thus leaving
sufficient leverage in the hands of the Company to raise long-term debt
for any future expansions.
MEDIUM TERM TRENDS
Aggressive marketing strategy of positioning our products in line with
specific speciality needs has led to a vastly improved financial
performance of the Company. Over the medium term of five years, sales
have recorded a compounded annual growth rate of about 31 per cent
compared to the industry average of about 12 per cent. Profits have
been improving both at the gross and net levels and net profits have
recorded a compounded average growth rate of more than 38 per cent in
the last five years. Although a relatively young company, the
Company's profitability has been consistently above industry average
and favourably matches the profitability of the best known companies in
the industry.
MANUFACTURING OPERATIONS
The Company has invested heavily in its existing facilities for
Vaccines and Pharmaceutical dosage forms manufacturing in New Delhi.
The modernisation/upgradation and investment in plant and machinery has
enabled the company to obtain cGMP Certification as per WHO guidelines
and accreditition by WHO for vaccines plant for procurement of Vaccines
by UNICEF. The pharmaceutical dosage forms facility and vaccines plant
are also having cGMP accredition.
Formulations Production Facility at Lalru: With a view to commercially
exploit the new products being made available by the Research &
Development facility of the Company, the production facility is now
coming up fast at Lalru and would be matching the international
standards. High value products would be produced at Lalru both for the
domestic and export markets.
Production facilities at Lalru for liquid orals and capsules Phase-1)
have been commissioned during the previous year. The production
facilities for other products and categories are at various stages of
completion.
Hepatitis B Production Facility: The Company's backward integration of
setting-up Hepatitis B bulk virus production facility with the Cuban
technology at Lalru is nearing completion. The civil work has been
completed and major equipments have already been received at the site
and the trial runs are expected to start in October, 2001.
Quality - a conscious and deliberate policy for achieving success
Quality is among the most important reasons, which can persuade a
customer to buy a product. Consistent pursuit of Total Quality
Management, which the Directors are proud to state, has always been a
cornerstone of the Company and this pursuit has resulted in achieving
greater heights in the past few years.
Quality has been and will always remain a conscious and deliberate
effort and can only be achieved by having a strong and dedicated team,
best quality material and of course the best machinery and equipments.
Quality can never be an after thought or an accident. The adherence to
strict standards equivalent to or excelling prescribed international
standards has been the Company's philosophy. In order to build quality
products, the Company has scouted for and studied the state of art
manufacturing processes world-wide and has installed the globally best
available equipments and machinery in our plants.
NEW PRODUCTS
During the year under review, the company has launched number of new
Brands including Kondro for Arthritic patients, Giro (ornidazole for
amoebic Dysentery and Diarrhea, Nimulid DS, for acute cases of pain and
Nimulid EF (effervescent tablets coming into folds a very pleasant and
matured Nimulid Family. Further, Alphadol-C, a brand extension for
Osteoporosis and Oglo, the novel PPAR y activator for diabetes
management, have been launched recently.
The Company has also lined up number of new product launches in the
next 12 months, thus expanding its branded product portfolio and
entrenching its presence in specific therapeutic areas viz.
Orthopaedics, Diabetology, while opening up fresh avenues in newer
therapeutic areas such as Gynaecology, Gastroenterology and Dentistry.
Each of the products under launch would be a marked improvement over
the existing therapy and these products are expected to enhance the
revenue and profitability of the company over the years on a sustained
basis.
The Company has recently collaborated with National Research
Development Corporation, New Delhi, for the commercial development of
the know-how for an improved formulation (Nimesulide based for Ocular
delivery using nanotechnology developed by the University of Delhi and
plans to commercialise the technology and launch advanced products
based on such technology at the earliest.
The Company also plans to venture in Cocktail Vaccines, which are
untouched and unexplored in India till date. A number of other 'value
added' vaccines are proposed to be launched in the market over the next
few years in order to enhance its market share. Enivac -Tetra, a
vaccine for diphtheria, pertutis, tetanus and hepatitis B, is in the
pipeline and expected to be launched fairly soon. The company is also
obtaining regulatory approvals for a Japanese encephalitis vaccine.
EXPORTS
The Company has identified Exports as the major thrust area of
operation and in order to improve the export turnover, a two pronged
strategy is being followed up, viz.
- To market branded pharmaceutical products to the developing markets
in Africa, CIS countries and South Asia.
- To enter the European Union, US, Australia and other developed
markets with technologically superior products.
The Company's efforts on the export front have shown positive results.
The export turnover of the Company has reached a level of Rs. 1,116.14
million during the year under review registering a growth of more than
51% as compared to the previous year export of Rs. 738.59 million.
With a view to facilitate the exports, the Liaisoning/ Representative
Offices have also been set-up in Russia, Turkmenistan, Yugoslavia and
Tanzania and similar offices are proposed to be opened in some other
countries like Nigeria, Kenya, Uganda and Sri Lanka.
In order to achieve long-term goals of higher revenue generation and
margins through exports, the Company has got the Product Registration
for more than 60 different products in different countries and is
exploring the opportunities for licensing some of its patented products
for manufacture abroad.
RESEARCH AND DEVELOPMENT
The Company's state-of-the-art 20,000 sq. ft. ultra modern Research and
Development Centre at Lalru, Punjab, having advanced equipments for in-
house testings and trials and manned by 60 personnel including those
with advanced degrees in specialised areas, matches with the best
laboratories in the world. The research conducted in the Lalru labs
has led to successful filing and grant of product patents world wide in
nine different categories.
The research activities currently being carried out are under the
following areas:
Formulation Research and Development for carrying out development of
new and latest technology in conventional and novel formulations and
development of Novel Drug Delivery System. The areas of interest
include biologicals, pain management, diabetics, osteoporosis,
tuberculosis and organ transplantation.
Analytical Research for development of analytical procedures for
finished products and raw materials using modern analytical techniques
with special emphasis on impurity profiling and degradation products.
Chemicals Research for development and scale-up of chemical processes
for synthesis of drug molecules and synthesis of impurities and
degradation products and areas of interest include novel NSAIDs,
hypoglycemics and anti-infectives.
Natural Products Research for isolation and standardisation of raw
materials and identification of active ingredients and areas of
interest include anti-hemorrhoids, anti-asthmatic, anti-migraine and
anti-tubercular natural products.
Drug Delivery Research for development of Novel Drug Delivery Systems
including mucoadhesive dosage forms, osmotically controlled delivery
systems, sustained release matrix dosage forms, aerosols, transdermals,
self-emulsifying microemulsion delivery systems and niosomes and
liposomes.
Pharmacology & Toxicology Research for testing the efficacy, acute and
sub- acute toxicity studies of formulations developed in-house using
various animal models.
Research in Vaccines & Biotechnology for development of newer vaccines
viz. DPT and Hepatitis B, other Cocktail vaccines, newer adjuvants,
monoclonal antibodies and r-DNA products.
Clinical Research for co-ordinating clinical trials in medical research
institutes/ hospitals, bioavalilability and phmacodynamic studies on
various Research Products of the Company.
Molecular Biology Research being set-up for genomic and proteomic
research program primarily focused on the above mentioned disease areas
with the emphasis on discovery of genetic influence in the drug
response and development of deep insight in genome discoveries in order
to identify new drug targets and drug interventions.
TECHNOLOGICAL COLLABORATIONS AND TIE-UPS FOR RESEARCH & DEVELOPMENT
The Company has collaborated with some of the premier research
institutes of the country, including All India Institute of Medical
Sciences, New Delhi, Maulana Azad Medical College, New Delhi and Post
Graduate Institute of Medical Education and Research, Chandigarh, for
carrying out clinical/ pharmacological research on the products
developed.
The Company has recently collaborated with National Research
Development Corporation, New Delhi, for the commercial development of
the know-how for an improved formulation (Nimesulide based) for Ocular
delivery using nanotechnology developed by the University of Delhi and
plans to commercialise the technology and launch advanced products
based on such technology at the earliest.
ONGOINIG RESEARCH PROJECT5
- The Company's ongoing research projects include:
- Development of combination product of a Novel NSAID and Anti-allergic
Medication.
- Standardisation of Natural Product Bioavailability enhancer.
- Taste masking of Bitter products such as anti-malarials, anti-biotics
for oral use.
- Scale up of mucoadhesive buccal dosage form.
- Topical gel formulation for natural anti-infective drug.
- Injectable formulation of Nimesulide.
- Multi-step process for making Gliclazide molecule.
- Topical ointment and cream of a natural product for Haemorrhoids.
RESEARCH PATENTS GRANTED
The Company has been granted US Patents on novel research/methodology
and has published findings in national as well as international
journals. With these patents, the Company is ready to face post Gatt
Scenario. Some of the patents granted in US include the patents in
respect of:
- Reversible Fertility Control for Prevention of Pregnancy in Females,
- Therapeutic in jectable analgesic composition containing nimesulide
and a process for the manufacture thereof,
- Therapeutic anti-inflammatory and analgesic composition containing
nimesulide for use transdermally and a process for the manufacture
thereof,
- Pharmaceutical composition for the control and treatment of anorectal
and colonic diseases,
- Antiispasmodic and anti-inflammatory composition and a process for
the manufacture thereof,
- Pharmaceutical compositions containing cyclosporin. - Pharmaceutical
compositions containing at least one NSAlDs having increased
bioavailability
NEW PRODUCTS RESEARCH
The Company's therapeutic focus has been in developing new products in
the therapies including analgesic/anti- inflammatory, anti-diabetic,
immuno- suppressants, antibiotics, anti-tuberculosis, anti-obesity,
anti-migraine, anti-asthmatics and G.I. prokinetics. The new product
research is focused towards the highly regulated markets of US, Europe,
Australia, Japan, South Africa besides domestic markets in India.
The Company has filed for eight product license application, besides
various herbal products as dietary supplements. The Company is looking
in the market of Dietary Supplements as anti-migraine, anti-piles,
hepatoprotective, immunomodulators and hypoglycemic agent.
KNOWLEDGE RESOURCE
The Company follows the principle 'Hire for attitude and Train for
Skill'. The success of a business enterprise entirely depends upon the
performance of its people. Therefore, development of people employed by
the Company, who are a knowledge resource for the Company, continued to
receive thrust during the year under review.
To meet the stringent needs of its work ethos, the Company believes in
breeding, hands on professionals, ensuring transparency at all levels.
With a pool of well qualified and high caliber seasoned and committed
workforce coupled with a strong R&D, matured leadership and
international quality standards, The Company is marching ahead in its
quest for continuous innovation, adaption and upgradation of its
products, services and people and thereby becoming one of the partners
in Doctor's vision of a disease free world.
The company organised number of advanced courses on selling skills for
our Sales Department across the ranks during the year. The company
also organised workshops for Production, Quality Control and Quality
Assurance staff, in addition to once a quarter interactive workshops
for entire operations staff through consulting companies.
The company organised lectures by eminent Scientists for the R & D
Scientists. In addition, several Scientists were sent to International
Conferences on Advanced Drug Research in USA, Germany, Switzerland,
etc.
INFORMATION TECHNOLOGY
Only Organizations capable of sharing knowledge efficiently and
effectively can create sustainable competitive advantage. Internet and
E-Commerce are now buzz words of today in efficient business practices.
The company has established intranet and internet connectivity
throughout the country with the C&F Agents, Depots, major Stockists and
various operational locations. The Company has integrated an ERP
software in the entire functioning of the company.
The company visualizes that in few years from now knowledge will be
created, stored, disseminated and accessed without any apparent complex
interfaces and accordingly the company has undertaken an Information
Technology Venture for hosting a portal which is on the verge of launch
with a concept of total health care, addressing to all needs of medical
fraternity. With this in view the Company is developing a portal on
health care which is likely to be launched shortly.
EMPLOYEE RELATIONS
The company continued to have very good relations with all its
employees. The Directors believes that the solid, perseverant effort,
made by the employees of the Company in pursuit of the common goals of
increasing the shareholders' value has been the significant factor such
a spectacular growth achieved by The Company in a short span of
period. The company recognises that tomorrow's worker will be a
knowledge worker and a knowledge worker is the most important asset for
the Company and our future investments in our knowledge workers will be
strategically aligned with our business goals.
SOCIAL RESPONSIBILITY
The company has always recognised its responsibility to the community
in which it operates. The company conducted several free Health Camps
throughout the year 2000-01 in following disease areas:
1. Diabetes Provided free sugar tests and consultation.
2. Osteoporosis Provided free Bone Mineral Density test and
consultation.
3 Hepatitis-B Carried out Hepatitis-B Immunization camps at subsidised
prices through charitable institutions like Rotary Club, Lions Club and
Indian Medical Association branches all over India.
Further, as a gesture of compassion towards the great disaster which
struck the soil of Gujarat state in the form of massive earthquake on
26h January, 2001, the Company has contributed Rs. 31 Lacs in cash to
Relief Funds apart from donating life-saving drugs to the hospitals to
the relief effort.
