Mar 31, 2023
Your Directors'' present the 33rd Annual Report of Divi''s Laboratories Limited ("the Company" or "Divi''s") along with the audited financial statements for the financial year ended March 31, 2023. The consolidated performance of the Company and its subsidiaries ("Group") has been referred to wherever required.
Financial performance of the Company for the year ended March 31, 2023 is summarised below:
(Rs. in Lakhs) |
||||
Standalone |
Consolidated |
|||
2022-23 |
2021-22 |
2022-23 |
2021-22 |
|
Revenue |
7,62,530 |
8,87,982 |
7,76,751 |
8,95,983 |
Other Income |
34,901 |
11,126 |
34,466 |
11,387 |
Total Income |
7,97,431 |
8,99,108 |
8,11,217 |
9,07,370 |
Expenditure before depreciation, interest |
5,27,762 |
5,00,336 |
5,39,969 |
5,07,789 |
Profit before depreciation, interest and tax (PBDIT) |
2,69,669 |
3,98,772 |
2,71,248 |
3,99,581 |
Depreciation |
34,207 |
31,055 |
34,318 |
31,151 |
Finance Cost |
52 |
65 |
67 |
80 |
Profit before Tax (PBT) |
2,35,410 |
3,67,652 |
2,36,863 |
3,68,350 |
Tax Expense: |
||||
Current Tax |
43, 758 |
63,720 |
43,917 |
64,400 |
Deferred Tax |
10,837 |
9,078 |
10,608 |
7,905 |
Total Tax |
54,595 |
72,798 |
54,525 |
72,305 |
Profit after Tax (PAT) |
1,80,815 |
2,94,854 |
1,82,338 |
2,96,045 |
Other comprehensive Income (net of tax) |
233 |
218 |
1,194 |
406 |
Total Comprehensive Income |
1,81,048 |
2,95,072 |
1,83,532 |
2,96,451 |
Earnings per Share of C 2/- each (EPS) Basic & Diluted (C) |
68.11 |
111.07 |
68.69 |
111.52 |
Standalone
Last year, the Company had the opportunity to make a significant contribution for the treatment of covid pandemic and swiftly developed process, mobilised its resources and capital infrastructure, quickly created capacities and produced large volumes of a product for covid-19 infection for an MNC customer, which helped in treatment of people infected with covid-19 virus. It is a great relief that the pandemic has since abated and people across the world are breathing normal activity. As a result, our supplies of the product for covid-19 have also substantially reduced during the year under review.
As the restrictions on movement of people has since eased and the over-stocking of inventories at different channels of some of the lifestyle medicines has also reduced, we are seeing growth of our normal business portfolio.
This financial year, the Company has earned a total income of C7,97,431 lakhs, which is about 11% lower than the previous financial year. As stated above, due to significant change in the product-mix, our net material consumption as a percentage of revenue for the year is about 40%, while it was about 34% during the last financial year. Our Profit before tax for the year accounted to C2,35,410 lakhs, which is significantly lower than the previous year.
Tax expense for the year amounted to C54,595 lakhs as against a tax expense of C72,798 lakhs in the previous year. Effective tax rate for the year has increased over the last year due to the changes in product mix and the resultant profitability across the Company''s manufacturing units.
Profit after tax for the year amounted to C1,80,815 lakhs as against C2,94,854 lakhs during the previous year.
Consolidated
The Group''s consolidated total income amounted to C8,11,217 lakhs as against C9,07,370 lakhs in the previous year.
Profit before tax for the year is C2,36,863 lakhs as against C3,68,350 lakhs in the previous year. The Company earned a Profit after Tax of C1,82,338 lakhs for the year as against C2,96,045 lakhs in the previous year. The consolidated operations are reflective of standalone operations, as standalone operations are substantial part of our business.
The Company''s wholly owned subsidiaries, vis., Divis Laboratories (USA) Inc., in USA and Divi''s Laboratories Europe AG in Switzerland, are engaged in marketing/distribution of nutraceutical ingredients used in the food, beverage, dietary supplement, feed and pet food industries; and they provide a greater reach to customers within these regions. During the year, the subsidiaries have achieved aggregate revenue of C51,530 lakhs as against C48,845 lakhs in the previous year, reflecting a growth of 5% of revenue at the subsidiary level. During the year, there was no significant change in the nature of business of the Subsidiaries.
As per Section 129(3) of the Companies Act, 2013 read with Companies (Accounts) Rules, 2014, statement containing the salient features of the financial statement of Company''s subsidiaries in form AOC-1 is annexed herewith as "Annexure - I". Moreover, pursuant to provisions of Section 136(1) of the Companies Act, 2013, audited financial statements of the subsidiary companies are placed on the Company''s website and can be accessed at https://www.divislabs.com/Subsidiary-Financials-2023.pdf. The Consolidated Financial Statements presented by the Company include the financial results of these two subsidiary companies.
Policy for determining Material Subsidiaries, is available on the Company''s corporate website and can be accessed at: https://www.divislabs.com/MaterialSubsidiaryPolicy.pdf. Presently, the Company does not have any material subsidiary.
Consolidated Financial Statements
As stipulated in the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 ("SEBI Listing Regulations") and the Companies Act, 2013 ("the Act"), the consolidated financial statements have been prepared by the Company in accordance with the relevant accounting standards. The audited consolidated financial statements together with Auditor''s Report thereon form part of the Annual Report.
During the year, we have capitalised Property, Plant and Equipment (PPE) and Intangible Assets valuing C74,140 lakhs. Capital Work-in-progress as at the year-end amounted to C21,188 lakhs.
A major part of the capitalisation is in the DC and DCV SEZs, besides capacity expansion, plant upgradation and augmenting the utility/support infrastructure at the other manufacturing facilities.
During the year, the Company has made significant progress for implementation of its project of setting up a manufacturing plant (Unit-III) at Ontimamidi (Kona) Village, Thondangi Mandal, Kakinada District of Andhra Pradesh. With all clearances obtained for the Unit III project, construction activity on the 500 acres of land is progressing well with an estimated capex of C1,20,000 lakhs to C1,50,000 lakhs for Phase-1 development depending upon options and opportunities available to the company and selection of capacities to be created for different products.
Material Changes and Commitments
No other material changes and commitments have occurred after the close of the financial year till the date of this Report, which affect the financial position of the Company. Further, there is no change in the nature of business of the Company.
Your Directors are pleased to recommend a dividend of C30/- per equity share of C2/- each, i.e., 1500% for the financial year ended March 31, 2023, subject to approval of members at the ensuing Annual General Meeting (AGM). The Dividend, if approved, will be paid to shareholders whose names appear in the Register of Members as on the book closure/record date.
The total dividend payout for the current year amounts to C79,641 lakhs as against C79,641 lakhs in the previous year. Dividend payout for the year as a percentage of profits is 44%. Payment of dividend to members will be subject to tax deduction at source (TDS) as per statutory requirement.
The dividend recommended is in accordance with the Company''s Dividend Distribution Policy. The Dividend Distribution Policy is available on the Company''s website and can be accessed at https://www.divislabs.com/DividendDistributionPolicy.pdf.
The Directors have decided to retain the entire total comprehensive income for the current year in Other Equity.
The Company has not accepted any deposits from public covered by provisions of Section 73 of the Act.
Loans, Guarantees or Investments
The Company has not given any loans or guarantees covered under the provisions of Section 186 of the Act. The details of
investments made by the Company are given in the notes to the financial statements forming part of this annual report.
There are no materially significant related party transactions made by the Company with related parties which may have potential conflict of interest with the Company at large. As a matter of policy, your Company carries out transactions with related parties on an arms'' length basis. Statement of these transactions is given at Note No. 37 of the Notes to financial statements.
Accordingly, particulars of contracts or arrangements with related parties referred to in Section 188(1) of the Act along with the justification for entering into such contract or arrangement in prescribed Form AOC-2 does not form part of this report.
The Policy on Materiality of Related Party Transactions and on dealing with Related Party Transactions as approved by the Board is available on the Company''s website and can be accessed at https://www.divislabs.com/RPT-Policy.pdf.
Information in respect of internal financial controls and their adequacy is included in the Management Discussion and Analysis, which forms part of this Annual report.
The Company has a Risk Management Committee of the Board. The brief of terms of reference, composition and names of members and chairperson are set out in the Corporate Governance Report forming part of the Report.
The Company has an enterprise-wide approach to risk management, which lays emphasis on identifying and managing key operational and strategic risks. The aim is to avoid or minimise risks that pose a threat to Divi''s continued existence and to make improved managerial decisions to create value. The Company has been addressing various risks impacting the Company pursuant to the Risk Management Policy.
The Risk Management Committee constantly evaluates various risks - business, customer concentration, supplier concentration, regulatory compliances, confidentiality of processes, consistency of cGMP practices, environment, employee health and safety etc., monitors risks and deploy appropriate control systems aimed at mitigating such risks to the extent possible. The Audit Committee reviews the risk elements of the company''s business, finance, operations and compliance, and their respective mitigation strategies.
Further details on the Risk Management activities including key risks identified, and their mitigations are covered in Management Discussion and Analysis Report, forming part of this Annual Report.
During the financial year 2022-23, the focus areas of Risk Management Committee included review of cyber security and data protection, business continuity, various ESG risks.
Management Discussion and Analysis
In terms of provisions of Regulation 34(2) of SEBI Listing Regulations report on Management Discussion & Analysis for the year under review is provided in a separate section forming part of this Annual Report.
Directors'' Responsibility Statement
As required under Section 134 (5) of the Act, Directors of your Company hereby state and confirm that:
a) the applicable accounting standards read with requirements of Schedule III to the Act have been followed in the preparation of the annual accounts for the year ended March 31, 2023 and there are no material departures from the same;
b) accounting policies selected were applied consistently and the judgements and estimates made are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at the end of the financial year and of the profit of the Company for the period;
c) proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;
d) the annual accounts have been prepared on a going concern basis.
e) internal financial controls have been laid down and such controls are adequate and operating effectively;
f) proper systems have been laid down to ensure compliance with the provisions of all applicable laws and such systems are adequate and operating effectively.
Number of Meetings of Board of Directors
The Board meets at least four times in a year at quarterly intervals and more frequently if deemed necessary, to transact its business. During the financial year, the Board has met four times, i.e. May 23, 2022, August 12, 2022, November 07, 2022 and February 03, 2023.
Directors and Key Managerial Personnel
During the financial year, there were no changes in the Board of Directors or Key Managerial Personnel.
Pursuant to the Members'' approval dated March 26, 2022 via postal ballot, Dr. Ramesh B.V. Nimmagadda and Dr. Ganapaty Seru were re-appointed as Independent Directors for a second
term of 5 years, and Ms. Nilima Prasad Divi was re-appointed as Whole-time Director (Commercial) of the Company for a period of 5 years.
Dr. Kiran S. Divi and Ms. Nilima Prasad Divi retires by rotation at the forthcoming 33rd AGM and being eligible, offer themselves for re-appointment.
Declaration by Independent Directors
The Company received declaration from all the Independent Directors of the Company under Section 149(7) of the Act and Regulation 25 of the SEBI Listing Regulations, confirming that they meet the criteria of independence as provided in Section 149(6) of the Act and Regulation 16(1 )(b) of SEBI Listing Regulations and there has been no change in the circumstances affecting their status as Independent Directors of the Company. Further, they have confirmed compliance to the code of conduct for independent directors as prescribed in Schedule IV of the Act. In the opinion of the Board, the Independent Directors of the Company possess necessary expertise, integrity and experience.
Performance Evaluation
The Board of Directors carried out an annual evaluation of its own performance, of the Committees of the Board and of the individual directors including Independent Directors, pursuant to the provisions of the Companies Act, 2013 and SEBI Listing Regulations.
Performance evaluation was carried out on the basis of criteria evolved, as provided by the Guidance Note on Board Evaluation issued by Securities and Exchange Board of India, seeking inputs from the Directors individually and the committees through a structured questionnaire which provides a valuable feedback for contribution to the Board, improving Board effectiveness, maximising strengths and highlighting areas for further improvement, etc.
In a separate meeting ofthe Independent Directors, performance of the Chairperson, non-independent directors and the Board as a whole was evaluated taking into account the views of the non-independent directors and the same was discussed in the Board Meeting. Performance evaluation of Independent Directors is done by the entire Board of Directors (excluding the Directors being evaluated).
The details of the separate meeting of the Independent Directors are reported in the Report on Corporate Governance which forms part of the Board''s Report.
Policy on Directors'' Appointment and Remuneration
The Policy on appointment and remuneration of directors, key managerial persons (KMP) and senior management including criteria for determining qualifications, positive attributes and director''s independence as required under Section 178(3) of
the Act, and Regulation 19 read with Schedule II Part D of SEBI Listing Regulations has been formulated by the Company, inter-alia includes:
⢠To identify persons who are qualified to become directors and who may be appointed in senior management in accordance with the criteria laid down.
⢠To ensure a transparent board nomination process with the diversity of thought, experience, knowledge, perspective and gender in the Board.
⢠To determine remuneration based on the Company''s size and financial position and trends and practices on remuneration prevailing in peer companies, in the Pharma industry besides qualifications, skills, capabilities, etc.
⢠To carry out evaluation of the performance of Directors, as well as Key Managerial and Senior Management Personnel.
⢠To provide them rewards linked directly to their effort, performance, dedication and achievement relating to the Company''s operations.
⢠To retain, motivate and promote talent and to ensure long term sustainability of talented managerial persons and create competitive advantage.
Policy on Nomination and Remuneration of Directors, Key/ Senior Managerial Personnel may be accessed on the Company''s website at:
https://www.divislabs.com/NominationRemunerationPolicy.pdf.
Remuneration details of Directors & KMP and Particulars of Employees
Pursuant to Section 197(12) of the Act, read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the prescribed particulars pertaining to remuneration and other details are given in "Annexure - II" to this Report.
The non-executive directors of the Company had no pecuniary relationship or transactions with the Company, other than sitting fees, annual remuneration and reimbursement of expenses, if any.
In terms of the provisions of Section 197(12) of the Act read with Rules 5(2) and 5(3) of the Rules, a statement showing the names and other particulars of employees drawing remuneration in excess of the limits set out in the said Rules forms part of this report. Further, the report and the annual accounts are being sent to the Members excluding the aforesaid statement. In terms of Section 136 of the Act, the said statement will be open for inspection upon request by the Members. Any Member interested in obtaining such particulars may write to the Company Secretary at [email protected].
Corporate Social Responsibility (CSR)
The Company has been doing CSR activities for over the past 3 decades. The CSR initiatives of the Company during the year include promoting education, safe drinking water, preventive healthcare, village development, environmental sustainability, support to differently abled, Swatch Bharath, livelihood enhancement, promotion of rural sports, etc.
Corporate Social Responsibility Policy (CSR Policy) indicating the activities to be undertaken by the Company was adopted by the Board on the recommendation of the CSR Committee. During the year the CSR policy was amended to include recent changes in the statutory requirements. The policy can be accessed at https://www.divislabs.com/wp-content/uploads/2022/12/Divis-CSR-Policy-1.pdf.
Report on Corporate Social Responsibility as per Rule 8 of Companies (Corporate Social Responsibility Policy) Rules, 2014 is prepared and the same is enclosed as "Annexure - III" to this Report.
Business Responsibility and Sustainability Report (BRSR)
Pursuant to the Regulation 34 of SEBI Listing Regulations, BRSR describing the initiatives taken by the Company is enclosed as part of this Report.
Conservation of Energy, Technology Absorption and Foreign Exchange Earnings & Outgo
Particulars required under Section 134 (3) (m) of the Act read with Rule 8(3) of the Companies (Accounts) Rules, 2014 is given in the "Annexure - IV" to this report.
The report on Corporate Governance as per Regulation 34(3) read with Schedule V of the SEBI Listing Regulations is included as a part of this Annual Report. The requisite certificate from Mr. V. Bhaskara Rao, Practicing Company Secretary confirming the compliance with the conditions of Corporate Governance is attached to the report on Corporate Governance.
The details pertaining to the role, objective and composition of the Audit Committee are included in the Corporate Governance Report forming part of this Annual Report.
The Company has established a vigil mechanism and formulated a Whistle Blower Policy to provide mechanism for directors and employees of the Company to report their concerns about any unethical behavior, actual or suspected fraud or violation of the
Company''s code of conduct or ethics policy. The Policy provides that the Company investigates such incidents, when reported, in an impartial manner and takes appropriate action to ensure that requisite standards of professional and ethical conduct are always upheld. This mechanism also provides for adequate safeguards against victimisation of director(s)/ employee(s) who avail the mechanism and also provide for direct access to the Chairman of the Audit Committee in exceptional cases. The Whistle Blower Policy may be accessed on the Company''s website at: https://www.divislabs.com/WhistleBlowerPolicy.pdf.
⢠Report of the Statutory Auditors on the financial statements for the year does not contain any qualification, reservation or adverse remark or disclaimer; or reporting of any offence or fraud.
⢠The Secretarial Audit Report does not contain any qualification, reservation or adverse remark or disclaimer.
⢠The Auditors have not reported any instances of frauds to the Audit Committee as prescribed under Section 143(12) of the Act.
M/s. Price Waterhouse Chartered Accountants LLP (Firm Registration No. 012754N/ N500016), Chartered Accountants, were appointed as statutory auditors of the Company to hold office for a second term of five consecutive years from the conclusion of the 32nd AGM of the Company held on August 22, 2022 till the conclusion of the 37th AGM to be held in the year 2027.
Pursuant to provisions of Section 204 of the Act and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Board of Directors of the Company has appointed Mr. V. Bhaskara Rao, Practicing Company Secretary (CP No. 4182) as the Secretarial Auditor of the Company to conduct the Secretarial audit for the financial year 2022-23. The Secretarial Audit report for the financial year 2022-23 is annexed herewith as "Annexure - V".
Pursuant to the Section 148 of the Act and Rule 3 of the Companies (Cost Records and Audit) Rules, 2014 as amended, the Company maintains cost records in its books of account. As per Rule 4 of the said rules, the requirement for cost audit is not applicable to a company which is covered under Rule 3, and whose revenue from exports, in foreign exchange, exceeds seventy five per cent of its total revenue or which is operating from a special economic zone. However, the Company has voluntarily opted for audit of cost records and appointed M/s. E.V.S & Associates, Cost Accountants as Cost Auditors.
In terms of Section 92(3) of the Act and Rule 12 of the Companies (Management and Administration) Rules, 2014, the Annual Return of the Company as on March 31, 2023 is available on the Company''s website and can be accessed at https://www.divislabs.com/annual-return/2022-23.pdf
⢠Information on Unclaimed Dividend and transfer to IEPF is provided in the Corporate Governance Report.
⢠No Company has become or ceased to be its subsidiary, joint venture or associate company during the year.
⢠No significant and material orders were passed by the regulators or courts or tribunals impacting the going concern status and Company''s operations in future.
⢠The Company has complied with provisions relating to the constitution of Internal Complaints Committee under the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 and rules made thereunder and during the year under review, there were no complaints received or pending.
⢠The information with respect to Compensation, Nomination and Remuneration Committee, Stakeholders Relationship Committee, Risk management Committee are disclosed in the Corporate Governance Report forming part of the Annual Report.
⢠The Company has followed the applicable Secretarial Standards, i.e. SS-1 and SS-2, relating to ''Meetings of the Board of Directors'' and ''General Meetings'' respectively.
⢠There was no application made or proceeding pending against the Company under the Insolvency and Bankruptcy Code, 2016 (31 of 2016) during the year under review.
Your Directors take this opportunity to thank the customers, shareholders, suppliers, bankers, business associates, financial institutions and Central and State Governments for their consistent support and encouragement to the Company.
We are sure you will join our Directors in conveying our sincere appreciation to employees at all levels of the Company and its subsidiaries, for their hard work, dedication and commitment, in particular during this unprecedented year, thereby ensuring uninterrupted supply of life saving medicines across the globe.
Mar 31, 2022
Your Directors'' have pleasure in presenting the 32nd Annual Report of Divi''s Laboratories Limited ("the Companyâ or "Divi''sâ) along with the audited financial statements for the financial year ended March 31, 2022. The consolidated performance of the Company and its subsidiaries ("Groupâ) has been referred to wherever required.
Financial performance of the Company for the year ended March 31 2022 is summarized below
(H in lakhs) |
||||
Particulars |
Stand |
alone |
Conso |
lidated |
2021-22 |
2020-21 |
2021-22 |
2020-21 |
|
Revenue |
8,87,982 |
6,79,861 |
8,95,983 |
6,96,940 |
Other Income |
11,126 |
6,253 |
11,387 |
6256 |
Total Income |
8,99,108 |
6,86,114 |
9,07,370 |
7,03,196 |
Expenditure before depreciation, interest |
5,00,336 |
3,97,793 |
5,07,789 |
4,10,946 |
Profit before depreciation, interest and tax (PBDIT) |
3,98,772 |
2,88,321 |
399,581 |
2,92,250 |
Depreciation |
31,055 |
25,465 |
31,151 |
25,559 |
Finance Cost |
65 |
69 |
80 |
87 |
Profit before Tax (PBT) |
3,67,652 |
2,62,787 |
3,68,350 |
2,66,604 |
Tax Expense: |
||||
Current Tax |
63,720 |
60,905 |
64,400 |
61,646 |
Deferred Tax |
9,078 |
6,410 |
7,905 |
6,529 |
Total Tax |
72,798 |
67,315 |
72,305 |
68,175 |
Profit after Tax (PAT) |
2,94,854 |
1,95,472 |
2,96,045 |
1,98,429 |
Other comprehensive Income (net of tax) |
218 |
16 |
406 |
40 |
Total Comprehensive Income |
2,95,072 |
1,95,488 |
2,96,451 |
1,98,469 |
Earnings per Share of H 2/- each (EPS) Basic & Diluted (H) |
111.07 |
73.63 |
111.52 |
74.75 |
Standalone
We have been able to achieve yet another year of decent business growth and profitability. The company has been able to conduct its operations with agility and resilience, duly handling the unprecedented covid pandemic and simultaneously quickly responded to the emerging opportunities.
