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Your Directors are pleased to present the thirty first (31 th) Annual report and the audited financial statements of the Company for the financial year ended 31.03.2018.
The following is the analysis of the standalone financial the Company during the year under review.
(in Rs. Crores)
|Particulars||F.Y 2017.18||F.Y 2016.17|
|Total income from operations||211.48||235.40|
|Profit from operations before interest,||8.15||8.59|
|other income and exceptional items.|
|Profit after tax||5.94||5.31|
|Total Comprehensive Income||5.64||4.96|
|Earnings per share (In )||3.98||3.50|
Your Directors are pleased to recommend a dividend of Rs. 1 /- per equity share of Rs. 10 each i.e 10% of the Equity Share Capital of the Company thereby appropriating an amount of Rs. 1.41 Crores towards Dividend for the F.Y 2017.18, which is exclusive of the dividend distribution tax of Rs. 28.85 Lakhs. The Company has not transferred any amount to General Reserves. The register of members and share transfer books of the Company shall remain closed from 18th September 2018 to 22nd September 2018 (both days inclusive) for the purpose of payment of dividend for the F.Y 2017-18 and for the 31st Annual General Meeting scheduled to be held on 22.09.2018.
During the financial year under review, Rs. 14,17,23,720/- comprising of 1,41,72,372 equity shares of Rs. 10 each continues to be the issued and paid up capital of the Company.
During the financial year 2017.18, the Company has not issued any Equity Shares with differential voting rights, granted stock options nor issued sweat Equity Shares.
MANAGEMENT DISCUSSION AND BUSINESS ANALYSIS.
India enjoys an important position in the global pharmaceuticals sector. The country also has a large pool of scientists and engineers who have the potential to steer the industry ahead to an even higher level. Presently over 80 per cent of the antiretroviral drugs used globally to combat AIDS (Acquired Immuno Deficiency Syndrome) are supplied by Indian pharmaceutical firms. India is the largest provider of generic drugs globally. Indian pharmaceutical sector supplies over 50 per cent of global demand for various vaccines, 40 per cent of generic demand in the US and 25 per cent of all medicine in UK.
The Indian pharmaceutical sector was valued at US$ 33 billion in 2017. The countrys pharmaceutical industry is expected to expand at a CAGR of 22.4 per cent over 2015 2020 to reach US$ 55 billion. Indias pharmaceutical exports stood at US$ 17.27 billion in 2017-18 and are ofexpected to reach US$ 20 billion by 2020.
Indian companies received 304 Abbreviated New Drug Application (ANDA) approvals from the US Food and Drug Administration (USFDA) in 2017. The country accounts for around 30 per cent (by volume) and about 10 per cent (value) in the US$ 70-80 billion US generics market.
Indias biotechnology industry comprising bio-pharmaceuticals, bio-services, bio-agriculture, bio-industry and bioinformatics is expected grow at an average growth rate of around 30 per cent a year and reach US$ 100 billion by 2025. Biopharma, comprising vaccines, therapeutics and diagnostics, is the largest sub-sector contributing nearly 62 per cent of the total revenues at Rs. 12,600 crore (US$ 1.89 billion).
The Union Cabinet has given its nod for the amendment of the existing Foreign Direct Investment (FDI) policy in the pharmaceutical sector in order to allow FDI up to 100 per cent under the automatic route for manufacturing of medical devices, subject to certain conditions. The drugs and pharmaceuticals sector attracted cumulative FDI inflows worth US$ 15.59 billion between April 2000 and December 2017, according to data released by the Department of Industrial Policy and Promotion (DIPP).
Some of the recent developments/investments in the Indian pharmaceutical sector are as follows:
During 2017-18, Indian pharmaceutical sector witnessed 46 merger & acquisition (M&A) deals worth US$ 1.47 billion.
The exports of Indian pharmaceutical industry to the US will get a boost, as branded drugs worth US$ 55 billion will become off-patent during 2017-2019.
Some of the important initiatives taken by the government to promote the pharmaceutical sector in India are as follows:
The National Health Protection Scheme is largest government funded healthcare programme in the world, which is expected to benefit 100 million poor families in the country by providing a cover of up to Rs. 5 lakh (US$ 7,723.2) per family per year for secondary and tertiary care hospitalisation. The programme was announced in Union Budget 2018-19.
In March 2018, the Drug Controller General of India (DCGI) announced its plans to start a single-window facility to provide consents, approvals and other information. The move is aimed at giving a push to the Make in India initiative.
The Government of India is planning to set up an electronic platform to regulate online pharmacies under a new policy, in order to stop any misuse due to easy availability.
The Government of India unveiled Pharma Vision 2020 aimed at making India a global leader in end-to-end drug manufacture. Approval time for new facilities has been reduced to boost investments.