JOINT VENTURE!i & SUBSIDIARIES
As you are aware, the Company has during 1999-2000 formed a Joint
Venture Company namely Panheber Biotec Pvt. Ltd., with M/s. Heber
Biotec S.A., Cuba, an arm of the world renowned biotechnology research
facility, Center for Genetic Engineering and Biotechnology CIGB). This
joint venture company would spearhead Panacea Biotec's entry into bulk
(raw material production of Recombinant Hepatitis B Vaccine and
Erythropoetin.
The Company's subsidiary namely Radicura & Co. Ltd., an existing
profit- making Company engaged in the trading and distribution of
pharmaceutical products, has made available its existing trading
strengths to the Company besides allowing us a ready outlet for sale.
The Company's another subsidiary, viz. Maxwell Impex India Ltd. which
owns a prime immovable property in close proximity to the existing
Corporate Office of the Company, would greatly help Panacea Biotec Ltd.
in housing its expanded corporate operations.
The Company has during the year acquired substantial interest in
Nuphar Alipro Ltd., a Company having objectives of trading of
pharmaceuticals and other products. Further, during the year under
review, two wholly-owned Subsidiary Companies, namely Tayonics Ltd. at
Isle of Men, U.K. and Gianteen Ltd. at Hongkong, China were set-up
for import- export of pharmaceutical, technologies and other products,
however, later with a view to have the operational efficiency the
investment in Gianteen Ltd. has been disinvested.
ENERGY CONSERVATION, TECHNOLOGY ABSORPTION & FOREIGN EXCHANGE
Information as required under Section 217(1) (e) of the Companies
Act,1956, read with the Companies (Disclosure of Particulars in the
Report of Board of Directors Rules,1988, regarding conservation of
energy, technology absorption and foreign exchange earnings & outgo, is
given in Annexure A, forming part of this report.
PUBLIC DEPOSITS
During the year under review, the Company has not invited or accepted
any deposits from the public pursuant to the provisions of Section 58A
of the Companies Act, 1956 and no amount of principal or interest was
outstanding in respect of deposits from the public as of the date of
balance sheet.
INFORMATION PURSUANT TO SECTION 217(2A)
As required by the provisions of Section 217(2A of the Companies Act,
1956, read with Companies (Particulars of Employees Rules,1975 as
amended, the names and other particulars of employees covered under
these Rules are set out in Annexure B, forming part of this Report.
DIRECTORS
With a view to broad base the Board of the Company and also to comply
with the SEBI Guidelines on Corporate Governance, during the year, Mr.
R.L. Narasimhan, Mr. N.N. Khamitkar and Mr. Sunil Kapoor were
appointed as the additional Directors of the Company w.e.f. 31st
January, 2001. Further, Mr. Sachidanand Hassija, Mr. C.C. Bhagat and
Mr. M.L. Kalra have also been appointed as additional Directors
w.e.f.14th July, 2001. As per the provisions of the Companies Act,
1956, these Directors hold office till the date of the ensuing Annual
General Meeting and are proposed to be appointed as Director liable to
retire by rotation with the approval of the members in the Annual
General Meeting.
Further, due to his other pre-occupations, Mr. Jai Bhushan Jain,
Director (Finance resigned from his office of Directorship and his
resignation was accepted with effect from 30'h March,2001. The Board
wishes to record its sincere appreciation of the valuable services
rendered by Mr. Jai Bhushan Jain during his tenure as a Director on the
Board of Directors of the Company.
In accordance with the provisions of the Companies Act, 1956, Shri
Ravinder Jain, Shri Sandeep Jain and Shri Ashwani Jain, Directors,
retire by rotation and being eligible, offer themselves for
re-appointment.
DIRECTORS/ RESPONSIBILITY STATEMENT
The Directors hereby confirm:
i that in the preparation of the annual accounts, the applicable
accounting standards had been followed along with proper explanation
relating to material departures;
ii that the directors had selected such accounting policies and applied
them consistently and 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 at the end of the financial year and of the profit or
loss of the Company for that period;
iii that the directors had taken proper and sufficient care for the
maintenance of adequate accounting records in accordance with the
provisions of the Companies Act,1956 for safeguarding the assets of the
Company and for preventing and detecting fraud and other
irregularities; and
iv that the directors had prepared the annual accounts on a going
concern basis.
CREDIT RATING
The Directors are pleased to inform you that the Company has received
the highest rating of A1 + from ICRA (a leading Investment Information
and Credit Rating Agency of India for its Rs. 10 Crores Commercial Paper
(CP Programme. The rating indicate highest safety and conveys that the
prospect of timely payment of debt/ obligation is high.
AUDITORS
As approved by the members in their Extra-ordinary General Meeting held
on 3rd May, 2001, M/s. S.R. Batliboi & Associates, Chartered
Accountants a renowned audit & consultancy firm, were appointed as
Auditors in casual vacancy caused by resignation of M/s Sudhir Sunil &
Co., Chartered Accountants. As per the provisions of the Companies
Act, 1956, they hold office as Statutory Auditors of the Company till
the conclusion of the ensuing Annual General Meeting and being
eligible, offer themselves for re- appointment. The Company has
received the Certificate from them as required under Section 224(1 B of
the Companies Act,1956, to the effect that their appointment, if made,
will be within the limits as prescribed under the provisions thereof.
The notes to the accounts and the conservations in the Auditors' Report
are self-explanatory and, therefore, do not call for any further
comments.
COST AUDITORS
In terms of the provisions of Section 233B of the Companies Act,1956,
M/s J.P. Gupta & Associates, Cost Accountants, have been appointed as
the Cost Auditors to conduct the audit of the Company's Cost Records in
respect of pharmaceutical formulations for the year ended 31st March,
2001 and 31st March, 2002, subject to the approval of the Central
Government.
AUDIT SUB-COMMITTEE
During the year under review, the Company has constituted an Audit Sub-
Committee of the Board of Directors which consists of three non-whole
time Directors viz. Mr. R.L. Narasimhan, Mr. N.N. Khamitkar and Mr.
Sunil Kapoor.
LISTING OF SHARES
The Equity Shares of the Company are presently listed at National
Stock Exchange and Stock Exchanges at Ludhiana, Delhi, Mumbai, Kolkata
and Chennai, the Ludhiana Stock Exchange being the Regional Stock
Exchange for the Company. The Company has been regular in paying the
Annual Listing Fees to the Stock Exchanges and the Listing Fee for the
current financial year has also been paid to them.
DEMATERIALISATION OF SHARES
The Company's Equity Shares are covered under compulsory demat w.e.f.
October 30, 2000 and the same have been admitted in the Depository
System with ISIN No. INE922B01015. More than 90% of the Company's total
Equity Shares have already been dematerialised till date.
Those members who have not yet get their Equity Shares dematerialised,
are requested to contact any of the Depository Participants in their
vicinity for getting their Shares dematerialised. In case any
clarification is needed in that regard, the Company Secretary may be
contacted in person or by communication addressed at the Head Office of
the Company.
ANNEXURE A
Statement of particulars pursuant to the Companies (Disclosure of
Particulars in the Report of Board of Directors) Rules, 1988.
FORM A
ENERGY CONSERVATION
Energy is one of the important resources which is essential for
industrial development of any country. The company believes that by
conserving energy, the company is helping in the industrialisation of
the country. Accordingly, the Company accords highest priority to the
energy conservation. The Company has so devised its production lines
which results in minimum energy losses. The employees of the Company
have also been oriented to accord priority to energy conservation, at
all times and places.
The company has also taken the following measures for the conservation
of energy:
1. Fuel consumption in the D.G. sets was reduced through their
overhauling and rationalisation of operations.
2. The Company's Technology Department continuously monitors energy
consumption in the plant and takes corrective measures for conserving
energy.
Form for disclosure of particulars with respect to Technology
Absorption
Research & Development (R&D)
1. Specific areas in which R & D carried out by the Company:
The Research is being pursued by the Company in the following areas:
- Pharmaceutical Formulations
- Natural Products
- Vaccines
- Bio-technological Products.
- Advanced Drug Delivery System.
2. Benefits derived as a result of above R & D:
- Novel drug delivery products.
- Competitively advanced products.
- Improved product quality
- Waste minimisation
- Safe and environmental friendly processes
- Grant of Product/process patents
- Import substitution
- Enhanced global presence
- Export Quality products
3. Future plan of Action:
The Company's R & D division will focus on achieving the results in
following areas:
- Analytical Research
- Formulation Research & Development
- Chemicals Research
- Natural Products Research
- Pharmacology & Toxicology Research
- Research in Vaccines & Biotechnology
- Molecular Biology Research
- Research in the areas of Genomics & Proteomics
3. Expenditure on R & D during 2000-01
(Rs. in million)
2000-01 1999-2000
Capital 24.37 87.64
Revenue 42.78 38.36
Total 67.15 126.00
Total R&D expenditure as a
percentage of total turnover 2.91% 6.48%
Technology absorption, adaptation and Innovation
1. Efforts, in brief, made towards technology adaptation and innovation
Technical collaboration for manufacture of vaccines
2. Benefits derived as a result of the above efforts
- Competitive products
- Product Improvement
- Product Development
- Import Substitution
3. In case of imported technology (imported during the last five years
reckoned from the beginning of the financial year), following
information may be furnished .
a. Technology imported
Technical collaboration for manufacture, maintenance and marketing of
vaccines
b. Year of import 1995-96,1996-97 & 1997-98
c. Has technology beenFully absorbed fully absorbed
d. If not fully absorbed, areas N .A. where this has not taken place,
reasons thereof and future plan(s) of action
FOREIGN EXCHANGE EARNINGS AND OUTGO
1. Activities relating to exports
The Company has identified Exports as the major thrust area of
operation and has acquired the status of a major drug export unit for
both branded and generic products, carving a niche in the CIS, African,
Middle East and Asian sub-continent countries and the emphasis has been
on entrenching the presence in the markets where product registrations
have been completed.
The Company has achieved export turnover of Rs .1116.14 million during
2000-01 as against Rs. 738.59 million during previous year.
The Liaisoning/ Representative Offices have been set-up in Russia,
Turkmenistan, Yugoslavia and Tanzania and the Company's wholly- owned
Subsidiary Company set-up at U.K. with the objective of import-export
of pharmaceutical, technologies and other products, has also commenced
its operations.
The Company has got the Product Registration for more than 60 different
products in different countries and is exploring the opportunities for
licensing some of its patented products for manufacture abroad.
Mar 31, 1999
FINANCIAL PERFORMANCE
The Directors are pleased to inform you that the Company has continued
its trend of steady and consistent growth over the years and has
achieved new heights during the year under review.
(Rs. In Lacs)
Particulars For the year ended For the year ended
31st March, 1999 31st March, 1998
Total Income 11393 9268
Gross Profit before Interest,
Depreciation & Tax 1774 1424
Financial Expenses 375 308
Gross Profit before Depreciation & Tax 1399 1116
Depreciation 248 162
Profit before Tax 1151 954
Provision for Taxation 85 75
Profit after Tax 1066 879
Appropriations :
Proposed Dividend 220 171
Tax on Proposed Dividend 22 11
Transfer to Debenture Redemption Reserve 150 -
Transfer to General Reserve 400 600
EPS (Rs.) 17.81 15.40
Book Value per Share (Rs.) 86.27 73.41
Dividend (%) 30 30
Thus it is evident from the above that the Company has achieved new
scales of growth in sales and profitability performance during the
year. The Sales turnover of the Company has grown consistently from
Rs.43.62 Crores in 1993-94 to Rs.92.54 Crores during 1997-98 and Rs.113.54 Crores during the year under review, registering an increase
of over 22% as compared to the last year. The net Profit has also jumped from Rs.1.83 Crores in 1994-95 to Rs.8.79 Crores in 1997-98 and
reached a record level of Rs.10.66 Crores for the year under review,
registering an increase of more than 21% over last year.
SHARE CAPITAL
During the year under review, the Company had allotted 50,00,000 - 12%
Redeemable Cumulative Preference Shares of Rs.10/- each aggregating
Rs.5.00 Crores to Industrial Development Bank of India on private
placement basis. These Shares are redeemable in five unequal annual
instalments after every twelve months from the date of allotment with
2% Redemption Premium payable alongwith the last redemption instalment.
Despite the best efforts and persuasion by the company, the allotment
money in respect of 15,500 Equity Shares remained unpaid. As sufficient time and opportunity had been given to the holders of these shares the company was left with no other alternative but to forfeit these shares. Accordingly, the Directors had, in their meeting held on 151h May, 1999, forfeited 15,500 Equity Shares for non-payment of allotment money thereon.
DIVIDEND
The Directors are pleased to recommend a Dividend, for the financial
year ended 31st March, 1999, @ 30% on the Equity Shares and 12% on
Redeemable Cumulative Preference Shares [issued to Industrial Development Bank of India (IDBI) on private placement basis]. The
dividend as above, is placed before you for the approval in the forthcoming Annual General Meeting and if approved, will absorb an
amount of Rs.2.20 Crores.
