Divis Laboratories Ltd


BSE: 532488 | NSE: DIVISLAB | ISIN: INE361B01024 
Market Cap: [Rs.Cr.] 19,518 | Face Value: [Rs.] 2
Industry: Pharmaceuticals - Indian - Bulk Drugs

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Director's Report

Directors

Dear Shareholders,

Your Directors have pleasure in placing before you the Twenty Third Annual Report ofthe Company together with the Audited Accounts for the year ended 31st March2013.

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 decentgrowth of 41% achieved during the last year.

We made a provision of Rs. 160.90 crores towards Income-tax this year (including MATcredit utilization of Rs.7.90 crores). Provision for last year amounted to Rs.136.51crores including a MAT credit utilization of Rs.3.68 crores. An amount of Rs. 19.26 croreshas been provided towards Deferred Tax Liability during the year as against Rs. 12.38crores during the previous year.

PAT amounted to Rs.611.42 crores for the year, reflecting a growth of 12%. Earnings PerShare 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’sLaboratories Europe AG in Switzerland are engaged in marketing/distribution ofnutraceutical 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 thenutraceutical 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 comparedto the previous year.

Auditors of these subsidiaries have observed that the subsidiaries have sufferedrecurring losses, lack sufficient liquidity to continue operations and to continue as agoing-concern depends on the temporary funding by the parent and successful realization oftheir 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 documentsof 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 subsidiarieswill be provided the same on receipt of a written request from them. These documents willbe available for inspection at the Registered Office of the Company and that of therespective subsidiary companies on any working day during business hours. The ConsolidatedFinancial Statements presented by the Company include the financial results of itssubsidiary companies.

Emphasis-of-Matter - Audit observations

Our Auditors have observed that the networth of the subsidiaries has eroded andconsequent possibility of any temporary impairment of investment by way of equity insubsidiaries amounting to Rs.281.61 lakhs and recovery of loans of Rs.4486.31 lakhs givento the subsidiaries.

The nutraceutical business has been established based on the strengths of Divi’sLabs in handling complex chemistry whereby all the synthetic carotenoids have beendeveloped and produced on a commercial scale for the first time in India. Over the lastfew years, we have made significant progress in terms of implementing the nutra facilityand stabilising operations. Technical/Quality/ Regulatory Experts employed at thesubsidiaries have also helped in implementation of the nutra facility and the variousprocesses of approvals and qualifications.

Different application forms have also been fully developed and now the nutraceuticalforms are offered for the entire use base in the pharma, food supplement and colorapplications as also for animal health segments. Approval processes are very elaborate andtime consuming. Approvals have since been received from several major users and theoutlook now looks very positive.

With the significant efforts having been made in stabilizing operations andqualifications from several customers, the company is confident of achieving profitabilityat 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 consolidatedfinancial statements have been prepared by the Company in accordance with the relevantaccounting standards under the Companies Act, 1956. The audited consolidated financialstatements 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 ensuingAnnual General Meeting and, being eligible, offer themselves for re-appointment.

Mr. Ranga Rao Ravipati has been appointed as Additional Director (Independent andNon-Executive) with effect from 3rd November, 2012. It is proposed to appointhim as Director of the Company, liable to retire by rotation, at the ensuing AnnualGeneral Meeting.

Mr. G. Venkata Rao has resigned as a Director of the company with effect from 3rdNovember, 2012 due to personal reasons and other pre-occupations. The Directors place onrecord their appreciation for the contribution made by Mr. G. Venkata Rao during his longtenure on the Board since 10.03.2001.

DIRECTORS’ RESPONSIBILITY STATEMENT

As required under Section 217 (2AA) of the Companies Act, 1956, Directors of yourcompany hereby state and confirm that :

a) the applicable accounting standards have been followed in the preparation of theannual accounts;

b) the accounting policies selected were applied consistently and the judgements andestimates made are reasonable and prudent so as to give a true and fair view of the stateof affairs of the Company as at 31st March, 2013 and its profit for the yearended on that date;

c) proper and sufficient care has been taken for the maintenance of adequate accountingrecords in accordance with the provisions of the Act for safeguarding the assets of theCompany 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, Hyderabadretire at the ensuing Annual General meeting and, being eligible, offer themselves forreappointment.

COST AUDIT

Pursuant to Section 233B of the Companies Act, 1956, the Central Government hasprescribed Cost Audit for the company. Based on recommendations of the audit committee andsubject to approval of the Central Government, M/s. EVS & Associates, CostAccountants, 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 thedue date on 29th January, 2013. The due date for filing the report was 28thFebruary, 2013.

MANAGEMENT DISUCSSION AND ANALYSIS

A report on Management Discussion & Analysis is provided as part of this AnnualReport.

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 CorporateGovernance as stipulated under Clause 49 of the Listing Agreement is attached to thisreport.

RELATED PARTY TRANSACTIONS

As a matter of policy, your Company carries out transactions with related parties on anarms-length basis. Statement of these transactions is given in the other explanatoryinformation attached in compliance of Accounting Standard No.AS-18.

