Aster DM Healthcare Ltd Directors Report.

Dear Shareholders,

Your Directors have immense pleasure in presenting the Eleventh Annual Report on the business and operations of your Company along with the audited financial statements for the financial year ended March 31, 2019.

1. RESULTS OF OPERATION AND STATE OF AFFAIRS

Financial Results

(? in crores except per share data)
Particulars Standalone Consolidated
2019 2018 2019 2018
Revenue from operations 594.78 530.07 7,962.71 6721.16
Other income 84.15 16.11 34.62 45.44
Total income 678.93 546.18 7,997.33 6766.60
Total expenditure 628.89 633.37 7,585.31 6590.76
Profit/(loss) before exceptional items and tax 50.04 (87.19) 412.02 175.84
Exceptional item (1.52) - (1.52) 129.64
Profit/(loss) before tax 48.52 (87.19) 410.50 305.48
Share of net profit/ (loss) of equity accounted investees - - (0.25) 2.29
Profit/(loss) before tax 48.52 (87.19) 410.25 307.77
Less: Tax expense 0.45 0.00 42.94 26.08
Profit for the year 48.07 (87.19) 367.31 281.69
Other comprehensive income/(loss), net of taxes 0.57 (0.02) 62.41 10.39
Total comprehensive income/ (loss) 48.64 (87.21) 429.72 292.08
Profit attributable to
Owners of the company 48.07 (87.19) 333.11 268.88
Non-controlling interest 0 0.00 34.20 12.81
Total 48.07 (87.19) 367.31 281.69
Total comprehensive income attributable to
Owners of the company 48.64 (87.21) 389.85 278.50
Non-controlling interest 0 0.00 39.87 13.58
Total 48.64 (87.21) 429.72 292.08
Earnings per share
Basic 0.96 (1.87) 6.63 5.75
Diluted 0.96 (1.87) 6.62 5.74

Financial position

(? in crores except per share data)
Particulars Standalone Consolidated
2019 2018 2019 2018
Cash and cash equivalents 3.49 83.85 227.64 204.17
Trade receivables 35.22 30.53 2,028.70 1,546.39
Other current assets 294.25 183.96 1,360.35 1,118.42
Total current assets 332.96 298.34 3,616.69 2,868.98
Property, plant and equipment (including capital work in progress) 821.01 787.34 3,872.01 3,367.23
Goodwill - - 839.65 708.34
Other intangible assets 1.79 2.35 126.89 64.44
Other non-current assets 2,221.06 2,205.74 481.17 475.25
Total non-current assets 3,043.86 2,995.43 5,319.72 4,615.26
Total Assets 3,376.82 3,293.77 8,872.12 7,484.24
Non-current liabilities 198.22 191.97 2,589.00 2,070.71
Current liabilities 198.32 175.82 2,603.29 2,223.50
Total current and non-current liabilities 396.54 367.79 5,192.29 4,294.21
Equity 505.23 505.23 505.23 505.23
Other equity 2,475.05 2,420.75 2,708.53 2,326.87
Non-controlling interest - - 466.06 357.94
Total equity 2,980.28 2,925.98 3,679.82 3,190.03
Total equity and liabilities 3,376.82 3,293.77 8,872.12 7,484.24

Performance Overview

During the year under review the Company reported, on a consolidated basis, a total income from operations of?7,963 crores as compared to?6,721 crores registering a year on year growth of 18.48%. Of the total revenues from operations for fiscal 2019, our hospital segment accounted for?3,950 crores, our clinic segment accounted for?1,978 crores and our retail pharmacy segment accounted for?2,021 crores. Our operations in India, which primarily consist of hospitals, accounted for Rs 1,314 crores of our total revenues from operations for the year ended March 31, 2019.

Our strategies for the financial year 2020 are explained in the Management Discussion and Analysis, which forms part of this Annual Report

2. TRANSFER TO RESERVES

There are no appropriations to/from the general reserves of the Company during the year under review.