PERFORMANCE DURING THE YEAR
The Company has maintained a constant profusion of quality drugs and
formulations, ranging from tablets, hard gelatin capsules, soft gelatin
capsules, dry powder injectables, liquid parenterals, vaccines,
transdermal gels etc. The success of the Company lies in its belief
that it is the adherence to stringent international quality, that makes
the difference. The state of art manufacturing facilities at New Delhi
comply with the WHO GMP norms, representing a world class manufacturing
facility. The Company meet rigorous standards of quality, right from
the raw material stage upto the final packaging and leaves no room for
compliance.
The adherence to rigorous quality standards and aggressive marketing
strategy of manufacturing and marketing of branded formulations adopted
by the Company since 1995-96, has resulted into the improved performance
of the Company year after year. The products launched in the domestic
market during 1995 and 1996 have continued to grow further in absolute
terms as also in terms of their market share. Similarly, the products
launched in the year 1997-98 have been well accepted in the market.
Among the new products launched during the last year was the
genetically engineered Hepatitis B Vaccine. Earlier, this was a very
high-priced vaccine in India, supremacy in which rested with MNCs and
with this launch the Company was able to bring down its prices to the
competitive levels. The product manufactured by the Company has been
well accepted by the medical fraternity in both its pediatric and adult
dosage forms and the same has achieved new scales of sale both in
absolute terms as also in terms of its market share. Another product
launched during the last year namely, Rispid, the brand name of the
drug Risperidone, heralded the entry of the Company in the psychiatric
segment and has successfully made inroads into the monopoly area of a
well entrenched MNC. The product enjoyed higher sale as well as
increased market share during the year under review as compared to last
year.
The other major products launched by the Company during previous years
namely, Nimulid, Panimun Bioral, Alphadol, Nimulid Gel, Cefaperazone,
Glizid and Livoluk have maintained their strength in the market. In
fact, the product Nimulid has achieved the status of one of the brand
leaders in the NSAID segment in the country and has gained increased
popularity in the local as well as global markets. Further, its
paediatric dosage form has become the drug of first choice for therapeutic use among children because of its better efficacy and
absorption. Nimulid Gel in the form of transdermal Gel has also performed exceedingly well and enjoys the position of market leader in
the segment.
EXPORTS
During the year under review, the Company has achieved an export turnover of Rs.12 Crores. The Company's export performance has thus
been satisfactory. The emphasis during the year has been to enhance
the presence in the markets where the product registrations had already
been obtained and the products are being well accepted in the overseas
markets.
FUTURE OUTLOOK
The Company's current focus is on gaining registration for the formulations in more and more countries. The Company is also working
on tie-ups with overseas parties who would do the overall marketing for
the patents registered in various countries. The impact of these
patents registrations and tie-ups with overseas parties will be evident
in the performance for the current as well as the coming years in the
next millennium.
The Company has also pioneered the concept of Mouth-dissolving
formulations in the form of Nimulid-MD. The process of clinical testing
has already been completed and the product is likely to be launched in
the market shortly. The Directors are confident that in view of the
enviable track record of supplying quality products both in domestic
and international markets, the new product would be well received by
the medical fraternity and will further add to the turnover and
profitability of the Company.
Moreover, as you are aware, the Company has successfully introduced
some speciality formulations like Nimulid and some of which are under
world wide patent in the Company's name with applications already filed
in over 50 countries and patent registration by more than 25 countries
(including United States of America) already granted. With a view to
increase the Company's share in the markets in the countries where the
products are being presently exported and also to penetrate market in
more and more countries, the Company is in the process of opening of
overseas marketing offices in some countries. The opening of these
offices will further boost the exports to CIS, European & African
countries and the Directors are confident that barring unforeseen
circumstances the Company would be able to achieve higher level of
exports in the years to come.
RESEARCH & DEVELOPMENT
The Company has realised the need of the in-house Research &
Development (R & D) facilities long before and is well prepared for the
shake-out which is expected in the Pharmaceutical industry with the
introduction of product patents in the country in the post-GATT (WTO
Agreement) era. As per the terms of the Agreement signed by WTO
countries including India, 10-year transition period had been granted
so that Indian companies could put up R&D facilities to meet new
challenges thrown up by the product patent to regime.
The Directors are pleased to state that the Company has already set-up
full-fledged R&D facilities at its pharmaceuticals complex at Lalru,
Punjab with a strong team of experienced medical professionals,
pharmacists and Research Scientists having a stint to take on the new
challenges with the desire to win. Accordingly, with the present R&D
facilities available within the Company, the Company is confident to
develop more new products and enjoy the growth in the market share and
profitability in the years to come.
ENERGY CONSERVATION, TECHNOLOGY ABSORPTION & FOREIGN EXCHANGE
Information as required under Section 217(1)(e) of the Companies Act,
1956 read with the Companies (Disclosure of Particulars in the Report
of Board of Directors) Rules, 1988, regarding conservation of energy,
technology absorption and foreign exchange earnings & outgo, is given
in the Annexure forming part of this report.
PUBLIC DEPOSITS
The Company had not invited or accepted any deposits from the Public
pursuant to the provisions of Section 58A of the Companies Act, 1956,
during the year under review.
DIRECTORS
In accordance with the provisions of the Companies Act, 1956, Shri Jai
Bhushan Jain and Shri Ashwani Jain, Directors retire by rotation and
being eligible, offer themselves for re-appointment.
AUDITORS
M/s. Sudhir Sunil & Co., Chartered Accountants, hold office as
Statutory Auditors of the Company till the conclusion of the ensuing
Annual General Meeting and being eligible, offer themselves for
re-appointment for the Financial Year 1999-2000. The Company has
received the Certificate from them as required under Section 224 (1B)
of the Companies Act, 1956, to the effect that their appointment, if
made, will be within the limits as prescribed under the provisions
thereof.
COST AUDITORS
The Central Government has directed the Company, pursuant to the
provisions of Section 233B of the Companies Act, 1956, to get the audit
of the Company's Cost Records in respect of formulations. Accordingly,
M/s. J.P. Gupta & Associates, Cost Accountants have been appointed to
conduct the audit of the Cost Accounts of the Company in respect of
formulations, for the year under review. Further, they have also been
proposed to be appointed to conduct the Cost Audit for the year ending
31st March, 1999, subject to the approval of the Central Government.
LISTING OF SHARES
The Equity Shares of the Company are presently listed at National Stock
Exchange and Stock Exchanges at Ludhiana, Delhi, Bombay, Calcutta and
Madras. The Company has been regular in paying the Annual Listing Fees
to the Stock Exchanges and has paid the same for the current financial
year as well.
HUMAN RESOURCE
The Company places its utmost importance to the human resource
available with the Company and continues to employ the best of
professionals in the industry. Training and orientation programmes are
conducted on regular basis so as to make them adapt well to the
industrial and other changes taking place rapidly and also to take on
the pressures of the challenges posed by the stiff competition both at
local as well as international level.
The Directors proudly place on record their deep sense of appreciation
for the devoted services, hard work, unfailing faith and commitment of
the Executives, staff and Workers of the Company in their endeavor to
make 'Panacea' a Global Company.
INDUSTRIAL RELATIONS
The Directors are pleased to inform you that a congenial atmosphere had
continued to prevail at all levels during the year under review and the
same has played a vital role in the Company's performance.
FORM A
ENERGY CONSERVATION
Quality products through efficient production lines - the policy of the
Company is of according highest priority to the energy conservation,
which is in the best interests of the Industry and the nation. The
Company has so devised its production lines which results in minimum
energy losses. The employees of the Company are as well oriented to
accord priority to energy conservation, at all times & places.
Form B
Form for disclosure of particulars with respect to absorption -
Research & Development (R&D)
Specific areas in which R & D carried out by the Company :
In support of life - the mission of the Company, has led itself to
strive in search of newer molecules to eradicate the diseases off the
face of the earth. The R & D Unit of the Company fully functional at
Lalru, Sub-tehsil Derra Bassi, Ambala-Chandigarh National Highway,
Punjab is managed by the experienced and senior functionary of the
Company and is manned by among the best research associates/scientists.
The Research is being pursued by the Company in the following areas :
* Pharmaceutical Formulations
* Natural Products
* Vaccines
* Bio-technological Products.
* Advanced Drug Delivery System.
* Bulk Drug and Drug Intermediates.
Benefits derived as a result of above R & D
* Novel drug delivery products.
* Competitively advanced products.
* Improved product quality
* Waste minimisation
* Safe and environmental friendly processes
* Grant of Product/process patents
* Import substitution
* Enhanced global presence
* Export Quality products
Future plan of Action :
The Company's R & D division will focus on achieving the results in
following areas :
* Analytical Research
* Pharmaceutical Research
* Chemical Research
* Natural Products Research
* Viral Vaccine Research
Expenditure on R & D during 1998-99
(Rs. in Lacs)
1998-99 1997-98
Capital 464 470
Recurring 326 251
Total 790 721
Total R&D expenditure as a
percentage of total turnover 6.96% 7.80%
Technology absorption, adaptation and Innovation.
1. Efforts, in brief, made towards Technical collaboration for
technology adaptation and manufacture of vaccines.
innovation.
2. Benefits derived as a result Competitive products, product
of the above efforts. improvement, product
development, import
substitution.
3. In case of imported
technology (imported during
the last five years reckoned
from the beginning of the
financial year), following
information may be furnished :
a. Technology imported Technical collaboration for
manufacture, maintenance and
marketing of vaccines.
b. Year of Import 1995-96, 1996-97 & 1997-98
c. Has technology been fully Fully absorbed.
absorbed ?
d. If not fully absorbed, areas N.A.
where this has not taken
place, reasons thereof and
future plan(s) of action.
FOREIGN EXCHANGE EARNINGS AND OUTGO
Activities relating to exports
The much needed liberalised policy of the Government of India in
investments outside India for trade promotion is going to help our
Company to get better organised and equipped to promote image of
Company, increase service to customer, create demand for Company's
quality products thus increasing better revenues/sales.
Panacea's export base has expanded considerably over the years and our
presence is being felt in the markets through our Branch
Office/Representative Offices abroad.
During the year 1998-99 exports were to the tune of Rs.1199.01 Lacs.
Our Company has taken concrete steps to fasten product registration and
patent filing abroad so as to cross the entry barriers of international
markets and establish ourselves. Panacea is thus fully geared to
compete in the International market.
The desire to be a truly worthy partner of the doctors in their battle
against disease in India and abroad will remain, forever, ours.
Total foreign exchange earned and used
(Rs. in Lacs)
Current Previous
Year Year
Earnings 1045.11 1075.69
Outgo 4685.70 3457.74
Mar 31, 1998
INVESTING IN HEALTH - A STRATEGY FOR INDIA
Foster an environment that enables households to improve health.
Household decisions shape health, but these decisions are constrained
by the income and education of household members. In addition to
promoting overall economic growth. Government can help to improve
those decisions if it will :
- Pursue economic growth policies that will benefit the poor
(including, where necessary, adjustment policies that preserve
cost-effective health expenditures).
Expend investment in schooling. particularly for girls. Promote the
rights and status of women through political and economic empowerment
and legal protection against abuse :
Improve government spending on health
The challenge for the Government is to concentrate resources on
compensating for market failures and efficiently financing services
that will particularly benefit the poor. A few adoptive directions and
policy responses to this challenge are :
- Reduce Government expenditures on tertiary facilities, specialist
training, and intervention that provide little health gain for the
money spent.
- Finance and implement a package of public health intervention to deal
with the substantial externalities surrounding infectious disease
control, prevention of AIDS, environmental pollution, and behaviours
(such as drunk driving) that put others at risk.
- Finance and ensure delivery of a package of essential clinical
services. The comprehensiveness and composition of such a package can
only be defined by each state and district, taking into account
epidemiological conditions, local preferences, and income.
- Improve management of Government health services through such
measures as decentralisation of administrative and budgetary authority
and contracting out of services.
Promote diversity and competition
Government finance of public health and of a nationally defined package
of essential clinical services would leave the remaining clinical
services to be financed privately. Government can promote diversity
and competition in provision of health services and insurance by
adopting policies that :
- Encourage social or private insurance (with regulatory incentives for
equitable access and cost containment) for clinical services outside
the essential package.
- Encourage suppliers (both public and private) to compete both to
deliver clinical services and to provide inputs, such as drugs, to
publicly and privately financed health services. Domestic suppliers
need not be protected from international competition.
- Generate and disseminate information on provider performance, on
essential equipment and drugs, on the costs and effectiveness of
interventions, and on the accredation status of institutions and
providers.
Increased scientific knowledge has accounted for much of the dramatic
improvement in health that has occurred in this century-by providing
information that forms the basis of household and government action and
by underpinning the development of preventive, curative, and diagnostic
technologies. Investment in continued scientific advance through
applied research and development will amplify the effectiveness of each
element of the above stated three-pronged strategy. As the fruits of
science benefit all segments of the society, collaborative efforts of
the industry, the Scientific Labs and Govt., of which there are several
excellent examples, will often be the right way to proceed.