During the year, the fast-track project taken up for an MNC customer was fully operational and achieved significant business. With our dynamic business model supported by our multi-purpose manufacturing facilities, we have been able to cater to customer demands and ensure speed of delivery.
Some of the highlights of the operations for the year are:
⢠Revenue for the year increased by 31% to H 8,87,982 lakhs.
⢠Profit before Tax (PBT) for the year has grown by 40% to H 3,67,652 lakhs.
⢠Tax Provision for the current year amounted to H 72,798 lakhs as against a tax provision of H 67,315 lakhs for the last year.
⢠Profit after Tax (PAT) for the year grew by 51% to H 2,94,854 lakhs as against a PAT of H 1,95,472 lakhs last year.
⢠Earnings Per Share of H 2/- each works out to H 111.07 for the year as against H 73.63 last year.
⢠Out of the total revenue, North America accounted for 44% and Europe for 33%.
Consolidated
The Group''s total consolidated income increased by 29% to
H 9,07,370 lakhs from H7,03,196 lakhs in the previous year.
Profit before tax (PBT) for the year grew by 38% to H 3,68,350 lakhs as against H 2,66,604 lakhs in the previous year. Profit after Tax for the year has increased by 49% to H 2,96,045 lakhs as against H 1,98,429 lakhs in the previous year.
The Company has 2 wholly owned subsidiaries viz., M/s. Divis Laboratories (USA) Inc., in USA and M/s. Divi''s Laboratories Europe AG in Switzerland, which are engaged in marketing/ distribution of nutraceutical products and to provide a greater reach to customers within these regions.
During the year, the subsidiaries have achieved revenue of H 48,845 lakhs as against H 45,631 lakhs in the previous year, reflecting a growth of 7% of revenue at the subsidiary level.
Subsidiaries are successful in establishing their market presence and in achieving consistent revenue. There has been no material change in the nature of the business of the subsidiaries.
As per Section 129(3) of the Companies Act, 2013 read with Companies (Accounts) Rules, 2014, statement containing the salient features of the financial statement of Company''s subsidiaries in form AOC-1 is annexed herewith as âAnnexure Iâ. Moreover, pursuant to provisions of Section 136(1) of the Companies Act, 2013, audited financial statements of the subsidiary companies are placed on the Company''s website and can be accessed at (https://www.divislabs.com/Subsidiarv-Financials-2022.pdf.) The Consolidated Financial Statements presented by the Company include the financial results of its subsidiary companies.
Policy for determining Material Subsidiaries, is available on the Company''s corporate website and can be accessed at: (https:// www.divis[abs.com/Materia[SubsidiarvPo[icv.pdf.) Presently, the Company does not have any material subsidiary.
As stipulated in the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 ("SEBI Listing Regulationsâ) and the Companies Act, 2013 ("the Actâ), the consolidated financial statements have been prepared by the Company in accordance with the relevant accounting standards. The audited consolidated financial statements together with Auditor''s Report thereon form part of the Annual Report.
During the year, the Company has capitalized Property, Plant and Equipment (PPE) and Intangible Assets valuing H 93,456 lakhs. Capital Work-in-Progress (WIP) as at the year-end amounted to H 46,993 lakhs.
During the year, the company has taken up several capacity expansion programs at the Company''s manufacturing facilities besides plant upgradation, augmenting the utility and support infrastructure.
Material Changes and Commitments
No other material changes and commitments have occurred after the close of the financial year till the date of this Report, which affect the financial position of the Company. Further, there is no change in the nature of business of the Company.
Dividend
Your Directors are pleased to recommend a dividend of H 30/-per equity share of H 2/- each, i.e., 1500% for the financial year ended March 31, 2022, subject to approval of members at the ensuing Annual General Meeting. The Dividend, if approved, will be paid to shareholders whose names appear in the Register of Members as on the book closure / record date.
The total dividend payout for the current year amounts to H 79,641 lakhs as against H 53,094 lakhs in the previous year. Dividend payout as a percentage of profits is 27% in line with the previous year. Payment of dividend to members will be subject to tax deduction at source (TDS) as per statutory requirement.
The dividend recommended is in accordance with the Company''s Dividend Distribution Policy. The Dividend Distribution Policy is available on the Company''s website and can be accessed at (https://www.divislabs.com/DividendDistributionPolicy.pdf.)
Transfer to Reserves
The Directors have decided to retain the entire total comprehensive income for the current year in Other Equity.
Deposits
The Company has not accepted any deposits from public covered by provisions of Section 73 of the Act.
Loans, Guarantees or Investments
The Company has not given any loans or guarantees covered under the provisions of Section 186 of the Act. The details of investments made by the Company are given in the notes to the financial statements forming part of this annual report.
Related Party Transactions
There are no materially significant related party transactions made by the Company with related parties which may have potential conflict of interest with the Company at large. As a matter of policy, your Company carries out transactions with related parties on an arms'' length basis. Statement of these transactions is given at Note No. 37 of the Notes to financial statements.
Accordingly, particulars of contracts or arrangements with related parties referred to in Section 188(1) of the Act along with the justification for entering into such contract or arrangement in prescribed Form AOC-2 does not form part of this report.
The Policy on Materiality of Related Party Transactions and on dealing with Related Party Transactions as approved by the Board is available on the Company''s website and can be accessed at (https://www.divislabs.com/RPT-Policy.pdf.)
Information in respect of internal financial controls and their adequacy is included in the Management Discussion and Analysis, which forms part of this Annual report.
The Company has a Risk Management Committee of the Board. The brief of terms of reference, composition and names of members and chairperson are set out in the Corporate Governance Report forming part of the Report.
The Company has an enterprise-wide approach to risk management, which lays emphasis on identifying and managing key operational and strategic risks. The aim is to avoid or minimise risks that pose a threat to Divi''s continued existence and to make improved managerial decisions to create value. The Company has been addressing various risks impacting the Company pursuant to the Risk Management Policy.
The Risk Management Committee constantly evaluates various risks - business, customer concentration, supplier concentration, regulatory compliances, confidentiality of processes, consistency of cGMP practices, environment, employee health and safety etc., monitors risks and deploy appropriate control systems aimed at mitigating such risks to the extent possible. The Audit Committee reviews the risk elements of the company''s business, finance, operations and compliance, and their respective mitigation strategies.
Further details on the Risk Management activities including key risks identified, and their mitigations are covered in Management Discussion and Analysis Report, forming part of this Annual Report.
During the financial year 2021-22, the focus areas of Risk Management Committee included review of cyber security and data protection, business continuity, various ESG risks.
In terms of provisions of Regulation 34(2) of SEBI Listing Regulations report on Management Discussion & Analysis for the year under review is provided in a separate section forming part of this Annual Report.
As required under Section 134 (5) of the Act, Directors of your Company hereby state and confirm that:
a) the applicable accounting standards read with requirements of Schedule III to the Act have been followed in the
preparation of the annual accounts for the year ended March 31, 2022 and there are no material departures from the same;
b) accounting policies selected were applied consistently and the judgements and estimates made are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at the end of the financial year and of the profit of the Company for the period;
c) proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;
d) the annual accounts have been prepared on a going concern basis.
e) internal financial controls have been laid down and such controls are adequate and operating effectively;
f) proper systems have been laid down to ensure compliance with the provisions of all applicable laws and such systems are adequate and operating effectively.
The Board meets at least four times in a year at quarterly intervals and more frequently if deemed necessary, to transact its business. During the financial year, the Board has met four times, i.e. May 29, 2021, August 07, 2021, November 06, 2021 and February 11, 2022.
During the financial year, the Members of the Company have approved re-appointment of Dr. Ramesh B.V. Nimmagadda as an Independent Director for a second term of 5 years effective from June 27, 2022, including approval pursuant to Regulation 17(1A) of the SEBI Listing Regulations for his continuation as Independent Director upon attaining 75 years of age on August 14, 2022. The Members also approved re-appointment of Dr. Ganapaty Seru as an Independent Director for a second term of 5 years effective from July 22, 2022.
Further, the Members have re-appointed Ms. Nilima Prasad Divi as Whole-time Director (Commercial) of the Company for a further period of 5 years with effect from June 27, 2022 and approved her remuneration.
Mr. N.V. Ramana and Mr. Madhusudana Rao Divi retires by rotation at the forthcoming 32nd AGM and being eligible, offer themselves for re-appointment.
The Company received declaration from all the Independent Directors of the Company under Section 149(7) of the Act
and Regulation 25 of the SEBI Listing Regulations, confirming that they meet the criteria of independence as provided in Section 149(6) of the Act and Regulation 16(1)(b) of SEBI Listing Regulations and there has been no change in the circumstances affecting their status as Independent Directors of the Company. Further, they have confirmed compliance to the code of conduct for independent directors as prescribed in Schedule IV of the Act. In the opinion of the Board, the Independent Directors of the Company possess necessary expertise, integrity and experience.
The Board of Directors carried out an annual evaluation of its own performance, of the Committees of the Board and of the individual directors including Independent Directors, pursuant to the provisions of the Companies Act, 2013 and SEBI Listing Regulations.
Performance evaluation was carried out on the basis of criteria evolved, as provided by the Guidance Note on Board Evaluation issued by Securities and Exchange Board of India, seeking inputs from the Directors individually and the committees through a structured questionnaire which provides a valuable feedback for contribution to the Board, improving Board effectiveness, maximising strengths and highlighting areas for further improvement, etc.
In a separate meeting of the Independent Directors, performance of the Chairperson, non-independent directors and the Board as a whole was evaluated taking into account the views of the non-independent directors and the same was discussed in the Board Meeting. Performance evaluation of Independent Directors is done by the entire Board of Directors (excluding the Directors being evaluated).
The details of the Separate meeting of the Independent Directors are reported in the Report on Corporate Governance which forms part of the Board''s Report.
The Policy on appointment and remuneration of directors, key managerial persons (KMP) and senior management including criteria for determining qualifications, positive attributes and director''s independence as required under Section 178(3) of the Act, and Regulation 19 read with Schedule II Part D of SEBI Listing Regulations has been formulated by the Company, inter-alia includes:
⢠To identify persons who are qualified to become directors and who may be appointed in senior management in accordance with the criteria laid down.
⢠To ensure a transparent board nomination process with the diversity of thought, experience, knowledge, perspective and gender in the Board.
⢠To determine remuneration based on the Company''s size and financial position and trends and practices on remuneration prevailing in peer companies, in the Pharma industry besides qualifications, skills, capabilities, etc.
⢠To carry out evaluation of the performance of Directors, as well as Key Managerial and Senior Management Personnel.
⢠To provide them rewards linked directly to their effort, performance, dedication and achievement relating to the Company''s operations.
⢠To retain, motivate and promote talent and to ensure long term sustainability of talented managerial persons and create competitive advantage.
Policy on Nomination and Remuneration of Directors, Key / Senior Managerial Personnel may be accessed on the Company''s website at: https://www.divislabs.com/ NominationRemunerationPolicy.pdf.
Pursuant to Section 197(12) of the Act, read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the prescribed particulars pertaining to remuneration and other details are given in "Annexure - IIâ to this Report.
The non-executive directors of the Company had no pecuniary relationship or transactions with the Company, other than sitting fees, annual remuneration and reimbursement of expenses, if any.
During the year, Dr. Kiran S. Divi received H 40 lakhs remuneration from the Company''s wholly owned subsidiary, Divi''s Laboratories Europe AG, for the services rendered by him in the capacity of Director. Pursuant to the terms of appointment of Dr. Kiran S. Divi to the extent of the remuneration paid at subsidiary is reduced from his salary payable by Divi''s Laboratories Limited.
Particulars of employees required to be furnished under Rule 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, as amended are given in "Annexure - IIIâ and forms part of this Report.
The Board of Directors has constituted Corporate Social Responsibility Committee (CSR Committee) consisting of members viz. Mr. R. Ranga Rao (Chairman), Dr. Murali K. Divi, Mr. Madhusudana Rao Divi and Dr. Ramesh B.V. Nimmagadda.
Corporate Social Responsibility Policy (CSR Policy) indicating the activities to be undertaken by the Company was adopted by the Board on the recommendation of the CSR Committee.
Report on Corporate Social Responsibility as per Rule 8 of Companies (Corporate Social Responsibility Policy) Rules, 2014 is prepared and the same is enclosed as ''''Annexure - IVâ to this Report.
Pursuant to the SEBI Listing Regulations, Business Responsibility Report (BRR) describing the initiatives taken by the Company is enclosed as part of this Report.
Particulars required under Section 134 (3) (m) of the Act read with Rule 8(3) of the Companies (Accounts) Rules, 2014 is given in the âAnnexure - Vâ to this report.
The report on Corporate Governance as per Regulation 34(3) read with Schedule V of the SEBI Listing Regulations is included as a part of this Annual Report. The requisite certificate from Mr. V. Bhaskara Rao, Practicing Company Secretary confirming the compliance with the conditions of Corporate Governance is attached to the report on Corporate Governance.
The details pertaining to the role, objective and composition of the Audit Committee are included in the Corporate Governance Report forming part of this Annual Report.
The Company has established a vigil mechanism and formulated a Whistle Blower Policy to provide mechanism for directors and employees of the Company to report their concerns about any unethical behavior, actual or suspected fraud or violation of the Company''s code of conduct or ethics policy. The Policy provides that the Company investigates such incidents, when reported, in an impartial manner and takes appropriate action to ensure that requisite standards of professional and ethical conduct are always upheld. This mechanism also provides for adequate safeguards against victimization of director(s)/ empioyee(s) who avail the mechanism and also provide for direct access to the Chairman of the Audit Committee in exceptional cases. The Whistle Blower Policy may be accessed on the Company''s website at: (https:// www.divisiabs.com/WhistieBiowerPoiicv.pdf.)
⢠Report of the Statutory Auditors on the financial statements for the year does not contain any qualification, reservation or adverse remark or disclaimer; or reporting of any offence or fraud.
⢠The Secretarial Audit Report does not contain any qualification, reservation or adverse remark or disclaimer.
⢠The Auditors have not reported any instances of frauds to the Audit Committee as prescribed under Section 143(12) of the Act.
Statutory Auditors
M/s. Price Waterhouse Chartered Accountants LLP (Firm Registration No. 012754N/ N500016), chartered accountants, were appointed as statutory auditors of the Company to hoid office for five consecutive years from the conclusion of the 27th Annual General Meeting (AGM) of the Company held on September 25, 2017 tiii the conclusion of the 32nd AGM to be held in the year 2022.
M/s. Price Waterhouse Chartered Accountants LLP wiii compiete their first term of five consecutive years as the statutory auditors of the Company at the conclusion of the 32nd AGM of the Company.
Pursuant to Section 139(2) of the Act, the Company can appoint M/s. Price Waterhouse Chartered Accountants LLP for a second term of five consecutive years.
The Audit Committee and the Board of Directors recommend to the Members for the reappointment of M/s. Price Waterhouse Chartered Accountants LLP, as statutory auditors of the Company for a second term of five consecutive years from the conclusion of the 32nd AGM tiii the conclusion of 37th AGM to be held in the year 2027.
M/s. Price Waterhouse Chartered Accountants LLP have consented to the said reappointment, and confirmed that their reappointment, if made, wouid be within the iimits specified under Section 141(3)(g) of the Act. They have further confirmed that they are not disquaiified to be reappointed as statutory auditor in terms of the provisions of the Act, and the provisions of the Companies (Audit and Auditors) Ruies, 2014, as amended from time to time.
Secretarial Audit
Pursuant to provisions of Section 204 of the Act and the Companies (Appointment and Remuneration of Manageriai Personnei) Ruies, 2014, the Board of Directors of the Company has appointed Mr. V. Bhaskara Rao, Practicing Company Secretary (PCS Registration No. 4182) as the Secretariai Auditor of the Company to conduct the Secretariai audit for the financiai year 2021-22. The Secretariai Audit report for the financiai year 2021-22 is annexed herewith as âAnnexure - VIâ.
Cost Audit
Pursuant to the Section 148 of the Act and Ruie 3 of the Companies (Cost Records and Audit) Ruies, 2014 as amended,
the Company maintains cost records in its books of account. As per Rule 4 of the said rules, the requirement for cost audit is not applicable to a company which is covered under Rule 3, and whose revenue from exports, in foreign exchange, exceeds seventy five per cent of its total revenue or which is operating from a special economic zone. However, the Company has voluntarily opted for audit of cost records and appointed M/s. E.V.S & Associates, Cost Accountants as Cost Auditors.
In terms of Section 92(3) of the Act and Rule 12 of the Companies (Management and Administration) Rules, 2014, the Annual Return of the Company as on March 31, 2022 is available on the Company''s website and can be accessed at (https://www. divislabs.com/annual-return/2021-22.pdf)
⢠Information on Unclaimed Dividend and transfer to IEPF is provided in the Corporate Governance Report.
⢠No Company has become or ceased to be its subsidiary, joint venture or associate company during the year.
⢠No significant and material orders were passed by the regulators or courts or tribunals impacting the going concern status and Company''s operations in future.
⢠The Company has complied with provisions relating to the constitution of Internal Complaints Committee under the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 and rules made thereunder and during the year under review, there were no complaints received or pending.
⢠The information with respect to Compensation, Nomination and Remuneration Committee, Stakeholders Relationship Committee, Risk management Committee are disclosed in the Corporate Governance Report forming part of the Annual Report.
⢠The Company has followed the applicable Secretarial Standards, i.e. SS-1 and SS-2, relating to ''Meetings of the Board of Directors'' and ''General Meetings'' respectively.
Your Directors take this opportunity to thank the customers, shareholders, suppliers, bankers, business associates, financial institutions and Central and State Governments for their consistent support and encouragement to the Company.
We are sure you will join our Directors in conveying our sincere appreciation to employees at all levels of the Company and its subsidiaries, for their hard work, dedication and commitment, in particular during this unprecedented year, thereby ensuring uninterrupted supply of life saving medicines across the globe.
Mar 31, 2021
Financial Results
Financial performance of the Company for the year ended March 31, 2021 is summarized below:
(H in Lakhs)
Particulars |
Standalone |
Consolidated |
||
2020-21| |
2019-20 |
2020-21| |
2019-20 |
|
Revenue |
6,79,861 |
5,31,057 |
6,96,940 |
5,39,442 |
Other Income |
6,253 |
18,986 |
6,256 |
18,963 |
Total Revenue |
6,86,114 |
5,50,043 |
7,03,196 |
5,58,405 |
Expenditure before depreciation and interest |
3,97,793 |
3,49,513 |
4,10,946 |
3,57,225 |
Profit before depreciation, interest and tax (PBDIT) |
2,88,321 |
2,00,530 |
2,92,250 |
2,01,180 |
Depreciation |
25,465 |
18,595 |
25,559 |
18,624 |
Finance Cost |
69 |
606 |
87 |
610 |
Profit before Tax (PBT) |
2,62,787 |
1,81,329 |
2,66,604 |
1,81,946 |
Provision for Tax: |
||||
Current Tax |
60,905 |
38,779 |
61,646 |
39,279 |
Deferred Tax |
6,410 |
5,279 |
6,529 |
5,013 |
Total tax provision |
67,315 |
44,058 |
68,175 |
44,292 |
Profit after Tax (PAT) |
1,95,472 |
1,37,271 |
1,98,429 |
1,37,654 |
Other comprehensive Income (net of tax) |
16 |
(521) |
40 |
35 |
Total Comprehensive Income |
1,95,488 |
1,36,750 |
1,98,469 |
1,37,689 |
Earnings per Share (EPS) Basic & Diluted (H) |
73.63 |
51.71 |
74.75 |
51.85 |
The new brownfield DC SEZ and DCV SEZ Units and the debottnecking / backward integration programs taken up by the Company have become fully operational during the year. Modernisation and upgradation of wastewater treatment plants at the manufacturing sites has been implemented.
During the year, we have also taken up another capex program with an estimated investment of H400 crores for fast-tracking a customs synthesis project. A part of the project has been completed and became operational and the rest of the capex will be completed during early part of the next financial year.
In respect of the Kakinada site, we have received final judgement from High Court dismissing the claims of the previous landowners. We are waiting for the final go-ahead from APIIC to hand over the balance land to us. We plan to implement the Project on receiving the possession of the balance part of the land.
Material Changes and Commitments
No other material changes and commitments have occurred after the close of the year till the date of this Report, which affect the financial position of the Company. Further, there is no change in the nature of business of the Company.
Dividend
Your Directors are pleased to recommend a dividend of H20/-per equity share of H2/- each, i.e., 1000% for the financial year ended March 31, 2021, subject to approval of members at the ensuing Annual General Meeting.
The total dividend payout for the current year amounts to H53,094 lakhs as against H51,206 lakhs in the previous year. Dividend payout as a percentage of profits is 27% as compared to 37% in the previous year. As members are aware, with effect from April 01, 2020, the Government has abolished the dividend distribution tax and dividend income is now taxable at the hands of shareholders. Hence payment of dividend to members will be subject to tax deduction at source (TDS) as per statutory requirement.
The dividend recommended is in accordance with the Company''s Dividend Distribution Policy. The Dividend Distribution Policy is available on the Company''s website and can be accessed at https://www.divislabs.com/DividendDistributionPolicy.pdf.