FIXED DEPOSITS

Your Directors wish to inform that the Company has not accepted any deposits frompublic 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 withRule 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 theCompanies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975 aregiven in the Annexure - II attached and forms part of this Report.

ACKNOWLEDGEMENTS

We thank our customers, suppliers and investors for their continued support. We alsogratefully acknowledge the continued assistance and co-operation extended by Governmentauthorities, financial institutions and banks to the company. The Board expresses itsappreciation for the dedication and commitment extended by its employees at all levels andtheir 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

Annexure - I

Information pursuant to Section 217(1)(e) of the Companies Act 1956 read with theCompanies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988.

FORM - A

Form for disclosure of particulars with respect to Conservation of Energy

A. CONSERVATION OF ENERGY

Power and Fuel consumption

Particulars 2012-13 2011-12
1. Electricity
(a) Purchases :
Units 14,42,26,769 11,44,19,352
Total Amount 95.26 46.42
- (Rs.crores)
Rate/Unit - Rs. 6.60 4.06
(b) Own generation :
Through diesel 51,11,404 72,44,181
Generator Units
Units per Lt. of diesel 3.41 3.47
Cost/Unit - Rs. 23.45 15.52
2. Coal (D/C grade)
Quantity (Kgs) 8,20,65,000 7,07,59,000
Total Cost - (Rs.crores) 30.68 26.28
Average rate - Rs. 3.74 3.71

B. CONSUMPTION PER UNIT OF PRODUCTION :

Products Electricity (Units) Coal (D/C Grade) Others (Specify) Since the Company manufactures different types of active pharmaceutical ingredients and intermediates, it is not practicable to give consumption per unit of production.

FORM - B

Form for disclosure of particulars with respect to technology absorption

RESEARCH AND DEVELOPMENT (R&D) :

1. Specific areas in which R&D is carried out by the Company. : Process development for Active Pharmaceutical Ingredients and interme- diates.
2. Benefits derived as a result of the above R&D : Developed new products and achieved cost and process efficiencies on existing products.
3. Future plan of action : To develop processes for newer products and intermediates.

4. Expenditure on R&D :

(Rs. in Crores)

Particulars 2012-13 2011-12
a) Capital 4.23 9.41
b) Recurring 24.00 18.86
c) Total 28.23 28.27
d) Total R&D Expen- diture as a percentage of Sales 1.32% 1.52%

TECHNOLOGY ABSORPTION, ADAPTATION AND INNOVATION :

1. Efforts in brief, made towards technology absorption and adoption. : The company has its own R&D Centre which develops tech- nologies and processes for Active Pharmaceutical Ingre- dients and drug intermediates and these technologies are absorbed and implemented at the company’s Plants.
2. Benefits derived as a result of the above efforts : The company constantly has been executing process devel- opments for its product range.
Process optimization has been achieved in Production, which resulted in lower cost of pro- duction and substantial ex- ports. The developments implemented brought more green chemistry by reducing reagents, minimize wastes and increasing recoveries.
3. Information regards import of technology during the last 5 years. : There is no import of technology.

FORM - C

Foreign Exchange Earnings and Outgo

(Rs.in Crores)

Particulars 2012-13 2011-12
(a) Foreign Exchange earnings :
i) FOB Value of Exports 1860.16 1606.88
ii) Contract Research Fee 2.24 5.90
iii) Jobwork Charges 16.53 2.31
(b) Foreign Exchange outgo :
i) Remittance in
Foreign Currency :
Dividend (Net of Tax) 0.07 0.05
ii) CIF value of imports :
Raw Materials 447.99 348.64
Packing Materials 1.12 1.72
Lab Materials 2.03 1.18

(Rs.in Crores)

Particulars 2012-13 2011-12
Capital Goods 16.24 11.55
Components & Spares 0.76 0.74
iii) Expenditure in Foreign Currency towards : (on accrual basis)
Memberships and
Subscriptions 0.75 0.49
Books and Periodicals 0.10 0.21
Traveling Expenses 0.97 0.66
Consultancy Charges 2.64 1.54
Sales Commission 4.37 3.73
Foreign Bank Charges 0.49 0.56
Interest 0.01 0.08
Others 2.08 0.69

Annexure – II

Information pursuant to Section 217 (2A) of the Companies Act, 1956 read with theCompanies (Particulars of Employees) Rules, 1975