The implications of healthy ageing - the physical and mental
characteristics of old age and their associated problems - need to be
better understood. Much more research is required in order to reduce
disability among older age groups.
Lest any complacency set in, we also stand on the brink of a global
crisis in in fectio us diseases. The optimism of a relatively few
years ago that many of these diseases could easily be brought under
control has led to a fatal complacency among the policy makers. This
complacency is now costing millions of lives - lives that we have the
knowledge and the means to save, yet we are allowing to trickle through
our fingers. Furthermore, most of the lives lost are in the vital age
groups that societies rely on to alleviate poverty - school-age
children and working-age adults-the potential workforces of tomorrow,
and the actual workforces of today.
Major diseases such as malaria and tuberculosis are making a deadly
comeback in more virulent varieties. In addition to HIV/AIDS, other
new and highly infectious diseases such as dengue haemorrhagic fever
are emerging at an unprecedented rate - at least 30 have been recorded
in the last 20 years - and many of them are incurable. Until recently,
antibiotics were regarded as the solution to many infectious diseases.
Today, however, they are becoming less and less effective as resistance
to them spreads. Meanwhile, evidence gathers on the role of viruses,
bacteria and parasites in the genesis of deadly cancers of the stomach,
cervix and liver.
The only answer to a great threat is a greater response - a response of
the kind that saw smallpox vanquished for ever, and saw the protection
of the children as a priority. What is needed now is concensus action
orientation across the entire political spectrum to provide a truly
unprecedented response to make this country a safer and healthier one
for all - rich or poor, male or female, young or old.
The focus now must be to renew the attack on those major diseases that
are already targets for elimination or eradication. Extra resources
must be mobilised against them, because to slacken the pace now would
be to compromise progress already made. The surveillance and control
of infectious diseases must be improved, and laboratory facilities for
rapid recognition of outbreaks and monitoring antibiotic susceptibility
have to be strengthened; they should be in the mainstream of health
systems development. Intensive research on new and emerging diseases
and on ways of controlling them has to be promoted and supported. If
catastrophe is to be avoided, education of people in simple personal
hygiene practices and basic food safety measures should be intensified.
CROSSING THE THRESHOLD
The war against ill-health in the 21st century will have to be fought
simultaneously on two main fronts : infectious diseases and chronic,
non-communicable diseases. India will come under greater attack from
both, as heart diseases, cancer, diabetes and other "lifestyle"
conditions become more prevalent, while infectious illnesses remain
undefeated. Of this latter group, HIV/AIDS and Hepatitis B and C will
continue to be the deadliest menace.
This double threat imposes the need for difficult decisions about the
allocation of scarce resources. Experience shows that reduced spending
on controlling infectious diseases can cause them to return with a
vengeance, while globalisation - particularly expanding international
travel and trade, including the transportation of foodstuffs -
increases the risks of their global spread. At the same time, the
stealthy onset of chronic conditions also saps a nation's strength.
The past few decades have seen the growing impact on health of poverty
and malnutrition; widening health inequalities between rich and poor;
the emergence of "new" diseases such as HIV/AIDS; the growing problem
of antibiotic-resistant infections; and the epidemic of tobacco-related
diseases.
These are only some of the problems representing the unfinished agenda
of public health actions at the end of one century and requiring urgent
action at the beginning of the next.
There are others challenges. While health levels at the averages have
steadily improved over the years, great numbers of people have seen
little if any improvement at all. The gaps between the health status
of rich and poor are at least as wide as they were half a century ago,
and are becoming wider still.
A SHARED VISION FOR ALL
The prime concern of the community must be the plight of those most
likely to be left furthest behind as the rest of us step confidently
into the future. These are the many hundreds of millions of men, women
and children still trapped in the past by the grimmest poverty. They
live mainly in the rural hinterland and the urban ghettos of our high
rise cities, where the burdens of ill-health, disease and inequality
are heaviest, the outlook is bleakest, and life is shortest.
Majority of premature deaths are preventable. At least 1 million
children a year die from diseases for which there are vaccines. There
is sufficient evidence that premature deaths among adults, too, can be
significantly reduced. Deaths from heart disease have been
dramatically reduced in many countries which are experiencing a
transition from high incidence of circulatory diseases to low incidence
mainly due to the adoption of healthier lifestyles. It is imperative
that such a favourable shift, conducive to further reductions in the
incidence of these diseases, should be sustained and if possible
accelerated. Infectious diseases, meanwhile, remain leading causes of
premature death among adults in much of the developing world. Reducing
these tolls depends largely on the political will and commitment of
individual State Governments, and the active support of the Central
Government and the community at large.
This means putting health high on the agenda of nation and keeping it
there. It is time to realise that health is a common issue which
transcends all shades of political opinion and it must be treated as
such.
The progress and achievements of the past 50 years are solid
foundations for a healthier and better world. It is already time to
build on them. Life in the 21st century could and should be better for
all.
We can pass no greater gift to the next generation than a healthier
future. That is our vision. Together, the people of the India can
make it a reality.
FINANCIAL PERFORMANCE OF THE COMPANY
The Directors are pleased to advise continued superlative performance
by the Company during the financial year ended March 31st, 1998.
(Rs. in lacs)
Particulars 1997-98
Total Income 9237.78
Profit before Depreciation, Interest & Tax 1424.13
Depreciation 162.01
Financial Expenses 307.87
Deferred Expenses w/o 47.97
Profit before tax 954.26
Profit after tax 879.26
Earning per share 15.40
Book value 73.41
Dividend 30%
Panacea Biotec Limited has exhibited sustained growth in sales and
profitability performance over the years. Sales have grown
consistently from Rs. 43.62 crores in 1994-95 to Rs. 92.38 crores in
1997-98, registering a compounded annual growth rate of about 30 per
cent. Profits before tax during the same period have grown from Rs.
1.83 crores to Rs. 9.54 crores, registering a more than 75 per cent
annualised growth rate. The profit margins, both at the net and the
gross levels have been increasing steadily. PBDIT margin improved from
8.83 per cent of sales in 1994-95 to about 15.39 per cent of sales in
1997-98.
Compared to other companies in the pharmaceutical industry in the
country, the turnover growth rate of Panacea Biotec is just about
double the industry average. Gross and net profit ratios are also
better than the industry aggregates.
With the induction of additional equity at a premium (with the
promoters also contributing at the same premium as the public) and
retained earnings, the Net Worth of the company has zoomed up to Rs.
3775.48 lacs as at the end of 1997-98 from Rs. 522.58 lacs as at the
end of 1994-95. The Book Value of the shares of the company has
concomitantly moved up from Rs. 22.88 per share to Rs. 73.41 per share
in four years. Higher stake of owned funds in the total funds employed
in the Company not only gives a higher safety and comfort level, it
allows for sufficient leverage for raising long term sources for growth
through the equity as also the debt route.
LIQUIDITY AND LEVERAGE
As regards short term liquidity position, the current ratio of the
Company has always been comfortable. As at the end of 1995-96 it was at
2.08 and remained comfortable at 1.97 and 1.65 as at the end of 1996-97
and 1997-98, respectively.
The total long term debt at the end of 1997-98 was less than Rs. 10
crores, thus giving a healthy debt equity ratio of 0.28:1.00. As cash
accruals of the Company are estimated to remain healthy, the debt
service coverage ratio, at a high of about 8 in 1997-98, is estimated
to remain high in the forseable future. With a view to balance its
capital structure, which at present is heavily loaded in favour of net
worth compared to a low long term debt, the company decided to
implement the backward integration and advanced formulations
manufacturing facility projects with the financial assistance of
Industrial Development Bank of India, Punjab National Bank, ANZ
Grindlays Bank and IDBI Bank Ltd.
In the performance and profitability projections accepted by the
Industrial Development Bank of India and other Institutions, the future
liquidity position of the Company is comfortable and, there are
sufficient cash accruals to meet the present and future debt
obligations. Even if the entire external funding of the expansion
projects is by the debt route for the company as a whole the average
net DSCR during the next five years is estimated at 4.89. Even at the
level of maximum term debt, the debt equity ratio is at 0.40 : 1.00 and
the current ratio is estimated throughout at levels above 1.50.
PERFORMANCE OF THE COMPANY IN 1997-98
Aggressive branded formulations marketing strategy adopted by the
Company since 1995-96 paid off and sales in this segment more than
doubled over 1996-97. While the products launched in the domestic
market in 1995 and 1996 continue to grow in absolute terms as also in
terms of their market share, five new product launches during the
course of the year ensured that the pace of growth would be sustained
in the years to come as well.
Among the new products launched during the year was the genetically
engineered Hepatitis B Vaccine. Even in its first year, not only the
monopoly of a well entrenched MNC was broken, the product has been well
received by the medical fraternity in both its paediateric and adult
dosage forms. The vaccine manufacturing facility of the company has
been approved as per the Good Manufacturing Practices (GMP) of the
World Health Organisation for campaign production of Hepatitis B
vaccine.
Another product launched during the course of the year heralded the
entry of the Company in the psychiatric segment. Rispid, the brand
name of the drug Risperidone, has successfully made inroads into the
territory held by a Multinational Company.
Among the other products, Nimulid continues to be the brand leader in
the NSAID segment in the country. Its paediatric dosage form has made
it the drug of first choice for therapeutic use among children because
of its better efficacy and absorption. Transdermal Gel has also
performed exceedingly well.
EXPORTS
Exports of formulations recorded an 85 per cent growth rate over the
previous year. Rather than going in for newer markets, the emphasis
this year was on entrenching the presence in the markets where product
registrations have been completed.
SIGNIFICANT FEATURES OF 1997-98 PERFORMANCE
As a deliberate policy the Company decided to cannibalise production
and marketing of generic and other low volume, low value and low margin
products and concentrate on the high value added, technology driven,
branded formulations products. As a result the unnecessary flogging
of machines as also other resources has been stopped and we are
striding into specific thrust areas.
The reach of our marketing team now covers all the districts of the
country and more than 1,00,000 medical practitioners of relevant
specialities are being covered. An information resource centre has
also been established at New Delhi to cater to the information needs of
the Medical fraternity.
The formulations and viral vaccine research facility of the company at
Lalru in Punjab has become fully functional.
PROFITABILITY OF OPERATIONS
The shortfall in sales during 1997-98 vis-a-vis our targets was mainly
on account of a big shortfall in pick up of vaccine supplies by the
Govt. of India, as for still unexplained reasons, the Government
decided to import finished vaccine at much higher prices rather than
buy from indigenous manufacturers like your Company. Further, the
Company as a deliberate policy decided to stop production of low value,
low margin generic products. As a result of these factors, the sales of
the Company as a whole during 1997-98 did not go up materially over
1996-97. However, as explained above, this gross position gives an
illussory picture as the Company has performed exceedingly well in its
core focus areas.
The performance, however, comes out distinctly better when the
profitability of operations is compared.
Operational Profits have gone up from Rs. 20.55 crores in 1996-97 to
Rs. 28.35 crores in 1997-98, recording an almost 40 per cent growth
rate. The operational profit ratio has improved from 22.42 per cent to
30.69 per cent. This clearly reflects the very high value addition in
our speciality branded formulations. Had the Rupee remained stable
during 1997-98, this ratio would have been still higher.
As the Company has spent heavily in the recent years (especially the
last year) on the creation of a nationwide marketing infrastructure and
on product development, administrative and selling expenses have gone
up considerably compared to the previous years. As the initial
expenses on these heads are always higher, the increase is expected to
taper in the coming years, thus the improved operational profitability
would start getting reflected in improved net profitability and cash
flows in the coming years.
PROSPECTS DURING 1998-99 AND BEYOND
Your directors have evolved a long term strategy of maximising the
shareholder value as the single aim of all operations. Over the next
five year time frame, concrete steps would be taken to achieve growth
in Economic Value Added of the Company as also in Earnings Per Share.
With this as the aim of our operations, all parameters of sales growth,
profitability, marketing and product development automatically get
taken care of.
Branded Formulations : During 1997-98 the Company launched five new
products under its own brand name. Each of these has been well
received by the market and are expected to contribute substantially to
the incremental sales in the current year. Current trend in sales
during the first four months of the year indicate that sales of branded
formulations are just about double than that of the same period last
year. If this trend is sustained, which our marketing team is making
every effort for, we may be able to exceed the targets internally set.
Exports : Efforts at exploring, identifying and cultivating new markets
abroad in the last four years have now given us the strength that our
export earnings would grow at an estimated 50 per cent per annum basis
through the next five years. The strategy for the current year is on
deepening our presence in the markets where product registration
process has been completed.
PROFITABILITY DURING 1998-99
The big gains in operational profitability notched up in 1997-98 over
1996-97 would be pared to some extent during the current year on
account of increase in depreciation (on account of commercial
production at Lalru commencing in stages) and increased energy and
direct labour costs. The material consumption cost is also estimated
to be high on account of dollar depreciation effect and customs duty
increase. To some extent the higher material cost would be compensated
by much higher value addition.
