Ajanta Pharma Ltd Directors Report.
Your Directors present their Fortieth Annual Report and Audited Financial Statements for the Year ended 31st March 2019.
1. Financial performance
(Rs. in cr. except EPS)
|Year ended 31st March||2019||2018||2019||2018|
|Revenue from operations||1,773||1,830||2,055||2,131|
|Profit/Loss before Depreciation, Finance Costs and Tax expenses||583||620||588||683|
|Profit after Tax||392||428||387||469|
|Total Comprehensive Income||390||426||384||472|
|Earning Per Share (EPS) (Rs.) (Basic)||44.51||48.59||43.97||53.26|
2. Performance Review
Company continues to operate only in one segment i.e. pharmaceuticals and there is no change in the nature of business of the company.
Revenue from operations has seen marginal decline, mainly on account of reduced anti-malaria institution business, which was partially compensated by other markets. Operating cost of 2 new manufacturing facilities at Dahej & Guwahati impacted the EBIDTA margins. Dahej plant is in the process of product registrations in different markets and Guwahati plant had been stabilizing the production line. Major events occurred during the year and state of companys affiars has been discussed in the Management Discussion and Analysis Report which forms part of this report.
After considering the companys dividend distribution policy, the Board had declared and paid interim dividend of Rs. 9/- (450%) per equity share of the face value of Rs. 2/- each. Total dividend payout was Rs. 79.22 cr. An amount of Rs. 37 Lakhs has been paid as dividend distribution tax on the interim dividend. Board recommends interim dividend to be considered as final.
The Dividend Distribution Policy is placed on the website of the company and its weblink is http:// www.ajantapharma.com/AdminData/PolicyCodes/ DividendPolicy.pdf
4. Transfer to Reserves
The Company proposes to keep the entire retained earnings in Profit & Loss account.
5. Subsidiaries, Associates and Joint Ventures
During the year, companys wholly owned subsidiary viz., Ajanta Pharma UK Limited was dissolved on 18th December 2018.
Post that, the company has five operating subsidiaries overseas, including one step down subsidiary. Financials of subsidiaries are disclosed in the consolidated financial statements which forms part of this Annual Report. The Company does not have any Associate company or Joint Venture.
All the subsidiaries have contributed positively in the growth and profitability of the company. The performance of subsidiaries in Philippines and USA had been outstanding with continued growth in sales and profits. US performance was driven by new launches during the year. Mauritius subsidiaries performance was little lower than previous year, but was part of a conscious strategy of realignment of inventory levels in Africa. Performance of our subsidiary in Nigeria was on expected lines as major business has now been routed through the local distributor directly.
There have been no material change in the nature of business of subsidiaries.
Statement containing salient features of financial statements of subsidiaries pursuant to section 129 of the Companies Act, 2013 (Act) read with Rule 5 of the Companies (Accounts) Rules, 2014 is annexed to this Report in the prescribed Form AOC-1, as Annexure A. The Audited Financial Statements of Companys subsidiaries are available on the Companys website at www.ajantapharma.com and the same are also available for inspection at the Registered Office of the Company as per the details mentioned in notice of the 40th Annual General Meeting. Your Company will also make available these documents upon request by any Member of the Company interested in obtaining the same.
The Company has laid down policy on material subsidiaries and placed on the website of the Company and its weblink is http://www. ajantapharma.com/AdminData/PolicyCodes/ PolicyonMaterialSubsidiaries2019.pdf
6. Consolidated Financial Statements
The Annual Audited Consolidated Financial Statements together with the Report of Auditors thereon forms part of this annual report.
7. Share capital
7.1. Buyback of equity shares
With an objective to enhance long term shareholder value and improve the Companys return on equity, in March 2019, the Company bought back 7,69,230 (Seven lakhs sixty-nine thousand two hundred and thirty only) fully paid-up equity shares of the face value of Rs. 2/- each, representing 0.87% of the total number of equity shares in the subscribed and paid-up equity share capital of the Company, from the existing shareholders / beneficial owners of equity shares of the Company on a proportionate basis, through Tender Offer route at a price of Rs. 1,300/- (Rupees One thousand three hundred only) per equity share for an aggregate amount of Rs. 100 cr. only. Post Buyback, the paid-up share capital has reduced from 8,80,23,000 to 8,72,53,770 equity shares of Rs. 2/- each. Details of the shareholding pattern post buyback is given in the Corporate Governance Report.