Transfer to Reserves
The Directors have decided to retain the entire total comprehensive income for the current year of H1,95,488 lakhs in the reserves (Retained Earnings).
Deposits
The Company has not accepted any deposits from public covered by provisions of Section 73 of the Companies Act, 2013.
Standalone
The current financial year has reflected the benefit of operations from the capex programs taken up by the Company during the last two years. The debottlenecking and backward integration programs taken up during the last two years have also become fully operational; and has reduced our dependence on key starting materials besides achieving productivity and cost efficiency. Validations have been completed for several active pharmaceutical ingredients in both the generic and Custom Synthesis products.
Ever since the outbreak of the Covid-19 pandemic, the Company has put in appropriate measures and protocols for the health and safety of its employees; besides streamlining the operations and maintaining the supply chain which enabled the Company to continue uninterrupted supply of active pharmaceutical ingredients to customers globally.
Some of the highlights of the operations for the year are:
⢠Total Income for the year increased by 25% to H 68,6114 lakhs.
⢠Operating profit (PBDIT) for the year amounted to H 2,88,321 lakhs as against an operating profit of H 2,00,530 lakhs last year.
⢠Profit before Tax (PBT) for the year has grown by 45% to H2,62,787 lakhs as against a PBT of H 1,81,329 lakhs for the last year.
⢠Tax Provision for the current year amounted to H 67,315 lakhs as against a tax provision of H44,058 lakhs for the last year.
⢠Profit after Tax (PAT) before other comprehensive income for the year grew by 42% to H 1,95,472 lakhs as against a PAT of H 1,37,271 lakhs last year.
⢠Earnings Per Share of H2/- each works out to H73.63 for the year as against H 51.71 last year.
⢠Out of the total revenue, 24% came from North America, 48% from Europe, 12% from Asia, 12% from India and 4% from rest of the World.
Consolidated
The Company''s total consolidated income increased by 26% to H7,03,196 lakhs from H5,58,405 lakhs in the previous year.
The operating profit before depreciation, finance charges and tax (PBDIT) amounted to H2,92,250 lakhs as against H2,01,180 lakhs in the previous year. Profit after Tax, before Other Comprehensive Income, for the year accounted to H1,98,429 lakhs as against H 1,37,654 lakhs in the previous year.
Our subsidiaries viz., M/s. Divis Laboratories (USA) Inc., in USA and M/s. Divi''s Laboratories Europe AG in Switzerland are engaged in marketing/distribution of nutraceutical products and to provide a greater reach to customers within these regions.
During the year, the subsidiaries have achieved revenue of H 45,631 lakhs as against H32,070 lakhs in the previous year, reflecting a growth of 42% of revenue at the subsidiary level.
Subsidiaries have been having consistent profits and have improved networth over the years. There has been no material change in the nature of the business of the subsidiaries.
As per Section 129(3) of the Companies Act, 2013 (the Act) read with Companies (Accounts) Rules, 2014, statement containing the salient features of the financial statement of Company''s subsidiaries in form AOC-1 is annexed herewith as "Annexure Iâ. Moreover, pursuant to provisions of Section 136(1) of the Companies Act, 2013, audited financial statements of the subsidiary companies are placed on the Company''s website and can be accessed at https://www.divislabs.com/Subsidiary-Financials-2021.pdf. The Consolidated Financial Statements presented by the Company include the financial results of its subsidiary companies.
Policy for determining Material Subsidiaries, is available on the Company''s corporate website and can be accessed at: https:// www.divislabs.com/MaterialSubsidiaryPolicy.pdf. Presently, the Company does not have any material subsidiary.
As stipulated in the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 ("SEBI Listing Regulationsâ) and the Companies Act, 2013, the consolidated financial statements have been prepared by the Company in accordance with the relevant accounting standards. The audited consolidated financial statements together with Auditors Report thereon form part of the Annual Report.
During the financial year 2020-21, the Company has capitalised assets of H1,18,351 lakhs, and an amount of H71,062 lakhs is carried forward as capital work-in-progress at the end of the year.
Further details on the Risk Management activities including the implementation of risk management policy, key risks identified, and their mitigations are covered in Management Discussion and Analysis section, which forms part of the Annual Report.
Management Discussion and Analysis
In terms of provisions of Regulation 34(2) of SEBI Listing Regulations report on Management Discussion & Analysis for the year under review is provided in a separate section forming part of this Annual Report.
Directors'' Responsibility Statement
As required under Section 134 (5) of the Companies Act, 2013, Directors of your Company hereby state and confirm that:
a) the applicable accounting standards read with requirements of Schedule III to the Act have been followed in the preparation of the annual accounts for the year ended March 31, 2021 and there are no material departures from the same;
b) accounting policies selected were applied consistently and the judgements and estimates made are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at the end of the financial year and of the profit of the Company for the period;
c) proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;
d) the annual accounts have been prepared on a going concern basis.
e) internal financial controls have been laid down and such controls are adequate and operating effectively;
f) proper systems have been laid down to ensure compliance with the provisions of all applicable laws and such systems are adequate and operating effectively.
Number of Meetings of Board of Directors
The Board meets at least four times in a year at quarterly intervals and more frequently if deemed necessary, to transact its business. During the financial year, the Board has met four times, i.e. on June 06, 2020, August 08, 2020, November 07, 2020 and February 06, 2021.
During the year, the Company has not given any loans or guarantees covered under the provisions of Section 186 of the Companies Act, 2013.
The details of investments made by the Company are given in the notes to the financial statements.
There are no materially significant related party transactions made by the Company with related parties which may have potential conflict of interest with the Company at large. As a matter of policy, your Company carries out transactions with related parties on an arms'' length basis. Statement of these transactions is given at Note No. 38 of the Notes to financial statements.
Accordingly, particulars of contracts or arrangements with related parties referred to in Section 188(1) along with the justification for entering into such contract or arrangement in Form AOC-2 does not form part of this report.
The Policy on Materiality of Related Party Transactions and on dealing with Related Party Transactions as approved by the Board is available on the Company''s website and can be accessed at https://www.divislabs.com/RPT-Policy.pdf.
Information in respect of internal financial controls and their adequacy is included in the Management Discussion and Analysis, which is a part of the Annual report.
The Company has an enterprise-wide approach to risk management, which lays emphasis on identifying and managing key operational and strategic risks. The aim is to avoid or minimise risks that pose a threat to Divi''s continued existence and to make improved managerial decisions to create value. The Company has been addressing various risks impacting the Company and the policy and processes of the Company on risk management is provided in the Management Discussion and Analysis.
The Risk Management Committee constituted by the Company constantly evaluates various risks - business, customer concentration, supplier concentration, regulatory compliances, confidentiality of processes, consistency of cGMP practices, environment, employee health and safety etc., monitors risk and deploy appropriate control systems aimed at mitigating such
As per the provisions of the Companies Act, 2013 and the Articles of Association of the Company, Dr. Kiran S. Divi and Ms. Nilima Prasad Divi, Directors of the Company, will retire by rotation at the ensuing Annual General Meeting and being eligible, the Directors offer themselves for re-appointment. The Board of Directors, on recommendation of Compensation, Nomination and Remuneration Committee, has recommended their reappointment.
The Company has obtained declaration from all Independent Directors of the Company under Section 149(7) of the Companies (the Act), 2013 confirming that they meet the criteria of independence as provided in Section 149(6) of the Companies Act, 2013 and Regulation 25 of SEBI Listing Regulations. There has been no change in the circumstances affecting their status as Independent Directors of the Company.
The Board of Directors carried out an annual evaluation of its own performance, of the Committees of the Board and of the individual directors including Independent Directors, pursuant to the provisions of the Companies Act, 2013 and SEBI Listing Regulations.
Performance evaluation was carried out on the basis of criteria evolved, as provided by the Guidance Note on Board Evaluation issued by Securities and Exchange Board of India, seeking inputs from the Directors individually and the committees through a structured questionnaire which provides a valuable feedback for contribution to the Board, improving Board effectiveness, maximising strengths and highlighting areas for further improvement etc.,
In a separate meeting of the Independent Directors, performance of the Chairperson, non-independent directors and the Board as a whole was evaluated taking into account the views of the nonindependent directors and the same was discussed in the Board Meeting. Performance evaluation of Independent Directors is done by the entire Board of Directors (excluding the Directors being evaluated).
The Policy on appointment and remuneration of Directors, Key Managerial Persons and Senior Management including criteria for determining qualifications, positive attributes and director''s independence as required under Section 178(3) of the Companies Act, 2013 and Regulation 19 read with Schedule II Part D of SEBI Listing Regulations has been formulated by the Company:
⢠To identify persons who are qualified to become directors and who may be appointed in senior management in accordance with the criteria laid down.
⢠To ensure a transparent board nomination process with the diversity of thought, experience, knowledge, perspective and gender in the Board.
⢠To determine remuneration based on the Company''s size and financial position and trends and practices on remuneration prevailing in peer companies, in the Pharma industry besides qualifications, skills, capabilities etc.,
⢠To carry out evaluation of the performance of Directors, as well as Key Managerial and Senior Management Personnel.
⢠To provide them rewards linked directly to their effort, performance, dedication and achievement relating to the Company''s operations.
⢠To retain, motivate and promote talent and to ensure long term sustainability of talented managerial persons and create competitive advantage.
Policy on Nomination and Remuneration of Directors, Key / Senior Managerial Personnel may be accessed on the Company''s website at: https://www.divislabs.com/ NominationRemunerationPolicy.pdf.
Particulars required to be furnished under Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, as amended are given in "Annexure - IIâ and forms part of this Report.
The non-executive directors of the Company had no pecuniary relationship or transactions with the Company, other than sitting fees, annual remuneration and reimbursement of expenses, if any.
Particulars of employees required to be furnished under Rule 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, as amended are given in "Annexure - IIIâ and forms part of this Report.
The Board of Directors has constituted Corporate Social Responsibility Committee (CSR Committee) consisting of members viz. Mr. R. Ranga Rao (Chairman), Dr. Murali K. Divi, Mr. Madhusudana Rao Divi and Dr. Ramesh B.V. Nimmagadda.
Annual Return
In terms of Section 92(3) of the Companies Act, 2013 and Rule 12 of the Companies (Management and Administration) Rules, 2014, the Annual Return of the Company as on March 31, 2021 is available on the Company''s website and can be accessed at https://www.divislabs.com/annual-return/2020-21.pdf
Other Disclosures
⢠Information on Unclaimed Dividend and transfer to IEPF is provided in the Corporate Governance Report.
⢠No Company has become or ceased to be its subsidiary, joint venture or associate Company during the year.
⢠No significant and material orders were passed by the regulators or courts or tribunals impacting the going concern status and Company''s operations in future.
⢠The Company has complied with provisions relating to the constitution of Internal Complaints Committee under the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 and rules made thereunder and during the year under review, there were no complaints received or pending.
Corporate Social Responsibility Policy (CSR Policy) indicating the activities to be undertaken by the Company was adopted by the Board on the recommendation of the CSR Committee.
Report on Corporate Social Responsibility as per Rule 8 of Companies (Corporate Social Responsibility Policy) Rules, 2014 is prepared and the same is enclosed as "Annexure - IVâ to this Report.
Pursuant to the SEBI Listing Regulations, Business Responsibility Report (BRR) describing the initiatives taken by the Company is enclosed as part of this Report.
Conservation of Energy, Technology Absorption and Foreign Exchange Earnings & Outgo
Particulars required under Section 134 (3) (m) of the Companies Act, 2013 read with Rule 8(3) of the Companies (Accounts) Rules, 2014 is given in the "Annexure - Vâ to this report.
The report on Corporate Governance as per Regulation 34(3) read with Schedule V of the SEBI Listing Regulations is included as a part of this Annual Report. The requisite certificate from Mr. V. Bhaskara Rao, Practicing Company Secretary confirming the compliance with the conditions of Corporate Governance is attached to the report on Corporate Governance.
The details pertaining to the role, objective and composition of the Audit Committee are included in the Corporate Governance Report which is part of the Annual Report for the year.
The Company has established a vigil mechanism and formulated a Whistle Blower Policy to provide mechanism for directors and employees of the Company to report their concerns about any unethical behavior, actual or suspected fraud or violation of the Company''s code of conduct or ethics policy. The Policy provides that the Company investigates such incidents, when reported, in an impartial manner and takes appropriate action to ensure that requisite standards of professional and ethical conduct are always upheld. This mechanism also provides for adequate safeguards against victimization of director(s)/ employee(s) who avail the mechanism and also provide for direct access to the Chairman of the Audit Committee in exceptional cases. The Whistle Blower Policy may be accessed on the Company''s website at: https://www.divislabs.com/WhistleBlowerPolicy.pdf.
⢠Report of the Statutory Auditors on the financial statements for the year does not contain any qualification, reservation or adverse remark or disclaimer; or reporting of any offence or fraud.
⢠The Secretarial Audit Report does not contain any qualification, reservation or adverse remark or disclaimer.
At the Annual General Meeting held on September 25, 2017, M/s Price Waterhouse Chartered Accountants LLP (Firm Registration No. 012754N/ N500016) were appointed as Statutory Auditors of the Company to hold office for five consecutive years till the conclusion of the 32nd Annual General Meeting of the Company in the calendar year 2022, subject to ratification by the members at each Annual General Meeting.
In terms of first proviso to Section 139 of the Companies Act, 2013, the appointment of the auditors shall be placed for ratification at every Annual General Meeting. However, Companies (Amendment) Act, 2017 omitted the first proviso to Section 139 of Companies Act, 2013 that requires ratification of appointment of auditor at every annual general meeting.
Accordingly, M/s. Price Waterhouse Chartered Accountants LLP will continue as the Statutory Auditors of the Company till conclusion of 32nd Annual General Meeting of the Company.
Pursuant to provisions of Section 204 of the Companies Act, 2013 and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Board of Directors of the Company has appointed Mr. V. Bhaskara Rao, Practicing Company Secretary (PCS Registration No. 4182) as the Secretarial Auditor of the Company to conduct the Secretarial audit for the financial year 2020-21. The Secretarial Audit report for the financial year 2020-21 is annexed herewith as "Annexure VIâ.
Pursuant to the Section 148 of the Act and Rule 3 of the Companies (Cost Records and Audit) Rules, 2014 as amended, the Company maintains cost records in its books of account. As per Rule 4 of the said rules, the requirement for cost audit is not applicable to a company which is covered under Rule 3, and whose revenue from exports, in foreign exchange, exceeds seventy five per cent of its total revenue or which is operating from a special economic zone. However, the Company has voluntarily opted for audit of cost records and appointed M/s. E.V.S & Associates, Cost Accountants as Cost Auditors.
⢠The information with respect to Compensation, Nomination and Remuneration Committee, Stakeholders Relationship Committee, Risk management Committee are disclosed in the Corporate Governance Report forming part of the Annual Report.
⢠The Company has followed the applicable Secretarial Standards, i.e. SS-1 and SS-2, relating to ''Meetings of the Board of Directors'' and ''General Meetings'' respectively.
Your Directors take this opportunity to thank the customers, shareholders, suppliers, bankers, business associates, financial institutions and Central and State Governments for their consistent support and encouragement to the Company.
We are sure you will join our Directors in conveying our sincere appreciation to employees at all levels of the Company and its subsidiaries, for their hard work, dedication and commitment, in particular during this unprecedented year, thereby ensuring uninterrupted supply of life saving medicines across the globe.
Mar 31, 2019
To
The Members,
The Directors have pleasure in presenting the Annual Report of Diviâs Laboratories Limited (the Company or Diviâs) along with the audited financial statements for the financial year ended March 31, 2019. The consolidated performance of the Company and its subsidiaries has been referred to wherever required.
Financial Results
Financial performance of the Company for the year ended 31 March 2019 is summarized below:
(Rs. lakhs)
Particulars |
Standalone |
Consolidated |
||
2018-19 1 |
2017-18 |
2018-19 |
2017-18 |
|
Revenue |
487966 |
383723 |
494626 |
391278 |
Other Income |
15658 |
11248 |
15563 |
11344 |
Total Revenues |
503624 |
394971 |
510189 |
402622 |
Expenditure |
303070 |
258660 |
307442 |
265107 |
Profit before depreciation, interest and tax (PBDIT) |
200554 |
136311 |
202747 |
137515 |
Depreciation |
16881 |
14242 |
16890 |
14249 |
Finance Cost |
350 |
133 |
350 |
133 |
Profit before Tax (PBT) |
183323 |
121936 |
185507 |
123133 |
Provision for Tax: |
||||
Current Tax |
47245 |
28713 |
47551 |
28983 |
Deferred Tax |
2813 |
6265 |
2682 |
6449 |
Total tax provision |
50058 |
34978 |
50233 |
35432 |
Profit after Tax (PAT) |
133265 |
86958 |
135274 |
87701 |
Other comprehensive Income (net of tax) |
105 |
67 |
(35) |
990 |
Total Comprehensive Income |
133370 |
87025 |
135239 |
88691 |
Earnings per Share (EPS) Basic & Diluted (Rs.) |
50.20 |
32.76 |
50.96 |
33.04 |
Operations
Operations for the year reflect normalized operations after successful closure of audits by US-FDA for Companyâs Unit-II at Visakhapatnam, Andhra Pradesh during the last year. The Companyâs Unit-I at Choutuppal, Telangana State was also inspected by the US-FDA during May 2018 and was concluded without any observations.
Standalone
- Total Revenues for the year increased by 28% to RS.503624 lakhs.
- Operating profit (PBDIT) for the year grew by 47% to RS.200554 lakhs as against an operating profit of RS.136311 lakhs last year.
- Profit before Tax (PBT) for the year amounted to RS.183323 lakhs as against a PBT of RS.121936 lakhs for the last year.
- Tax Provision for the current year amounted to RS.50058 lakhs as against a tax provision of RS.34978 lakhs for the last year.
- Profit after Tax (PAT) before Other Comprehensive Income for the year amounted to RS.133265 lakhs as against a PAT of RS.86958 lakhs last year.
- Earnings Per Share of RS.2/- each works out to RS.50.20 for the year as against RS.32.76 last year.
- Out of the total revenue, 27% came from North America, 46% from Europe, 12% from Asia, 12% from India and 3% from rest of the World.
Consolidated
Our total revenues on consolidated basis Increased by 27% to RS.510189 lakhs from RS.402622 lakhs In the previous year.
The operating profit before depreciation, finance charges and tax (PBDIT) amounted to RS.202747 lakhs as against RS.137515 lakhs in the previous year. Profit after Tax, before Other Comprehensive Income, for the year accounted to RS.135274 lakhs as against RS.87701 lakhs in the previous year.
Subsidiaries
Our subsidiaries viz., M/s. Diviâs Laboratories (USA) Inc., in USA and M/s. Diviâs Laboratories Europe AG in Switzerland are engaged in marketing/distribution of nutraceutical products and to provide a greater reach to customers within these regions.
During the year, the subsidiaries have achieved aggregate turnover of RS.35638 lakhs as against RS.22593 lakhs in the previous year, reflecting a growth of 58% for the nutraceutical products in North America and Europe.
Subsidiaries have been having consistent profitable operations for the past few years, have cleared accumulated losses and turned into positive networth. There has been no material change in the nature of the business of the subsidiaries.
As per Section 129(3) of the Companies Act, 2013 read with Companies (Accounts) Rules, 2014, statement containing the salient features of the financial statement of Companyâs subsidiaries in form AOC-1 is annexed herewith as âAnnexure Iâ. Moreover, pursuant to provisions of Section 136(1) of the Companies Act, 2013, audited financial statements of the subsidiary companies are placed on the website of the Company at www.divislabs.com. The Consolidated Financial Statements presented by the Company include the financial results of its subsidiary companies.
Policy for determining Material Subsidiaries, is available on the Companyâs corporate website at: https://www.divislabs.com/wp-content/uploads/2018/07/Policy-on-Material-Subsidiary 1.pdf Presently, the Company does not have any material subsidiary.
Consolidated Accounts
As stipulated in the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (âSEBI Listing Regulationsâ) and the Companies Act, 2013, the consolidated financial statements have been prepared by the Company in accordance with the relevant accounting standards. The audited consolidated financial statements together with Auditors Report thereon form part of the Annual report.
Capital Expenditure
In order to cater to the increasing opportunities in generic and big pharma business, the Company is taking up two brownfield projects with an aggregate investment of RS.1200 crores:
- An SEZ Unit at our Unit-II at Visakhapatnam, named as DCV SEZ Unit, with an investment of RS.600 crores. (revised from the estimate of RS.400 crores announced at the last General Meeting).
- Another SEZ Project with an investment of RS.600 crores in the available land at our Unit-1 in Bhuvangiri-Yadadri (erstwhile Nalgonda) District, Telangana State.
Work has already commenced and the Projects are expected to be completed by end of the year 2019-20 barring unforeseen circumstances. The Company has also taken up debottlenecking programs at Unit-I as well as Unit-II by investing an aggregate amount of RS.300 crores -which would also create additional capacities for existing products. In addition, we have also taken up augmentation of waste treatment infrastructure at Unit-II at an estimated cost of RS.150 crores.
Material Changes and Commitments
No other material changes and commitments have occurred after the close of the year till the date of this Report, which affect the financial position of the Company, Further, there is no change in the nature of business of the Company,
Dividend
Your Directors are pleased to recommend a dividend of RS.16/- per equity share of RS.2/- each, i.e., 800% for the financial year ended 31 March 2019, subject to approval of members at the ensuing Annual General Meeting.