The government introduced mechanisms such as the Drug Price Control Order and the National Pharmaceutical Pricing Authority to deal with the issue of affordability and availability of medicines.
Healthcare spending in India is expected to increase at 9-12 per cent CAGR between 2018-22 to US$ 50-55 billion, driven by increasing consumer spending, rapid urbanisation, and raising healthcare insurance among others.
Going forward, better growth in domestic sales would also depend on the ability of companies to align their product portfolio towards chronic therapies for diseases such as cardiovascular, anti-diabetes, anti-depressants and anti-cancers, which are on the rise.
The Indian government has taken many steps to reduce costs and bring down healthcare expenses. Speedy introduction of generic drugs into the market has remained in focus and is expected to benefit Indian pharmaceutical companies. In addition, the thrust on rural health programmes, lifesaving drugs and preventive vaccines also augurs well for the Indian pharmaceutical companies.
BUSINESS OPERATIONS: Turnover and Net profit:
Your company has registered a total revenue of Rs. 211.48 Crores for the financial year ended 31.03.2018 as against Rs. 235.40 Crores during the previous year. The drop in the turnover is due to the effect of implementation of GST during the financial year and also due to changes in the presentation of Profit & Loss Account as per IND AS.
The Company has registered a net profit of Rs. 5.93 Crores for the year ended 31.03.2018 as against the net profit of Rs. 5.31 Crores during the previous year.
The company has recorded an EPS of Rs. 3.98 per equity share of Rs. 10 each as against Rs. 3.50 during the previous year. Formulations Business: The formulations business of the Company has contributed a revenue of Rs. 103.10 Crores during F.Y 2017.18 as against the revenue of Rs. 106.31 Crores during F.Y 2016.17. Turnover from the export of formulations during F.Y 2017.18 is at Rs. 52.97 Crores as against Rs. 61.43 crores during F.Y 16.17.
Domestic sales of formulations mainly constituting branded formulations has contributed a revenue of Rs. 50.12 Crores during F.Y 2017.18 as against a revenue of Rs. 44.88 Crores during F.Y 2016.17.
Bulk Drugs Business:
As against the total revenue of Rs. 120.49 Crores from the bulk drugs business during F.Y 2016.17, the company has recorded a sales revenue of Rs. 103.17 Crores from bulk drugs for the financial year 2017.18. Revenue from export of API products has resulted in a turnover of Rs. 60.33 Crores and domestic sales of the said products has yield a revenue of Rs. 42.85 Crores.
Diabetic and cardiac drugs of the Company continues to be the major revenue earners of the Company, from both domestic and export markets during the financial year.
The Company has recorded export sales of Rs. 113.29 Crores as against Rs. 121.67 Crores recorded during the previous financial year.
The Company has recorded a revenue of Rs. 92.97 Crores from its domestic business for the financial year 2017.18 as against the domestic revenue of Rs. 105.13 crores during 2016.17.
During the year under review, Bal Pharma Ltd has acquired 100% stake and management control of Golden Drugs Private Ltd, an Udaipur, Rajasthan based private limited Company involved in the manufacture the of bulk drugs and intermediates. The total cost of acquisition is Rs. 14 Crores which involves purchase of 100% shareholding of the Company with a purchase consideration of Rs. 20.66/- per shares and also towards repayment of all the past liabilities of the Company. With this acquisition, Bal Pharma Ltd aims to increase its production capacity by at least 20% and also enter into unexplored API markets, both domestic and international.
In addition to this, the Company assesses the future infrastructure requirements and continuously invests in the same on need basis.
AUDIT COMMITTEE: the Company for the
Audit Committee, a subcommittee of the Board consists of Mr.Pramod Kumar.S, Dr.G.S.R Subba Rao, Mrs. Sarika Bhandari, Independent Directors of the Company.
Audit Committee of the Company continues to discharge its duties as per the provisions of Section 177 of the Companies Act, 2013 and also SEBI (LODR) Regulations, 2015.
AUDITORS AND AUDITORS REPORT:
a) Statutory Auditors:
Messers NSVM & Associates, Chartered Accountants (FRN # 010072S) were appointed as Statutory Auditors of the Company from the conclusion of 30th Annual General Meeting held on 22.09.2017 up to the conclusion of 35th Annual General Meeting i.e for a period of 5 years.
There are no qualifications or adverse remarks or observations by the Statutory Auditors in their report issued for the financial year 2017.18.
b) Cost Auditors:
Mr.M.R Krishna Murthy , Cost accountant,(FCMA # 7568) was reappointed as the Cost Auditor of the Company for the financial year 2018-19, to conduct cost audit of the cost records maintained by the Company.
c) Secretarial Auditors:
Mr.Parameshwar G Bhat, Practising Company Secretary (CP # 11004) were appointed as the Secretarial Auditor of the Company for the financial year 2017.18. No adverse comments or remarks were made by the auditor in his report for the F.Y 2017.18, which is annexed to this report.
d) Internal Auditors:
Messers Bharath & Co, Chartered Accountants, (MRN # 240163) were appointed as the Internal Auditors of the Company for the F.Y 2017.18 and the internal audit reports issued by them were periodically reviewed by the Audit Committee and the management of the Company is appraised about the observations of the internal auditor and on corrective actions, if any, that needs to be taken.
