Your Directors have pleasure in placing before you the Twenty Fourth Annual Report of the Company together with the Audited Accounts for the year ended 31st March 2014.
The Companys financial performance, for the year ended 31st March, 2014 is summarized below:
(Rs. in lakhs)
|Other Operating Income||679||494||679||494|
|Profit before tax (PBT)||100864||79158||99092||78124|
|Provision for tax:|
|MAT Credit (Entitlement)/ Utilisation||(2367)||790||(2367)||790|
|Profit after tax (PAT)||79172||61142||77334||60201|
|Earnings per Share (EPS) (Rs.)|
RESULTS OF OPERATIONS
Your company has achieved a sales growth of 18% for the year, on the back of a growth of 15% achieved during the last year. PBDIT increased by 27% at Rs. 110276 lakhs.
Profit after Tax for the year amounted to Rs.79172 lakhs, reflecting a growth of 29%. Earnings Per Share of Rs.2/-each works out to Rs. 59.65 for the year as against Rs. 46.06 last year.
Out of the total revenue, 44% came from North America, 37% from Europe, 6% from Asia, 9% from India and 4% from Rest of the World.
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)
Provision has been made for Rs. 18180 lakhs towards Income-tax for the current year (net of MAT credit entitlement of Rs.2367 lakhs). Provision for last year amounted to Rs.16090 lakhs including a MAT credit utilization of Rs.790 lakhs. An amount of Rs. 3512 lakhs has been provided towards Deferred Tax Liability for the year as against Rs. 1926 lakhs during the previous year.
Our total income on consolidated basis increased to Rs. 252535 lakhs from Rs. 213990 lakhs in the previous year, recording a growth rate of 18%. PBDIT amounted to Rs. 108510 lakhs as against Rs. 85997 lakhs in the previous year. Profit after Tax for the year increased by 28% at Rs. 77334 lakhs as against Rs. 60201 lakhs in the previous year.
Your Directors are pleased to recommend a dividend of Rs.20 per equity share of Rs.2/- each, i.e., 1000% (last year Rs. 15 per equity share) for the financial year ended 31st March, 2014, subject to approval of members at the ensuing Annual General Meeting.
The total dividend payout for the current year amounts to Rs. 31059 lakhs (inclusive of tax of Rs.4512 lakhs) as against Rs. 23294 lakhs in the previous year. Dividend (including dividend tax) as a percentage of profits is 39% as compared to 38% 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 2nd August, 2014. 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.
Our subsidiaries viz., M/s. Divis Laboratories (USA) Inc., in USA and M/s. Divis 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.12618 lakhs as against sales of Rs. 9078 lakhs previous year resulting in growth of 39% for the nutraceutical products in North America and Europe.
Brief operations of the subsidiaries are as under:
(Rs. in lakhs)
|Particulars||Divis Laboratories (USA) Inc.,||Divi's Laboratories Europe AG|
|Salaries & Wages||528||518||176||134|
|Loss before tax||182||491||774||93|
Subsidiaries have achieved good growth in operating profit. Loss on forex currency translation for the year accounted to Rs.632 lakhs for US subsidiary and Rs.698 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.
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
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 of loans of Rs.4796.31 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.
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.
Pursuant to the provisions of Section 161(1) of the Companies Act, 2013 and the Articles of Association of the Company, Mr. K.V.K. Seshavataram and Smt. S. Sridevi have been appointed as Additional Directors designated as Independent Directors w.e.f. 23rd June, 2014 and they shall hold office up to the date of the ensuing Annual General Meeting. The Company has received requisite notice in writing from a member proposing Mr. K.V.K. Seshavataram and Smt. S. Sridevi for appointment as Independent Directors.
Impending notification of Section 149 and other applicable provisions of the Companies Act, 2013, your Directors are seeking appointment of Dr. G. Suresh Kumar and Mr. R. Ranga Rao as Independent Directors for a term of five consecutive years upto 31st March, 2019. Details of the proposal for appointment of Mr. K. V. K. Seshavataram, Smt. S. Sridevi, Dr. G. Suresh Kumar and Mr. R. Ranga Rao are mentioned in the Explanatory Statement under Section 102 of the Companies Act, 2013 of the Notice of the Annual General Meeting.
The Company has received declarations from all the Independent Directors of the Company confirming that they meet with the criteria of independence as prescribed both under sub-section (6) of Section 149 of the Companies Act, 2013 and under Clause 49 of the Listing Agreement with the Stock Exchanges.
As per the provisions of the Companies Act, 2013 Mr. Kiran S. Divi will retire by rotation at the ensuing Annual General Meeting and, being eligible, offer himself for re-appointment.