At the net level, however, the profits and profitability of the company
is estimated to be better in the current year and through the next five
years on account of better economies of scale resulting from reduced
marketing and product development cost and administrative and selling
expenses per unit of output & sales. Although at the absolute level the
interest cost is estimated to go up, active financial engineering in
terms of appropriate mix of financing and derivative products, the
average cost of funds is expected to come down progressively.
PRODUCT DEVELOPMENT AND MARKETING STRENGTHS
The Company has consistently improved its market share in all its
product lines, viz. Biologicals, branded formulations and natural
products.
In formulations, the Company has successfully introduced some specialty
formulations like Nimulid (two of formulations are under world wide
patent in PBL's name with applications filed in 72 countries and patent
by 7 countries including the United States of America, already
granted), Gliclazid, Risparidone, Cefaperazone, Roxythromycin and
Panimun, which have been well received by the market and the medical
fraternity alike on account of their better efficacy and mode of
action/delivery. With its speciality formulations and patented
products having found acceptance in the markets in India and abroad,
the sales and margins of the Company, which were quite healthy in the
past, are expected to improve further in the coming years.
MANAGEMENT
In terms of its management structure, the Board of Directors of the
Company comprises of Directors with varied experience, skills and
exposures in the industry, each heading individual functional areas.
The operational management is in the hands of the some of the best
professionals in the country with cross functional exposure.
The future of the Company is being shaped and made secure in the R&D
labs of the Company. The Research and Development setup of the company
is recognised by the Govt. of India. Clinical trials in respect of
atleast three new products filling identified therapeutic gaps have
been completed and the process of patent filing and commercial product
launched is in advanced stage.
DIVIDEND
The Board is pleased to recommend dividend @ 30% for the year ended
31st March, 1998, of which dividend @ 20% has been declared and paid by
the Company as Interim Dividend. The Dividend @ 30% (inclusive of
Interim Dividend @ 20%) is placed before you for your approval.
PERFORMANCE VIS-A-VIS PROJECTIONS
In terms of Clause 43 of the Listing Agreement with Stock Exchanges,
the comparison between the actual results and projections for the year
1997-98, made in the Prospectus dated 16th August, 1995, are given
hereunder :
(Rs. in lacs)
Particulars Projections Performance
Total Income 9074.98 9237.78
Profit before Depreciation,
Interest & Tax 897.84 1424.13
Depreciation 144.13 162.01
Financial Expenses 186.74 307.87
Deferred Expenses W/o 19.22 47.97
Profit before tax 566.97 954.26
Profit after tax 483.37 879.26
Earning per share 8.45 15.40
Book value 53.44 73.41
Share Capital 572.13 570.79
Reserves and Surplus 2588.50 3619.44
Dividend 20% 30%
It would be observed that inspite of an economy wide recession, Panacea
Biotec has outperformed on all fronts from the projections made to the
public in 1995..
INFORMATION UNDER SECTION 217(1)(D) & SECTION 217(1)(E) OF THE
COMPANIES ACT, 1956
The information as required under Section 217(2A) of the Companies Act,
1956 read with the Companies (particular of employees) Rules, 1975,
forms part of this record. The matters specified in Section 217 of the
Companies Act, 1956 to the extent to which they are applicable to our
company are incorporated in this report.
The Board also confirms that there are no material changes and
commitments affecting the financial position of the Company which have
occurred between the end of the financial year of the Company to which
the balance sheet relates and the date of this report.
PUBLIC DEPOSITS
The Company did not, under the provisions of section 58A of the
Companies Act, 1956, invite or accept deposits from the Public, during
the financial year 1997-98.
HUMAN RESOURCE
The company continues to employ the best of professionals in the
industry. The employees are oriented and trained on a regular basis to
adapt well to the industrial changes taking place and as well to take
on the pressures of the challenges posed by the competitive economic
environment. The board proudly places on record their deep
appreciation for the hard work, unfailing faith and commitment of the
employees in their endeavour to make `Panacea' a global company.
INDUSTRIAL RELATIONS
Industrial relations played a vital role in the Company's activities
and a congenial atmosphere prevailed at all levels during the year.
DIRECTORS
In accordance with the provisions of Articles of Association of the
Company, Mr. Ravinder Jain and Mr. Sandeep Jain, Directors of the
Company retire by rotation at this meeting, and, being eligible, offer
themselves for re-appointment.
AUDITORS
M/s. Sudhir Sunil & Co., Chartered Accountants, hold office as
Statutory Auditors of your company till the conclusion of the ensuing
General Meeting, and, being eligible, offer themselves for appointment.
The Company has received the certificate from them as required under
Section 224(1B) of the Company's Act 1956. The Board seeks your
approval for the appointment.
FORM A
ENERGY CONSERVATION
Quality products through efficient production lines - the policy of the
Company, is of according highest priority to energy conservation, which
is in the best interests of the Industry and the Nation. The Company
has so devised its production lines which results in minimum energy
losses. The employees of the Company are well oriented to accord
priority to energy conservation, at all times & places.
FORM B
Form for disclosure of particulars with respect to absorption -
Research & Development (R&D)
1. Specific areas in which R & D carried out by the Company :
In support of life - the mission of the Company, has led itself to
strive in search of newer molecules to eradicate the diseases in India
and abroad, by becoming a worthy partner of the Doctor. The Company in
consequence has established a state-of-the-art R & D Unit at Lalru,
Sub-tehsil Derra Bassi, Ambala-Chandigarh National Highway, Punjab.
The R & D Unit is managed by an experienced and senior functionary of
the Company and is manned by among the best research
associates/scientists. Research being pursued by the Company is in the
following broad areas
* Advanced Drug Delivery System.
* Continuous improvement & upgradation of existing
technologies/products.
* Design & Development of new drug molecules.
* Molecular modifications to achieve New Molecular Entities with better
therapeutic profiles.
* Biotechnology based products.
2. Benefits derived as a result of above R & D :
* Competitively advanced products
* New products
* Improved productivity/process efficiencies.
* Improved product quality
* Waste minimisation
* Safe and environmental friendly processes
* Grant of process patents
* Import substitution
* Enhanced global presence
* Export Quality products
3. Future plan of Action
The Company's R & D division will focus on achieving the results in
following areas :
* Analytical research
* Pharmaceutical research
* Chemical research
* Natural Products Research
* Viral Vaccine research
4. Expenditure on R & D during 1997-98
(Rs. in Lacs)
1997-98 1996-97
Capital 470 319
Recurring 251 251
Total 721 570
Total R&D expenditure
as a percentage of total
turnover 7.80% 6.21%
Technology absorption, adaptation and innovation
1. Efforts, in brief, made towards Technical collaboration for
technology adaptation and manufacture of vaccines
innovation
2. Benefits derived as a result - Competitive products
of the above efforts - Product Improvement
- Product Development
- Import Substitution
3. In case of Imported
technology (imported during
the last five years reckoned
from the beginning of the
financial year), following
information may be
furnished.
a. Technology imported Technical collaboration for
manufacture of vaccines
b.Year of import 1995-96, 1996-97 & 1997-98
c. Has technology been fully Fully absorbed
absorbed
d. If not fully absorbed, areas
where this has not taken
place, reasons thereof and
future plan(s) of action
FOREIGN EXCHANGE EARNINGS AND OUTGO
1. Activities relating to exports
The much needed liberalised policy of the Government of India in
investments outside India for trade promotion is going to help our
Company to get better organised and equipped to promote image of the
Company, increase service to customer, create demand for Company's
quality products and thus increasing better revenues/sales.
Panacea's export base has expanded considerably over the year and our
presence is being felt in the markets through our Offices abroad.
During the year 1997-98 exports were to the tune of Rs. 1105.24 lacs.
Our Company has taken concrete steps to hasten product registration and
patent filing abroad so as to cross the entry barriers of international
markets and establish ourselves.
Panacea is thus fully geared to compete in the International market.
The desire to be a truly worthy partner of the doctor in his battle
against disease in India and abroad will remain, forever, ours.
2. Total Foreign exchange earned and used :
(Rs. in lacs)
Current Previous
Year Year
Earnings 1075.69 600.73
Outgo 3374.22 2746.17
Mar 31, 1997
The directors have pleasure in presenting the Thirteenth Annual Report together with the Audited Accounts of the Company for the year ended 31st March, 1997 and Auditors' Report thereon.
STATE OF THE INDIAN ECONOMY
Last decade has seen India's economic landscape transform itself, and
across the diverse political spectrum that charecterises Indian polity, there is a unique consensus that economic liberalisation and globalisation is a paramount necessity if India is to stand erect among the comity of nations as we approach the new millennium lust a few years ahead.
A TIGER UNCAGED?
Progressive unshackling of the economy has shown immediate results and the last five years have seen the economy growing at the macro level at rates matching the best performers in the world. Furthermore, seeds for a much faster growth rate have been sown for the next decade and beyond with reform of the investment, industrial licencing, exchange rate and foreign trade and the tax system, and other measures to deregulate the domestic markets, integrate them with the global markets and reduce the role of the government. The immediate result has been that an indigineous industrial entrepreneur class has emerged and powered by cutting edge technology, the industry has acquired competitive strength with the output of best products anywhere in the world becoming available here.
In the next phase - the more difficult and politically painful - Govt.
has shown willingness to carry forward the reform process to the Public Sector. Agriculture, Infrastructure and labour markets. Disinvestment of the Public Sector and greater autonomy is on the cards; specific sectors of infrastructure - power, road transport, civil aviation and telecommunications have been opened for private sector entry both by Indian and foreign investors. Next step would be for private participation in the ports and railways. Intention of dismantling the most inefficient subsidy delivery mechanism has been exhibited - food, fertiliser and petroleum product subsidy continues to be loosely targeted, leading to massive leakages and siphoning away of the benefits by the creamy layer rather than the needy poor, besides telling heavily on the fiscal deficit.
One critical area which has still not received sufficient attention is that for the economic reforms to sustain themselves over a longer term frame work, there has to be the necessary input of intangibles - intangibles of literacy, education and skills, and the health status of the population charecterised not merely by the absence of disease (which itself has not been achieved) but by basic needs fulfillment.
THE STATE OF INDIA'S HEALTH SECTOR
The world's biggest killer and the greatest cause of ill-health and
suffering across the globe is listed almost at the end of the International Classification of Diseases. It is given the code Z59.5
- extreme poverty.
POVERTY - THE SYMPTOM OR THE DISEASE ITSELF
Poverty in India is the main reason why babies are not vaccinated, why clean water and sanitation are not provided, why curative drugs and other treatments are unavailable and why mothers die in childbirth. is the underlying cause of reduced life expectancy, handicap, disability and starvation. Poverty is a major contributor to mental illness, stress, suicide, family disintegration and substance abuse. Every year in the country more than 4 million children under 5 years die, most of them from causes which could be prevented for just a few Rupees per child. They die largely because the development of the economy has bypassed them, but most of all they die because they are poor.
In the time it takes to read this sentence, somewhere in India a baby has died in its mother's arms. For that mother, the message that her neighbour's infant will live is no consolation. it does not stem her grief to know that 8 out of 10 children in the country have been vaccinated against the five major killer diseases of childwood, or that since 1970 infant mortality has fallen by 40%, while overall life expectancy has increased by more than 10 years during the period, to about 65 years at present.
HEALTH SECTOR PRIORITIES
Beneath the heartening facts about decrease mortality and increasing
life expectancy, and many other undoubted health advances, lie unacceptable disparities in health. The gaps between rich and poor,
between one population group and another, between ages and between the sexes, are widening. For most people in the world today every step of life, from infancy to old age, is taken under the twin shadows of poverty and inequity, and under the double burden of suffering and disease.
With the opening up of the economy to the world at large, besides the
aforesaid poverty diseases, health status of the Indian population is
being increasingly affected by a number of factors over which the
individual has little control, and over which the conventional health
sector also has little sway: social and economic circumstances labour- saving technologies, and the information and communication revolutions. People in India are now acquiring many of the unhealthy lifestyles and behaviours of the industrialised world: sedentary occupations, inadequate physical activity unsatisfactory diets, tobacco, alcohol and drugs. Populations in richer countries continue to live with all these risks. Problems are aggravated by the international spread of misleading information about consumer products. All these factors together, unless addressed with suitbale response immediately, will lead to substantial increase in premature ill-health from chronic diseases in India.
CHARTING THE FUTURE
Seen in the above backdrop, while on the macro front we are all for India's grand globalisation spree, the economic planners must not lose sight of such inequities in access to basic human needs. Besides answering other crucially important questions, the wider question which needs to be tackled is: what are the country health priorities? Which are the major diseases, the major causes of death, handicap, disability and diminution of the quality of life? Which conditions cause most misery, although they may not be fatal? Which parts of the country, or communities within states, have the greatest health needs? Where should health resources be targeted?