Name Age (yrs) Qualifications Designation Date of commencement of employment Experience (yrs) Gross remuneration (Rs.Crores) Last employment
Dr. Murali K. Divi 62 M. Pharm. Ph. D. Chairman & Managing Director 12-Oct-90 38 26.46 Managing Director, Cheminor Drugs Ltd.
Ramana N.V. 55 B.Sc. (Chem) Executive Director 26-Dec-94 28 13.71 President, Enmark Exim Services Pvt. Ltd
Madhusudana Rao Divi 69 M.E.(Structural Engg.) Director- Projects 14-Oct-94 44 0.99 Executive Director, Sadah General Trading & Const Co., Kuwait
Kiran S. Divi 37 B. Pharm. Director & President - Operations 10-Aug-01 12 9.45 -
Chandra S. Divi 45 B.E. General Manager 19-Oct-94 19 0.84 -
Devendra Rao S. 51 M. Sc. General Manager 10-Feb-95 30 0.90 Senior Manager (Prod), Natco Pharma Ltd.
Hemanth Kumar G. 53 M. Sc. General Manager 1-Nov-94 30 0.87 Sr. Prodn. Manager, Sumitra Pharma Ltd.,
Kishore Babu L. 61 B.Com, FCMA Chief Financial Officer 20-Nov-94 40 1.01 Finance Manager, Nagarjuna Fert & Chem Ltd.,
Prasad Y.T.S. 45 B.E. General Manager 1-Nov-90 25 0.90 Engineer (Devpt), Cheminor Drugs Ltd.,
Ramakrishna S. 51 M. Sc. General Manager 15-Feb-95 30 0.87 General Manager (Works), Vera Laboratories Ltd.
Ramesh Babu M. 47 B. Sc. Chief Technologist 1-Nov-90 27 0.90 R&D Incharge, Cheminor Drugs Ltd.,
Srinivasa Rao P. 48 B. Pharm Chief Technologist 1-Nov-90 25 0.90 Sr. Chemist, Cheminor Drugs Ltd.
Ramesh Babu L. 57 M.Com, MBA, LLB Chief Information Officer 20-May-09 24 0.67 Group Captain, Indian Air Force

Notes:

1) Remuneration includes salary, allowances, company contribution to provident fund,Commission, benefits and value of stock options.

2) All the above appointments are contractual.

3) Dr. Murali K. Divi, Chairman and Managing Director and Mr. Madhusudana Rao Divi,Director - Projects are related to each other.

4) Dr. Murali K. Divi, Chairman and Managing Director and Mr. Kiran S. Divi, Director& President - Operations are related to each other.

5) Mr. L. Ramesh Babu, Chief Information Officer is related to Mr. N. V. Ramana,Executive Director of the company.

6) No other employee mentioned above is related to any Directors of the Company.

For and on behalf of the Board
Hyderabad Dr. MURALI K. DIVI
20th May, 2013 Chairman and Managing Director
   

Peer Comparison

Company Market Cap
(Rs. in Cr.)
P/E (TTM)
(x)
P/BV (TTM)
(x)
EV/EBIDTA
(x)
ROE
(%)
ROCE
(%)
D/E
(x)
Lupin 50,179.60 21.76 7.19 12.61 39.3 49.4 0.07
Divi's Lab. 19,518.23 24.65 6.43 14.99 25.9 32.9 0.02
Jubilant Life 2,891.30 12.70 1.67 15.32 4.2 7.0 1.52
Shilpa Medicare 1,890.73 23.39 3.88 9.81 14.9 14.9 0.25
Vinati Organics 1,788.20 20.75 5.77 5.75 32.1 27.2 0.96
Marksans Pharma 1,263.78 22.78 8.63 4.97 41.9 19.5 0.00
Suven Life Scie. 1,231.66 8.85 4.66 3.88 68.8 67.7 0.50
Granules India 1,226.46 13.84 3.56 5.09 11.7 13.3 0.76
Dishman Pharma. 1,219.78 14.06 1.53 5.90 9.1 11.6 0.72
Sequent Scien. 1,020.42 0.00 25.39 0.00 0.0 0.0 2.06
Hikal 1,007.53 15.72 2.53 8.61 -2.5 5.0 1.57
Shasun Pharma. 956.57 28.01 2.70 8.58 11.7 9.0 1.56
Aarti Drugs 751.43 12.91 2.99 4.35 26.9 21.9 1.39
Nectar Lifesci. 611.22 9.84 0.66 4.00 10.4 12.8 1.16
Orchid Chemicals 525.56 0.00 1.08 16.79 0.0 0.0 3.31

Futures & Options Quote

 
Expiry Date
1452.95 25.65  [1.7]%
Instrument: FUTSTK
Expiry Date: 31 Jul 2014
Open Price: 1,475.00
Average Price: 1,452.39
No. of Contracts Traded: 216,750
Open Interest: 458,250
Underlying: DIVISLAB
Market Lot: 250
Previous Close: 1,452.95
Day’s High | Low: 1,477.00 | 1,435.60
Turnover (Cr.): 31.48
Open Int. Change: -55,250.00 ( [10.8]% )
View detailed F& O quotes >>

Key Information

Key Executives:

Murali K Divi , Chairman & Managing Director  

N V Ramana , Executive Director  

Madhusudana Rao Divi , Director (Projects)  

Kiran S Divi , President & Director  


Company Head Office / Quarters:
7-1-77/E/1/303 Divi Towers,
Dharam Karan Road Ameerpet,
Hyderabad,
Andhra Pradesh-500016
Phone : 91-40-23786300
Fax : 91-40-23786460
E-mail : mail@divislaboratories.com
Web : http://www.divislaboratories.com
Registrars:
Karvy Computershare Pvt Ltd
Plot No 17-24
Vittal Rao Nagar
Madhapur
Hyderabad-500081

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