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Abbott India Ltd

BSE: 500488 | NSE: ABBOTINDIA ISIN: INE358A01014
Market Cap: [Rs.Cr.] 11,059.14 Face Value: [Rs.] 10
Industry: Pharmaceuticals - Multinational

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Director's Report



To The MeMbers

Your Directors have pleasure in presenting the seventy-first Annual report and the Audited Financial statements of the Company for the financial year 2014-15.


(Rs in Lakhs)

For the year ended March 31, 2015 For the Period January 1, 2013 to March 31,
sales 2237,60.25 2231,28.59
Profit before Tax 344,36.08 294,55.35
Profit After Tax 228,95.93 198,45.07
balance brought forward 539,34.96 418,20.25
Profit available for 768,30.89 616,65.32
Appropriations :
Dividend (Proposed) 65,87.28 48,87.34
Corporate Dividend Tax 13,41.02 8,58.51@
Transfer to reserves 22,89.59 19,84.51
balance carried forward 666,13.00 539,34.96

@ Includes Corporate Dividend Tax of Rs 27.91 Lakhs for the year ended December 31, 2012.

* With effect from previous financial year, the Company has changed its accounting year from year ended December 31 to year ended March 31.


Your Directors have pleasure in recommending a dividend of Rs 31/- per share on 2,12,49,302 fully paid-up equity shares of Rs 10/- each of the Company for the year ended March 31, 2015. The proposed dividend, if approved at the Annual General Meeting, will absorb a sum of Rs 65,87.28 Lakhs (Previous year : Rs 48,87.34 Lakhs) and Corporate Dividend Tax of Rs 13,41.02 Lakhs (Previous year : Rs 8,30.60 Lakhs). The Corporate Dividend Tax is provided at the rate applicable on the day on which the Financial statements were approved by the board of Directors.


During the year, Rs 22,89.59 Lakhs was transferred to General reserve. The total reserves as on March 31, 2015 amounted to Rs 916,27.83 Lakhs comprising of Amalgamation reserve Rs 37.82 Lakhs, Capital reserve Rs 5,22.62 Lakhs, Capital redemption reserve Rs 2,52.48 Lakhs, General reserve Rs 242,01.91 Lakhs and surplus as per the statement of Profit & Loss amounting to Rs 666,13.00 Lakhs.



According to the World economic outlook published by the International Monetary Fund (IMF), the global economy expanded at 3.3% in 2014, reflecting a moderate growth over the previous year in spite of challenging economic conditions and heightened geo-political tensions during the year. While developing countries and emerging economies continued to witness slowdown, there was a steady recovery in advanced economies, particularly the Us, which benefitted from low oil prices and steady improvements in job creation and consumer confidence. In China, growth slowed down to its lowest in the last 24 years at 7.4%, short of the government’s target of 7.5%. (source: IMF) In India, economic activity saw a marked revival as a result of positive structural reforms by the new government. The core sectors of banking, insurance, defence and infrastructure saw bold steps being taken after a gap of many years. Another step taken during the year was a change in the GDP calculation methodology - the Central statistics organisation (Cso) changed the base year for GDP calculation from 2004-05 to 2011-12. In addition, in line with international practices, GDP will now be measured at market prices compared to GDP at factor cost. Post this revision, the Indian GDP growth rate at constant prices for financial year 2014-15 was 7.4% compared to 6.9% in the previous fiscal year. The new method will also increase the size of the Indian economy to around Rs 126.5 Lakhs Crores at current prices (estimate as of February 2015). Low oil prices, particularly in the second half of the year, eased inflation. This prompted the reserve bank of India (rbI) to ease monetary policy and lower interest rates in January 2015.

The all-round India growth story continues to remain strong and attractive. both IMF and World bank have predicted that the Indian economy will grow at 7.5% in 2015-16 and 2016-17. This is positive for the Indian Pharmaceutical Market.


The Indian Pharmaceuticals Market (IPM) is estimated to have grown from Rs 72,000 Crores in 2013 to Rs 79,000 Crores in 2014. IMs health (IMs), a leading healthcare global information and technology services company, estimates the Compounded Annual Growth rate (CAGr) for IPM to be in the range of 10%-11% till 2018.

some of the key features of the IPM are :

• IPM occupies an important position in the global pharmaceuticals industry. In terms of volumes, it was the 3rd largest market in the world in 2014, a position it has retained since 2013.

• IPM has consistently grown at a CAGr of 10%-11%over the last few years and has shown resilience in spite of a global economic slowdown and local regulatory challenges.