7.2. Employee Stock Option Scheme
During the year, 8,500 shares were issued against the options exercised and 7,000 new options were granted under the Companys ESOP scheme, ESOS - 2011. Disclosures with regard to Employees Stock Options Scheme are put up on the Companys website and can be accessed at http://www.ajantapharma.com/ AnnualReports.aspx
8. New projects & CAPEX
Company proactively builds infrastructure for meeting its growing needs in manufacturing, R&D, office space, etc. Currently the work on third phase of Guwahati plant is at an advanced stage of completion, which will be operational during FY 2020. Further, another manufacturing facility is being setup in Pithampur SEZ, District Dhar, Madhya Pradesh, which will also be operational by FY 2020. During the year, an amount of Rs. 355 cr. was incurred on Capex.
9. Directors and Key Managerial Personnel
During the year, Mr. Purushottam B. Agrawal relinquished his directorship w.e.f. 11th August 2018. Further, Dr. Anil Kumar resigned as Director of the Company w.e.f. 3rd April 2019.
The Board places on record its appreciation for the valuable contribution made by Mr. Purushottam B. Agrawal since companys inception and for the services rendered by Dr. Anil Kumar during his long association with the Company. There were no other changes in Directors and Key Managerial Personnel during the year.
Mr. Chandrakant Khetan, Mr. K H. Viswanathan, Mr. Prabhakar Dalal and Dr. Anjana Grewal were appointed as Independent Directors at the 35th Annual General Meeting held on 5th August 2014 for a period of five years and accordingly they hold office upto the ensuing Annual General Meeting. Considering their knowledge, experience and skillset in respective fields as also significant contribution made by them during last five years, the Board has on the recommendations of the Nomination and Remuneration Committee and subject to approval of members at the ensuing Annual General Meeting, re-appointed them as Independent Directors for another term of 5 years, not liable to retire by rotation.
Mr. Chandrakant Khetan, Mr. K H. Viswanathan, Mr. Prabhakar Dalal and Dr. Anjana Grewal have given declarations that they continue to meet the criteria of independence as laid down under Section 149(6) of the Act and Rules made thereunder and under the Securities and Exchange Board of India (Listing Obligation and Disclosure Requirements) Regulation, 2015 (Listing Regulations). Based on disclosures provided by these Directors, none of them are disqualified from being appointed as Directors under section 164 of the Act and are independent from the management. In terms of Section 160 (1) of the Companies Act, 2013, the Company has received notice in writing from member signifying his intention to propose the candidature for the re-appointment of Mr. Chandrakant Khetan, Mr. K H. Viswanathan, Mr. Prabhakar Dalal and Dr. Anjana Grewal as Independent Directors at the ensuing Annual General Meeting for another term of 5 years.
Resolutions for aforementioned re-appointments alongwith brief profile of the directors proposed to be re-appointed, form part of the Notice of the 40th AGM and respective resolutions are recommended for your approval.
Independent Directors are compliant with the Code of Independant Directors as per schedule IV of the Act.
9.3. Retirement by rotation
Mr. Madhusudan B. Agrawal and Mr. Rajesh M. Agrawal, retire by rotation at the ensuing Annual General Meeting and being eligible, offer themselves for re-appointment. The Board recommends their re-appointment.
9.4. Policy on appointment and remuneration of Directors
The Nomination and Remuneration committee of directors has approved a policy for the selection, appointment and remuneration of directors. Criteria for appointment of Directors (http://www. ajantapharma.com/AdminData/PolicyCodes/ Policy for determining qualifications of Directors. pdf) and policy on remuneration of Directors (http://www.ajantapharma.com/AdminData/ PolicyCodes/Policyforremuneration2018.pdf) is given in the Corporate Governance Report.
9.5. Key Managerial Personnel
Mr. Yogesh M. Agrawal, Managing Director (DIN: 00073673), Mr. Rajesh M. Agrawal, Joint Managing Director (DIN: 00302467), Mr. Arvind Agrawal, Chief Financial Officer (DIN: 00648589) and Mr. Gaurang Shah, Company Secretary (FCS No.: 6696) are the Key Managerial Personnel of the Company as on the date of this Report.