The total dividend payout for the current year amounts to RS.51206 lakhs (inclusive of tax of RS.8731 lakhs) as against RS.32004 lakhs in the previous year. Dividend payout (including dividend tax) as a percentage of profits is 38% as compared to 37% in the previous year.
Transfer to Reserves
The Directors have decided to retain the entire total comprehensive income of RS.133370 lakhs in the Retained Earnings.
Deposits
The Company has not accepted any deposits from public covered by provisions of Section 73 of the Companies Act, 2013.
Loans, Guarantees or Investments
During the year, the Company has not given any loans or guarantees covered under the provisions of Section 186 of the Companies Act, 2013.
The details of investments made by the Company are given in the notes to the financial statements.
Related Party Transactions
There are no materially significant related party transactions made by the Company with Promoters, Key Managerial Personnel or other designated persons which may have potential conflict with interest of the Company at large. As a matter of policy, your Company carries out transactions with related parties on an armsâ length basis. Statement of these transactions is given at Note No. 39 of the Notes to Accounts.
Accordingly, particulars of contracts or arrangements with related parties referred to in Section 188(1) along with the justification for entering into such contract or arrangement in Form AOC-2 does not form part of this report.
Internal Financial Controls
Information in respect of internal financial controls and their adequacy is included in the Management Discussion and Analysis, which is a part of the Annual report.
Risk Management
The Company has an enterprise-wide approach to risk management, which lays emphasis on identifying and managing key operational and strategic risks. The aim is to avoid or minimise risks that pose a threat to Diviâs continued existence and to make improved managerial decisions to create value. The Company has been addressing various risks impacting the Company and the policy and processes of the Company on risk management is provided in the Management Discussion and Analysis.
The Risk Management Committee constituted by the Company constantly evaluates various risks - business, customer concentration, supplier concentration, regulatory compliances, confidentiality of processes, consistency of cGMP practices, environment, employee health and safety etc., monitors risk and deploy appropriate control systems aimed at mitigating such risks to the extent possible.
Management Discussion and Analysis
In terms of provisions of Regulation 34(2) of SEBI Listing Regulations report on Management Discussion & Analysis for the year under review is provided in a separate section forming part of this Annual Report.
Directorsâ Responsibility Statement
As required under Section 134 (5) of the Companies Act, 2013, Directors of your Company hereby state and confirm that:
a) the applicable accounting standards have been followed in the preparation of the annual accounts;
b) accounting policies selected were applied consistently and the judgements and estimates made are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at the end of the financial year and of the profit of the Company for the period;
c) proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;
d) the annual accounts have been prepared on a going concern basis;
e) internal financial controls have been laid down and such controls are adequate and operating effectively;
f) proper systems have been laid down to ensure compliance with the provisions of all applicable laws and such systems are adequate and operating effectively.
Number of Meetings of Board of Directors
The Board meets at least four times in a year at quarterly intervals and more frequently if deemed necessary, to transact its business. During the financial year, the Board has met six times, i.e. on 26 May 2018, 04 August 2018, 27 October 2018, 02 February 2019, 09 March 2019 and 28 March 2019.
Directors and Key Managerial Personnel
Re- Appointment:
As per the provisions of the Companies Act, 2013 Mr. Wran S. Divi and Ms. Nilima Motaparti, Whole-time Directors will retire by rotation at the ensuing 29th Annual General Meeting (AGM) and, being eligible, offer themselves for re-appointment.
Members have approved the re-appointment of Dr. G. Suresh Kumar and Mr. R. Ranga Rao as Non-executive Independent Directors of the Company by special resolution passed through postal ballot for a second term of five years with effect from 31 March 2019.
Members have approved the continuance of directorship and reappointment of Mr. K. V, K. Seshavataram as Non-executive Independent Director of the Company by special resolution passed through postal ballot for a second term of five years with effect from 23 June 2019.
Appointment:
Your Board has appointed Prof. Sunaina Singh as an Additional Independent Director, at its meeting held on 28 March 2019 on the recommendation of the Nomination and Remuneration Committee. The Board commends her appointment as an Independent Director for your approval.
Brief profile of the directors proposed for appointment/ re-appointment is given in the notice convening the 29th AGM for reference of the members.
Declaration by Independent Directors
The Company has obtained declaration from all independent directors of the Company under Section 149(7) of the Companies Act, 2013 confirming that they meet the criteria of independence as provided in Section 149(6) of the Companies Act, 2013 and Regulation 25 of SEBI Listing Regulations.
Board Evaluation
The Board of Directors carried out an annual evaluation of its own performance, of the committees of the Board and of the individual directors pursuant to the provisions of the Companies Act, 2013 and SEBI Listing Regulations.
Performance evaluation was carried out on the basis of criteria evolved, as provided by the Guidance Note on Board Evaluation issued by Securities and Exchange Board of India, seeking inputs from the directors individually and the committees through a structured questionnaire which provides a valuable feedback for contribution to the Board, improving board effectiveness, maximising strengths and highlighting areas for further improvement etc.,
In a separate meeting of the Independent Directors, performance of the non-independent directors and the Board as a whole was evaluated taking into account the views of the non-independent directors and the same was discussed in the Board Meeting. Performance evaluation of Independent Directors is done by the entire Board of Directors (excluding the directors being evaluated).
Policy on Directorsâ Appointment and Remuneration
The Policy on appointment and remuneration of Directors, Key Managerial Persons and Senior Management including criteria for determining qualifications, positive attributes and directorâs independence as required under Section 178(3) of the Companies Act, 2013 and Regulation 19 read with Schedule II Part D of SEBI Listing Regulations has been formulated by the Company:
- To identify persons who are qualified to become directors and who may be appointed in senior management in accordance with the criteria laid down.
- To ensure a transparent board nomination process with the diversity of thought, experience, knowledge, perspective and gender in the Board.
- To determine remuneration based on the Companyâs size and financial position and trends and practices on remuneration prevailing in peer companies, in the Pharma industry besides qualifications, skills, capabilities etc.,
- To carry out evaluation of the performance of Directors, as well as Key Managerial and Senior Management Personnel.
- To provide them rewards linked directly to their effort, performance, dedication and achievement relating to the Companyâs operations.
- To retain, motivate and promote talent and to ensure long term sustainability of talented managerial persons and create competitive advantage.
Policy on Nomination and Remuneration of Directors, Key / Senior Managerial Personnel may be accessed on the Companyâs website at: https://www.divislabs.com/wp-content/uploads/2018/07/Nomination-and-Remuneration-policy18-1.pdf
Remuneration Details of Directors and KMP
Particulars required to be furnished under Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, as amended are given in âAnnexure - IIâ and forms part of this Report.
Particulars of Employees
Particulars of employees required to be furnished under Rule 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, as amended are given in âAnnexure - IIIâ and forms part of this Report.
Corporate Social Responsibility
The Board of Directors has constituted Corporate Social Responsibility Committee (CSR Committee) consisting of members viz. Mr. R. Ranga Rao (Chairman), Dr. Murali K. Divi, Mr. Madhusudana Rao Divi and Dr. Ramesh B.V, Nimmagadda.
Corporate Social Responsibility Policy (CSR Policy) indicating the activities to be undertaken by the Company was adopted by the Board on the recommendation of the CSR Committee.
Report on Corporate Social Responsibility as per Rule 8 of Companies (Corporate Social Responsibility Policy) Rules, 2014 is prepared and the same is enclosed as âAnnexure - IVâ to this Report.
Business Responsibility Report
Pursuant to the SEBI Listing Regulations, Business Responsibility Report (BRR) describing the initiatives taken by the Company is enclosed as part of this Report.
Conservation of Energy, Technology Absorption and Foreign Exchange Earnings & Outgo
Particulars required under Section 134 (3) (m) of the Companies Act, 2013 read with Rule 8(3) of the Companies (Accounts) Rules, 2014 is given in the âAnnexure - Vâ to this report.
Corporate Governance Report
The report on Corporate Governance as per Regulation 34(3) read with Schedule V of the SEBI Listing Regulations is included as a part of this Annual Report. The requisite certificate from Mr. V, Bhaskara Rao, Practicing Company Secretary confirming the compliance with the conditions of Corporate Governance is attached to the report on Corporate Governance.
Audit Committee
The details pertaining to the role, objective and composition of the Audit Committee are included in the Corporate Governance Report which is part of the Annual Report for the year.
Vigil Mechanism
The Company has established a vigil mechanism and formulated a Whistle Blower Policy to provide mechanism for directors and employees of the Company to report their concerns about any unethical behavior, actual or suspected fraud or violation of the Companyâs code of conduct or ethics policy. The Policy provides that the Company investigates such incidents, when reported, in an impartial manner and takes appropriate action to ensure that requisite standards of professional and ethical conduct are always upheld. This mechanism also provides for adequate safeguards against victimization of director(s)/ employee(s) who avail the mechanism and also provide for direct access to the Chairman of the Audit Committee in exceptional cases. The Whistle Blower Policy may be accessed on the Companyâs website at:
https://www.divislabs.com/wp-content/uploads/2019/03/Whistle-blower-policy.pdf
Audit Reports
- Report of the Statutory Auditors for the year does not contain any qualification, reservation or adverse remark or disclaimer or reporting of any offence or fraud.
- The Secretarial Audit Report does not contain any qualification, reservation or adverse remark or disclaimer.
Statutory Auditors
At the Annual General Meeting held on 25 September 2017, M/s Price Waterhouse Chartered Accountants LLP (Firm Registration No. 012754N/ N500016) were appointed as Statutory Auditors of the Company to hold office for five consecutive years till the conclusion of the 32nd Annual General Meeting of the Company in the calendar year 2022 (subject to ratification by the members at each Annual General Meeting).
In terms of first proviso to Section 139 of the Companies Act, 2013, the appointment of the auditors shall be placed for ratification at every Annual General Meeting. However, Companies (Amendment) Act, 2017 omitted the first proviso to Section 139 of Companies Act, 2013 that requires ratification of appointment of auditor at every annual general meeting.
Accordingly, M/s. Price Waterhouse Chartered Accountants LLP will continue as the Statutory Auditors of the Company till conclusion of 32nd Annual General Meeting of the Company.
Secretarial Audit
Pursuant to provisions of Section 204 of the Companies Act, 2013 and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Board of Directors of the Company has appointed Mr. V. Bhaskara Rao, Practicing Company Secretary (PCS Registration No. 4182) as the Secretarial Auditor of the Company to conduct the Secretarial audit for the financial year 2018-19. The Secretarial Audit report for the financial year 2018-19 is annexed herewith as âAnnexure VIâ.
Cost Audit
Pursuant to the Section 148 of the Act and Rule 3 of the Companies (Cost Records and Audit) Rules, 2014 as amended, the Company maintains cost records in its books of account. As per Rule 4 of the said rules, the requirement for cost audit is not applicable to a company which is covered under Rule 3, and whose revenue from exports, in foreign exchange, exceeds seventy five per cent of its total revenue or which is operating from a special economic zone. However, Company has voluntarily opted for audit of cost records and appointed M/s. E.V.S & Associates, Cost Accountants as Cost Auditors.
Extract of Annual Return
An Extract of Annual Return in Form MGT-9 as per the provisions of Section 92(3) of the Companies Act, 2013 and Rule 12 of Companies (Management and Administration) Rules, 2014, is enclosed as âAnnexure VIIâ to this report and is also available on the website of the Company at https://www.divislabs.com/wp-content/ uploads/2019/07/FR0M-N0.-MGT-9.pdf.
Other Disclosures
- Information on Unclaimed Dividend and transfer to IEPF is provided in the Corporate Governance Report.
- No company has become or ceased to be its subsidiary, joint venture or associate company during the year.
- No significant and material orders were passed by the regulators or courts or tribunals impacting the going concern status and Companyâs operations in future.
- Company has complied with provisions relating to the constitution of Internal Complaints Committee under the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 and rules made thereunder.
- No cases remain unresolved pursuant to the Sexual Harassment of Women at Work Place (Prevention, Prohibition and Redressal) Act, 2013 during the year under review,
- As per Regulation 43A of the SEBI Listing Regulations, the Dividend Distribution Policy is disclosed in the Corporate Governance Report and on the website of the Company.
- Directors of your company hereby state and confirm that the Company has complied with all the applicable Secretarial Standards.
Acknowledgements
The Directors thank the customers, vendors, various Government departments and agencies, investors and its banks for their continuous support. The Directors also appreciate and value the commitment and contribution by its employees at all levels.
For and on behalf of the Board
Dr. Murali K. Divi
Place: Hyderabad Chairman & Managing Director
Date: 25 May 2019 (DIN: 00005040)
Mar 31, 2018
BOARD''S REPORT
Dear Shareholders,
The Directors have pleasure in placing before you the Twenty Eighth Annual Report of the Company together with the Audited Accounts for the year ended 31 March 2018.
Financial Results
The Company''s financial performance, for the year ended 31 March, 2018 is summarized below:
RS,in Lakhs
Particulars |
Standalone |
Consolidated |
||
2017-18 |
2016-17 |
2017-18 |
2016-17 |
|
Revenue |
383723 |
406578 |
391278 |
410626 |
Other Income |
11248 |
7594 |
11344 |
7489 |
Total Revenues |
394971 |
414172 |
402622 |
418115 |
Expenditure |
258660 |
262798 |
265107 |
266023 |
Profit before depreciation, interest and tax (PBDIT) |
136311 |
151374 |
137515 |
152093 |
Depreciation |
14242 |
12326 |
14249 |
12333 |
Finance Cost |
133 |
225 |
133 |
225 |
Profit before Tax (PBT) |
121936 |
138823 |
123133 |
139534 |
Provision for Tax: |
||||
Current Tax |
28713 |
28523 |
28983 |
28523 |
Deferred Tax |
6265 |
4973 |
6449 |
4969 |
Total tax provision |
34978 |
33496 |
35432 |
33492 |
Profit after Tax (PAT) |
86958 |
105327 |
87701 |
106042 |
Other comprehensive Income (net of tax) |
67 |
(140) |
990 |
367 |
Total Comprehensive Income |
87025 |
105187 |
88691 |
106409 |
Earnings per Share (EPS) Basic & Diluted (H) |
32.76 |
39.68 |
33.04 |
39.95 |
Operations
Standalone
- Total Revenues for the year decreased by 5% to RS,394971 lakhs.
- Operating profit (PBDIT) for the year amounted to RS,136311 lakhs as against an operating profit of RS,151374 lakhs last year.
- Profit before Tax (PBT) for the year amounted to RS,121936 lakhs as against a PBT of RS,138823 lakhs for the last year.
- Tax Provision for the current year amounted to RS,34978 lakhs as against a tax provision of RS,33496 lakhs.
- Profit after Tax (PAT) before Other Comprehensive Income for the year amounted to RS,86958 lakhs as against a PAT of RS,105327 lakhs last year.
- Earnings Per Share of H2/- each works out to H32.76 for the year as against H39.68 last year.
- Out of the total revenue, 29% came from North America, 44% from Europe, 9% from Asia, 13% from India and 5% from rest of the World.
Consolidated
Our total revenues on consolidated basis decreased by 4% to RS,402622 lakhs from RS,418115 lakhs in the previous year.
The operating profit before depreciation, finance charges and tax (PBDIT) amounted to RS,137515 lakhs as against RS,152093 lakhs in the previous year. Profit after Tax, before Other Comprehensive Income, for the year accounted to RS,87701 lakhs as against RS,106042 lakhs in the previous year.
Subsidiaries
Our subsidiaries viz., M/s. Divis Laboratories (USA) Inc., in USA and M/s. Divi''s Laboratories Europe AG in Switzerland are engaged in marketing/distribution of nutraceutical products and to provide a greater reach to customers within these regions.
During the year, the subsidiaries have achieved aggregate turnover of RS,22593 lakhs as against RS,21678 lakhs in the previous year, reflecting a growth of 4% for the nutraceutical products in North America and Europe.
Subsidiaries have been into profitable operations for the last few years and with the additional capacities created at Visakhapatnam, the planned growth of nutraceutical business and the support from the parent, the company is confident of continuing profitability at the subsidiaries and recovery of the investments/advances made in the foreseeable future. There has been no material change in the nature of the business of the subsidiaries.
As per section 129(3) of the Companies Act, 2013 read with Companies (Accounts) Rules, 2014, statement containing the salient features of the financial statement of Company''s subsidiaries in form AOC-1 is annexed herewith as "Annexure Iâ. Moreover, pursuant to provisions of Section 136(1) of the Companies Act, 2013, audited financial statements of the subsidiary companies are placed on the website of the company at www.divislabs.com. The Consolidated Financial Statements presented by the Company include the financial results of its subsidiary companies.
Policy for determining Material Subsidiaries, is available on the Company''s corporate website at:
http://www.divislabs.com/inside/pdf/Policy%20Subsidiary.pdf Presently, the Company does not have any material subsidiary.
Consolidated Accounts
As stipulated in the listing regulations and Companies Act, 2013, the consolidated financial statements have been prepared by the Company in accordance with the relevant accounting standards. The audited consolidated financial statements together with Auditors Report thereon form part of the Annual report.
Regulatory Inspections
We reported in the last Board''s report that the company''s Unit-II at Visakhapatnam was inspected by US-FDA during Nov-Dec, 2016 and that an Import Alert was issued to the company. The US-FDA also exempted several products from the Import Alert. Subsequently, the company received a warning letter from US-FDA, summarizing the deviations from current Good Manufacturing Practices (CGMP) for active pharmaceutical ingredients (APIs).
The company filed detailed responses and given updates to the Form-483 and the warning letter within the stipulated time. The company, along with its external regulatory consultants and subject matter experts, has taken up appropriate remediation measures to address the deficiencies observed by US-FDA. During July, 2017, the US-FDA has lifted the Import Alert under Clause 99-32 imposed on the company''s Unit-II at Visakhapatnam.
The company''s Unit-II was again inspected by the US-FDA during September 2017. This inspection was for full cGMP and verification of all corrective actions proposed against the previous Inspection observations. All previous observations have been confirmed as completed and resolved. On completion of the current inspection, the Investigators of US-FDA have issued a Form-483 with 6 observations and the company filed its response to the same within the stipulated time. During November, 2017, FDA has removed the import alert under clause 66-40 and also closed out the warning letter and issued Establishment Inspection Report (EIR) for the Unit-II.
Unit-II was inspected by HPRA (Ireland) and JAZMP (Slovenia) during July/August, 2017 and the inspection concluded successfully with no critical observations.
The company''s Unit-I at Choutuppal, Telangana State has also been inspected by the US-FDA during May 2018. This was a general cGMP inspection by the FDA and the inspection was concluded without any observations.
Material Changes and Commitments
No other material changes and commitments have occurred after the close of the year till the date of this Report, which affect the financial position of the company. Further, there is no change in the nature of business of the Company.
Dividend
Your Directors are pleased to recommend a dividend of H10/- per equity share of H2/- each, i.e., 500% for the financial year ended 31 March, 2018, subject to approval of members at the ensuing Annual General Meeting.
The total dividend payout for the current year amounts to RS,32004 lakhs (inclusive of tax of RS,5457 lakhs) as against RS,31951 lakhs in the previous year. Dividend (including dividend tax) as a percentage of profits is 37% as compared to 30% in the previous year.
Transfer to Reserves
The Directors have decided to retain the entire profit of RS,87025 lakhs in the Retained Earnings.
Deposits
The Company has not accepted any deposits from public covered by provisions of Section 73 of the Companies Act, 2013.
Loans, Guarantees or Investments
During the year, the company has not given any loans or guarantees covered under the provisions of section 186 of the Companies Act, 2013.
The details of investments made by company are given in the notes to the financial statements.
Related Party Transactions
There are no materially significant related party transactions made by the company with Promoters, Key Managerial Personnel or other designated persons which may have potential conflict with interest of the company at large. As a matter of policy, your Company carries out transactions with related parties on an arms'' length basis. Statement of these transactions is given at Note No. 39 of the notes to Accounts.
Accordingly, particulars of contracts or arrangements with related parties referred to in section 188(1) along with the justification for entering into such contract or arrangement in Form AOC-2 does not form a part of this report.
Internal Financial Controls
Information in respect of internal financial control and their adequacy is included in the Management Discussion and Analysis, which is a part of the Annual report.
Risk Management
The Company has an enterprise-wide approach to risk management, which lays emphasis on identifying and managing key operational and strategic risks. The company has been addressing various risks impacting the company and the policy and processes of the company on risk management is provided in the Management Discussion and Analysis.
The Risk Management Committee constituted by the Company constantly evaluates various risks - business, customer concentration, supplier concentration, regulatory compliances, confidentiality of processes, consistency of cGMP practices, environment, employee health and safety etc., monitors risk and deploy appropriate control systems aimed at mitigating such risks to the extent possible.
Management Discussion and Analysis
In terms of provisions of regulation 34(2) of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (âSEBI Listing Regulations") report on Management Discussion & Analysis for the year under review is provided in a separate section forming part of this Annual Report.
Directors'' Responsibility Statement
As required under Section 134 (5) of the Companies Act, 2013, Directors of your company hereby state and confirm that:
a) the applicable accounting standards have been followed in the preparation of the annual accounts;
b) accounting policies selected were applied consistently and the judgements and estimates made are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at the end of the financial year and of the profit of the company for the period;
c) proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;
d) the annual accounts have been prepared on a going concern basis.
e) internal financial controls have been laid down and such controls are adequate and operating effectively;
f) proper systems have been laid down to ensure compliance with the provisions of all applicable laws and such systems are adequate and operating effectively.
Number of Meetings of Board of Directors
The Board meets at least four times in a year at quarterly intervals and more frequently if deemed necessary, to transact its business. During the financial year the Board has met five times, i.e. on 26 May 2017, 27 June 2017, 22 July 2017, 31 October 2017 and 27 January 2018.