3. DIVIDEND

The Company continues to look at growth prospects through new investment opportunities. Considering the changes in the healthcare landscape in India it presents the Company with more challenges in terms of growth and it is imperative that the Company looks at available options for organic as well as inorganic growth. The key objective of the Company is to achieve a consistent sustainable growth over the next few years and consolidate the Companys position.

Keeping in view the growth strategy of the Company, the Board of Directors have decided to plough back the profits and thus do not recommended any dividend for the financial year under review.

In terms of Regulation 43A of the Listing Regulations, the Company has adopted Dividend Distribution Policy setting out the parameters and circumstances that will be taken into account by the Board in determining the distribution of dividend to the Shareholders and/or retaining profits earned by the Company. The said policy is hosted on the website of the Company at www.asterdmhealthcare.com/investors The detailed Policy is annexed to this report as Annexure 10.

4. SHARE CAPITAL

The share capital of the Company as on March 31, 2019 was?505.23 Crores consisting of 50,52,27,345 equity shares of?10 each. During the year under review, the Company has not issued any shares with differential voting rights or any sweat equity shares. Details of Employee Stock Options granted by the Company are provided separately in the report.

As on March 31, 2019, except Dr. Azad Moopen who holds 17,50,720 equity shares, Mr. T J Wilson who holds 27,37,210 equity shares, Mr. Shamsudheen Bin Mohideen Mammu Haji who holds 57,17,829 equity shares, Mr. Anoop Moopen who holds 10,00,300 equity shares and Ms. Alisha Moopen who holds 1,16,990, no other Directors hold any equity shares or preference shares in the Company.

During the year under review, the Company has not issued any bonus shares or rights shares.

5. PUBLIC DEPOSITS

The Company has not accepted any public deposits within the meaning of Section 73 of the Companies Act, 2013 and the Companies (Acceptance of Deposits) Rules, 2014.

6. LOANS, GUARANTEE AND INVESTMENTS

Pursuant to Section 186 of the Companies Act, 2013 and Schedule V of the Listing Regulations, disclosure relating to loans/advances given, guarantees provided and investments made are provided as part of the financial statements.

7. SUBSIDIARY, JOINT VENTURES AND ASSOCIATE COMPANIES

The Company along with its subsidiaries are engaged in the business of setting up hospitals, clinics and pharmacies in India and GCC. At the beginning of the year your company had 8 subsidiaries and 49 stepdown subsidiaries and 4 associate companies. As on March 31, 2019 the Company has 8 direct subsidiaries, 63 step-down subsidiaries and 5 associate companies. Your Company has no joint ventures as on March 31, 2019. There has been no material change in the nature of the business of the subsidiaries.

Following entities have become subsidiaries, step-down subsidiaries / associates of the Company during the reporting period:

a. Sanghamitra Hospitals Private Limited

b. Ramesh Fertility Centre LLP

c. Noor Al Shefa Clinic LLC

d. Zahrath Al Shefa Medical Center LLC

e. Zahrath Al Shefa Pharmacy LLC

f. Samary Pharmacy LLC

g. Metro Meds Pharmacy L.L.C

h. Metro Medical Center L.L.C

i. Oman Al Khair Hospital L.L.C

j. Radiant Healthcare L.L.C

k. Alfa Investments Limited

l. Active Holdings Limited

m. EfCare International Medical Billing Services Co. LLC

n. Al Mutamaizah Medcare Healthcare Investment Co. L.L.C

Pursuant to provisions of section 129(3) of the Companies Act, 2013, a statement containing salient features of the financial statements of the Companys subsidiaries in Form AOC-1 is appended as Annexure 1 to the report.

8. CONTRACTS AND ARRANGEMENTS WITH RELATED PARTIES

In line with the requirements of the Companies Act, 2013 and Listing Regulations, the Company has formulated a Policy on Dealing with Related Party Transactions which is available on the Companys website at www.asterdmhealthcare.com/investors . The policy intends to ensure that proper reporting, approval and disclosure processes are in place for all transactions between the Company and related parties.