INDIAN PHARMACEUTICAL INDUSTRY
-2000 AND BEYOND
A PLACE OF PRIDE PANACEA BIOTEC
Pharmaceutical industry in India continues to record growth rates in
turnover much higher than other industrial segments of the economy,
riding as it is on crest of an export boom and liberalisation of the
licencing and price controls by the Govt. of India. The volume growth is expected to continue as the markets within the country get more entrenched and more and more countries in Africa, South East Asia and CIS look towards India for sourcing their requirements of bulk drugs as also formulations. With the avowed goal of the national planners of Health for All by 2000 AD, and growing awareness of the common man towards preventive and curative health issues, domestic demand of pharma products is going to keep increasing in the years to come.
GROWTH WITH CONSOLIDATION - R&D THE KEY TO SURVIVAL
Along side volume growth, following the global trends, the pharmaceutical industry is going through a phase of consolidation with thousands of companies in the unorganised sector with their weak manufacturing base, bowing out to more organised and quality geared
Companies. Within the organised sector the winners are going to be the ones who pre-empt the market demand with disease specific products matching the needs of the tropical climate. Well entrenched marketing network and dedicated Research and Development are going to make all the difference in the ensuing battle of survival of the fittest in the market place.
Developments of far reaching consequences have been taking place in the industry in the recent past. With the signing of the new GATT accord pharmaceutical industry in India has been irretrievably linked with the global pharma trade, which is dominated by well entrenched majors with turnovers many times those of the largest Companies of India. In the emerging scenario, Research and Development capability both at newer product development and advanced drug delivery systems, of a Company would make the real difference. Panacea Biotec Limited realised this fact long back and ventured to create a state-of-the-art R&D facility of its own, manned by some of the best professionals in the field.
PATENT PROTECTION - A MUST
A major controversy marred by ecrie flash points & stubborn stand offs is raging through the pharmaceutical industry in India on the matter of India's Patent laws.
Going by the experience of other countries in the world - both developed and the developing - we are of the reasoned opinion that patent protection is absolutely necessary in the research-based pharmaceutical industry. Patent protection for pharmaceuticals as per new GATT (TRIPS) laws would sharply increase local pharmaceutical research and development, attract foreign investment in, and foster technology transfer in what is one of the most successful worldwide high-technology industries besides producing high-technology employment and the potential for exports.
Most important of all, patent protection for pharmaceuticals would
facilitate the availability of modern medicine to improve the health and well-being of the population.
If there were no patent protection for pharmaceuticals worldwide, there would simply be no research-based industry. Worse, from a public policy view, there would be no new medicines for patients who need them.
EXPORT THRUST
Another change which has taken place in the Indian Pharma Industry is
that, today India is the net exporter of Drugs and Pharmaceuticals.
Industry both at the basic drugs and formulation level, has grown at
15-18 per cent compounded per annum in the last decade. This growth
rate is going to be in excess of 20 per cent per annum in the next five years. Exports have not only grown to African and Asian markets, but the Industry, riding on an improving quality curve, has been successful in exporting basic drugs and formulations to the US and EU markets also. Panacea Biotec Limited has also taken concrete steps of product registration and patent tiling abroad and increasing share of its turnover is expected to be exported - thus deriving benefits of higher profit margins and tax shield.
INDIA SPECIFIC THERAPY TO THE FORE
India today stands on the threshold of a new era in which hundreds of
millions of citizens will at last be safe from some of the most terrible diseases. With the active contribution by the corporate sector - Panacea Biotec is justifiably proud at being the pioneer and leader in this regard - about 8 out of 10 of all the India's children are protected by immunisation against six major life threatening diseases.
But fatal complacency of the industry towards other infectious diseases is literally costing thousands of lives - lives that we have the knowledge and means to save. Infectious diseases constitute the country's leading cause of pre-mature death and morbidity - accounting for some 5 million out of total about 12 million deaths in the country per year. To give an example, acute lower respiratory diseases like pneumonia and tuberculosis kill about 1 million Indians per year. An equal number die of diarrhoeal diseases. Some estimates suggest that about a quarter of the population is a chronic carrier of Hepatitis B virus and 10 per cent of the Hepatitis C virus. There is no cure known to mankind of the diseases related to these two viruses, and the only remedy is prevention. Incidentally Panacea Biotec is again going to be playing a pioneering role in preventive therapy of this deadly disease.
Knowing fully well that the advanced West would not be interested in
researching any therapy for diseases endemic to tropical countries like India, we at Panacea Biotec, as a responsible corporate citizen have always worked towards this goal of introducing into the Indian market, pharmaceutical products with 'India Specificity. While giving us a tremendous sense of satisfaction, it has been the primary reason of our commercial success as well.
The direction of our R&D effort is geared towards evolving effective
therapeutic molecules and drug delivery systems of relevance to this
country. Research on Anti Tubercular drugs and immuno supperessant
chemical entities on the formulations side and preventive therapy for
communicable disease prevalent in near epidemic forms in India by
producing viral vaccines, only goes to show the `India Centric' thrust of Panacea Biotec Limited even while it is globalising its operations.
INDUSTRY GROWTH IN THE NEXT FIVE YEARS AND PANACEA GOES PLACES
The working group on drugs and pharmaceuticals the Ninth Five year Plan (1997-2002) has anticipated an increase in production corresponding to Rs. 16,552 crores in the sector. There would be an increase of Rs. 3,617 crores and Rs. 12,935 crores respectively in the value of production of bulk drugs and formulations. The investment required for creating facilities for additional production is estimated to be Rs. 1,800 crores for bulk drugs and Rs. 1,000 crores for formulations, totalling Rs. 2,800 crores. The group has assumed 15 per cent growth in domestic consumption, 10 per cent in the export of formulations, 20 per cent in the export of bulk drugs and another 20 per cent in the growth of bulk drug production. Based on the available data, it has opined that the domestic market would grow at the rate of 15 per cent and exports at the rate of 25 per cent.
PANACEA BIOTEC - GROWING FASTER THAN THE INDUSTRY
When comparisons are drawn, Panacea Biotec Limited already ranks among the top 50 pharmaceutical companies of the country - a list which includes companies which continue to derive brand and psychological advantage of their international lineage and in respect of some of them, their major turnovers come from frivolous segments like health drinks, baby foods and vitamins, or at best OTC and generic products. Some of Panacea Biotec's products are unique to the industry - there are atleast ten formulations which were manufactured for the first time in India by Panacea Biotec Limited.
Panacea Biotec's ranking among Indian Pharma giants comes out still
better when comparisons are made for Gross and Net Profit ratio and of return on Net Worth and return on capital employed, vis-a-vis other companies in the industry.
Formulating branded and generic drugs (generic drugs only for the export of market) and blending of viral vaccines since 1989 at its two manufacturing facilities in New Delhi, Panacea Biotec today has acquired significant market presence and share in each of its product lines. It is competing successfully with large multinationals in the domestic market place. More recently, it has globalised its operations with product registration, patent filing and establishment of offices in a number of countries abroad, opening up markets for exports and licenced production abroad.
Panacea Biotec commands major market share in India in Viral vaccines. Riding on its nation wide ethical marketing and product efficacy strengths, Company enjoys substantial brand equity for some of it speciality formulations. After having pioneered in their launch, some of its formulations have reached a brand leadership status in the therapeutic segments it is operating, in a very short span of time.
Panacea Biotec has achieved consistent improvement in rating of retail chemist sales out of top 200 companies in India (source ORG Retails Sales Rating) out of companies promoting products ethically. The Company's ranking (as reported by ORG) made tremendous progress from 161 in June '93 to 101 in May '97 a jump of 60 ranks in less than 4 years.
The turnover of the Company comprises of vaccine and formulation sales, almost in equal proportion at present. For the company as a whole, the proportion of vaccine sales is going to progressively decrease in the years to come. The Company has been consistently improving its market share in all its product lines, viz. Vaccines, Biologicals, branded formulations and natural products. In formulations, the Company has successfully introduced some speciality formulations like Nimulid (two of those formulations are under world wide patent in PBL's name with applications filed in 72 countries), Glizid, Myticef and Panimun Bioral each of which have been well received by the market and the medical fraternity alike on account of their better efficacy and mode of action/ delivery. With its speciality formulations and patented products having found acceptance in the markets in India and abroad, the sales and margins of the Company, which were quite healthy in the past, are expected to improve further in the coming years.
EXPANSION AND INTEGRATION TO TAKE ON THE WORLD
With a view to immunise itself from the vagaries of the market of raw
materials for its critical formulations and vaccines, Panacea Biotec has taken up implementation of a backward integration project at Lalru on he Delhi-Chandigarh National Highway, 35 kms before Chandigarh in Punjab, North India.
At the same site, with a view to increase its production capacity of
formulations and also to comply with Good Manufacturing Practices (GMP) requirements of WHO and UKMCA, Panacea Biotec is setting up an advanced formulations facility. Some segments of the formulation facility have already become operational beginning the first quarter of 1997-98. Once all the facilities coming up at Lalru become fully operational in about 18 month's time, Panacea Biotec would command some of the best manufacturing facilities in the country, comparable with the best in the world, with full integration in its major product areas.
R&D DRIVEN STRENGTHS
Realising the implications of new world wide patent regime following the signing of the Uruguay round of GATT negotiations, the Company took specific steps at organising its own Research and Development set up geared towards discovery of newer molecules. The R&D facility operating from two locations, at New Delhi and at Lalru in Punjab is recognised by the Ministry of Science and Technology of Govt. of India (there are only three Govt. recognised Industry R&D facilities in North India). During the past year, the Company, backed by this in-house R & D, has filed product patents in 72 countries worldwide.
Being a corporate leader in the field of viral vaccines in the country, and knowing fully well that preventive immunisation of the population against viral diseases is an absolute must if the health status of the citizens is to be improved and many lives presently being lost or wasted to be saved, Panacea Biotec is undertaking frontline research in developing newer and safer methods of vaccine delivery at the Lalru research facility.
Company's current research is in the area of newer chemical entities,
Viral Vaccines, Biologicals, New Drug delivery systems and natural
products ensuring excellent bio-availability, stability and organoleptic charecteristics.
Having filed patent in the NSAID category, work was initiated for
filing of product patents in three more categories of drugs, namely, a wound healing preparation with anti TB efficacy, an anti spasmodic drug, and a natural preparation meant to cure (not just provide relief from) piles.
It would be observed from the figures above that Panacea Biotec Limited has exhibited sustained growth in sales and profitability performance in the last three years. Sales have grown consistently from Rs. 43.62 crores in 1994-95 and Rs. 60.42 crores in 1995-96 to about Rs. 91.66 crores in 1996-97, registering a compounded annual growth rate of about 50 per cent. Profits before tax during the same period have grown from 1.83 crores to Rs. 4.52 crores and further to about Rs. 9.16 crores, registering a geometrical progression growth rate. The profit margins, both at the net and the gross levels have been increasing steadily. PBDIT margin improved from 8.83 per cent of sale in 1994-95 to about 14.07 per cent of sales in 1996-97.
The turnover growth rate of Panacea Biotec Limited is more than double the pharmaceutical industry average in India. Gross and net profit ratios are also better than the industry aggregates.
With that induction of additional equity at a premium (with the promoters also contributing at the same premium as the public) and
retained earnings, the Net Worth of the company has zoomed up to Rs.
3481.52 lacs as at the end of 1996-97 from Rs. 622.72 lacs as at the end of 1994-95. The Book Value of the shares of the company has concomitantly moved up from Rs. 22.88 per share to Rs. 61.03 per share to two years. Higher stake of owned funds in the total funds employed in the Company not only gives a higher safety and comfort level it allows for sufficient leverage for raising long term sources for growth through the equity as also the debt route.
LIQUIDITY AND LEVERAGE
As regards short term liquidity position, the current ratio of the
Company has always been comfortable. As at the end of 1996-97 it was
at 1.97. The net working capital available is sufficient to take care of future working capital requirements.
The total long term debt at the end of 1996-97 was Rs. 190 lacs only,
thus giving a healthy debt equity ratio of 0.055:1.00 As such, total debt is virtually negligible as compared to the net worth. As cash
accruals of the Company are fairly good and a very small component of
debt, the debt service coverage ratio is at 18. With a view to balance its capital structure, as at present it is heavily loaded in favour of net worth compared to negligible long term debt, the company decided to implement the expansion cum backward integration projects with the financial assistance of the Indian Financial Institutions/Banks. All the financing for the expansion program currently in hand has been fully tied up in advance and at most competitive rates.
In the performance and profitability projections accepted by the Indian Financial Institutions the future liquidity position of the Company is comfortable and, there are sufficient cash accruals to meet the present and future debt obligations. Even if the entire external funding of the expansion projects is by the debt route, for the company as a whole the average net DSCR during the next five years is estimated at about 5. Even at the level of maximum term debt, the debt equity ratio is at 0.40 :1.00 and the current ratio is estimated throughout at levels above 1.50.
PRODUCT DEVELOPMENT AND MARKETING STRENGTHS
The Panacea Biotec is engaged in all product lines of pharmaceuticals
viz. biologicals, formulations and natural products.