Directors and Key Managerial Personnel
Retirement:
Smt. S. Sridevi has completed her tenure of appointment as Small Shareholder Independent Director on 22 June, 2017 and she is not eligible for re-appointment. Your Board appreciates the contribution made by her during her tenure as Director of the Company.
Re- Appointment:
As per the provisions of the Companies Act, 2013 Mr. N.V. Ramana, Executive Director and Mr. Madhusudana Rao Divi, Whole-time Director will retire by rotation at the ensuing 28th Annual General Meeting and, being eligible, offer themselves for re-appointment.
Appointment:
Mrs. Nilima Motaparti has been appointed as Whole-time Director of the company in the Annual General Meeting held on 25 September 2017 for a period of five years with effect from 27 June 2017.
Dr. Ramesh B.V. Nimmagadda and Dr. S. Ganapaty have been appointed as Independent Directors of the company in the Annual General Meeting held on 25 September 2017 for a period of five years with effect from 27 June 2017 and 22 July 2017 respectively.
Brief profile of the directors proposed for appointment/ reappointment is given in the notice convening the 28th AGM for reference of the shareholders.
Declaration By Independent Directors
The Company has obtained declaration from all independent directors of the company under section 149(7) of the Companies Act, 2013 confirming that they meet the criteria of independence as provided in Section 149(6) of the Companies Act, 2013 and Regulation 25 of SEBI Listing Regulations.
Board Evaluation
The Board of Directors carried out an annual evaluation of its own performance, of the committees of the Board and of the individual directors pursuant to the provisions of the Companies Act, 2013 and SEBI Listing Regulations.
Performance evaluation was carried out on the basis of criteria evolved, as provided by the Guidance Note on Board Evaluation issued by Securities and Exchange Board of India, seeking inputs from the directors individually and the committees through a structured questionnaire which provides a valuable feedback for contribution to the Board, improving board effectiveness, maximizing strengths and highlighting areas for further improvement etc.,
In a separate meeting of the Independent directors, performance of the non-independent directors and the Board as a whole was evaluated taking into account the views of the no independent directors and the same was discussed in the Board meeting. Performance evaluation of Independent Directors is done by the entire Board of Directors (excluding the directors being evaluated)
Policy on Directors'' Appointment and Remuneration
The Policy on appointment and remuneration of Directors, Key Managerial Personnel and Senior Management including criteria for determining qualifications, positive attributes and director''s independence as required under section 178(3) of the Companies Act, 2013 and Regulation 19 read with Schedule II Part D of SEBI Listing Regulations has been formulated by the company:
- To identify persons who are qualified to become directors and who may be appointed in senior management in accordance with the criteria laid down.
- To ensure a transparent board nomination process with the diversity of thought, experience, knowledge, perspective and gender in the Board.
- To determine remuneration based on the Company''s size and financial position and trends and practices on remuneration prevailing in peer companies, in the Pharma industry besides qualifications, skills, capabilities etc.,
- To carry out evaluation of the performance of Directors, as well as Key Managerial and Senior Management Personnel.
- To provide them rewards linked directly to their effort, performance, dedication and achievement relating to the Company''s operations.
- To retain, motivate and promote talent and to ensure long term sustainability of talented managerial personnel and create competitive advantage.
Policy on Nomination and Remuneration of Directors, Key / Senior Managerial Personnel may be accessed on the Company''s website at: http://www.divislabs.com/inside/pdf/Nomination%20and%20 Remuneration%20policy18.pdf
Remuneration Details of Directors and KMP
Particulars required to be furnished under Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, as amended are given in âAnnexure - II" and forms part of this Report.
Particulars of Employees
Particulars of employees required to be furnished under Rule 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, as amended are given in "Annexure - IIIâ and forms part of this Report.
Corporate Social Responsibility
The Board of Directors has constituted Corporate Social Responsibility Committee (CSR Committee) consisting of members viz. Mr. R. Ranga Rao (Chairman), Dr. Murali K. Divi, Mr. N. V. Ramana and Mr. Madusudana Rao Divi.
Corporate Social Responsibility Policy (CSR Policy) indicating the activities to be undertaken by the Company was adopted by the Board on the recommendation of the CSR Committee.
Report on Corporate Social Responsibility as Per Rule 8 of Companies (Corporate Social Responsibility Policy) Rules, 2014 is prepared and the same is enclosed as âAnnexure - IV" to this Report.
Business Responsibility Report
Pursuant to the SEBI Listing Regulations, Business Responsibility Report (BRR) describing the initiatives taken by the Company is enclosed as part of this Report.
Conservation of Energy, Technology Absorption and Foreign Exchange Earnings & Outgo
Particulars required under Section 134 (3) (m) of the Companies Act, 2013 read with Rule 8(3) of the Companies (Accounts) Rules, 2014 is given in the âAnnexure - V" to this report.
Corporate Governance Report
The report on Corporate Governance as per regulation 34(3) read with Schedule V of the SEBI Listing Regulations is included as a part of this Annual Report. The requisite certificate from Mr. V. Bhaskara Rao, Practicing Company Secretary confirming the compliance with the conditions of Corporate Governance is attached to the report on Corporate Governance.
Audit Committee
The details pertaining to the role, objective and composition of the Audit Committee are included in the Corporate Governance Report which is part of the Annual Report for the year.
Vigil Mechanism
The Company has established a vigil mechanism and formulated a Whistle Blower Policy to provide mechanism for directors and employees of the company to report their concerns about any unethical behavior, actual or suspected fraud or violation of the company''s code of conduct or ethics policy. The Policy provides that the company investigates such incidents, when reported, in an impartial manner and takes appropriate action to ensure that requisite standards of professional and ethical conduct are always upheld. This mechanism also provides for adequate safeguards against victimization of director(s)/ employee(s) who avail the mechanism and also provide for direct access to the Chairman of the Audit Committee in exceptional cases. The Whistle Blower Policy may be accessed on the Company''s website at: http://www. divislabs.com/inside/pdf/Whistle%20blower%20policy.pdf
Audit Reports
- Report of the Statutory Auditors for the year does not contain any qualification, reservation or adverse remark or disclaimer or reporting of any offence or fraud.
- The Secretarial Audit Report does not contain any qualification, reservation or adverse remark or disclaimer
Statutory Auditors
At the Annual General Meeting held on 25 September 2017, M/s Price Waterhouse Chartered Accountants LLP (Firm Registration No. 012754N/ N500016) were appointed as Statutory Auditors of the Company to hold office for five consecutive years till the conclusion of the 32nd Annual General Meeting of the Company in the calendar year 2022 (subject to ratification by the shareholders at each Annual General Meeting).
In terms of first proviso to Section 139 of the Companies Act, 2013, the appointment of the auditors shall be placed for ratification at every Annual General Meeting. However, Companies (Amendment) Act, 2017 omitted the first proviso to Section 139 of Companies Act, 2013 that requires ratification of appointment of auditor at every annual general meeting.
Accordingly, M/s. Price Waterhouse Chartered Accountants LLP will continue as the Statutory Auditors of the Company till conclusion of 32nd Annual General Meeting of the Company.
Secretarial Audit
Pursuant to provisions of section 204 of the Companies Act, 2013 and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Board of Directors of the Company has appointed Mr. V. Bhaskara Rao, Practicing Company Secretary (PCS Registration No. 4182) as the Secretarial Auditor of the Company to conduct the Secretarial Audit for the financial year 2017-18. The Secretarial Audit report for the financial year 2017-18 is annexed herewith as "Annexure VIâ.
Cost Audit
Pursuant to the Section 148 of the Act and rule 3 of the Companies (cost records and audit) Rules, 2014 as amended, the company maintains cost records in its books of account. As per rule 4 of the said rules, the requirement for cost audit is not applicable to a company which is covered under rule 3, and whose revenue from exports, in foreign exchange, exceeds seventy five per cent of its total revenue or which is operating from a special economic zone. However, company has voluntarily opted for audit of cost records and appointed M/s. E.V.S & Associates, Cost Accountants as Cost Auditors.
Extract of Annual Return
An Extract of Annual Return in Form MGT-9 as per the provisions of Section 92(3) of the Companies Act, 2013 and Rule 12 of Companies (Management and Administration) Rules, 2014, is enclosed as "Annexure VIIâ to this report.
Other Disclosures
- Information on Unclaimed Dividend and transfer to IEPF is provided in the Corporate Governance Report
- No company has become or ceased to be its Subsidiary, joint venture or associate company during the year
- No significant and material orders were passed by the regulators or courts or tribunals impacting the going concern status and company''s operations in future.
- No cases were filed pursuant to the Sexual Harassment of Women at Work Place (Prevention, Prohibition and Redressal) Act, 2013 during the year under review.
- As per Regulation 43A of the SEBI Listing Regulations, the Dividend Distribution Policy is disclosed in the Corporate Governance Report and on the website of the Company.
- Directors of your company hereby state and confirm that the Company has complied with all the applicable Secretarial Standards.
Acknowledgements
The Board expresses its appreciation for the continued support received from Government authorities, Banks, customers, vendors and investors. The Board also appreciates and value the commitment and contribution of its employees at all levels.
For and on behalf of the Board
Dr. Murali K. Divi
Hyderabad Chairman & Managing Director
26 May 2018 (DIN: 00005040)
Mar 31, 2017
Dear Shareholders,
The Directors have pleasure in placing before you the Twenty Seventh Annual Report of the Company together with the Audited Accounts for the year ended 31st March 2017.
Financial Results
The Company''s financial performance, for the year ended 31st March, 2017 is summarized below:
RS, in Lakhs
Particulars |
Standalone |
Consolidated |
||
2016-17 |
2015-16 |
2016-17 |
2015-16 |
|
Revenue |
406577.66 |
374984.94 |
410626.01 |
380487.97 |
Other income |
7597.65 |
9591.58 |
7489.30 |
9744.05 |
Total Revenue |
414175.31 |
384576.52 |
418115.31 |
390232.02 |
Expenditure |
262800.58 |
234936.34 |
266022.79 |
238751.22 |
Profit before depreciation, interest and tax (PBDIT) |
151374.73 |
149640.18 |
152092.52 |
151480.80 |
Depreciation |
12326.23 |
11810.20 |
12333.19 |
11818.13 |
Finance Cost |
225.62 |
300.69 |
225.62 |
378.28 |
Profit before Tax (PBT) |
138822.88 |
137529.29 |
139533.71 |
139284.39 |
Provision for Tax: |
||||
Current Tax |
28522.55 |
28423.09 |
28522.55 |
28423.09 |
Deferred Tax |
4973.34 |
(1978.13) |
4969.35 |
(1717.15) |
Total tax provision |
33495.89 |
26444.96 |
33491.90 |
26705.94 |
Profit after Tax (PAT) |
105326.99 |
111084.33 |
106041.81 |
112578.45 |
Other comprehensive Income (net of tax) |
(140.02) |
(301.24) |
322.24 |
(1577.57) |
Total comprehensive Income |
105186.97 |
110783.09 |
106408.61 |
111000.88 |
Earnings per Share (EPS) Basic & Diluted (H) |
39.68 |
41.84 |
39.95 |
42.41 |
Indian Accounting Standards (Ind-AS)
The Ministry of Corporate Affairs (MCA), vide its notification dated 16th February, 2015, notified the Indian Accounting Standards (Ind-AS) applicable to certain classes of companies replacing the previous Indian GAAP prescribed under the Companies Act, 2013. For our company, Ind AS is applicable from this financial year with a transition date of 1st April, 2015.
Major areas which had impact on account of transition to Ind AS are:
o Fair value of certain financial instruments like investments, loans to subsidiaries, deposits o Remeasurement of post-employment benefit obligations o Reporting Revenue inclusive of excise duty o Deferred tax on GAAP adjustments o Remeasurement of lease rentals
Reconciliation of the effect of transition from the previous Indian GAAP to Ind AS has been provided in Note No.46 in the notes to accounts in the standalone and Note No.45 to the consolidated financial statements.
Operations
Standalone
o Revenues for the year increased by 8% to RS,414175.31 lakhs. o Operating profit (PBDIT) for the year amounted to RS,151374.73 lakhs as against an operating profit of RS,149225.94 lakhs last year o Profit before Tax (PBT) for the year amounted to RS,138822.88 lakhs as against a PBT of RS,137529.29 lakhs for the last year, o Tax Provision for the current year amounted to RS,33495.89 lakhs as against a tax provision of RS,26444.96 lakhs). o Profit after Tax (PAT) before Other Comprehensive Income for the year amounted to RS,105326.99 lakhs as against a PAT of RS,111084.33 lakhs last year.
o Earnings Per Share of H2/- each works out to H39.68 for the year as against H41.84 last year. o Out of the total revenue, 33% came from North America, 40% from Europe, 12% from Asia, 13% from India and 2% from rest of the World.
Consolidated
Our total revenues on consolidated basis increased to RS,418115.31 lakhs from RS,390232.02 lakhs in the previous year, reflecting a growth of 7%.
The operating profit before depreciation, finance charges and tax (PBDIT) amounted to RS,152092.52 lakhs as against RS,151480.80 lakhs in the previous year. Profit after Tax, before Other Comprehensive Income, for the year accounted to RS,106041.81 lakhs as against RS,112578.45 lakhs in the previous year.
Dividend
Your Directors are pleased to recommend a dividend of H10/- per equity share of H2/- each, i.e., 500% for the financial year ended 31st March, 2017, subject to approval of members at the ensuing Annual General Meeting.
The total dividend payout for the current year amounts to RS,31951.17 lakhs (inclusive of tax of RS,5404.32 lakhs) as against RS,31951.17 lakhs in the previous year. Dividend (including dividend tax) as a percentage of profits is 30% as compared to 29% in the previous year.
Transfer to Reserves
The company proposes to retain the entire amount of RS,407694.36 lakhs in the Profit and Loss Account.
Subsidiaries
Our subsidiaries viz., M/s. Divis Laboratories (USA) Inc., in USA and M/s. Divi''s Laboratories Europe AG in Switzerland are engaged in marketing/ distribution of nutraceutical products and to provide a greater reach to customers within these regions.
During the year, the subsidiaries have achieved aggregate turnover of H21677.72 lakhs as against previous year turnover of H18856.54 lakhs, reflecting a growth of 14.96% for the nutraceutical products in North America and Europe.
Subsidiaries have achieved growth in operating profit. Gain on forex currency translation for the year accounted to RS,254.94 lakhs for US subsidiary and RS,194.79 lakhs for Europe subsidiary. With significant efforts having been made in the operations, market reach and qualifications from several customers, the company is confident of achieving profitability at the subsidiaries and recovery of the investments/advances made in the next couple of years. There has been no material change in the nature of the business of the subsidiaries.
As per section 129(3) of the Companies Act, 2013 read with Companies (Accounts) Rules, 2014, statement containing the salient features of the financial statement of Company''s subsidiaries in form AOC-1 is annexed herewith as "Annexure I". Moreover, pursuant to provisions of Section 136(1) of the Companies Act, 2013, audited financial statements of the subsidiary companies are placed on the website of the company at www.divislabs.com. The Consolidated Financial Statements presented by the Company include the financial results of its subsidiary companies.
Policy for determining Material Subsidiaries, is available on the Company''s corporate website at:
http://www.divislabs.com/inside/pdf/Policy%20Subsidiary.pdf Presently, the Company does not have any material subsidiary.
Consolidated Accounts
As stipulated in the listing regulations and Companies Act, 2013, the consolidated financial statements have been prepared by the Company in accordance with the relevant accounting standards. The audited consolidated financial statements together with Auditors Report thereon form part of the Annual report.
Kakinada Project
Your company proposes to set up a new manufacturing facility at Kakinada in the state of Andhra Pradesh with an initial investment of RS,700 crores for augmenting capacities as also de-risking its operations; and in this regard, has approached the Government of Andhra Pradesh for allotment of suitable land. The Government has allotted 505 acres of land at Ontimamidi Village (Kona), Thondangi Mandal, East Godavari District, in the State of Andhra Pradesh and gave us advance possession of the land, pending procedural formalities. The company has spent an amount of RS,3435.22 lakhs during the year towards the cost of land and minor civil works at the site. Government has registered land of an extent of 351.72 acres in favour of the company.
While we started the preliminary procedures for securing the land and applications for permissions for setting up the facility, several farmers/earlier owners whose land has been acquired/resumed by the Government have filed writ petitions before the Hon''ble High Court of Telangana and Andhra Pradesh contesting such acquisition/resumption or seeking additional compensation. The company hopes that the Government would resolve the legal issue with the contestants paving the way for registration of the balance land after which the company would be able to set up its manufacturing facility.
Deposits
The Company has not accepted any deposits from public covered by provisions of Section 73 of the Companies Act, 2013.
Loans, Guarantees or Investments
During the year, the company has not given any loans or guarantees covered under the provisions of section 186 of the Companies Act, 2013. The details of investments made by company are given in the notes to the financial statements.
Management Discussion and Analysis
In terms of provisions of Regulation 34(2) of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 ("SEBI Listing Regulations") report on Management Discussion & Analysis for the year under review is provided in a separate section forming part of this Annual Report.
Internal Financial Controls
Information in respect of internal financial control and their adequacy is included in the Management Discussion and Analysis, which is a part of the Annual report.
FDA Inspection
The Company has received a warning letter from US-FDA for its Unit-II at Visakhapatnam subsequent to inspection of the facility during Nov-Dec, 2016 and issue of an Import Alert. The US-FDA has also exempted several products from the Import Alert. The warning letter summarized the deviations from current Good Manufacturing Practices (cGMP) for active pharmaceutical ingredients (APIs) and also that its Investigators documented that the company limited and/or refused an FDA inspection.
The company responded to the observations in Form-483 issued by the US-FDA and also to the warning letter within the stipulated time. The company engaged reputed consultants and subject matter experts for advising on the deviations observed and have initiated the remediation measures to comply with the cGMP requirements.
Material Changes and Commitments
No other material changes and commitments have occurred after the close of the year till the date of this Report, which affect the financial position of the company. Further, there is no change in the nature of business of the Company.
Risk Management
The Company has an enterprise-wide approach to risk management, which lays emphasis on identifying and managing key operational and strategic risks. Through this approach, the company strives to identify opportunities that enhance organizational values while managing or mitigating risks that can adversely impact its future performance. The company has been addressing various risks impacting the company and the policy of the company on risk management is provided elsewhere in this annual report in Management Discussion and Analysis.
The Risk Management Committee constituted by the Company constantly evaluates various risks - business, customer concentration, supplier concentration, regulatory compliances, confidentiality of processes, consistency of cGMP practices, environment, employee health and safety etc., monitors risk and deploy appropriate control systems aimed at mitigating such risks to the extent possible.
Directors'' Responsibility Statement
As required under Section 134 (5) of the Companies Act, 2013, Directors of your company hereby state and confirm that:
a) the applicable accounting standards have been followed in the preparation of the annual accounts;
b) accounting policies selected were applied consistently and the judgments and estimates made are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at the end of the financial year and of the profit of the company for the period;
c) proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;
d) the annual accounts have been prepared on a going concern basis.
e) internal financial controls have been laid down and such controls are adequate and operating effectively;
f) proper systems have been laid down to ensure compliance with the provisions of all applicable laws and such systems are adequate and operating effectively.
Directors and Key Managerial Personnel Re-appointment:
As per the provisions of the Companies Act, 2013 Mr. Kiran S. Divi, Whole time Director will retire by rotation at the ensuing 27th Annual General Meeting and, being eligible, offers himself for re-appointment.
Retirement:
Smt. S. Sridevi has completed her tenure of appointment as Small shareholder Independent Director on 22nd June, 2017 and she is not eligible for re-appointment. Your Board appreciates the contribution made by her during her tenure as director of the company.
Appointment:
Your Board has appointed Mrs. Nilima Motaparti as an Additional Director designated as Whole-time Director, at its meeting held on 27th June, 2017 on the recommendation of the Nomination and Remuneration Committee and the Audit Committee. Mrs. Nilima has been working in the management cadre of the company as Chief Controller (Commercial) since July, 2012 as approved by the members at their meeting held on 6th August, 2012. The Board commends her appointment as Whole-time Director for your approval.
Your Board has appointed Dr. Ramesh B.V. Nimmagadda as an Additional Independent Director, at its meeting held on 27th June, 2017 on the recommendation of the Nomination and Remuneration Committee. The
Board commends his appointment as an Independent Director for your approval.
Brief profile of the directors proposed for appointment/re-appointment are given in the notice convening the 27th AGM for reference of the shareholders.
Number of Meetings of Board of Directors
The Board meets at least four times in a year at quarterly intervals and more frequently if deemed necessary, to transact its business. During the financial year the Board has met four times, i.e. on 28th May 2016, 12th August 2016, 12th November 2016 and 4th February 2017.
Delaration By Independent Directors
The company has obtained declaration from all independent directors of the company under section 149(7) of the Companies Act, 2013 confirming that they meet the criteria of independence as provided in Section 149(6) of the Companies Act, 2013 and Regulation 25 of SEBI Listing Regulations.
Audit Committee
Details pertaining to the role, objective and composition of the Audit Committee are included in the Corporate Governance Report which is part of the Annual Report for the year.
Board Evaluation
The Board of Directors carried out an annual evaluation of its own performance, of the committees of the Board and of the individual directors pursuant to the provisions of the Companies Act, 2013 and SEBI Listing Regulations.