All related party transactions are placed before the Audit and Risk Management Committee for review and approval. Prior omnibus approval is obtained for related party transactions on yearly basis for transactions which are of repetitive nature and / or entered in the ordinary course of business.

No material related party transactions, i.e. transactions exceeding 10% of the annual consolidated turnover as per the last audited financial statements, were entered into by the Company during the year.

A statement giving details of all related party transactions entered pursuant to the omnibus approval so obtained, is placed before the Audit and Risk Management Committee for their review on a quarterly basis. Disclosures as required under Section 134(3) (h) read with Rule 8(2) of the Companies (Accounts) Rules, 2014, are given in Form AOC 2 as speci-ied under Companies Act, 2013, which is annexed herewith as Annexure 2 and forms part of the report.

9. DIRECTORS RESPONSIBILITY STATEMENT

In terms of section 134 (5) of the Companies Act, 2013 the Directors confirm that:

a) in the preparation of the annual accounts, the applicable accounting standards have been followed and there has been no material departures;

b) the Directors 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 at the end of the financial year and of the profit and loss of the Company for that period;

c) the Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

d) the Directors have prepared the annual accounts on a going concern basis;

e) they have laid down internal financial controls to be followed by the Company, which are adequate and are operating effectively;

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

10. DIRECTORS AND KEY MANAGERIAL PERSONNEL

Reappointment of Directors

In accordance with Articles of Association, Mr. Daniel Robert Mintz, Director shall retire by rotation at the ensuing Annual General Meeting. The Director being eligible offers himself for re-appointment.

Change in Directors

During the year under the review the Board underwent the following changes.

SL No Name of the Director Date Nature of Change
1 Mr. Rajagopal Sukumar August 14, 2018 Resignation
2 Prof. Biju Varkkey November 12, 2018 Appointment
3 Mr. Harsh Charandas Mariwala February 13, 2019 Resignation
4 Dr. Layla Mohamad Hassan Ali Almarzooqi March 28, 2019 Appointment

Key Managerial Personnel

In terms of the provisions of Section 203 of the Companies Act, 2013, the Company has appointed the following Key Managerial Personnel:

(i) Dr. Azad Moopen - Managing Director
(ii) Mr. Sreenath Reddy - Chief Financial Officer
(iii) Mr. Rajesh A - Company Secretary and Compliance Officer (till May 31, 2018)
(iv) Ms. Puja Aggarwal - Company Secretary and Compliance Officer (w.e.f August 14, 2018)

Dr. Azad Moopen was appointed as our Chairman and Managing Director, pursuant to a board resolution dated November 19, 2014 with effect from December 1, 2014 for a period of five years. Dr. Azad Moopen is a non-resident Indian and in accordance with the provisions of the Companies Act, 2013, the Shareholders of the Company had approved the appointment of the Managing Director vide special resolution passed at the extraordinary general meeting held on February 18, 2015 and approval of the Central Government was obtained for the appointment vide letter reference no. C36259455/2014-CL-VII dated February 27, 2015. It is proposed to re-appoint Dr. Azad Moopen as the Managing Director of the Company for a period of five years starting on December 1, 2019, i.e. after completion of his current term.

Mr. Rajesh A had resigned from the post of Company Secretary and Compliance officer with effect from May 31, 2018 and Ms. Puja Aggarwal was appointed as the Company Secretary and Compliance Officer with effect from August 14, 2018.

11. COMMITTEES OF DIRECTORS

The Company has constituted committees as required under the Companies Act, 2013 and the Listing regulations, the details of the said committees forms part of the Corporate Governance Report.

12. BOARD EVALUATION

The Board of Directors have carried out an annual evaluation of its own performance, Board Committees, and individual Directors including the Chairman of the Board as per the provisions of the Companies Act, 2013 and the corporate governance requirements as prescribed by the Listing Regulations.