Panacea Biotec Limited was the first company in India to manufacture
formulations of Nimulid (in three dosage forms), Cisapride, Gliclazide, Roxythromycine, Cefaperazone and Cyclosporine (in two dosage forms).
ETHICAL MARKETING
The Company's products/formulations are being sold both in the domestic and export market. In the domestic market the company is exclusively into branded formulations marketed through the ethical promotion route of prescription medication. Formulations are being promoted on all India basis through Company's own marketing network with a field force of over 325, 20 branches/C&F/Consignee agents (super distributors) and 560 distributors/dealers spread all over the country.
All the 20 centres are linked to the Central Warehouse as also the
Accounts Deptt. through a fully computerised Online network, besides an E Mail network and the position as at the end of any given day is down loaded at New Delhi, thus allowing for effective control and check on the movement of material and an update on the market situation.
The present field force of 325 and 65 Managers/Supervisors in the field is covering a doctor population of more than 80,000 on a 30 day cycle basis. This spread and penetration gives Panacea Biotec accessability to about 75 per cent of all prescribing Doctors in the therapeutic areas the company is presently operative in the domestic market.
SALES BEYOND SHORES
On the Export front the Company started its efforts in 1992-93 by initiating product registration in different countries of Africa, CIS, SAARC and West Asia, to begin with. As on date 52 of its products are registered in 21 countries and actual exports have taken place to 12 of these countries during 1996-97. Company has already opened representative offices abroad and atleast two warehouses/depots are planned for the current financial year itself, with the number going up to 6 by next year. With depots abroad it would become possible to service the export orders with a much lesser lead hub and consistency in supplies would get established. Local distributors have also been appointed in 13 countries. The real boost in export volume and value is expected beginning 1998-99 when the advanced formulation facility meeting UKMCA standards would go operational and by which time product patents in respect of atleast five of Panacea's products would also have been registered worldwide.
DIVIDEND
The Directors of your Company are pleased to recommend the dividend
of 20% for the year ended 31st March, 1997 on pro-rata basis all equity shareholders on their paid up equity share capital.
INFORMATION UNDER SECTION 217(1)(D) & SECTION 217(1)(E) OF THE COMPANIES ACT, 1956
There are no employees of the category mentioned in section 217(2A) of the Companies Act, 1956 read with the Companies (particulars of employees) Rules, 1975 as amended. The Directors being wholetime Directors having been appointed under Section 198, 269 & 309 read with Schedule XIII of the Companies Act, 1956 and by virtue of holding substantial powers of management, are not covered under this Section. The Board also confirms that there are no material changes and commitments affecting the financial position of the Company which have occurred between the end of the financial year of the Company to which the balance sheet relates and the date of the report.
PUBLIC DEPOSITS
The Company under the provisions of Section 58 A of the, Companies Act, 1956 filed statement in lieu of advertisement with ROC, Delhi & Haryana for accepting Public Deposits without issuing advertisement.
The Company, however, during the year under review, did not accept any deposits from the public within the meaning of Section 58 A of the Companies Act, 1956.
HUMAN RESOURCE
The sweeping economic changes has also made its demands on the Human
capital of your Company. Your Company has been able to adapt well with the changes taking place around the globe. This has been made possible by the team of highly talented and dedicated employees, which has been built over the years. We have been working towards achieving environment where people at all levels work together for achieving the goals of the company as a whole. The synergy effect which has been the driving force towards achieving the present growth has crossed all linguistic well as territorial boundaries. We have been able to form a small INDIA at Panacea Biotec. The Directors place on record their deep appreciation for the hard work and unfailing faith of these `partners' in the noble endeavour called Panacea.
DIRECTORS
In accordance with the provisions of Articles of Association of the
Company, Mr. Soshil Kumar Jain, and Mr. Rajesh Jain, Directors of the
Company retire by rotation at this meeting and being eligible offer
themselves for reappointment.
AUDITORS
M/s. Sudhir Sunil & Co., Chartered Accountants, hold office as Statutory Auditors of your Company till the conclusion of the ensuing Annual General Meeting and being eligible offer themselves for reappointment. The Company has received certificate from them as required under section 224 (1B) of the Companies Act, 1956 and seeks your approval for their appointment.
FORM B
Form for disclosure of particulars with respect to absorption
Research and Development (R&D)
1. Specific areas in which R & D carried out by the Company :
The search for new molecules in the science of life has been Panacea
Biotec's R & D mission. That's why, constant focus has been laid on
critical life saving drugs and the new drugs to fill the gaps of therapy. The R&D centre of the company is approved by the Department of Scientific and Industrial Research, Ministry of Science and Technology and provides a stimulating atmosphere to the research scientists. The Company owns best equipped Research and Development Laboratory to achieve and establish consistent quality of products in the market. Currently Research is being pursued by the Company in following areas :
* Design & Development of new drug molecules.
* Continuous improvement & upgradation of existing technologies/products.
* Advanced Drug Delivery System.
* Blood based products and blood substitutes.
* Molecular modifications to achieve New Molecular Entities with better therapeutic profiles.
* Newer drugs for Anti-cancer therapy Alzeheimer's Disease and like.
* Biotechnology based products.
2. Benefits derived as a result of the above R & D :
* Improved productivity/process efficiencies
* Improved product quality
* Waste minimisation
* Safe and environmental friendly processes
* Grant of process patents
* Import substitution
* Enhanced global presence
3. Future plan of Action :
The Company's R&D division will focus on achieving the results in
following areas :
* Analytical Research
* Pharmaceutical Research
* Chemical Research
* Natural Products Research
* Viral Vaccine Research
4. Expenditure on R & D during 1996-97 : (Rs. in lacs)
1996-97 1995-96
Capital 251 186
Recurring 446 167
Total 697 353
Total R&D expenditure as a
percentage of total turnover 7.60% 5.84%
Technology absorption, adaptation and Innovation
1. Efforts, in brief, made towards Technical collaboration for
technology absorption, adaptation and manufacture of vaccines.
innovation.
2. Benefits derived as a result of the Product improvement
above efforts Cost reduction
Product development
Import substitution
3. In case of imported technology
(Imported during,the last 5 years
reckoned from the beginning of the
financial year), following
information may be furnished.
Technical collaboration for
a) Technology imported manufacture, maintenance
and marketing of Vaccines
b) Year of import 1995-96 & 1996-97
c) Has technology been fully Fully absorbed on pilot scale
absorbed?
d) If not fully absorbed, areas Would be fully absorbed on
where this has not taken place, commercial scale in the
reasons thereof and future upcoming production facility
plan(s) of action at Lalru, Punjab.
FOREIGN EXCHANGE EARNINGS AND OUTGO
1. Activities relating to exports :
Initiatives taken to increase exports; development of new export
markets for products and services; Export sales during the year were
Rs. 61.7 million - an increase of 36 % over the preceding year. The
Company is presently operating in Asian, African, Russian, C.I.S.,
European, South American & Middle East regions. The Company has also
set up branch offices/representative offices abroad. Besides, the
Company has also taken steps to patent its products and has been
successful in obtaining product registration in 22 countries. The
Company is further gearing towards becoming cost competitive in order
to compete in the international markets.
2. Total foreign exchange earned and used :
(Rs. in Lacs)
Current Year Previous Year
Earnings 600.73 453.06
Outgo 2746.17 1997.57
For and on behalf of the Board
Mar 31, 1996
Your Directors have pleasure in presenting the Twelfth Annual Report
together with the Audited Accounts of the Company for the year ended
31st March, 1996 and Auditors' report thereon.
ECONOMIC ENVIRONMENT
India is on the threshold of a major leap forward in terms of its
economic growth and development. Progressive policies of
liberalisation and globalisation of the economy have for the first
time given a glimmer of hope that poverty, and its concomitant
maladies of squalor and disease, can indeed be banished from this
country. In the last few years, we have witnessed a real paradigm
shift in the approach of the Central and State Governments alike.
Wherever there has been a choice, Govt. machinery is now choosing
development over regulation. Although the introduction of Minimum
Alternative Tax in this year's Central Government Budget would
adversely affect reinvestment of increased earnings by fast growing
Company(ies) like ours, we, nevertheless, whole heartedly support the
other measures at liberalisation and transparency introduced by the
Govt.
In the pharmaceutical field, developments of far reaching
consequences have been taking place. With the signing of the new GATT
accord, Indian pharmaceutical industry has been irretrievably linked
with the global pharma trade, which is dominated by well entrenched
majors with turnovers many times those of the largest Companies of
India. In the emerging scenario, Research and Development capability
both at newer product development and advanced drug delivery systems,
of a Company would make the real difference. Your Company had
realised this fact long back and ventured to create a
state-of-the-art R&D facility of its own, manned by some of the best
professionals in the field.
Another change which has taken place in the Indian Pharma Industry is
that, today India is a net exporter of Drugs & Pharmaceuticals.
Industry, both at the basic drug & formulation level, has grown at
15-18 per cent compounded per annum in the last decade. This growth
rate is going to be in excess of 20 per cent per annum in the next
five years. Exports have not only grown to the African & Asian
markets, but the Industry, riding on an improving quality curve, has
been successful in exporting basic drugs & formulations to the US &
EU markets also. Your Company has also taken concrete steps of
product registration and patent filing abroad and increasing share of
our turnover is expected to be exported - thus deriving benefits of
higher profit margins and tax shield.
Engaged as we are in the broader "Health" sector, we are very much
conscious of the fact that we have a responsibility and an obligation
of contributing our might towards the Govt. of India's avowed aim of
'Health for All' by 2000 AD. With the health specificity of the
country in the mind, the direction of our R&D effort is geared
towards evolving effective threapeutic molecules and drug delivery
systems of relevance to this country. As our humble contribution to
the pragramme of Universal immunization of the children of the
country against debilitating viral diseases, we stepped up our
vaccine production capacity to meet the growing needs. Further, we
have taken concrete steps towards establishing a production facility
for the raw material of the vaccine, hitherto imported, thus saving
valuable foreign exchange, and more than that, insulating the country
from the vagaries of the international drug cartels in this critical
segment.
FINANCIAL PERFORMANCE
The financial results for the year under review are as under:
(Rs.in lacs)
For the year For the year
ended ended
31.03.1996 31.03.1995
Sales 6041.82 4361.73
Other Income 8.99 2.03
Operating Income 6,050.81 4,363.76
Profit before interest
depreciation & tax 628.66 385.06
Interest 116.27 159.22
Provision for Depreciation 59.67 43.07
Provision for tax NIL 55.00
Profit after tax 452.72 127.77
Appropriations:
Dividend 52.50 24.95
Transfer to General Reserve 400.22 102.82
Net Profit Ratio 7.49 2.93
Gross Profit Ratio 10.41 8.83
PERFORMANCE
Your Company has continued to achieve above average growth in
turnover and profits for the fourth year in a row. In the year under
review, the Company has recorded sales of Rs. 60.42 crores,
registering a growth of 38.52% over last year. The Net Profits have,
during the same period zoomed up from Rs. 1.28 crores to Rs. 4.53
crores. Improved efficiency of operations, lower interest charge on
account of efficient funds management and nil corporate tax led the
dramatic increase in profits. The weighted average EPS comes to Rs.
14.27.
Over the longer term, over the last three years the Company has
registered compounded annual growth rate of 34.28 % per annum in
sales and 85% per annum in net profits. The Company has been
growing at a rate almost double the industry average.
Qualitative parameters of liquidity and debt equity leverage are much
better than the past as also the industry average, allowing for
sufficient cushion to absorb short term marketing and liquidity
stocks.
With high proportion of retained earnings and inflow of equity by the
Promoters and Public, the Net Worth of the Company has galloped to
more than Rs. 22 crores, reflecting a higher stake of owned funds and
allowing sufficient leverage for raising long term sources for growth
through the equity as also the debt route.
Sales and margins in all the three lines of activity of the Company,
viz, Vaccines, Formulations, and Biologicals have shown significant
improvements over the last year.
Another significant feature of sales in 1995-96 has been that a major
portion of the growth in formulation sales is accounted for by
Company's speciality formulations, thus ensuring advantages of brand
equity for sustained growth in sales in the coming years. In the
domestic market, as per ORG ranking of formulation sales at the
retail in the country; the ranking of the Company has improved from
137 in April 1995 to 112 in March 1996.
Beginning 1991-92, increase share of turnover of the Company has been
coming from Exports. During 1995-96 Company exported formulations
worth Rs.4.55 crores. More important is that 22 of Company's products
are registered in 16 countries, thus ensuring much higher level of
exports in the coming years.
SIGNIFICANT DEVELOPMENTS OF 1995-96
a. R&D CENTER AT LALRU
The Company has successfully commissioned a state-of-the-art Viral
Vaccine Research facility at Latru near Chandigarh. The facility
matching among the best is equipped with a industry size Animal house
and manned by expert Scientists in the field of Virology and
Veterinary Sciences for undertaking research on various techniques
for overcoming human viral diseases.
b. FILING OF FIRST PRODUCT PATENT
Having taken steps ahead of others in establishing a pharmacological
Research and Development infrastructure in both physical and human
terms, the Company successfully filed its first Product Patent in
July, 1995 under the new IPR laws following the conclusion of GATT.