Performance evaluation was carried out on the basis of criteria evolved, as provided by the Guidance Note on Board Evaluation issued by Securities and Exchange Board of India, seeking inputs from the directors individually and the committees through a structured questionnaire which provides a valuable feedback for contribution to the Board, improving board effectiveness, maximizing strengths and highlighting areas for further improvement etc.,
In a separate meeting of the Independent directors, performance of the non-independent directors and the Board as a whole was evaluated taking into account the views of the non-independent directors and the same was discussed in the Board meeting. The performance evaluation of independent directors shall be done by the entire Board of Directors (excluding the director being evaluated).
Policy on Directors'' Appointment and Remuneration
The Policy on appointment and remuneration of Directors, Key Managerial Persons and Senior Management including criteria for determining qualifications, positive attributes and directors'' independence as required under section 178(3) of the Companies Act, 2013 and Regulation 19 read with Schedule II Part D of SEBI Listing Regulations is annexed herewith as "Annexure II".
Remuneration Details of Directors and KMP
Particulars required to be furnished under Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, as amended are given in "Annexure-III" and forms part of this Report.
Related Party Transactions
There are no materially significant related party transactions made by the company with Promoters, Key Managerial Personnel or other designated persons which may have potential conflict with interest of the company at large. As a matter of policy, your Company carries out transactions with related parties on an arms'' length basis. Statement of these transactions is given at Note No.42 of the notes to Accounts.
Accordingly, particulars of contracts or arrangements with related parties referred to in Section 188(1) along with the justification for entering into such contract or arrangement in Form AOC-2 does not form a part of this report.
Vigil Mechanism
The Company has established a vigil mechanism and formulated a Whistle Blower Policy to provide mechanism for directors and employees of the company to report their concerns about any unethical behavior, actual or suspected fraud or violation of the company''s code of conduct or ethics policy. The Policy provides that the company investigates such incidents, when reported, in an impartial manner and takes appropriate action to ensure that requisite standards of professional and ethical conduct are always upheld. This mechanism also provides for adequate safeguards against victimization of director(s) / employee(s) who avail the mechanism and also provide for direct access to the Chairman of the Audit Committee in exceptional cases. The Whistle Blower Policy may be accessed on the Company''s website at: http://www.divislabs.com/inside/pdf/Whistle%20blower%20policy.pdf
Particulars Of Employees
Particulars of employees required to be furnished under Rule 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, as amended are given in "Annexure-IV" and forms part of this Report.
Corporate Social Responsibility
The Board of Directors has constituted Corporate Social Responsibility Committee (CSR Committee) consisting of members viz. Mr. R. Ranga Rao (Chairman), Dr. Murali K. Divi, Mr. N. V. Ramana and Mr. Madusudana Rao Divi.
Corporate Social Responsibility Policy (CSR Policy) indicating the activities to be undertaken by the Company was adopted by the Board on the recommendation of the CSR Committee.
Report on Corporate Social Responsibility as Per Rule 8 of Companies (Corporate Social Responsibility Policy) Rules, 2014 is prepared and the same is enclosed as "Annexure-V" to this Report.
Business Responsibility Report
Pursuant to the SEBI Listing Regulations, Business Responsibility Report (BRR) describing the initiatives taken by the Company is enclosed as part of this Report.
Conservation of Energy, Technology Absorption and Foreign Exchange Earnings & Outgo
Particulars required under Section 134 (3) (m) of the Companies Act, 2013 read with Rule 8(3) of the Companies (Accounts) Rules, 2014 is given in the "Annexure-VI" to this report.
Audit Reports
o Report of the Statutory Auditors for the year does not contain any qualification, reservation or adverse remark or disclaimer or reporting of any offence or fraud. o The Secretarial Audit Report does not contain any qualification, reservation or adverse remark or disclaimer.
Statutory Auditors
Under Section 139 of the Companies Act, 2013 and Rules made there under, it is mandatory for the Company to rotate current statutory auditors on completion of maximum term permitted under the Section.
M/s. PVRK Nageswara Rao & Co, Chartered Accountants, the statutory auditors of the Company, hold office till the conclusion of this 27th Annual General Meeting of the Company and pursuant to Section 139(2) and the rules notified in this regard, they are not eligible for re-appointment.
Your Board of Directors, on the recommendation of the Audit Committee, do recommend the appointment of M/s. Price Waterhouse Chartered Accountants LLP (Firm Registration No. 012754N/N500016) as the Statutory Auditors of the Company, for a term of five consecutive years from the conclusion of the 27th Annual General Meeting of the Company scheduled to be held in the year 2017 till the conclusion of the 32nd Annual General Meeting to be held in the year 2022, subject to the ratification of their appointment at every AGM.
Secretarial Audit
Pursuant to provisions of section 204 of the Companies Act, 2013 and the Companies (Appointment and Remuneration of Managerial Personnel)
Rules, 2014, the Board of Directors of the Company has appointed Mr. V Bhaskara Rao, Practicing Company Secretary (PCS Registration No. 4182) as the Secretarial Auditor of the Company to conduct the Secretarial audit for the financial year 2016-17. The Secretarial Audit report for the financial year 2016-17 is annexed herewith as "Annexure-VII".
Corporate Governance Report
The report on Corporate Governance as per Regulation 34(3) read with Schedule V of the SEBI Listing Regulations is included as a part of this Annual Report. The requisite certificate from Mr. V. Bhaskara Rao, Practicing Company Secretary confirming the compliance with the conditions of Corporate Governance is attached to the report on Corporate Governance.
Extract of Annual Return
An Extract of Annual Return in Form MGT-9 as per the provisions of Section 92(3) of the Companies Act, 2013 and Rule 12 of Companies (Management and Administration) Rules, 2014, is enclosed as "Annexure-VIII" to this report.
Other Disclosures
o Information on Unclaimed Dividend and transfer to IEPF is provided in the Corporate Governance Report. o No company has become or ceased to be its Subsidiary, joint venture or associate company during the year o No significant and material orders were passed by the regulators or courts or tribunals impacting the going concern status and company''s operations in future. o No cases were filed pursuant to the Sexual Harassment of Women at Work Place (Prevention, Prohibition and Redressal) Act, 2013 during the year under review. o As per Regulation 43A of the SEBI Listing Regulations, the Dividend Distribution Policy is disclosed in the Corporate Governance Report and on the website of the Company.
Acknowledgements
The Board expresses its appreciation for the continued support received from Government authorities, Banks, customers, vendors and investors. The Board also appreciates and value the commitment and contribution of its employees at all levels.
For and on behalf of the Board
Dr. Murali K. Divi
Hyderabad Chairman & Managing Director
27th June, 2017 (DIN: 00005040)
Mar 31, 2015
Dear Shareholders,
The Directors have pleasure in placing before you the Twenty Fifth
Annual Report of the Company together with the Audited Accounts for the
year ended 31st March 2015.
FINANCIAL RESULTS
The Company's financial performance, for the year ended 31st March,
2015 is summarized below :
(Rs. in lakhs)
Particulars Standalone
2014-15 2013-14
Net Sales 307230.09 250717.32
Other Operating Income 1170.80 679.22
Other Income 4284.08 8390.26
Total Income 312684.97 259786.80
Expenditure 192195.68 149511.03
PBDIT 120489.29 110275.77
Depreciation 13585.22 9206.18
Finance Cost 186.45 205.52
Profit before tax (PBT) 106717.62 100864.07
Provision for tax :
Current Tax 21614.04 20615.88
MAT Credit Entitlements (679.91) (2436.08)
Deferred Tax 1077.96 3511.96
Profit after tax (PAT) 84705.53 79172.31
Earnings per Share (EPS) (Rs.)
-Basic & Diluted 63.82 59.65
Paticular Consolidated
2014-15 2013-14
Net Sales 310323.21 252534.82
Other Operating Income 1170.80 679.22
Other Income 4469.68 7060.32
Total Income 315963.69 260274.36
Expenditure 194969.62 151765.58
PBDIT 120994.07 108508.78
Depreciation 13599.84 9211.60
Finance Cost 186.45 205.52
Profit before tax (PBT) 107207.78 99091.66
Provision for tax :
Current Tax21 614.04 20615.88
MAT Credit Entitlements (679.91) (2436.08)
Deferred Tax 1121.47 3578.05
Profit after tax (PAT) 85152.18 77333.81
Earnings per Share (EPS) (Rs.)
-Basic & Diluted 64.15 58.26
RESULTS OF OPERATIONS Standalone
- Sales for the year increased by 23% to Rs. 307230.09 lakhs.
- PBDIT for the year increased by 9% at Rs. 120489.29 lakhs.
- Profit before Tax (PBT) for the year amounted to Rs.106717.62 lakhs
as against a PBT of Rs.100864.07 lakhs for the last year.
- Tax Provision for the currentyear amounted to Rs. 20934.13 lakhs
(net of MAT credit entitlement of Rs.679.91 lakhs). Provision for last
year was Rs. 18179.80 lakhs (net of a MAT credit entitlement of
Rs.2436.08 lakhs).
- An amount of Rs. 1077.96 lakhs has been provided towards Deferred
Tax Liability for the year as against Rs. 3511.96 lakhs during the
previous year.
- Forex loss was Rs.104.50 lakhs as against a forex gain of
Rs.5041.79 lakhs during the last year.
- Profit after Tax for the year amounted to Rs.84705.53 lakhs.
- Earnings Per Share of Rs.2/- each works out to Rs. 63.82 for the
year as against Rs. 59.65 last year.
- Out of the total revenue, 38% came from North America, 35% from
Europe, 10% from Asia, 13% from India and 4% from Rest of the World.
Depreciation : The company has revised charging of depreciation on
fixed assets according to the useful life as specified in Schedule II
to the Companies Act, 2013 which came into effect from 1st April, 2014.
In view of the amendment to the Schedule II vide Notification dated
29-08-2014 issued by the Ministry of Corporate Affairs and the
Application Guide issued by the ICAI on 10-04-2015, which gave the
company an option to charge-off depreciation of assets, whose useful
life has already been exhausted before 1st April, 2014, after retaining
residual value, either to the opening balance of retained earnings or
to the Statement of Profit and Loss, your company has decided to
charge-off such depreciation to the Profit and Loss Account for the
year.
Consolidated
Our total income on consolidated basis increased to Rs. 315963.69 lakhs
from Rs. 260274.36 lakhs in the previous year, recording a growth of
21%.
PBDIT amounted to Rs. 120994.07 lakhs as against Rs. 108508.78 lakhs in
the previous year. Profit after Tax for the year accounted to Rs.
85152.18 lakhs as against Rs. 77333.81 lakhs in the previous year.
There has been a wide fluctuation in the exchange rates of currencies
worldwide. Gain for the current and previous year is given below :
(Rs. in lakhs)
Particulars 2014-15 2013-14
Forex gain/(loss) 185.51 3711.73
SUBSIDIARIES
Our subsidiaries viz., M/s. Divis Laboratories (USA) Inc., in USA and
M/s. Divi's Laboratories Europe AG in Switzerland are engaged in
marketing/distribution of nutraceutical products and to provide a
greater reach to customers within these regions.
During the year, the subsidiaries have achieved a turnover of
Rs.16835.44 lakhs as against previous year turnover of Rs. 12618.50
lakhs, resulting in growth of 33% for the nutraceutical products in
North America and Europe.
Brief of financial results of the subsidiaries, as per Indian GAAP, are
as under :
(Rs. in lakhs)
Particulars Divis Laboratories (USA) Inc.,
Year ended 31-03-2015 31-03-2014
Turnover 10002.58 8763.97
Profit / (Loss )before
taxation (111.91) (750.93)
Provision for taxation
(Deferred Income Tax) 43.51 66.09
Profit / ( Loss) after taxation (155.42) (817.02)
pATICULAR Divi's Laboratories Europe AG
31-03-2015 31-03-2014
Turnover 6832.86 3854.53
Profit / (Loss )before
taxation 602.07 (1021.48)
Provision for taxation
(Deferred Income Tax)
Profit / ( Loss) after taxation 602.07 (1021.48)
Subsidiaries have achieved good growth in operating profit. Loss on
forex currency translation for the year accounted to Rs. 225 Lakhs for
US subsidiary and forex gain on currency translation of Rs. 515 Lakhs
for Europe subsidiary.
Auditors of these subsidiaries have observed that the subsidiaries have
suffered recurring losses, lack sufficient liquidity to continue
operations and to continue as a going-concern depends on the temporary
funding by the parent and successful realization of their business
plans.
This year, the company has increased the subordination of its loans to
Divi's Laboratories Europe to an aggregate to CHF 5.00 million.
As stated above, with the significant efforts having been made in
stabilizing operations and qualifications from several customers, the
company is confident of achieving profitability at the subsidiaries and
recovery of the investments/advances made in the foreseeable future.
As per section 129(3) of the Companies Act, 2013, statement containing
the salient features of the financial statement of Company's
subsidiaries in form AOC-1 is annexed herewith as "Annexure I".
Moreover, pursuant to provisions of Section 136(1) of the Companies
Act, 2013, audited financial statements of the subsidiary companies are
placed on the website of the company at www.divislaboratories.com.
Shareholders who wish to have a copy of the full report and accounts of
the subsidiaries will be provided the same on receipt of a written
request from them. These documents will be available for inspection at
the Registered Office of the Company on any working day during business
hours. The Consolidated Financial Statements presented by the Company
include the financial results of its subsidiary companies.
Emphasis of Matter
Our Auditors have observed that the networth of the subsidiaries has
eroded and consequent possibility of any temporary impairment of
investment by way of equity in subsidiaries amounting to Rs.281.61
lakhs and non-recovery or partial recovery of loans of Rs.4358.08 lakhs
given to the subsidiaries.
Over the last few years, we have made significant progress in terms of
implementing the nutra facility and stabilising operations. Approvals
have since been received from several major users and the outlook now
looks very positive.
During the year, the subsidiaries have achieved good growth of business
and have achieved operating profit. Net loss could have reduced
significantly, but for the loss on account of foreign currency
translation. With the significant efforts having been made towards
optimizing operations and cost efficiency, the company is confident of
achieving profitability at the subsidiaries and recovery of the loans
given in the foreseeable future.
CONSOLIDATED ACCOUNTS
As stipulated in the listing agreement with the stock exchanges and
Companies Act, 2013, the consolidated financial statements have been
prepared by the Company in accordance with the relevant accounting
standards. The audited consolidated financial statements together with
Auditors Report thereon form part of the Annual report.
DIVIDEND
Your Directors are pleased to recommend a dividend of Rs.20/- per
equity share of Rs.2/- each, i.e., 1000% for the financial year ended
31st March, 2015, subject to approval of members at the ensuing Annual
General Meeting.
The total dividend payout for the current year amounts to Rs. 31951.17
lakhs (inclusive of tax of Rs. 5404.31 lakhs) as against Rs. 31058.50
lakhs in the previous year. Dividend (including dividend tax) as a
percentage of profits is 38% as compared to 39% in the previous year.
The dividend on equity shares, if declared at the AGM, will be paid to
members whose names appear in the Register of Members as on 8th August,
2015. In respect of shares held in dematerialised form, it will be paid
to members whose names are furnished by Depositories as beneficial
owners as on that date.
TRANSFER TO GENERAL RESERVES
We propose to transfer an amount of Rs.20000.00 lakhs to General
Reserve for facilitating the dividend for the year.
FIXED DEPOSITS
Your Directors wish to inform that the Company has not accepted any
deposits from public covered by provisions of Section 73 of the
Companies Act, 2013.
PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS
During the year, the company has not given any loans or guarantees
covered under the provisions of section 186 of the Companies Act, 2013.
The details of investments made by company are given in the notes to
the financial statements.
RELATED PARTY TRANSACTIONS
As a matter of policy, your Company carries out transactions with
related parties on an arms' length basis. There are no materially
significant related party transactions made by the company with
Promoters, Key Managerial Personnel or other designated persons which
may have potential conflict with interest of the company at large.
Statement of these transactions is given in other explanatory
information attached in compliance of Accounting Standard No.AS-18.
MANAGEMENT DISCUSSION AND ANALYSIS
A report on Management Discussion & Analysis for the year under review,
as stipulated under Clause 49 of the Listing Agreement with the Stock
Exchanges in India, is provided in a separate section forming part of
this Annual Report.
MATERIAL CHANGES AND COMMITMENTS
No material changes and commitments have occurred after the close of
the year till the date of this Report, which affect the financial
position of the company.
INTERNAL FINANCIAL CONTROLS
The Company has in place adequate internal financial controls with
reference to financial statements. During the year, such controls were
tested and no reportable material weakness in the design or operation
was observed.
RISK MANAGEMENT
Divis has an enterprise-wide approach to risk management, which lays
emphasis on identifying and managing key operational and strategic
risks. Through this approach, the company strives to identify
opportunities that enhance organisational values while managing or
mitigating risks that can adversely impact its future performance. The
company has been addressing various risks impacting the company and the
policy of the company on risk management is provided elsewhere in this
annual report in Management Discussion and Analysis.
Pursuant to section 134 (3) (n) of the Companies Act, 2013 & Clause 49
of the listing agreement, the company has constituted a business risk
management committee to review the processes and procedures for
ensuring that all strategic and operational risks are properly
identified and that appropriate systems of monitoring and control are
in place and to oversee and review the risk management framework,
assessment of risks and minimization procedures.
DIRECTORS' RESPONSIBILITY STATEMENT
As required under Section 134 (5) of the Companies Act, 2013, Directors
of your company hereby state and confirm that :
a) the applicable accounting standards have been followed in the
preparation of the annual accounts;
b) the accounting policies selected were applied consistently and the
judgements and estimates made are reasonable and prudent so as to give
a true and fair view of the state of affairs of the Company as at 31st
March, 2015 and its profit for the year ended on that date;
c) proper and sufficient care has been taken for the maintenance of
adequate accounting records in accordance with the provisions of the
Act for safeguarding the assets of the Company and for preventing and
detecting fraud and other irregularities;
d) the annual accounts have been prepared on a going concern basis.
e) internal financial controls have been laid down and such controls
are adequate and operating effectively;
f) proper systems have been laid down to ensure compliance with the
provisions of all applicable laws and such systems are adequate and
operating effectively.
NUMBER OF MEETINGS OF BOARD OF DIRECTORS
The Board meets at least four times in a year at quarterly intervals
and more frequently if deemed necessary, to transact its business.
During the financial year the Board has met five times, i.e. on 24th
May 2014, 23rd June, 2014, 11th August 2014, 1st November 2014 and 31st
January 2015.
DIRECTORS AND KEY MANAGERIAL PERSONNEL Appointments :
Pursuant to the provisions of Section 149 and other applicable
provisions of the Companies Act, 2013, Dr. G. Suresh Kumar, Mr. R.
Ranga Rao, Mr. K.V.K. Seshavataram and Smt. S. Sridevi were appointed
as Independent Directors in the Annual General Meeting held on 25th
August, 2014 for a period of five years.
Re-appointments :
As per the provisions of the Companies Act, 2013 Mr. N.V. Ramana,
Executive Director will retire by rotation at the ensuing Annual
General Meeting and, being eligible, offers himself for re-appointment.
Members of the Company in the Annual General Meeting held on 25th
August, 2014, approved the re-appointment of Dr. Murali K. Divi as
Chairman & Managing Director of the Company for a further period of
five years from October 10, 2014 and Mr. N. V. Ramana as Executive
Director of the company for a further period of five years from
December 26, 2014.
Members of the Company through Postal Ballot Resolution (declared on
20th March, 2015) approved the re-appointment of Mr. Madhusudana Rao
Divi as Director - Projects of the Company for a further period of five
years from April 1,2015 and Mr. Kiran S. Divi as Director & President -
Operations of the company for a further period of five years from April
1,2015.
Resignations:
Dr. K. Satyanarayana, Independent Director has resigned from the Board
with effect from 23rd June, 2014. Dr. K. Satyanarayana joined the Board
on 08.08.1995 and has been part of Divi's journey for 19 years. The
Board would like to thank him for his long association with the
company.
Mr. S. Vasudev, Independent Director has resigned from the Board with
effect from 23rd June, 2014. Mr. S. Vasudev has been part of the Board
from 09.08.2004. The Board sincerely appreciates his contribution to
the company during his tenure as member of the Board. DECLARATION BY
INDEPENDENT DIRECTORS
In terms of provisions of section 149(7) of the Companies Act, 2013,
the company has obtained declaration from all independent directors of
the company confirming that they meet the criteria of independence as
provided in Section 149(6) of the Companies Act, 2013 and clause 49 of
the Listing Agreement with Stock Exchanges.
MECHANISM FOR EVALUATION OF BOARD
Pursuant to the provisions of the Companies Act, 2013 and Clause 49 of
the Listing Agreement, the Nomination and Remuneration Committee laid
down criteria for performance evaluation of individual directors, the
board and its committees. Accordingly, the Board has carried out an
evaluation of its own performance, the directors individually as well
as the evaluation of the working of its Committees. Evaluation of all
Directors is carried on an annual basis. Performance evaluation of
Directors shall be done by the entire Board of Directors excluding the
director being evaluated.
Board performance evaluation is carried out through a structured
questionnaire which provides a powerful and valuable feedback for
improving board effectiveness, maximising strengths and highlighting
areas for further development.
The following are some of the broad issues that are considered in
performance evaluation :
Criteria for evaluation of Board and its Committees :
- Ability to act on a fully informed basis, in good faith, with due
diligence and care, and in the best interest of the company and the
shareholders.
- Optimum combination of knowledge, skill, experience and diversity on
the Board as well its Committees.
- Relationships and effective communication among the Board members.
- Effectiveness of individual non-executive and executive directors and
Committees of Board.
- Quality of the discussions, general information provided on the
company and its performance, papers and presentations to the board.
- Stakeholders' engagement.
- Risk and Crisis management as well processes for identifying and
reviewing risks.