The evaluation of all the Directors, Committees, Chairman of the Board and the Board as a whole was conducted based on the criteria and framework adopted by the Board. The evaluation parameters and the process has been explained in the Corporate Governance Report.

To ensure independence and transparency, an independent firm, M/s Damodaran and Associates LLP (MDA), had been engaged to conduct the evaluation process for FY 2018-19.

At a separate meeting of the Independent Directors which was held on May 27, 2019, the performance of the Board and Non-independent Directors, the performance of the Chairman, assessment of the quality, quantity and timeliness of -low of information between the Companys Management and the Board were discussed. Thereafter, the outcome of the Board evaluation for FY 2018-19 was discussed at the Nomination and Remuneration Committee and the Board at their meetings held on 27 and 28 of May 2019 respectively.

13. DECLARATION BY INDEPENDENT DIRECTORS

The Company has received declarations from all the Independent Directors confirming that they meet the criteria of independence as prescribed under the provisions of Section 149 (7) of the Companies Act, 2013 read with the schedules and rules issued thereunder.

14. POLICY ON APPOINTMENT OF DIRECTORS AND REMUNERATION

The Companys policy on Directors appointment and remuneration and other matters provided in Section 178 (3) of the Companies Act, 2013, has been disclosed in the Corporate Governance Report. The Remuneration Policy applicable to Non-Executive Directors is also disclosed on the website of the Company www.asterdmhealthcare.com/investors

15. BOARD MEETINGS AND ANNUAL GENERAL MEETING

The Board of Directors met 4 times during the financial year viz May 21, 2018; August 14, 2018; November 12, 2018 and February 13, 2019. The intervening gap between the meetings was within the period prescribed under the Companies Act, 2013, detailed information regarding the meetings of the Board and meetings of the Committees of the Board is included in the report on Corporate Governance. The following resolutions were passed as Circular resolutions and duly noted in the meeting of Board of Directors:

SL No Resolution Date of passing Date of noting by Board
1 Taking note of the Cost Audit Report for FY 2017-18 September 29, 2018 November 12, 2018
2 Authorization to Dr. Harish Pillai to do all activities in relation to the Aster Medical Journal March 26, 2019 May 28, 2019
3 Approving the revised Code for Prevention of Insider Trading in the Securities of Aster DM Healthcare Limited (Insider Trading Policy) March 26, 2019 May 28, 2019
4 Approval for appointing Additional (Independent) Director March 28, 2019 May 28, 2019

The annual general meeting for the FY 2017-18 was held on August 16, 2018 at the registered office of the Company.

16. SECRETARIAL STANDARDS

The Company has devised proper Systems to ensure compliance with all applicable Secretarial Standards issued by the Institute of Company Secretaries of India (ICSI) as required under section 118 (10) of the Companies Act, 2013.

17. PARTICULARS OF EMPLOYEES

The statement containing particulars of employees as required under section 197 (12) of the Companies Act, 2013, read with Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, is provided in Annexure 3 forming part of this report.

18. EMPLOYEE STOCK OPTION SCHEME

The Nomination and Remuneration Committee of the Board, inter alia administers and monitors the Companys ESOP Scheme DM Healthcare Employee Stock Option Scheme 2013 in accordance with SEBI (Share Based Employee Benefits) Regulations, 2014 (SBEB Regulations) and the Scheme is implemented through DM Healthcare Employees Welfare Trust.