9.6. Independent Directors familiarisation programme
Company continued to familiarise Independent directors with business operations, important functions and other critical aspects to enable them to contribute on full informed basis and discharge their responsibilities effectively. During the year, the Independent Directors were familiarised with following aspects/operations: i. Advancement and initiatives on Information Technology; ii. Business operations in India & emerging markets; iii. Business in emerging markets; iv. Manufacturing operations; v. Quality control.
Details of familiarisation programme imparted is placed on the companys website and its weblink is http://www.ajantapharma.com/ AdminData/DirectorFamiliarizationProgram/ Directorsfamilarisationprogramme2019.pdf
9.7. Evaluation of Boards performance
Pursuant to the provisions of the Act and the Listing Regulations, the evaluation of performance of the Board, individual directors and Board committees for the year 2018 was carried out by the Board as suggested by the Nomination and Remuneration Committee. Further, Independent Directors at a separate meeting evaluated performance of the Non-Independent Directors, Board as a whole and of the Chairman of the Board. Board of Directors were satisfied with the evaluation process.
Manner in which the evaluation has been carried out and matters incidental thereto, have been detailed in the Corporate Governance Report, which forms part of this report.
10. Board meetings
During the year, four Board meetings were held, details of which are given in the Corporate Governance Report.
11. Board Committees
Details of composition of various Board Committees and matters incidental thereto are provided in the Corporate Governance Report.
12. Related Party Transactions and Policy
All the Related Party transactions (RPTs) affected during the financial year were on an arms length basis and in the ordinary course of business and the same were undertaken after taking approval of the Audit Committee. Omnibus approval of Audit Committee was obtained for all the transactions which are of repetitive nature. All the RPTs affected during the year are disclosed in the notes to Financial Statements. Except to the extent of the shares held in the Company and the remuneration paid, if any, there were no materially significant related party transactions made by the company with promoters, directors or key managerial personnel which may have a potential conflict with the interest of the company at large or which warrants approval of the shareholders, drawn from the Company.
The Board has approved and adopted Policy on Related Party Transactions and the same is uploaded on the Companys website and its weblink is http://www.ajantapharma.com/AdminData/ PolicyCodes/PolicyonRelatedPartyTransactions2019.pdf Since all the transactions with related parties were in the ordinary course of business and at arms length, and there were no material related party transactions, the statement Form AOC-2, is not annexed to this report.
13. Corporate Social Responsibility (CSR)
Company continues to contribute on CSR front with thrust areas of Healthcare, Education & Community welfare, in accordance with companys CSR policy. During the year, Company continued several initiatives under the CSR program, directly as well as through agencies permitted under the Act. These included cataract surgery camps, family welfare camps, educational initiatives at schools etc. benefitting thousands of underprivileged population in the rural & tribal areas. Details of CSR policy and CSR activities undertaken during the year in accordance with Section 134 & 135 of the Act read with Rule 8 of the Companies (Corporate Social Responsibility Policy) Rules 2014 and Rule 9 of the Companies (Accounts) Rules 2014, is annexed to this report as Annexure B.
14. Management Discussion and Analysis
A detailed review of the operations, performance and future outlook is given in the Management Discussion and Analysis, which forms part of this Report.
15. Report on Corporate Governance
Report on Corporate Governance is annexed and forms an integral part of this Annual Report together with certificate from the Practicing Company Secretary regarding compliance of conditions of Report on Corporate Governance.
16. Business Responsibility Report
Business Responsibility Report for FY 2019, forms part of the Annual Report and as a Green Initiative the same has been hosted on the Companys website, which can be accessed at http://www. ajantapharma.com/AnnualReports.aspx Any Member interested in obtaining a copy of BRR may write to the Company Secretary.
17. Credit Rating
The Companys bank facilities are rated by Credit Analysis and Research Limited (CARE). They have assigned rating Care A1+ for working capital facilities and Care AA for long term borrowings, which indicates very strong/high degree of safety regarding timely payment of financial obligations. Such instruments carry lowest credit risk.