The Risk Management Committee of the Company comprising of the functional heads of the Company will submit its periodical report to the Board of Directors on the measures to be taken for mitigation of potential risk factors that may affect the business of the Company. The Risk Management Policy implemented by the Company which is designed to enable risks to be identified, assessed and mitigated appropriately, is available on the website of the Company i.e www. balpharma.com.
Internal Control System and its Adequacy:
Your Company has an adequate system of internal controls with clearly defined authority limits. Internal controls ensure that the Companys assets are protected against loss from unauthorised use or disposition and all transactions are authorised, recorded and reported in conformity with generally accepted accounting principles. The Company has in place adequate internal financial controls with respect to Financial Statements. These systems are designed to ensure accuracy and reliability of accounting data, promotion of operational efficiency and adherence to the prescribed management principles. These policies are periodically reviewed to meeting business requirements.
Directors responsibility statement.
In compliance with the provisions of Section 134(5) of the Companies Act,2013, your Directors wish to confirm, a) That in preparing the annual accounts, all the applicable accounting standards had been followed along with proper explanation relating to material departures. b) That the Directors had selected such accounting policies and applied them consistently and made judgements and estimates that
|Name of the Company/LLP||Nature of Business||% of stake with Bal Pharma, as on 31.03.2018|
|01 Lifezen Healthcare Private Limited||Marketing of OTC products||50.50%|
|02 Bal Research Foundation||Research and Development||80%|
|03 Balance Clinics LLP||Diabetic care clinics.||80%|
|04 Golden Drugs Private Limited||Manufacturing of APIs||100%|
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) That the Directors had taken proper and sufficient care 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 / detecting fraud and other irregularities.
d) That the Directors had prepared the annual accounts on a going concern basis.
e) That the Directors had laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and are operating effectively.
f) That the Company had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems are adequate and operating effectively.
Related party Transactions:
All contracts /arrangements / transactions entered by the Company during the financial year with related parties were in ordinary course of business and at arms length basis. During the year, the Company has not entered into any contract/arrangement/transaction with the related parties that could be considered material, as per the policy of the Company on materiality of related party transactions.
There were no materially significant could have potential conflict with the interests of the Company at large. The Companys policy on the related party transactions as approved by the Board can be assessed from the website i.e www.balpharma.com. For disclosure relating to the related party transactions, please refer to note # 34 of the financial statements.
Subsidiary, Joint Venture and Associate Companies:
During the year under review, the following Companies listed below continues to be the subsidiaries, joint ventures or associates of Bal Pharma Ltd. A report on the financial performance of each of the subsidiaries, joint ventures or associate companies as per section 129(3) of the Companies Act, 2013 is provided in Annexure 1 to the Boards report and hence not repeated here for the sake of brevity.
Secretarial Standards i.e SS1 & SS2 relating to the meetings of Board of Directors and General meetings, respectively have been duly followed by the Company.
Directors and Key Managerial Personnel (KMPs):
The Nomination and Remuneration Committee has recommended for reappointing Dr.Subba Rao Prasanna as whole time Director of the Company for a further period of 2 years. His reappointment is being considered at the ensuing Annual General Meeting by a special resolution. The Company has received declarations from all the Independent Directors confirming that they meet the criteria of independence, as prescribed under Section 149(6) of the Companies Act, 2013. The Company has devised a policy for familiarization of Independent Directors on their roles, rights, responsibilities with the Company and the said policy is available on our website.
The Company has also in place a Policy for nomination and remuneration of KMPs, Senior Management personnel and Directors of the Company, which is in compliance with Section 178 of the Companies Act, 2013. The Company has devised a policy for performance evaluation of the Board, committees and Individual directors. The evaluation process inter alia considers attendance of Directors at Board and Committee meetings, acquaintance with business, communication within Board members, effective participation, domain knowledge, compliance with the internal code of conduct, vision and strategy.
The Board carried out annual performance evaluation of itself, Committees, Individual Directors and Chairman. The performance of each committee is evaluated based on the reports of evaluation received from the respective committees.
Report on performance evaluation of the individual Directors was reviewed by the Chairman and feedback was given to the Directors. Details of Board and Committee Meetings held during the year is disclosed in the Corporate Governance Report.
The vigil mechanism of the Company which also incorporates Whistle Blower Policy as prescribed by SEBI(LODR) Regulations, 2015 includes compliance task force comprising of senior executives of the Company. The policy of whistle blower is available on our website.