• The market continues to remain fragmented, with over 24,000 players; however, there are only approximately 330 players in the organized sector.

• The market continues to be dominated by branded- generics and more recently generic-generic products. Generic drugs form 72% of the total market and oTC drugs contribute approximately 19%.

• As far as therapeutic segments are concerned, Anti- Infectives form the largest sub-segment of IPM with 16% followed by Cardiovascular at 13% (in value terms).

• The top 10 companies account for around 40% of total sales and top 30 companies together account for nearly 75% of total sales. Among the top 10 companies in IPM space, 7 Indian companies account for almost 70% of the market with the 3 MNCs making up the balance 30%. Price levels continue to remain low driven by intense competition.

The overall improvement in the Indian economy will continue to remain one of the key growth drivers of IPM in the short term and will be characterized by :

Healthcare as a Priority Sector - In 2014-15 Union budget, healthcare has been declared as a priority sector by the government. Key recommendations that are likely to impact IPM in the medium term include raising the limit in Foreign Direct Investment (FDI) in medical insurance to 49%.

• Increased Focus on IPM - The Government of India has unveiled ‘Pharma Vision 2020’ aimed at making India a global leader in end-to-end drug manufacturing. It has reduced approval times for new facilities to boost investments. The industry is also expecting friendly policies and incentives to give a major thrust to the growth.

• Improving Rural Market - 70% of India’s population is in rural markets. over the last few years, there has been a significant increase in healthcare awareness as well as healthcare spend in rural India. As income levels rise in rural India, the rural markets present a big opportunity for growth.

• Increasing Digital Penetration - With the growth in digital media (including social media) and mobile, new patient engagement tools and technologies are being aggressively tested by various players. We expect this trend to continue and gain in importance in aspects such as patient awareness and diagnosis.

According to McKinsey & Company, the rise in the prevalence and treatment of diseases, increased affordability due to greater health insurance coverage and rising incomes, increase in medical infrastructure, launch of patented products and new market creation in newer therapies will drive growth of the Indian Pharmaceutical Market.

(source : IMs, India brand equity Foundation)


The following factors are likely to impact the IPM in the next few years :

• The mix of therapies will continue to gradually move in favour of specialty and super-specialty therapies. According to McKinsey & Company, mass therapies will constitute about half the market by 2020.

• Metro and Tier-I markets will make significant contributions to growth, driven by rapid urbanisation and greater economic development. rural markets will grow the fastest, driven by step-up from current poor levels of penetration.

• The affordability of drugs will rise due to sustained growth in incomes and increase in insurance coverage.

With real GDP growing at nearly 8% over the next decade, income levels will rise steadily.

• In addition to income growth, health insurance coverage will augment affordability. by 2020, McKinsey & Company expects nearly 650 million people to be covered by health insurance.

• The acceptability of modern medicine and newer therapies will increase due to aggressive market creation by players, an increased acceptance of biologics and preventive medicine, and a greater propensity to self-medicate. Players will shape the patient funnel, especially for chronic therapies such as cardiovascular and neuropsychiatry.

• The hospital segment will increase its share and influence, growing to 25% of the market in 2020, from the current 13%.


Financial Performance Sales :

Net sales for the year ended March 31, 2015 amounting to Rs 2237,60.25 Lakhs grew at 25.4%* over the prior period which is significantly higher than the 10.7%* growth achieved last year. each of the businesses achieved double digit growth, as highlighted in the Division-wise Performance.

Material Cost and Manufacturing :

Due to various inflationary pressures, Material Cost increased to 58.6% of Net sales as compared to 58.1% that was achieved in the prior period.

Employee Benefit Expenses :

During the year under review, the Company augmented its people strength by 3.7% to 2,867. The increase of 27.4%* in employee Cost is mainly due to merit increase and sales incentives.

Other Expenses :

The Company continued to keep a tight control on all discretionary spending like Advertising & Promotional spend and, therefore, has managed to bring down the other expenses from 19.4% of Net sales last year to 16.7% of Net sales this year.

Other Income : other Income for the year under review includes Profit on sale of residential Properties amounting to Rs 1,87 Lakhs this year against Rs 12,22 Lakhs last year.

Further, the investment strategy of the Company is reviewed periodically by the Audit Committee. The Company continued to invest in bank Deposits, with a view to safeguarding the principal and maintaining liquidity. The Company has an investment portfolio as at March 31, 2015 of approximately Rs 603,67.36 Lakhs generated out of operating surplus.