18. Extract of the Annual Return
In pursuance of Section 92(3) of the Act, and Rule 12(1) of the Companies (Management & Administration) Rules, 2014, extracts of Annual Return in Form MGT.9 is annexed to this Report as Annexure C. The same is available at http://www.ajantapharma.com/ AnnualReports.aspx
19. Auditors and Audit reports
19.1. Statutory Auditors
At the 38th Annual General Meeting held on 5th July 2017, the shareholders had approved the appointment of B S R & Co. LLP., Chartered Accountants (ICAI Firms Registration No. 101248W/W-100022) as the Statutory Auditors for a period of 5 years commencing from the conclusion of the 38th Annual General Meeting until the conclusion of 43rd Annual General Meeting, subject to ratification by the shareholders every year.
Pursuant to the recent amendment to Section 139 of the Act effective 7th May 2018, ratification by Shareholders every year for the appointment of the Statutory Auditors is no longer required and accordingly, the notice of ensuing Annual General Meeting does not include the proposal for seeking shareholders approval for ratification of Statutory Auditors appointment. In terms of the Listing Regulations, the auditors have confirmed that they hold a valid certificate issued by the Peer Review Board of the ICAI. Auditors Report for the year under review forms part of this annual report and does not contain any qualifications, reservations or adverse remarks.
19.2. Secretarial Auditors
Pursuant to the provisions of Section 204 of the Act and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 and Regulation 24A of the Listing Regulations, Board had appointed M/s. Alwyn Dsouza & Co., Company Secretaries in Practice to undertake the Secretarial Audit of the Company. Their Secretarial Audit Report is annexed to this report as Annexure D. There are no qualifications, reservation or adverse remark in the report.
19.3 Cost Auditors
Board has appointed M/s. Sevekari, Khare & Associates, Practicing Cost Accountants to audit the cost records of the Company for the financial year 2019-20. Their remuneration is subject to ratification by shareholders at the ensuing Annual General Meeting. Accordingly, resolution seeking members ratification of their remuneration, forms part of the Notice convening the 40th Annual General Meeting.
Cost Audit Report for the FY 2018 has been filed with the Ministry of Corporate Affairs on 24th August 2018.
The company is required to maintain cost records as specified by the Central Government under Section 148(1) of the Act and accordingly such accounts and records are made and maintained.
During the year under review, the statutory auditors, secretarial auditors and cost auditors have not reported any instances of fraud committed in the Company by its officers or employees to the Audit Committee under Section 143(12) of the Act, details of which needs to be mentioned in this Report.
20. Internal Control System, Risk Management and Compliance Framework
The Company believes that a strong internal control framework is very much essential and is part of good corporate governance practices. Company has in place well defined and adequate internal financial control framework commensurate with the size and complexity of its business. During the year, such controls were tested and no material weakness in their design of operations were observed. The Board of Directors of the Company has formed a Risk Management Committee to frame, implement and monitor the risk management plan for the Company. The Committee is responsible for monitoring and reviewing the risk management plan and ensuring its effectiveness. The Audit Committee has additional oversight in the area of financial risks and controls. The major risks identified by the businesses and functions are systematically addressed through mitigating actions on a continuing basis. There are no risks identified which may threaten existence of the company. Risk Management system followed by the Company is detailed in the Management Discussion and Analysis report.
21. Vigil Mechanism/Whistle Blower policy
Company has set up vigil mechanism viz. Whistle Blower Policy to enable the employees and Directors to report to the Audit Committee Chairman, genuine concerns, unethical behavior and irregularities, if any, noticed by them in the Company, which could adversely affect companys operations. It is posted on the intranet and website of the Company and the same is available at http://www.ajantapharma.com/AdminData/ PolicyCodes/WhistleBlowerPolicy2019.pdf The policy is reviewed by the Audit Committee from time to time. No concerns or irregularities have been reported by employees/directors till date.
22. Managerial Remuneration and particulars of employees
There were 6,800 permanent employees of the Company as of 31st March 2019. The information pursuant to Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is annexed to this report as Annexure E.
Information pursuant to Rule 5(2) & 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 pertaining to the top 10 names and other particulars of employees also form part of this report. However, this information is not sent along with this report pursuant to the proviso to Section 136(1) of the Act. Any shareholder interested in obtaining a copy of the same may write to the Company Secretary at the registered office address of the Company.