Conservation of Energy, Technology Absorption, Foreign Exchange Earnings and Outflow:
As per the provisions of Section 134 of the Companies Act, 2013, details relating to the conservation of energy, technology absorption, foreign exchanges earnings and outflow are given as Annexure -3 to this report.
The Company is committed to maintaining highest standards of Corporate Governance requirements set out by the Securities and Exchange Board of India. A detailed report on the corporate governance system and practises of the Company along with a certificate practising Company secretary confirming to the compliance with the corporate governance requirements, are given in a separate section of this report.
Particulars of Loans given, investments made, Guarantees given or security provided by the Company.
The Company makes investments and trade advances to its subsidiaries for their business purpose. Details of loans, investments and advances covered under Section 186 of the Companies Act, 2013, form part of the notes to the financial statements provided in this annual report.
Material Changes and Commitments affecting the financial position of the Company between the end of the financial year and up to the date of this report.
There have been no material changes or commitments affecting the financial position of the Company between the end of the financial year and date of this report. There has been no change in the nature of business or constitution of the Company.
Extract of the Annual Return:
In accordance with Section 134 (3) (a) of the Companies Act, 2013, an extract of the Annual return of the Company for the financial year 2017-18 in Form MGT-9 is annexed to this report as Annexure-5.
Corporate Social Responsibility:
As per the provisions of Section 135 of the Companies Act,2013, the Company has constituted a CSR committee with the following Composition.
|1.Dr.G.S.R Subba Rao||Chairman|
|4.Mr.Shailesh Siroya -||Member|
The Committee has formulated an Corporate Responsibility policy which recommends the activities to be undertaken by the Company, as specified in Schedule VII of Companies Act,2013. A copy of the said policy is available on the website i.e www.balpharma.com. The Committee has not recommended any CSR budget for the financial year 2018.19, due to inadequate profits
Human resources of the Company has major share in the growth and development of the Company. The Company continues to hire new talent in order to keep pace with the new projects and initiatives undertaken. The Management of the Company aims to strengthen its employee relations through progressive people management.
The Board of Directors of the Company has carried out annual performance evaluation of its own performance, its Committees and individual Directors at their meeting held on 14.02.2018. The Board has expressed satisfaction over the overall functioning of the Board members and their committees which are in line with the objectives and goals of the Company.
Listing with Stock Exchanges:
The Equity Shares of the Company continued to be listed on BSE Limited, Mumbai and National Stock Exchange of India Ltd, Mumbai and the Company has paid the annual listing fees for F.Y 2018-19 to the exchanges.
CEO & CFO certification:
The CEO and CFO of the Company in their submission to the Board have confirmed that the annual financialstatements presents a true and fair view of the Companys affairs and do not omit any material facts, contained therein which may make either statements or figures misleading or false.
The Management confirmthat all the of the Company wishes to movable, immovable and current assets of the Company are covered with comprehensive and adequate insurance cover.
The discipline with which the Company conducts its financial transactions is reflected in the BBB(stable) rating given by the credit rating agency ICRA for the financial year 2017-18. The Management of the Company aims at further improving its credit rating during the current financial
Disclosure under the sexual harassment of Women at work place (Prevention, Prohibition and Redressal) Act, 2013:
The Company has in place an anti-sexual harassment policy on lines with the requirements of the sexual harassment of women at the work place (Prevention, Prohibition and Redressal) Act,2013. All the employees of the Company either they are permanent, contractual, temporary or trainees, are covered by the policy.
The following is the summery of the Complaints regarding sexual harassment, received and redressed during the financial year 2017-18
|Number of Complaints received during the year||: Nil|
|Number of Complaints resolved||: NA|
|Number of Complaints pending at the end of the year||: NA|
Particulars of Employees:
Disclosures pertaining to remuneration and other details as required under Section 197(12) of the Companies Act, 2013, read with Rules 5(1), 5(2) & 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are attached as "Annexure 4" to this report.
Your Directors reports that no disclosure or reporting is required in respect of the following items as there were no transactions on these items during the year under review.
1 Details relating to the deposits covered under Chapter V of the Companies Act, 2013.
2 Issue of equity shares with differential voting rights with respect to dividend, voting etc.
3. Issue of shares (including sweat equity shares) to the employees of the Company under any scheme.
4. Neither the Managing Director nor the whole time Directors of the Company receive any remuneration or commission from any of its subsidiaries.
5. No significant courts or tribunals which impacts the going concern status of the Company and its operations in future.
6. No fraud has been reported by the Auditors to Audit Committee or the Board during the year.
Your Directors express their gratitude to the Companys customers, shareholders, employees, business partners viz. distributors, suppliers, medical professionals, Companys bankers, financial institutions including investors for their valuable, sustainable support and . co-operation.