Profit Before Tax :

Profit before Tax for the year ended March 31, 2015 stood at Rs 344,36.08 Lakhs, which was significantly higher at 15.4% of Net sales as compared to 13.2% of Net sales in the prior period. This was largely due to higher sales, and other cost control measures and initiatives as mentioned above.

The board of Directors has recommended a dividend of Rs 31/- per equity share.

Division-wise Performance

The Company operates in single reportable business segment i.e. pharmaceuticals.

The Company’s business operations are divided into four divisions. The key performance highlights of each business division for the year 2014-15 are as follows :

Women’s Health, Gastroenterology and Hepatic Care Division Women’s Health :

This segment grew by 20.3%* in 2014-15. Duphaston, one of the flagship brands, dominates the market with approximately 19.7%# market share.

Gastroenterology :

This segment posted a strong growth of 22.2%* in 2014-15. This growth was majorly driven by Cremaffin, which grew at 26.1%* vs. 18.7%* in the prior period.

Hepatic Care :

This segment grew by 42.2%* in 2014-15 heptral growing at 15.2%* continued to drive the growth of this segment.

Specialty Care Division

Metabolics :

This segment continued with its strong performance, growing at 34.8%* in 2014-15. Thyronorm is the undisputed market leader with a market share of 52.6%# and registered a growth of 41.2%* in 2014-15.

Central Nervous System :

This segment grew by 30.2%* in 2014-15. The Company has a portfolio of strong brands in this segment like Zolfresh, Vertin and Prothiaden. A strong commitment to emphasize the importance of sleep and its relationship with chronic disorders, has made Zolfresh the No. 1 brand# in the extended sleep market. In the vertigo treatment sub-segment, the Company’s brand Vertin continues its leadership position as the No.1 brand.# In the anti-depression sub-segment, Prothiaden continues to maintain its leadership position.#

General Care Division

This division comprises multi-specialty drugs and applications, and is primarily aimed at general physicians. This division turned the corner in the last year with a 13.5%* growth from negative 4.6% in 2012-13. In the current year, the division continued the momentum with a growth of 19.7%*. All the major brands in the segment like brufen, Digecaine and surbex registered strong performance. Arachitol Nano, a new product launched during the year, achieved sales of Rs 2,83.27 Lakhs within 11 months of launch.

Consumer Care Division

This division is one of the new focus areas of growth for the Company. Its products fall within the oTC category and are targeted directly at patients through TV advertising and engagement programs. This segment grew at 19.4%* in 2014-15. Digene, the flagship brand in this segment, has shown impressive growth of 17.7%* in 2014-15. Digene Fizz has also performed well and registered a sales of Rs 9,08.07 Lakhs during this year.


In 2014, we built further on our long-standing commitment to clinical trial transparency. To facilitate further research that can help advance medical science or improve patient care, we conducted nine trials of which three are on-going, one study on recurrent miscarriage has been published in The Journal of obstetrics and Gynaecology, two studies have been submitted to the journal for publication, while the remaining three are in report writing phase.

A brief snapshot of studies conducted in 2014 is as follows :

• An observational study was conducted to profile Chronic Cholestatic Liver diseases in several centres across India. The study is complete and has moved to the report writing phase.

• A nationwide epidemiology study was conducted to study Minimal hepatic encephalopathy among patients of Cirrhosis which is also in the report writing phase.

• The third surveillance study on physicians’ prescribing patterns in Acid Peptic Disease in India has been completed.

• Constipation and its prevalence and its clinical subtypes in Indian patients is the subject of an ongoing study for which we are currently recruiting patients.

• A study on the prevalence of Insomnia in Indian corporate employees has been completed and the report has been submitted to the journals for publication.

• Miscarriage and Menstrual Cycle regularisation have formed the subject of two clinical trials that have been completed in the last year, one of which has been published and the other currently being reviewed for publication in prestigious scientific journals.

• In addition, we have an ongoing thyroid registry to determine disease and treatment profile in newly diagnosed hypothyroidism patients.

All the studies have been conducted after receiving appropriate regulatory approvals and stringently adhere to international and national guidelines on conduct of clinical trials.


An analysis by IMs shows that the Indian Pharmaceuticals Market will likely grow between 10% and 11% year on year to more than 1 lakh crore by 2018. This growth will be driven by increasing affordability, increasing access particularly as private providers expand to lower tier towns and cities and favourable demographic factors – an overall increase in Indian population as well as increased prevalence of chronic, non-communicable diseases such as cardiovascular diseases, diabetes and cancer.