- Well- defined mandate and terms of reference of Committee.
Criteria for evaluation of Individual Directors :
- Attendance at Board as well as Committee Meetings
- Procurement of Information, preparation for Board Meetings and value
of contribution at meetings
- Relationships with fellow board members, the company secretary and
senior management and mutual trust and respect they stimulated within
the Board.
- Keeping update with the latest developments in the areas of
governance and financial reporting
Additionally, Independent directors are expected to provide an
effective monitoring role and to provide help and advice for the
executive directors. In evaluating independent Directors it is
necessary to address the following aspects as well :
- Willingness to devote time and effort to understand the company and
its business
- Providing necessary guidance using their knowledge and experience in
development of corporate strategy, major plans of action, risk policy,
and setting performance objectives.
- Independence exercised in taking decisions, listening to views of
others and maintaining their views with resolute attitude
- Ability in assisting the Company in implementing the best corporate
governance practices.
- Capability in exercising independent judgement to tasks where there
is a potential for conflict of interest.
- Commitment in fulfilling the director's obligations fiduciary
responsibilities.
POLICY ON DIRECTORS' APPOINTMENT AND REMUNERATION
The Board has, on the recommendation of the Nomination & Remuneration
Committee, framed a policy for appointment and remuneration of
Directors, Key Managerial Perosnnel and other employees including
criteria for determining qualifications, positive attributes and
director's independence. The Remuneration Policy is annexed herewith as
"Annexure II".
REMUNERATION DETAILS OF DIRECTORS AND KMP
Particulars required to be furnished under Rule 5(1) of the Companies
(Appointment and Remuneration of Managerial Personnel) Rules, 2014 are
given in "Annexure - III" and forms part of this Report.
PARTICULARS OF EMPLOYEES
Particulars of employees required to be furnished under Rule 5(2) and
5(3) of the Companies (Appointment and Remuneration of Managerial
Personnel) Rules, 2014 are given in "Annexure - IV" and forms part of
this Report.
CORPORATE SOCIAL RESPONSIBILITY
The Board of Directors has constituted Corporate Social Responsibility
Committee (CSR Committee) consisting of members Mr. R. Ranga Rao
(Chairman), Dr. Murali K. Divi, Mr. N. V. Ramana and Mr. Madusudana Rao
Divi. The said Committee has formulated and recommended to the Board, a
Corporate Social Responsibility Policy (CSR Policy) indicating the
activities to be undertaken by the Company, which has been approved by
the Board.
As per the requirements of Companies Act, 2013, Company needs to spend
at least 2% of its average net profit for the immediately preceding
three financial years on corporate social responsibility activities.
During the last several years, your Company has already been spending
resources to improve the quality of life and sustainable development of
the communities living in the villages around the manufacturing units.
Report on Corporate Social Responsibility as Per Rule 8 of Companies
(Corporate Social Responsibility Policy) Rules, 2014 is prepared and
the same is enclosed as "Annexure - V" to this Report.
CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE
EARNINGS & OUTGO
Particulars required under Section 134 (3) (m) of the Companies Act,
2013 read with Rule 8(3) of the Companies (Accounts) Rules, 2014 is
given in the "Annexure - VI" to this report.
AUDIT COMMITTEE
The primary objective of the Audit Committee of the company is to
monitor and provide effective supervision of the management's financial
reporting process with a view to ensure accurate, timely and proper
disclosures and transparency, integrity and quality of financial
reporting. Composition of the Audit Committee is as follows :
Name Category Designation
Sri. K. V. K. Seshavataram Independent Director Chairman
Dr. G. Suresh Kumar Independent Director Member
Sri. R. Ranga Rao Independent Director Member
VIGIL MECHANISM
The Company has established a vigil mechanism and accordingly,
formulated a Whistle Blower Policy to provide mechanism for directors
and employees of the company to report their concerns about unethical
behaviour, actual or suspected fraud or violation of the company's code
of conduct or ethics policy and disclosed the details of establishment
of such mechanism on its website. This mechanism also provides for
adequate safeguards against victimization of director(s) / employee(s)
who avail of the mechanism and also provide for direct access to the
Chairman of the Audit Committee in exceptional cases. The Whistle
Blower Policy may be accessed on the company's website at the link:
http://www.divislabs.com/inside/pdf/Whistle%20blower%20policy.pdf.
STATUTORY AUDITORS
At the Annual General Meeting held on 25th August, 2014, M/s. P.V.R.K.
Nageswara Rao & Co., Chartered Accountants, Hyderabad (Firm's Regn. No
002283S) were appointed as statutory auditors of the Company to hold
office for three consecutive years till the
conclusion of the 27th Annual General Meeting. In terms of first
proviso to Section 139 of the Companies Act, 2013, the appointment of
the auditors shall be placed for ratification at every Annual General
Meeting.
Accordingly, the appointment of M/s. P.V.R.K. Nageswara Rao & Co.,
Chartered Accountants as statutory auditors of the company is placed
for ratification by shareholders.
The Company has received a communication from the Auditors to the
effect that their re-appointment, if made, would be within the
prescribed limits under Section 141(3)(g) of the Companies Act, 2013
and that they are not disqualified for re-appointment. SECRETARIAL
AUDIT
Pursuant to provisions of section 204 of the Companies Act, 2013 and
The Companies (Appointment and Remuneration of Managerial Personnel)
Rules, 2014, the Board of Directors of the Company has appointed M/s.
V. Bhaskara Rao & Co., Company Secretaries as the Secretarial Auditor
of the Company for the financial year 2014-15. The Secretarial Audit
report for the financial year 2014-15 is annexed herewith as "Annexure
VII". The secretarial Audit Report does not contain any qualification,
reservation or adverse remark. COST AUDIT
Pursuant to the Section 148 of the Act and rule 3 of the Companies
(cost records and audit) Rules, 2014, the company maintains cost
records in its books of account. As per rule 7 of the said rules, the
requirement for cost audit shall not be applicable to a company which
is covered under rule 3, and whose revenue from exports, in foreign
exchange, exceeds seventy five per cent of its total revenue or which
is operating from a special economic zone. However, company has
voluntarily opted for audit of cost records and appointed M/s. E.V.S &
Associates, Cost Accountants as cost auditors.
CORPORATE GOVERNANCE AND SHAREHOLDERS' INFORMATION
A report on Corporate Governance is included as a part of this Annual
Report. Certificate from M/s. V. Bhaskara Rao & Co., Company
Secretaries confirming the compliance with the conditions of Corporate
Governance as stipulated under Clause 49 of the Listing Agreement is
attached to the report on Corporate Governance.
EXTRACT OF ANNUAL RETURN
The Extract of Annual Return in Form MGT-9 as per the provisions of the
Companies Act, 2013 and Rule 12 of Companies (Management and
Administration) Rules, 2014 is annexed herewith as "Annexure VIII".
OTHER DISCLOSURES
- No company has become or ceased to be its Subsidiary, joint venture
or associate company during the year
- No significant and material orders were passed by the regulators or
courts or tribunals impacting the going concern status and company's
operations in future.
- No cases were filed pursuant to the Sexual Harassment of Women at
Work Place (Prevention, Prohibition and Redressal) Act, 2013 during the
year under review.
ACKNOWLEDGEMENTS
The Board expresses its gratefully appreciation for the continued
assistance and co-operation received from Government authorities,
Financial Institutions, Banks, customers, suppliers and investors. The
Board also wishes to place on record its appreciation for the
dedication and commitment extended by its employees at all levels and
their contribution to the growth and progress of the company.
For and on behalf of the Board
Dr. MURALI K. DIVI
Chairman and Managing Director
(DIN : 0005040)
Hyderabad
23.05.2015
Mar 31, 2013
Dear Shareholders,
The Directors have pleasure in placing before you the Twenty Third
Annual Report of the Company together with the Audited Accounts for the
year ended 31st March 2013.
FINANCIAL RESULTS
(Rs. in crores)
Particulars 2012-13 2011-12
Net Sales 2123.95 1839.49
Other Operating Income 4.94 5.44
Other income 48.51 65.76
Total Income 2177.40 1910.69
Expenditure 1307.14 1150.06
PBDIT 870.26 760.63
Depreciation 76.90 62.03
Finance Cost 1.78 3.74
Profit before tax (PBT) 791.58 694.86
Provision for tax
Current Tax 153.00 132.83
MAT Credit Utilisation 7.90 3.68
Deferred Tax Liability 19.26 12.38
Profit after tax (PAT) 611.42 545.97
Earnings per Share (EPS)
a)Basic (Rs.) 46.06 41.15
b)Diluted (Rs.) 46.06 41.15
Your company has achieved a sales growth of 15% for the year on the
back of a decent growth of 41% achieved during the last year.
We made a provision of Rs. 160.90 crores towards Income- tax this year
(including MAT credit utilization of Rs.7.90 crores). Provision for
last year amounted to Rs.136.51 crores including a MAT credit
utilization of Rs.3.68 crores. An amount of Rs. 19.26 crores has been
provided towards Deferred Tax Liability during the year as against Rs.
12.38 crores during the previous year.
PAT amounted to Rs.611.42 crores for the year, reflecting a growth of
12%. Earnings Per Share of Rs.2/- each works out to Rs. 46.06 for the
year as against Rs. 41.15 last year.
DIVIDEND
Your Directors are pleased to recommend a dividend of Rs.15 per equity
share of Rs.2/- each, i.e., 750% for the year 2012- 13 subject to
approval of members.
SUBSIDIARIES
Our subsidiaries viz., M/s. Divis Laboratories (USA) Inc., in USA and
M/s. Divi''s Laboratories Europe AG in Switzerland are engaged in
marketing/distribution of nutraceutical products and to provide a
greater reach to customers within these regions.
During the year, the subsidiaries have achieved aggregate sales of
Rs.90.78 crores for the nutraceutical products in North America and
Europe.
Brief operations of the subsidiaries are as under :
Particulars Divis Laboratories
(USA) Inc., Divi''s
Laboratories
Europe AG Total
Year ended 31-03-13 31-03-12 31-03-13 31-03-12 31-03-13 31-03-12
Sales 62.02 51.90 28.76 22.94 90.78 74.84
Other income 0 0 0.01 0.01 0.01 0.01
Total Income 62.02 51.90 28.77 22.95 90.79 74.85
Expenditure 66.89 59.78 29.69 29.24 96.58 89.02
Depreciation 0.04 0.04 0.01 0.01 0.05 0.05
Loss before tax 4.91 7.92 0.93 6.30 5.84 14.22
Tax Asset (0.94) (1.52) 0 0 (0.94) (1.52)
Net Loss 3.97 6.40 0.93 6.30 4.90 12.70
Losses for the current year at the subsidiaries have significantly
reduced as compared to the previous year.
Auditors of these subsidiaries have observed that the subsidiaries have
suffered recurring losses, lack sufficient liquidity to continue
operations and to continue as a going- concern depends on the temporary
funding by the parent and successful realization of their business
plans.
In accordance with the general circular issued by the Ministry of
Corporate Affairs, Government of India, the Balance Sheet, Statement of
Profit and Loss and other documents of the subsidiary companies are not
being attached with the Balance Sheet of the Company. Shareholders who
wish to have a copy of the full report and accounts of the subsidiaries
will be provided the same on receipt of a written request from them.
These documents will be available for inspection at the Registered
Office of the Company and that of the respective subsidiary companies
on any working day during business hours. The Consolidated Financial
Statements presented by the Company include the financial results of
its subsidiary companies.
Emphasis-of-Matter - Audit observations
Our Auditors have observed that the networth of the subsidiaries has
eroded and consequent possibility of any temporary impairment of
investment by way of equity in subsidiaries amounting to Rs.281.61
lakhs and recovery of loans of Rs.4486.31 lakhs given to the
subsidiaries.
The nutraceutical business has been established based on the strengths
of Divi''s Labs in handling complex chemistry whereby all the synthetic
carotenoids have been developed and produced on a commercial scale for
the first time in India. Over the last few years, we have made
significant progress in terms of implementing the nutra facility and
stabilising operations. Technical/Quality/ Regulatory Experts employed
at the subsidiaries have also helped in implementation of the nutra
facility and the various processes of approvals and qualifications.
Different application forms have also been fully developed and now the
nutraceutical forms are offered for the entire use base in the pharma,
food supplement and color applications as also for animal health
segments. Approval processes are very elaborate and time consuming.
Approvals have since been received from several major users and the
outlook now looks very positive.
With the significant efforts having been made in stabilizing operations
and qualifications from several customers, the company is confident of
achieving profitability at the subsidiaries and recovery of the loans
given in the foreseeable future.
CONSOLIDATED ACCOUNTS
As stipulated in the listing agreement with the stock exchanges, the
consolidated financial statements have been prepared by the Company in
accordance with the relevant accounting standards under the Companies
Act, 1956. The audited consolidated financial statements together with
Auditors Report thereon form part of the Annual report.
Financial summary of consolidated accounts :
(Rs. in crores)
Particulars 2012-13 2011-12
Net Sales 2139.90 1858.43
Other Operating Income 4.94 5.44
Other income 44.81 56.05
Total Income 2189.65 1919.92
Expenditure 1329.68 1173.47
PBDIT 859.97 746.45
Depreciation 76.95 62.08
Finance Cost 1.78 3.74
Profit before tax (PBT) 781.24 680.63
Provision for tax
Current Tax 153.00 132.83
MAT Credit Utilisation 7.90 3.68
Deferred Tax Liability 18.33 10.86
Profit after tax (PAT) 602.01 533.26
Earnings per Share (EPS)
a) Basic (Rs.) 45.35 40.19
b) Diluted (Rs.) 45.35 40.19
DIRECTORS
Dr. G. Suresh Kumar and Mr. Madhusudana Rao Divi will retire by
rotation at the ensuing Annual General Meeting and, being eligible,
offer themselves for re-appointment.
Mr. Ranga Rao Ravipati has been appointed as Additional Director
(Independent and Non-Executive) with effect from 3rd November, 2012. It
is proposed to appoint him as Director of the Company, liable to retire
by rotation, at the ensuing Annual General Meeting.
Mr. G. Venkata Rao has resigned as a Director of the company with
effect from 3rd November, 2012 due to personal reasons and other
pre-occupations. The Directors place on record their appreciation for
the contribution made by Mr. G. Venkata Rao during his long tenure on
the Board since 10.03.2001.
DIRECTORS'' RESPONSIBILITY STATEMENT
As required under Section 217 (2AA) of the Companies Act, 1956,
Directors of your company hereby state and confirm that :
a) the applicable accounting standards have been followed in the
preparation of the annual accounts;
b) the accounting policies selected were applied consistently and the
judgements and estimates made are reasonable and prudent so as to give
a true and fair view of the state of affairs of the Company as at 31st
March, 2013 and its profit for the year ended on that date;
c) proper and sufficient care has been taken for the maintenance of
adequate accounting records in accordance with the provisions of the
Act for safeguarding the assets of the Company and for preventing and
detecting fraud and other irregularities;
d) the annual accounts have been prepared on a going concern basis.
AUDITORS
The Auditors, M/s. P.V.R.K. Nageswara Rao & Co., Chartered Accountants,
Hyderabad retire at the ensuing Annual General meeting and, being
eligible, offer themselves for reappointment.
COST AUDIT
Pursuant to Section 233B of the Companies Act, 1956, the Central
Government has prescribed Cost Audit for the company. Based on
recommendations of the audit committee and subject to approval of the
Central Government, M/s. EVS & Associates, Cost Accountants, Hyderabad
have been appointed as Cost Auditors for the year.
The relevant cost audit report for the financial year 2011-12 has been
filed within the due date on 29th January, 2013. The due date for
filing the report was 28th February, 2013.
MANAGEMENT DISUCSSION AND ANALYSIS
A report on Management Discussion & Analysis is provided as part of
this Annual Report.
CORPORATE GOVERNANCE AND SHAREHOLDERS'' INFORMATION
A report on Corporate Governance is included as a part of this Annual
Report. Certificate from the Statutory Auditors of the company M/s.
P.V.R.K. Nageswara Rao & Co., Chartered Accountants confirming the
compliance with the conditions of Corporate Governance as stipulated
under Clause 49 of the Listing Agreement is attached to this report.
RELATED PARTY TRANSACTIONS
As a matter of policy, your Company carries out transactions with
related parties on an arms-length basis. Statement of these
transactions is given in the other explanatory information attached in
compliance of Accounting Standard No.AS-18.
FIXED DEPOSITS
Your Directors wish to inform that the Company has not accepted any
deposits from public covered by provisions of Section 58A of the
Companies Act, 1956.
CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE
EARNINGS AND OUTGO
Particulars required under Section 217 (1) (e) of the Companies Act,
1956 read with Rule 2 of the Companies (Disclosure of Particulars in
the Report of Board of Directors) Rules, 1988 is given in the Annexure
- I to this report.
HUMAN RESOURCES
Particulars of employees required to be furnished under Section 217
(2A) of the Companies Act, 1956 read with the Companies (Particulars of
Employees) Rules, 1975 are given in the Annexure - II attached and
forms part of this Report.
ACKNOWLEDGEMENTS
We thank our customers, suppliers and investors for their continued
support. We also gratefully acknowledge the continued assistance and
co-operation extended by Government authorities, financial institutions
and banks to the company. The Board expresses its appreciation for the
dedication and commitment extended by its employees at all levels and
their contribution to the growth and progress of the company.
For and on behalf of the Board
Hyderabad Dr. MURALI K. DIVI
20th May, 2013 Chairman and Managing Director
Mar 31, 2012
The Directors have pleasure in placing before you the Twenty Second
Annual Report of the Company together with the Audited Accounts for the
year ended 31st March 2012.
FINANCIAL RESULTS
(Rs. in Crores)
Particulars 2011-12 2010-11
Net Sales 1839.49 1308.66
Other Operating Income 5.44 6.21
Other income 65.76 29.23
Total Income 1910.69 1344.10
Expenditure 1150.06 810.18
PBDIT 760.63 533.92
Depreciation 62.03 53.35
Finance Cost 3.74 1.52
Profit before tax (PBT) 694.86 479.05
Provision for tax :
Current Tax 133.59 39.20
MAT Credit Utilisation 2.92 1.28
Deferred Tax Liability 12.38 3.00
Profit after tax (PAT) 545.97 435.57
Earnings per Share (EPS)
a) Basic 41.15 32.90
b) Diluted 41.15 32.88
We have had a very satisfactory business performance this financial
year. We achieved a growth of sales of 41% over the last year. PBT
amounted to Rs.695 crores for the year, reflecting a growth of 45%.
Some of the capex programmes taken up at the existing Units have become
operational during the year. The new DSN SEZ Unit has also become
operational during the year. These capacity additions have contributed
to business during the year.
We have made a provision of Rs. 136.51 crores towards Income-tax as
against Rs.40.48 crores during the last year - as no tax holiday is
available to EOU Unit from this financial year and as our first SEZ
Unit is eligible only for 50% of tax exemption from this year. Deferred
Tax provision for the year amounted to Rs.12.38 crores as against
Rs.3.00 crores during last year.
Profit after Tax (PAT) for the year came to Rs.546 crores as against
Rs.436 crores during the previous year, a growth of 25%. Earnings Per
Share of Rs.2/- each works out to Rs. 41.15 for the year as against Rs.
32.90 last year.
DIVIDEND
Your Directors are pleased to recommend a dividend of Rs.13/- per
equity share of Rs.2/- each, i.e., 650% for the year 2011-12 subject to
approval of members.
EQUITY CAPITAL
During the year, we allotted 1,39,180 equity shares of Rs.2 each to
employees on exercise of their stock options.
As a result of the allotment of shares under ESOP scheme, the paid-up
equity capital of the company has increased by Rs.0.03 crores to
Rs.26.55 crores and an addition of Rs. 1.36 crores to the Share
Premium Account.
EMPLOYEE STOCK OPTION SCHEME
The Employee Stock Option Scheme (ESOP 2006) approved by the company
provided for vesting of stock options in 4 tranches. The fourth/last
tranche under this Scheme was vested on 13th March, 2010 and all the
options have been exercised by the employees. There are no outstanding
options as at the end of the year. Under the Scheme, the total number
of options exercised / shares allotted are 37,92,815.
As per the provisions of Securities and Exchange Board of India
(Employee Stock Option Scheme and Employee Stock Purchase Scheme),
Guidelines, 1999, disclosures with respect to Scheme are given in the
Annexure - I to this report.
SUBSIDIARIES
We have two wholly owned subsidiaries viz., M/s. Divis Laboratories
(USA) Inc., in USA and M/s. Divi's Laboratories Europe AG in
Switzerland which are engaged in marketing of nutraceutical products
and to provide a greater reach to customers within these regions.
During the year, the subsidiaries have enhanced their reach to
customers in North America and Europe and contributed net sales of
Rs.81 crores for the nutraceutical products to the company.
While loss for current year at Divis Laboratories (USA) is Rs.6.40
crores, the loss at Divi's Laboratories Europe is Rs.6.30 crores.
Auditors of these subsidiaries have observed that they have negative
networth and suffer from deficiency of cash for continuing operations
as a going-concern without the support of the parent. The losses in the
subsidiaries are on account of low level of operations at the
subsidiaries.
In accordance with the general circular issued by the Ministry of
Corporate Affairs, Government of India, the Balance Sheet, Profit and
Loss Account and other documents of the subsidiary companies are not
being attached with the Balance Sheet of the Company. Shareholders, who
wish to have a copy of the full report and accounts of the
subsidiaries, will be provided the same on receipt of a written request
from them. These documents will be put up on the website of the company
viz., www.divislaboratories.com and will also be available for
inspection at the Registered Office of the Company and that of the
respective subsidiary companies on any working day during business
hours. The Consolidated Financial Statements presented by the Company
include the financial results of its subsidiary companies.