During the year, 7,00,610 shares were transferred from the ESOP Trust to the eligible employees under the Companys prevailing ESOP Scheme. As at March 31, 2019, the ESOP Trust held 30,03,952 (0.59%) equity shares of the Company. The ESOP Scheme has been amended with effect from February 12, 2019 and the plan is in compliance with SBEB Regulations. Disclosures as required under SEBI (SBEB) Regulations, 2014 read with SEBI Circular CIR/CFD/POLICY CELL/2/2015 dated June 16, 2015 have been provided separately in Annexure 4 to the Directors Report. The Company has received a certificate from the Statutory Auditor that the scheme has been implemented in accordance with SEBI Share Based Employee Benefits (SBEB) Regulations and the resolutions passed by the shareholders. The certificate would be placed at the AGM for inspection by the Members.

19. INTERNAL CONTROL SYSTEMS

The Management has laid down internal financial controls to be followed by the Company. The Company has adopted policies and procedures for ensuring the orderly and efficient conduct of the business, including adherence to the Companys policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial disclosures. The internal control system is commensurate with the nature of business, size and complexity of operations and has been designed to provide reasonable assurance on the achievement of objectives, in effectiveness and efficiency of operations, reliability of financial reporting and compliance with applicable laws and regulations.

As part of the Corporate Governance Report, CEO/ CFO certification is provided, for assurance on the existence of effective internal control systems and procedures in the Company.

The internal control framework is supplemented with an internal audit program that provides an independent view of the efficacy and effectiveness of the process and control environment and supports a continuous improvement program. The internal audit program is managed by an in-house internal audit function and an external consultant. The Audit and Risk Management Committee of the Board oversees the internal audit function. The Committee is regularly apprised by the internal auditors through various reports and presentations.

The scope and authority of the internal audit function is derived from the audit charter approved by the Audit and Risk Management Committee. The internal audit function develops an internal audit plan to assess control design and operating effectiveness, as per the risk assessment methodology. The internal audit function provides assurance to the Board that a system of internal control is designed and deployed to manage key business risks and is operating effectively.

20. VIGIL MECHANISM

The Company has established a vigil mechanism for Directors and employees to report concerns and grievances in a responsible manner. Further details of the same are given in the Corporate Governance Report.

21. RISK MANAGEMENT POLICY

The Audit and Risk Management Committee monitors the risk management plan of the Company and ensures its effectiveness. It also reviews the risk management report issued by the Auditors. The major risks identified by the businesses and functions are systematically addressed through mitigating actions on a continual basis. The Risk Management Policy of the Company is available on the website at www.asterdmhealthcare.com/investors

22. CORPORATE SOCIAL RESPONSIBILITY

The Company has been taking initiatives under Corporate Social Responsibility (CSR) for society at large. Over the years, the Company has been pursuing CSR voluntarily as a part of its corporate philosophy, which goes much beyond mere philanthropic gestures and integrates the interest, welfare and aspirations of the community with those of the Company itself to create an environment of partnership for inclusive development.

The Company has a well-defined policy on CSR as per the requirement of Section 135 of the Companies Act, 2013 which covers the activities as prescribed under Schedule VII of the Act Companies Act, 2013. Details on Corporate Social Responsibility activities undertaken during the year is given as a part of the Annual report.

23. AUDITORS

i. Statutory Auditors

At the Annual General Meeting held on September 12, 2014, M/s B S R and Associates., Chartered Accountants, [Firm Registration No: 128901W] were appointed as the Statutory Auditor of the Company to hold office till the conclusion of 11th Annual General Meeting. They being eligible, are proposed for reappointment from the conclusion of the 11th AGM upto the conclusion of the 12th AGM.

ii. Secretarial Auditor

Mr. Sunil Sankar, Practising Company Secretary, [ACS No: 20171, CP No: 10613] was appointed to conduct the Secretarial Audit of the Company for the financial year 2018-19, as required under Section 204 of the Companies Act, 2013 and Rules thereunder.

iii. Cost Auditor

Your Directors had approved the appointment of M/s BBS & Associates Cost Accountants, Kochi [Firm Registration No: 00273] as the Cost Auditor of your Company to conduct the audit of cost records for the financial year 2018-19.