For the near future, the Company has identified specific opportunities to leverage this growth, capitalise on its strengths and position itself as a leading science driven pharmaceutical company. some of the identified initiatives include :

• The Company is a market leader in 5 out of the 9 therapy areas that it is present in.# The Company will continue to build on its leadership position by entering adjacent therapy areas and launching new molecules which complement its suite of products.

• Driving diagnosis and creating patient awareness is another focus area especially through partnerships with other organizations in the healthcare value chain. A successful example of this has been in the area of thyroid through patient screening camps.

• To accelerate growth even further, the Company will be entering the Vaccines market with launch of 4 new vaccine brands in 2015. This will continue to be a high focus and high growth area for the Company.

• Another expansion area is oTC, with the launch of Consumer Care products. This expansion will be two-pronged – 1) Continue to build on the franchise and value of existing brands such as Digene; and 2) enter new oTC segments which the Company is not present in.

• The Company also anticipates a strong adoption of technologies which complement our products and KoL engagement strategy. The Company will continue to drive patient diagnosis and treatment using cutting edge tools and new innovations. The use of innovative technology is also being aggressively adopted as part of our regular marketing programs.

• During the year, the Company launched 9 new products and will continue launching new products and molecules.


Regulatory Challenges :

The pharmaceutical regulatory environment across the world is becoming more stringent including the Indian Pharmaceutical Industry. The Industry witnessed many important changes and challenges which included the New Pharmaceutical Pricing Policy, additional oversight mechanisms for clinical trials, Fixed Dose Combinations (FDCs) and new rules being notified for new drugs as well as clinical trials.

Various regulatory Committees were formed by the Government to streamline the current processes which resulted in delays of clinical trials and new drug approvals. These processes form an inherent part of the drug development process. The mandatory generic generics drive by the state Governments will also pose challenges for pharma companies in the near future.

Drug Price Control Order, 2013 :

The Drug Price Control order, 2013 (DPCo) changed the pricing mechanism of drug price control from ‘cost-based’ to ‘market-based’ for 348 drug molecules. In July 2014, the National Pharmaceutical Pricing Authority (NPPA) brought another 50 cardio-vascular and anti-diabetic drugs under price control. A revision in the National List of essential Medicine list is in progress which, if expanded, may pose a risk to your Company’s future profitability.


The Internal Controls of the Company are adequate and commensurate with the size and scale of the operations. These controls operate through well documented standard operating procedures, policies and process guidelines that are designed to provide reasonable assurance to management of the reliability of financial information, compliance to operating and adherence to statutory / regulatory requirements. The Internal Controls are routinely tested and certified by the Internal as well as the statutory Auditors. significant audit observations and the management actions thereon are reported to the Audit Committee on a quarterly basis. The Audit committee reviews the observations and assesses the adequacy of the actions proposed as well as monitors their implementation.


At Abbott India Limited, our people have always been our most critical and valuable resource. The hr division of the Company plays a strategic role in engaging with employees at all levels, keeping them motivated and driven to the Performance excellence and Leadership engagement culture of the Company.

Talent Development :

We continued to attract high quality talent throughout the year. The Global summer Internship and Leadership Development Programs attract talent from some of the world’s best universities including the harvard business school, MIT sloan and Wellesley College. The Management Trainee Program attracts talent from leading Indian business schools such as Isb, IIMs and NMIMs.

For our frontline salesforce, we have adopted a differentiated hiring approach. As a result, 30% of our Therapy business Managers come with differentiated backgrounds such as Commerce Graduates, MbA, FMCG and from other leading Indian and MNC pharmaceutical companies.

India Talent Strategy :

With a view to support future business growth and the Company’s strategic direction, the India Talent strategy program was launched. As part of a consolidated talent strategy, we initiated recruitment of freshers from premium graduate colleges.

• During the year, a benchmarking study on the perceived ranking of our field force vis-a-vis competition was also undertaken. our field force was ranked among the top 3 in India.

• AMCAT, an external talent assessment tool, has been implemented to make our lateral hiring process for field force more robust.

• 100% of our field managers (260 first line managers and 50 second line managers) underwent coaching workshops during the year.

• We strengthened our goal setting process by standardizing goal templates and conducted a cross functional goal alignment workshop.

Training and Certification :

The hr team partnered with the Commercial excellence team to establish a robust three tier ‘Field Certification Program’ (Prima, Magna and Maxima) aligned to career paths of our employees.

• The Field Force Certification Program has now seen 1,113 Prima, 576 Magna and 32 Maxima certified employees.

• To enhance the capability of our field force, the Commercial excellence team launched an online e-learning module in February 2015.