23. Loans, Guarantees or Investments
Details of Loans, Guarantees and Investments, covered under the provisions of Section 186 of the Act are given in Notes to the Financial Statements.
Your Company has not accepted any deposits from the public falling within the purview of Section 73 of the Act read with the Companies (Acceptance of Deposits) Rules, 2014.
25. Directors Responsibility Statement
To the best of their knowledge and belief and according to the information and explanations obtained by them, your Directors confirm:
a. that in the preparation of the annual accounts for the year ended 31st March 2019, the applicable Accounting Standards had been followed along with proper explanation relating to material departures, if any;
b. that the directors had selected accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the company at the end of the financial year ended 31st March 2019 and of the profit of the company for the period;
c. that proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities;
d. that the annual accounts/financial statements have been prepared on a going concern basis;
e. that proper internal financial controls were in place and that the financial controls were adequate and were operating effectively; f. that the Directors had devised proper systems to ensure compliance with the provisions of all applicable laws were in place and were adequate and operating effectively.
26. Conservation of energy, technology absorption, foreign exchange earnings and outgo
Pursuant to Section 134 of the Act read with Companies (Accounts) Rules, 2014, details of conservation of energy, technology absorption, foreign exchange earnings and outgo, are given in Annexure F to this report.
27. Unclaimed Dividend/Shares
In pursuance of Regulation 39 read with Schedule VI of the Listing Regulations, the details with respect to shares lying in unclaimed suspense account and unclaimed shares/dividend transferred to IEPF are provided in the Corporate Governance Report.
28. Compliance with Secretarial Standards
During FY 2018-19, the Company has complied with applicable Secretarial Standards issued by the Institute of The Company Secretaries of India.
29. Material changes & commitment affecting the financial position of the company
There are no material changes and commitments affecting the financial position of the company, which have occurred between the end of the financial year and the date of this report.
30. Significant & material orders passed by the Regulators or Courts or Tribunals
The Scheme of Amalgamation and Arrangement of Gabs Investments Pvt. Ltd. with the Company which was filed by the Company with National Company Law Tribunal (NCLT) in the last year, was rejected by NCLT on grounds cited in its order. The Company had preferred an appeal before the National Company Law Appellate Tribunal (NCLAT) challenging the order of NCLT. However, after considering all the pros and cons at length, it was deemed appropriate to withdraw the appeal. Accordingly, the same was withdrawn on 7th December 2018.
Save and except above, no significant or material orders have been passed against the Company by the Regulators, Courts or Tribunals, which impacts the going concern status and companys operations in future.
31. Human Resource, Health & Safety
Industrial relations were cordial throughout the year. Health & Safety of our work force is of prime importance to us and we maintain highest standards in all the plants with adoption of best technologies and manufacturing practices which are at par with global standards.
Zero casualty and zero harm incidences demonstrates our indomitable and impeccable HSE standards. Recognizing the fact that employees play vital role in growth of the organisation, Company undertakes various employee engagement programmes and initiatives to harness the talent pool with the objectives of building highly motivated team, promoting individual wellness and maintaining work-life balance. Various training and grooming programs, sports events and fun events like cricket tournament, indoor sports tournament, singing competition, cooking competition, hobby classes like nail art, guitar learning, calligraphy etc. were conducted during the year as part of employee engagement initiatives.
32. Policy on sexual harassment of women at work place
The Company has in place, policy on Prevention, Prohibition and Redressal of Sexual Harassment for women at workplace in accordance with the requirements of The Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. An Internal Complaints Committee (ICC) has been set up as per the statutory requirements, to redress complaints regarding sexual harassment. The policy has set guidelines on the redressal and enquiry process that is to be followed by complainants and the ICC, whilst dealing with issues related to sexual harassment at the work place. All women employees (permanent, temporary, contractual and trainees) are covered under this policy. The company has not received any complaints during the year.
33. Gratitude & Acknowledgements
Your Directors place on record their appreciation for the persistent and highly inspired performance by employees across the globe. Your Directors also express their gratitude to all the stakeholders, medical professionals, business partners, government & other statutory bodies, banks, financial institutions, analysts and shareholders for their continued assistance, cooperation and support.
|For and on Behalf of the Board of Directors,|
|Mannalal B. Agrawal|
|Mumbai, 30th April 2019||Chairman|