During the course of the year three more product patents were filed
by the Company.
With its pharmacological R&D effort geared towards discovery of newer
molecules and improved drug delivery system, Company has
strategically positioned itself to lead in the post GATT scenario
with stringent Patent. laws on the anvil.
c. UNIVERSAL IMMUNISATION PROGRAMME
Company contributed its might to the Universal Immunisation
programme against Polio of all children below the age of three
years by enhancing its production capacity of vaccines and
effectively met the needs of the Country arising out of the special
mission for control and eradication of the disease by the year 2000.
RESEARCH & DEVELOPMENT
Liberalization of the economy and globalization of industry have
opened up new challenges and opportunities. They also have
necessitated drastic changes in business strategies, therefore for
sustained long term growth, Research & Development has attained
strategical importance.
Research & Development wing of your Company continues to provide
valuable support to Company business while keeping pace with process
of globalization. The excellent performance during the period is
attributed to Company's special emphasis on R & D wing.
The R & D establishment of your Company has the rare distinction of
being among the very few recognised by the Ministry of Science &
Technology, Govt. of India.
Through R & D wing, your Company has been able to produce high
quality, cost effective, process know how for production of
formulation(s) which lead to higher profitability and sustained growth.
With its pharmacological R & D effort geared towards discovery of
newer molecules and improved drug delivery system, Company has
strategically positioned itself to lead in the post GATT scenario with
stringent Patent Laws on the anvil.
FUTURE PROSPECTS
Going by the trend of sales in the first four months of the current
financial year, both export and domestic formulations and vaccine
divisions, are expected to record growth in turnover and profits on
the same lines as in the last three years.
Four specialty formulations, Nimulid, Panimun, Roxythromycin and
Glizid, recently introduced by the Company, with drastically improved
efficacy and minimal side effects, have been enthusiastically received
by the market and are expected to contribute significantly to the
increased sales during the year. With product registration formalities
having been completed and marketing contacts established, exports
of formulations are expected to record manifold growth.
With economies of scale, relatively stable foreign exchange markets
this year compared to last year, efficiency of operations, a country
wide marketing network being already in place, grewing thrust on the
export front and fast pick up and market acceptance of Company's own
newly introduced high value items of formulations both in the
domestic and international markets, the profits for the current year
are expected to be concomitantly higher both at the operating and net
levels.
EXPANSION PROJECTS
Integrated Pharmaceutical Complex at Samalheri, Lalru (chandigarh)
To give concrete shape to its plans of attaining leadership status in
the Indian Pharmaceuticals Market, your Company has acquired 24 acres
of contiguous land on the Delhi-Chandigarh Highway at Samalheri,
Lalru (25 kms from Chandigarh), Distt, Patiala, Punjab. Appropriate
sanctions for conversion of land use to Industrial category have
since been obtained, deep tube well has been dug up for water, soil
structure and water quality studies have been done and electricity
connection since obtained.
A state of the art fully equipped Viral Diseases Research Centre with
a world class Animal House has been established effective March 1996.
Work is already in its advanced stage on the main factory building,
the Scientist's block and the pharmacological Research And
Development Block
The integrated pharmaceutical project would have the following
production facilities to begin with:
a. Bulk Vaccine Production
Debilitating viral diseases having been already banished from most of
the developed world, the production facilities for the vaccine have
remain stagnant for the last decade and a half, and there are
confirmed reports speaking of the facilities getting decommissioned
in the near future. This would leave a big raw material availability
gap in the not too distant future in the world wide market. While the
disease has ceased to exist in epidemic proportions in the developed
countries, compulsory universal immunization programs have started in
the third world countries like India only in the recent years. We can
foresee a big demand supply gap emerging.
Your Company has the longest experience as a corporate entity in the
production and marketing of Viral Vaccines, and it was but logical
for us to go in for backward integration and do away with long term
dependence on imported raw material, especially since the possibility
of the supply line suddenly drying up is distinctly visible on the
horizon. The project cost for the Bulk Vaccine Project is of the
order of Rs. 16.65 crores. While our application for a term
assistance of Rs. 10 crores is in the advanced stage of processing
with the Industrial Development Bank of India, the rest of the gap
would be met from internal accruals/fresh induction of equity.
b. Formulation facility
The existing facilities for formulations production at Mohan
Cooperative Industrial Estate, New Delhi nave evolved over a period
of time to meet the specific requirements as perceived at any given
point of time depending upon the market needs. With growing product
diversification and differentiation and to match the expected demand
from both the domestic and the export markets, an advanced
formulation production facility is under implementation with the
following capacities:
1 Capsules: form 10 Lac to 20 Lac per day.
(separate for ampi and non ampi sections)
2. Tablets : from 12.5 Lac to 32.5 Lac per day.
3. Suspensions/Liquids : from 6,000 to 11,000 bottles per day.
4. Injectibles/Parenterals : 36,000 vials per day.
5. Lyphalised Products: 24,000 ampules per day.
6. Gels/Ointments:1 lac tubes per month.
The formulation facility coming up at Lalru is going to meet the
exact quality requirements of Good Manufacturing Practices (GMP) of
WHO and MCA of UK, which would enable us to tap the international
market with full vigor.
The formulation project was originally planned to cost Rs. 9.40
crores, but with the change in the scope of the project with the
addition of Parenterals, Lyphalised Products and Gels/Ointment lines,
as also the stricter quality standards of UKMCA, the project cost is
now placed at Rs.18.15 crores. PSIDC has already sanctioned a Term
Loan of Rs. 5 crores to the Company under its ERS scheme to partially
fund the project cost, the rest of the cost being met out of the
proceeds of the Public Issue floated in Sept, 1995. Different
segments of the formulation facility are going to become operational
in phases beginning Dec, 1996 and the full project coming into
operation in June, 1997.
DIVIDEND
The Directors of your Company are pleased to recommend the dividend
of 15% for the year ended 31st March, 1996 on pro-rata basis subject
to deduction of tax at source on the paid up equity share capital.
PUBLIC ISSUE
The maiden Public Issue of the Company at a premium was
oversubscribed by 2.17 times. The basis of allotment was finalised in
consultation with 'The Delhi Stock Exchange' in the presence of a
SEBI nominee. The Shares of your Company were initially listed on
Delhi, Bombay, Calcutta and Madras Stock Exchange(s). In order to
provide more liquidity & in the interest of shareholders, thereafter
shares were also listed on National Stock Exchange. Your Directors
place on record their deep appreciations, and sincerely thank the
investors for their unfailing faith in the management of the Company
and hope that the Company will continue to receive the support in
future. In terms of Clause 43 of the Listing Agreement, the
comparison between the actual results and projections made in the
Prospectus dated 16th August, 1995 are given hereunder:
Particulars Projections Performance
Total Income 5,853.16 6,050.81
Profit before depreciation
Interest & Tax 500.46 683.04
Depreciation 44.40 59.67
Financial Expenses 198.57 116.27
Deferred Expenses W/O 33.82 54.38
Profit before Tax 257.49 452.72
Profit after Tax 178.48 452.72
Earning per share (weighted) 5.14 14.27
Book Value 40.77 41.17
Share Capital 572.13 535.64
Reserve & Surplus 1977.00 1991.02
Dividend 15% 15%
INFORMATION UNDER SECTION 217(1)(D) & SECTION 217(1)(E)
OF THE COMPANIES ACT, 1956
There are no employees of the category mentioned in section 217 (2A)
of the Companies Act, 1956 read with the Companies (particulars of
Employees) Rules, 1975 as amended. The Board also confirms that there
are no material changes and commitments affecting the financial
position of the Company which have occurred between the end of the
financial year of the Company to which the balance sheet relates and
the date of the report.
PUBLIC DEPOSITS
The Company, during the year under review, did not accept any
deposits from the public within the meaning of Section 58 A of the
Companies Act, 1956.
HUMAN RESOURCE
Your Company considers human capital the critical resource for
achieving its ambitious plans. The Company, over the years, has been
able to build a team of highly talented and dedicated employees. The
employees are encouraged to enrich their skills through well
developed training programs. Industrial relations remained cordial
through out the year under review.
DIRECTORS
In order to broad base and professionalise the Board, Sh. Gurmeet
Singh with his wide experience in the pharmaceutical trade was
inducted in the Board as an additional Director w.e.f 29th June, 1996
and his appointment shall cease at the ensuing Annual General
meeting. The Company seeks your approval for his appointment as a
'Whole Time Director-Sales'.
In accordance with the provisions of Articles of Association of the
Company, Mr. Jal Bhushan Jain and Mr. Ashwani Jain, Directors of the
Company retire by rotation at this meeting and being eligible offer
themselves for reappointment.
AUDITORS
M/s. Sudhir Sunil & Co., Chartered Accountants, hold office as
statutory Auditors of your Company till the conclusion of the ensuing
Annual General Meeting and being eligible, offer themselves for
re-appointment. The Company has received a certificate from them as
required under section 224(1B) of the Companies Act, 1956 and seeks
your approval for their appointment.
ACKNOWLEDGEMENT
Your directors acknowledge the support received from the Investors,
Bankers, Financial Institutions, Government Agencies and Customers
and also wish to place on record their appreciation of the dedicated
efforts of the Company's personnel at all levels.
FORM B
Form for disclosure of particulars with respect to absorption
Research and Development (R&D)
1. Specific areas in which R & D carried out by the Company:
A state of the art R & D Centre, which is approved from the
Department of Scientific Research (DSIR), Govt. of India has been
established by the Company. The research is being pursued in
following areas:
A. Analytical Research : The Company has developed new and efficient
analytical methods for detection & quantification of parent drug
molecule and its degradation products in dosage forms and biological
fluids. The department is equipped with Sophisticated instruments
like HPLC, GLC, spectrophotometers complying to GLR.
B. Pharmaceutical Research: The Company has developed dosage forms of
Nimulid (Nimusulide), Panimun (Cyclosporin), Glizid (Gliclazide),
Albupan (Human Albumin), Myticef (Cefoperazone Sodium), Kardia
(Dobutamine) and several other drugs. Some of the products have been
developed as advanced Drug Delivery systems.
C. Chemical Research : The Company has developed industrial processes
of manufacturing several drugs including Nimesulide, Gliclazide and
Roxythromycin. Currently, several new products are under various
stages of research. The R & D facility is supported by a pilot-scale
facility.
D. Natural Products Research : The R & D is working on products
derived from plants for certain therapeutic areas where no remedy is
currently available. These areas include Multi-drug Resistant
Tuberculosis, Haemorhoids, Kidney stones, Lipid disorder, etc.
2. Benefits derived as a result of the above R & D:
The Company has been able to produce high quality, cost effective
process know how for production of formulation(s).
3. Future plan of Action:-
The Company's R & D will focus on research on following areas in
near future :-
1. Advanced Drug Delivery System.
2. Blood based products and blood substitutes.
3. Molecular modifications to achieve New Molecular Entities with
better therapeutic profiles.
4. Newer drugs for Anti-cancer therapy, Alzeheimer's Disease and
like.
5. Newer recombinant DNA based Vaccines.
4. Expenditure on R & D during 1995-96: (Rs. in lacs)
a) Capital 186
b) Recurring 167
c) Total 353
d) Total R & D expenditure as a percentage
of total turnover. 5.84%
Technology absorption, adaptation and Innovation
1. Efforts, in brief, made towards technology absorption, adaptation
and innovation.
Technical collaboration entered with Tito R.U.Ltd. U.S.A for
manufacture of bulk Viral vaccines.
2. Benefits derived as a result of the above efforts e.g. product
improvement, cost reduction, product development, import
substitution,etc.,
First stage Technology Transfer has taken place and samples of bulk
vaccine produced by Company have been approved by National Institute
of Communicable Diseases, New Delhi
3. In case of imported technology (Imported during, the last 5 years
reckoned from the beginning of the financial year), following
information may be furnished.
a) Technology imported
Technical collaboration for manufacture, maintenance & marketing of
Viral Vaccine
b) Year of import
1995-96
c) Has technology been fully
absorbed?
Partly absorbed
d) If not fully absorbed, areas where this has not taken place,
reasons thereof and future plan(s) of action
Would be absorbed in the upcoming production facility at Lalru,
Punjab.
FOREIGN EXCHANGE EARNINGS AND OUTGO
1. Activities relating to exports:
Initiatives were taken to increase exports and to develop new export
markets. The Company has drawn up short term and long term plans to
boost exports. Company's products have been registered in 16
countries worldwide. Steps have also been taken to patent three
products worldwide. All these measures shall result in increase of
exports substantially.
2. Total foreign exchange earned and used (Rs.):
Current Previous
Year Year
Earnings 4,53,06,194 1,78,46,312
Outgo 19,97,57,431 8,76,16,395
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