• More than 1,800 employees have accessed the e-learning module in the first month of launch.

Career Management Framework :

As part of the overall talent development program, the Company also launched a proprietary program called ‘Tracks’ which has created a structured framework for career development for employees and enables cross- functional, cross-geographical movement. This program outlines career progression in the organisation in a transparent manner so that all employees can plan their career advancement. The program has helped retain our key talent and positively impacted the Company’s retention rate. Under this program :

• We conducted over 20 internal assessments and processed 800 applications for roles in different functions and divisions

• 14 second-line managers have been placed through internal assessments and 95% of managerial positions were backfilled by internal talent promotions

Online Performance Reviews :

During the year, we launched an online tool for conducting performance reviews across the organization. Given the size of the field force this was a critical initiative in bringing efficiency to how the Company does performance reviews. For the first time majority of the field force including first line managers was appraised through an online tool and represents a pioneering initiative in the industry.

Other Initiatives :

As part of the launch of the new Vaccines Division, 40 employees were recruited to ensure that this division is ready to go to market in 2015.

• In Nepal, we increased our field force from 25 in November 2014 to 45 in April 2015.

• We established a Zonal hr Model in 2014 to create a decentralised structure and improve connect and access with the field force.

Prevention of Sexual Harassment at Work Place :

The Company has constituted Internal Complaints Committee (ICC) under the sexual harassment of Women at Workplace (Prevention, Prohibition and redressal) Act, 2013. During the year, two complaints were received by the Company and disposed off by ICC in terms of the provisions of the said Act

Total Number of Employees :

Total number of employees as on March 31, 2015 is 2,867.


Pursuant to section 134(5) of the Companies Act, 2013, your Directors state that :

a. in the preparation of the Annual Accounts for the year ended March 31, 2015, the applicable accounting standards have been followed and there are no material departures from the same;

b. they have selected such accounting Policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at March 31, 2015 and of the profits of the Company for that year;

c. they have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

d. they have prepared the Annual Accounts of the Company on a going concern basis;

e. they have laid down adequate Internal Financial Controls to be followed by the Company and that such Internal Financial Controls are adequate and operating effectively;

f. they have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.


Policy on dealing with Related Party Transactions and Materiality :

Policy on dealing with related Party Transactions and Materiality, as approved by the board, is available on the Company’s website at http://www.abbott.co.in/investor-relations.html.

As per the said Policy, all related Party Transactions are pre-approved by the Audit Committee and board as and when required. The same are also reviewed by the Audit Committee and board on a quarterly / annual basis.

Details of Related Party Transactions :

All contracts / arrangements / transactions entered into by the Company during the financial year 2014-15 with related Parties were in the ordinary course of business and on arm’s length basis. Also, there was no contract / arrangement / transaction with any of the related Parties which could be considered material in accordance with the Companies Act, 2013, rules framed thereunder and Clause 49 of the Listing Agreement.

Details of related Party Transactions entered into by the Company during the financial year 2014-15 are provided in Note 40 to the Financial statements.


Corporate Social Responsibility (CSR) Policy :

The board has, on recommendation of the Corporate social responsibility Committee, adopted a Csr Policy. The said Policy is available on the Company’s website at http://www. abbott.co.in/investor-relations.html.

CSR initiatives undertaken during the financial year 2014-15 :

During the year, the Company spent Rs 4,63.19 Lakhs on Csr activities.

The Annual report of Csr Activities undertaken by the Company during the financial year 2014-15, is annexed as "Annexure I" and forms part of this report.


The Company recognises risk Management as an integrated, forward-looking and process-orientated approach. It has developed a risk Framework that broadly encompasses : aligning risk appetite & strategy; enhancing risk response; reducing operational surprises. During the year, a risk Management Core Team was formed with representatives of different businesses and functions, who would identify risks and propose mitigation plans. The Company has set up a risk Management Committee, in accordance with the requirements of Clause 49 of the Listing Agreement, which would periodically monitor the major risks & assess the adequacy

Futures & Options Quote
Future Data Not present
Key Information

Key Executives:

Munir Shaikh , Chairman

Rajendra A Shah , Director

Ranjan Kapur , Director

Kaiyomarz Marfatia , Whole-time Director

Company Head Office / Quarters:

3-4 Corporate Park,
Sion Trombay Road Chembur,
Phone : Maharashtra-91-22-67978888 / Maharashtra-
Fax : Maharashtra-91-22-67978727/8920 / Maharashtra-
E-mail : webmaster@abbott.co.in
Web : http://www.abbott.co.in


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