24. AUDIT REPORT

i. Statutory Audit Report

Audit report on the financial statements of the Company for the financial year 2018-19 is being circulated to the shareholders along with the financial statements. There are no qualifications or adverse remarks made by the Statutory Auditors in their Report for the financial year ended March 31, 2019.

The Statutory Auditors have not reported any incident of fraud to the Audit and Risk Management Committee of the Company in the year under review.

ii. Secretarial Audit Report

The Secretarial Audit Report does not contain any qualification, reservation or adverse remark.

The Secretarial Audit Report for FY 2018-19 forms part of the Annual Report as Annexure 5 to the Boards Report.

25. MATERIAL CHANGES AND COMMITTEMENTS AFFECTING FINANCIAL POSITION

There are no material changes affecting the financial position of the Company between the end of the financial year reported and the date of this report.

26. EXTRACT OF ANNUAL RETURN

As per Section 134 (3) (a) of the Companies Act, 2013, an extract of the annual return in prescribed format is given in Form MGT 9 as Annexure 6 to the Directors Report.

27. SIGNIFICANT AND MATERIAL ORDERS

There are no significant or material orders passed by any regulators or courts or tribunals impacting the going concern status and Companys operations in future.

28. BUSINESS OF THE COMPANY

The Company is into the business of setting up and running of hospitals and healthcare centres. There has been no change in the nature of business during the last financial year.

29. DISCLOSURE UNDER SEXUAL HARRASSMENT OF WOMEN AT WORKPLACE

The Company has in place a Policy on Prevention of Sexual Harassment at workplace framed under Sexual Harassment of Women at Workplace (Prevention, Prohibition & Redressal) Act, 2013. All employees (permanent, contractual, temporary, trainees) are covered under this policy. Below is the report on the same containing details of number of cases filed, their disposal, nature or action taken and the number of cases pending.

No. of cases reported No. of cases disposed Nature of action taken No. of cases pending
2 2 Employee counselled Nil

30. CONSERVATION OF ENEGY, TECHNOLOGY ABSORBTION, FOREX EARINGS AND OUTGO

The information on conservation of energy, technology absorption and foreign exchange earnings and outgo stipulated under Section 134 (3) (m) of the Companies Act, 2013, read with Rule 8 of the Companies (Accounts) Rules, 2014 is detailed in Annexure 7.

31. MANAGEMENT DISCUSSION AND ANALYSIS

The Management Discussion and Analysis as required under the Regulation 34 (3) of the SEBI Listing Regulations and Schedule V (B) to the said regulation forms part of this report

32. CORPORATE GOVERNANCE

As per Regulation 34 and Schedule V (C) to the SEBI Listing Regulations, the Corporate Governance Report with the Compliance certificate from the Practicing Company Secretary is attached to this report in Annexure 8.

33. BUSINESS RESPONSIBILITY REPORT

As per the Regulation 34 (2) (f) of the SEBI Listing Regulations, a Business Responsibility Report is attached and is a part of this report in Annexure 9

34. LISTING ON STOCK EXCHANGES

The Companys shares are listed on both BSE Limited and National Stock Exchange of India Limited from February 26, 2018

35. ACKNOWLEDGEMENT

Your Directors thank the Companys Shareholders, customers, banks, financial institutions, and well-wishers for their continued support during the year. Your Directors place on record their appreciation on the contribution made by the employees at all levels. The Companys consistent growth was made possible by their hard work, solidarity, cooperation and support. The Board sincerely expresses its gratitude to Government of India, Ministry of Corporate affairs, Reserve Bank of India, Foreign Investment Promotion Board, Securities and Exchange Board of India, BSE Limited, National Stock Exchange of India Limited and Governments of Kerala, Karnataka, Andhra Pradesh, Telengana and Maharashtra for the guidance and support received from them including officials thereat from time to time.

For and on behalf of the Board of Directors
Dr. Azad Moopen
Place: Dubai Chairman & Managing Director
Date: May 28, 2019 DIN: 00159403