The Board of Directors at its meeting held on June 23, 2014, subject to the approval of the shareholders, reappointed Dr. Murali K. Divi as the 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.
Prof. C. Ayyanna has resigned as a Director of the company with effect from 20th May, 2013 due to personal reasons and other pre-occupations. The Directors place on record their appreciation for the contribution made by Prof. C. Ayyanna during his long tenure on the Board since 10.03.2001.
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 Divis 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. Sri 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.
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, 2014 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.
CORPORATE SOCIAL RESPONSIBILITY COMMITTEE
During the year, your directors have constituted the Corporate Social Responsibility Committee (CSR Committee). 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, monitoring the implementation of the framework of the CSR Policy and recommending the amount to be spent on CSR activities.
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.
The Company has received letter 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.
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 2013-14.
The relevant cost audit report for the financial year 2012-13 has been filed within the due date on 3rd September, 2013. The due date for filing the report was 30th September, 2013.
MANAGEMENT DISCUSSION AND ANALYSIS
A report on Management Discussion & Analysis for the year under review is provided in a separate section forming 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 Practicing Company Secretary Mr. V. Bhaskara Rao confirming the compliance with the conditions of Corporate Governance as stipulated under Clause 49 of the Listing Agreement is attached to this report.
TRANSFER OF AMOUNTS TO INVESTOR EDUCATION AND PROTECTION FUND
Pursuant to the provisions of Section 205A(5) and 205C of the Companies Act, 1956, relevant amounts which remained unpaid or unclaimed for a period of seven years have been transferred by the Company, from to time to time on due dates, to the Investor Education and Protection Fund.
Pursuant to the provisions of Investor Education and Protection Fund (Uploading of information regarding unpaid and unclaimed amounts lying with companies) Rules, 2012, the Company has uploaded the details of unpaid and unclaimed amounts lying with the Company as on August 05, 2013 (date of last Annual General Meeting) on the websites of the Company and Ministry of Corporate Affairs.
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 other explanatory information attached in compliance of Accounting Standard No.AS-18.
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 & 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.
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.
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 of Directors
Dr. Murali K. Divi
Chairman & Managing Director
23rd June 2014
Annexure - I
Information pursuant to Section 217(1)(e) of the Companies Act 1956 read with the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988.
FORM - A
Form for disclosure of particulars with respect to Conservation of Energy
A. CONSERVATION OF ENERGY
Power and Fuel consumption
|Total Amount - (Rs.lakhs)||10698||9526|
|Rate/Unit - Rs.||6.68||6.60|
|(b) Own generation:|
|Units per Lt. of diesel||3.36||3.41|
|Cost/Unit - Rs.||16.10||13.22|
|2. Coal (D/C grade)|
|Total Cost - (Rs.lakhs)||3944||3068|
|Average rate - Rs.||3.90||3.74|
B. CONSUMPTION PER UNIT OF PRODUCTION:
|Products Electricity (Units) Coal (D/C Grade) Others (Specify) }||Since the Company manufac- tures different types of active pharmaceutical ingredients and intermediates, it is not practicable to give consump- tion 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 inter- mediates.|
|2. Benefits derived as a resultof 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 lakhs)
|d) Total R&D Expenditure as a percentage of Sales||1.40%||1.33%|
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 technologies and processes for Active P h a r m a c e u t i c a l Ingredients and drug intermediates and these technologies are absorb- ed and implemented at the companys Plants.|
|2. Benefits derived as a result of the above efforts :||The company constantly has been executing process developments for its product range. Process optimization has been achieved in Produ- ction, which resulted in lower cost of production and substantial exports. 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 (on accrual basis)
(Rs. in lakhs)
|(a) Foreign Exchange earnings:|
|i) FOB Value of Exports||225764||186016|
|ii) Service charges||421||1877|
|(b) Foreign Exchange outgo:|
|i) Remittance in Foreign Currency:|
|Dividend (Net of Tax)||0.15||7|
|ii) CIF value of imports:|
(Rs. in lakhs)
|Components & Spares||97||76|
|iii) Expenditure in Foreign Currency towards:|
|Memberships and Subscriptions||60||75|
|Books and Periodicals||14||10|
|Foreign Bank Charges||53||49|
Information pursuant to Section 217 (2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975
|Name||Age (Yrs)||Qualifications||Desig nation||Date of commencement of employment||Expe rience (Yrs)||Gross remune ration (Rs.crores)||Last employment|
|Dr. Murali K. Divi||63||M. Pharm. Ph. D.||Chairman & Managing Director||12-Oct-90||39||33.39||Managing Director, Cheminor Drugs Ltd.|
|Ramana. N.V.||56||B.Sc.(Chem)||Executive Director||26-Dec-
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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,
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