CONSOLIDATED ACCOUNTS
As stipulated in the listing agreement with the stock exchanges, the
consolidated financial statements have been prepared by the Company in
accordance with the relevant accounting standards under the Companies
Act, 1956. The audited consolidated financial statements together with
Auditors Report thereon form part of the Annual report.
Financial summary of consolidated accounts :
(Rs. in Crores)
Partuculars 2011-12 2010-11
Net Sales 1858.59 1310.33
Other Operating Income 5.44 6.21
Other income 56.05 27.12
Total Income 1920.08 1343.66
Expenditure 1173.63 816.37
PBDIT 746.45 527.29
Depreciation 62.08 53.40
Finance Cost 3.74 1.52
Profit before tax (PBT) 680.63 472.37
Provision for tax :
Current Tax 133.59 39.20
MAT Credit Utilisation 2.92 1.28
Deferred Tax Liability 10.86 2.62
Profit after tax (PAT) 533.26 429.27
Earnings per Share (EPS)
a) Basic 40.19 32.42
b) Diluted 40.19 32.41
DIRECTORS
Dr. K. Satyanarayana, Mr. S. Vasudev and Mr. Kiran S. Divi will retire
by rotation at the ensuing Annual General Meeting and, being eligible,
offer themselves for re- appointment.
Dr. P. Gundu Rao has resigned as a Director of the company with effect
from 31st December, 2011 as he has relocated to USA and wishes to spend
more time with his family.
DIRECTORS' RESPONSIBILITY REPORT
As required under Section 217 (2AA) of the Companies Act, 1956,
Directors of your company hereby state and confirm that :
a) the applicable accounting standards have been followed in the
preparation of the annual accounts
b) the accounting policies selected were applied consistently and the
judgements and estimates made are reasonable and prudent so as to give
a true and fair view of the state of affairs of the Company as at 31st
March, 2012 and its profit for the year ended on that date;
c) proper and sufficient care has been taken for the maintenance of
adequate accounting records in accordance with the provisions of the
Act for safeguarding the assets of the Company and for preventing and
detecting fraud and other irregularities.
d) the annual accounts have been prepared on a going concern basis.
AUDITORS
The Auditors, M/s. P.V.R.K. Nageswara Rao & Co., Chartered Accountants,
Hyderabad retire at the ensuing Annual General meeting and, being
eligible, offer themselves for reappointment.
COST AUDIT
Pursuant to Section 233B of the Companies Act, 1956, the Central
Government has prescribed Cost Audit for the company. Based on
recommendations of the audit committee and subject to approval of the
Central Government, M/s. EVS & Associates, Cost Accountants, Hyderabad
have been appointed as Cost Auditors for the year.
The relevant cost audit report for the financial year 2010-11 has been
filed within the due date on 3rd September, 2011. The due date for
filing the report was 27th September, 2011.
MANAGEMENT DISUCSSION AND ANALYSIS
A report on Management Discussion & Analysis is provided as part of
this Annual Report.
CORPORATE GOVERNANCE AND SHAREHOLDERS' INFORMATION
A report on Corporate Governance is included as a part of this Annual
Report.
RELATED PARTY TRANSACTIONS
As a matter of policy, your Company carries out transactions with
related parties on an arms-length basis. Statement of these
transactions is given in the Notes to Accounts attached in compliance
of Accounting Standard No.AS-18.
FIXED DEPOSITS
Your Directors wish to inform that the Company has not accepted any
deposits from public covered by provisions of Section 58A of the
Companies Act, 1956.
CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION
Particulars required under Section 217 (1) (e) of the Companies Act,
1956 read with Rule 2 of the Companies
(Disclosure of Particulars in the Report of Board of Directors) Rules,
1988 is given in the Annexure à II to this report.
HUMAN RESOURCES
Particulars of employees required to be furnished under Section 217
(2A) of the Companies Act, 1956 read with the Companies (Particulars of
Employees) Rules, 197 5 are given in the Annexure - III attached and
forms part of this Report.
ACKNOWLEDGEMENTS
We thank our customers, suppliers and investors for their continued
support. We also gratefully acknowledge the continued assistance and
co-operation extended by Government authorities, financial institutions
and banks to the company. The Board expresses its appreciation for the
dedication and commitment extended by its employees at all levels and
their contribution to the growth and progress of the company.
For and on behalf of the Board
Visakhapatnam Dr. MURALI K. DIVI
12th May, 2012 Chairman & Managing Director
Mar 31, 2011
The Directors have pleasure in placing before you the Twenty first
Annual Report of the Company together with the Audited Accounts for the
year ended 31st March 2011.
FINANCIAL RESULTS
(Rs. in Crores)
Particulars 2010-11 2009-10
Net Sales 1305.44 929.29
Other operating income 13.08 17.36
Other income 25.52 13.33
Total Income 1344.04 959.98
Expenditure 809.46 517.43
PBDIT 534.58 442.55
Finance charges 2.18 2.76
Depreciation 53.35 51.45
Profit before tax (PBT) 479.05 388.34
Provision for tax
Current Tax 39.20 31.20
MAT Credit Utilisation 1.28 9.60
Deferred Tax 3.00 3.34
Profit after tax (PAT) 435.57 344.20
Earnings per Share (EPS)
a) Basic 32.90 26.40
b) Diluted 32.88 26.35
During the year, Divi achieved a turnover of Rs.1305 crores as against
Rs.929 crores during the previous year resulting in a growth of 41%.
Exports constituted 93% of total turnover as against 91% during the
last year. Profit after Tax (PAT) for the year amounted to Rs.436
crores as against Rs. 344 crores during the last year, a growth of 27%.
Business has grown satisfactorily across all the segments, especially
during the second half. The issue of destocking of inventory at our
customers seen during the last year is done with and we see normal flow
of business across the product portfolio of the company.
DIVIDEND
Your Directors are pleased to recommend a dividend of Rs.10/- per
equity share of Rs.2/- each, i.e., 500% for the year 2010-11 subject to
approval of members.
TAXATION
We made a provision of Rs. 40.48 crores towards Income-tax this year
(including MAT credit utilization of Rs.1.28 crores. Provision for
last year amounted to Rs.40.80 crores including a MAT credit
utilization of Rs.9.60 crores.
An amount of Rs. 3.00 crores has been provided towards Deferred Tax
Liability during the year as against Rs. 3.34 crores during the
previous year.
EQUITY CAPITAL
During the year, we allotted 4,50,965 equity shares of Rs.2 each to
employees on exercise of their stock options.
As a result of the the allotment of shares under ESOP scheme, the
paid-up equity capital of the company has increased by Rs.0.09 crores
to Rs.26.52 crores and an addition of Rs. 7.59 crores to the Share
Premium Account.
EMPLOYEE STOCK OPTION SCHEME
The Employee Stock Option Scheme (ESOP 2006) approved by the company
provided for vesting of stock options in 4 tranches. The fourth/last
tranche under this Scheme was vested on 13th March, 2010 and a majority
of the options have been exercised by the employees. There are 1,39,180
outstanding options yet to be exercised as at the end of the year.
As per the provisions of Securities and Exchange Board of India
(Employee Stock Option Scheme and Employee Stock Purchase Scheme),
Guidelines, 1999, disclosures with respect to Scheme are given in the
Annexure - I to this report.
SUBSIDIARIES
Your company has two wholly owned subsidiaries viz., M/s. Divis
Laboratories (USA) Inc., in USA and M/s. Divis Laboratories Europe AG
in Switzerland for marketing its nutraceutical products and a greater
reach to customers within these regions. While loss for current year at
Divis Laboratories (USA) is Rs.0.63 crores, the loss at Divis
Laboratories Europe is Rs.5.66 crores.
Auditors of these subsidiaries have observed that they have negative
networth and suffer from deficiency of cash for continuing operations
as a going-concern without the support of the parent. The losses in the
subsidiaries are on account of low level of operations at the
subsidiaries. With the expected increase in the level of operations,
the subsidiaries would be getting into cash profits shortly.
During the year, we have enhanced the equity capital in Divis
Laboratories (USA) Inc., by converting Rs.2.23 crores from out of the
loans given to the subsidiary into equity capital. We would also be
increasing the equity capital of Divis Laboratories Europe AG during
the next fiscal.
In accordance with the general circular issued by the Ministry of
Corporate Affairs, Government of India, the Balance Sheet, Profit and
Loss Account and other documents of the subsidiary companies are not
being attached with the Balance Sheet of the Company. Shareholders who
wish to have a copy of the full report and accounts of the subsidiaries
will be provided the same on receipt of a written request from them.
These documents will be put up on the website of the company viz.,
www.divislaboratories.com and will also be available for inspection at
the Registered Office of the Company and that of the respective
subsidiary companies on any working day during business hours. The
Consolidate Financial Statements presented by the Company include the
financial results of its subsidiary companies.
CONSOLIDATED ACCOUNTS
As stipulated in the listing agreement with the stock exchanges, the
consolidated financial statements have been prepared by the Company in
accordance with the relevant accounting standards under the Companies
Act, 1956. The audited consolidated financial statements together with
Auditors Report thereon form part of the Annual report. The
consolidated net profits after tax of the company and its subsidiaries
for the year amounted to Rs.429.27 crores as compared to Rs.340.33
crores in the previous year representing a basic earning per share of
Rs.32.42 and Rs.32.41 per share on diluted basis for the current year
as against Rs. 26.11 and Rs. 26.06 respectively for the previous year.
DIRECTORS
Sri G.Venkata Rao, Dr. G. Suresh Kumar and Sri Madhusudana Rao Divi
will retire by rotation at the ensuing Annual General Meeting and,
being eligible, offer themselves for re- appointment.
Dr. P. Gundu Rao has resigned from his whole-time employment with the
company as he wishes to relocate to the U.S.A. to spend time with his
family. Dr. Gundu Rao will, however, continue as a Non-Executive
Director of the company.
DIRECTORS RESPONSIBILITY REPORT
As required under Section 217 (2AA) of the Companies Act, 1956,
Directors of your company hereby state and confirm that:
a) the applicable accounting standards have been followed in the
preparation of the annual accounts
b) the accounting policies selected were applied consistently and the
judgements and estimates made are reasonable and prudent so as to give
a true and fair view of the state of affairs of the Company as at 31st
March, 2011 and its profit for the year ended on that date;
c) proper and sufficient care has been taken for the maintenance of
adequate accounting records in accordance with the provisions of the
Act for safeguarding the assets of the Company and for preventing and
detecting fraud and other irregularities.
d) the annual accounts have been prepared on a going concern basis.
AUDITORS
The Auditors, M/s. P.V.R.K. Nageswara Rao & Co., Chartered Accountants,
Hyderabad retire at the ensuing Annual General meeting and, being
eligible, offer themselves for reappointment.
COST AUDIT
Pursuant to Section 233B of the Companies Act, 1956, the Central
Government has prescribed Cost Audit for the company. Based on
recommendations of the audit committee and subject to the approval of
the Central Government, M/s. EVS & Associates, Cost Accountants,
Hyderabad have been appointed as Cost Auditors for the year.
The relevant cost audit report for the financial year 2009-10 was filed
within the due date on 20th August, 2010. The due date for filing the
report was 27th September, 2010.
MANAGEMENT DISUCSSION AND ANALYSIS
A report on Management Discussion & Analysis is provided as part of
this Annual Report.
CORPORATE GOVERNANCE AND SHAREHOLDERS INFORMATION
A report on Corporate Governance is included as a part of this Annual
Report.
RELATED PARTY TRANSACTIONS
As a matter of policy, your Company carries out transactions with
related parties on an arms-length basis. Statement of these
transactions is given in the Notes to Accounts attached in compliance
of Accounting Standard No. AS-18.
FIXED DEPOSITS
Your Directors wish to inform that the Company has not accepted any
deposits from public covered by provisions of Section 58A of the
Companies Act, 1956.
CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION
Particulars required under Section 217 (1) (e) of the Companies Act,
1956 read with Rule 2 of the Companies (Disclosure of Particulars in
the Report of Board of Directors) Rules, 1988 is given in the Annexure
- II to this report.
HUMAN RESOURCES
Particulars of employees required to be furnished under Section 217
(2A) of the Companies Act, 1956 read with the Companies (Particulars of
Employees) Rules, 1975 are given in the Annexure - III attached and
forms part of this Report.
ACKNOWLEDGEMENTS
We thank all our customers, suppliers and investors for their continued
support. We also gratefully acknowledge the continued assistance and
co-operation extended by Government authorities, financial institutions
and banks to the company. The Board expresses its appreciation for the
dedication and commitment extended by its employees and their
contribution to the growth and progress of the company.
For and on behalf of the Board of Directors
Hyderabad Dr. Murali K. Divi
20th May, 2011 Chairman & Managing Director
Mar 31, 2010
The Directors have pleasure in placing before you the Twentieth Annual
Report of the Company together with the Audited Accounts for the year
ended 31st March 2010.
FINANCIAL RESULTS
(Rs. in Crores)
Particulars 2009-10 2008-09
Net Sales 929.28 1190.56
Other operating income 17.37 12.93
Other income 13.33 10.08
Total Income 959.98 1213.57
Expenditure 517.43 700.18
PBDIT 442.55 513.39
Finance charges 2.76 7.23
Depreciation 51.45 47.82
Profit before tax (PBT) 388.34 458.34
Provision for tax :
Current Tax 31.20 29.59
MAT Credit Entitlements 9.60 (3.19)
Deferred Tax Liability 3.34 7.27
Fringe Benefit Tax - 0.22
Profit after tax (PAT) 344.20 424.45
Earnings per Share (EPS)
a) Basic 26.40 32.79
b) Diluted 26.35 32.46
Operations during the year were affected due to destocking of
inventories by our customers across all their supply chains covering
their plants, warehouses, distributors, stockists as well as suppliers
- as part of the efforts to conserve resources in view of the current
global economic slowdown.
DIVIDEND
Your Directors are pleased to recommend a dividend of Rs.6 per equity
share of Rs.2/- each, i.e., 300% on the enlarged equity capital after
the bonus issue, for the year 2009-10 subject to approval of members.
TAXATION
We made a provision of Rs. 40.80 crores towards Income- tax this year
(including prior year adjustment) as against a corresponding provision
of Rs. 26.41 crores during the previous year.
Based on the amendment to income-tax provisions for SEZ Units in the
Finance Act, 2009 made effective only prospectively from 1st April,
2009, the company had, during the quarter ending 30-06-2009, provided
an amount of Rs.54.04 crores towards tax expense of earlier years,
representing shortfall of tax provision on account of claims in respect
of the SEZ Unit set up by the company, under exceptional item, as the
same is not in the nature of provision for ordinary activities of the
current period. As the Finance Act, 2010 enacted by the Government of
India in May, 2010 has amended the applicable income-tax provisions for
SEZ Units retrospectively effective from 1st April, 2006, the provision
of Rs.54.04 crores made towards tax expense of earlier years and of
interest thereon amounting to Rs.3.51 crores have now been withdrawn.
An amount of Rs.3.34 crores has been provided towards Deferred Tax
Liability during the year as against Rs. 7.27 crores during the
previous year. There is no provision towards Fringe Benefit Tax (FBT)
for the year as the FBT has since been withdrawn.
CHANGES IN CAPITAL STRUCTURE
(i) Authorised Share Capital
The Authorised Capital of the company was reclassified as Rs.20 crores
divided into 10 crores Equity shares of Rs.2 each and has been
increased to Rs.30 crores divided into 15 crores equity shares of Rs.2
each.
(ii) Bonus Issue
During the year, your company has allotted bonus shares in the
proportion of ONE equity share for every ONE equity share held, with
the approval of the members through postal ballot resolution dated
22.07.2009. Company has issued 6,48,47,975 equity shares as Bonus
Shares by capitalizing a part of the reserves comprising Debenture
Premium, Debenture Forfeiture, Share Premium and/or General Reserves of
the company.
(iii) Allotment of Equity Shares to the Employees under ESOP 2006
Scheme
During the year, we allotted 25,38,145 equity shares of Rs.2 each to
employees on exercise of their stock options.
As a result of the Bonus issue and the allotment of shares under ESOP
scheme, the paid-up equity capital of the company has increased by
Rs.13.48 crores to Rs.26.43 crores. There has been an addition of Rs.
25.77 crores to the Share Premium Account on account of ESOPs
allotment.
EMPLOYEE STOCK OPTION SCHEME
The Employee Stock Option Scheme (ESOP 2006) approved by the company
provided for vesting of stock options in 4 tranches of which the third
tranche has been vested to the employees during the last year. The
fourth/last tranche under this Scheme was vested on 13th March, 2010.
An amount of Rs.2.25 crores (Rs. 4.90 crores during last year) has been
charged to Expenses during the year as per SEBI Guidelines.
As per the provisions of Securities and Exchange Board of India
(Employee Stock Option Scheme and Employee Stock Purchase Scheme),
Guidelines, 1999, disclosures with respect to Scheme are given in the
Annexure à I to this report.
SUBSIDIARIES
Your company has two wholly owned subsidiaries viz., M/s. Divis
Laboratories (USA) Inc., in USA and M/s. DiviÃs
Laboratories Europe AG in Switzerland for marketing its nutraceutical
products and a greater reach to customers within these regions. As the
Nutra facility at our SEZ Unit at Visakhapatnam stabilized operations,
the marketing activity has gathered momentum at the subsidiaries. The
subsidiaries have been able to cover their overheads significantly and
reported lower losses amounting to Rs.0.64 crores for the US subsidiary
and Rs.2.37 crores at the Swiss subsidiary for the current year.
Auditors of these subsidiaries have observed that they have negative
networth and suffer from deficiency of cash for continuing operations
as a going-concern without the support of the parent. The losses in the
subsidiaries are on account of low level of operations as the
subsidiaries have currently been marketing only a few of the
nutraceutical products. With the scale up of operations of the Nutra
facility, the subsidiaries will have full scale marketing operations
and would achieve profitable operations.
CONSOLIDATED ACCOUNTS
As stipulated in the listing agreement with the stock exchanges, the
consolidated financial statements have been prepared by the Company in
accordance with the relevant accounting standards under the Companies
Act, 1956. The audited consolidated financial statements together with
Auditors Report thereon form part of the Annual report. The
consolidated net profits after tax of the company and its subsidiaries
for the year amounted to Rs. 340.33 crores as compared to Rs. 416.64
crores in the previous year representing a basic earning per share of
Rs. 26.11 and Rs.26.06 per share on diluted basis for the current year
as against Rs.32.19 and Rs. 31.87 respectively for the previous year.
DIRECTORS
Dr. K. Satyanarayana, Prof. C. Ayyanna and Dr. P. Gundu Rao will retire
by rotation at the ensuing Annual General Meeting and, being eligible,
offer themselves for re- appointment.
DIRECTORSÃ RESPONSIBILITY REPORT
As required under Section 217 (2AA) of the Companies Act, 1956,
Directors of your company hereby state and confirm that:
a) the applicable accounting standards have been followed in the
preparation of the annual accounts
b) the accounting policies selected were applied consistently and the
judgements and estimates made are reasonable and prudent so as to give
a true and fair view of the state of affairs of the Company as at 31st
March, 2010 and its profit for the year ended on that date;
c) proper and sufficient care has been taken for the maintenance of
adequate accounting records in accordance with the provisions of the
Act for safeguarding the assets of the Company and for preventing and
detecting fraud and other irregularities.
d) the annual accounts have been prepared on a going concern basis.
AUDITORS
The Auditors, M/s. P.V.R.K. Nageswara Rao & Co., Chartered Accountants,
Hyderabad retire at the ensuing Annual General meeting and, being
eligible, offer themselves for reappointment.
COST AUDIT
Pursuant to Section 233B of the Companies Act, 1956, the Central
Government has prescribed Cost Audit for the company. M/s. EVS &
Associates, Cost Accountants, Hyderabad have been appointed as Cost
Auditors. While the Cost audit reports for the year 2008-09 have
already been filed with the Central Government, cost audit for the year
2009-10 is in progress.
MANAGEMENT DISUCSSION AND ANALYSIS
A report on Management Discussion & Analysis is provided as part of
this Annual Report.
CORPORATE GOVERNANCE AND SHAREHOLDERSÃ INFORMATION
A report on Corporate Governance is included as a part of this Annual
Report.
RELATED PARTY TRANSACTIONS
As a matter of policy, your Company carries out transactions with
related parties on an arms-length basis. Statement of these
transactions is given in the Notes to Accounts attached in compliance
of Accounting Standard No.AS-18.
FIXED DEPOSITS
The Company has not accepted any deposits from public covered by
provisions of Section 58A of the Companies Act, 1956.
CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION
Particulars required under Section 217 (1) (e) of the Companies Act,
1956 read with Rule 2 of the Companies (Disclosure of Particulars in
the Report of Board of Directors) Rules, 1988 is given in the Annexure
à II to this report.
HUMAN RESOURCES
Particulars of employees required to be furnished under Section 217
(2A) of the Companies Act, 1956 read with the Companies (Particulars of
Employees) Rules, 1975 are given in the Annexure - III attached and
forms part of this Report.
ACKNOWLEDGEMENTS
We thank our customers, suppliers and investors for their continued
support. We also gratefully acknowledge the continued assistance and
co-operation extended by Government authorities, financial institutions
and banks to the company. The Board expresses its appreciation for the
dedication and commitment extended by its employees at all levels and
their contribution to the growth and progress of the company.
For and on behalf of the Board of Directors
Hyderabad Dr. Murali K. Divi
22nd May, 2010 Chairman & Managing Director