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We present you the Fortieth (40th) Annual Report on business and operations along with the Audited Financial Statements and the Auditors Report of your Company for the financial year ended March 31, 2018.
|Particulars||Standalone Results||Consolidated Results|
|Share of profit of joint venture and associate, net||-||-||213||163|
|Profit before tax||3,058||5,362||6,100||8,497|
|Income tax on exceptional items||-||(1,042)||-||78|
|Profit for the year||2,385||5,193||3,724||6,121|
|Other comprehensive income, net||(65)||84||130||646|
|Total comprehensive income||2,320||5,277||3,854||6,767|
|Earnings per Share (EPS) before exceptional item||4.04||7.05*||_6.31||10.53*|
|Earnings per Share (EPS) after exceptional item||4.04||8.82*||_6.31||10.39*|
* Adjusted for the effect of bonus shares
Standalone and Consolidated Financial Statements
The Standalone and Consolidated Financial Statements of your Company have been prepared in accordance with Indian Accounting Standards (Ind AS) notified under the Companies (Indian Accounting Standards) Rules, 2015.
Further, a statement containing the salient features of the Financial Statements of our subsidiaries pursuant to sub-section 3 of Section 129 of the Companies Act, 2013 in the prescribed Form AOC-1 is appended as Annexure 1 to the Boards Report. The statement also provides the details of performance and financial positions of the subsidiaries.
State of Affairs
The highlights of your Companys Standalone performance are as under:
Revenue from operations for FY18 stood at Rs 24,255 mn compared to Rs 26,184 mn for FY17. Other income for FY18 amounted to Rs 1,247 mn as against Rs 988 mn in FY17, primarily comprised income on investments at Rs 628 mn, foreign exchange gain Rs 174 mn and dividend income from subsidiaries at Rs 145 mn.
Core operating margins (EBIDTA margins net of licensing, impact of forex, R&D and dividend from subsidiaries) was 23% compared to 30% in FY18 on account of lower revenues. Profit for the year stood at Rs 2,385 mn compared to Rs 5,193 mn for FY17.
Effective Tax Rate (ETR) for the year was 22% as compared to 23% in the previous year before exceptional item. The highlights of your Companys Consolidated Financial Performance are as under:
During the year, our consolidated revenues registered a growth of 6% to Rs 43,359 mn from Rs 40,787 mn in FY17. From a segment perspective, the research services recorded an annual growth of 19% while Biologics and Branded Formulation registered a growth of 10% and 11% respectively. Small molecules was down 8%.
Core margins (EBITDA margins net of licensing, impact of forex and R&D) stood at 27% as compared to 32% in FY17. Profit for the year stood at Rs 4,531 mn compared to Rs 6,881 mn for FY17. Profits for FY17 included tax on exceptional item of Rs 78 mn.
Income Tax on Exceptional Items
Income tax on exceptional items during the FY17 comprised the following:
During the year ended March 31, 2017, the Company, in its Standalone Financial Statements recorded MAT credit entitlement of Rs 1,042 mn on sale of equity shares of Syngene International Limited in FY16. However, in the Consolidated Financial Statements such entitlement is recognised as a credit in equity along with the underlying dilution gain on sale of equity stake in Syngene, as it did not impact Groups control.
During the year ended March 31, 2017, Biocon SA ("BSA") transferred all of its rights, interests and obligations in Insulin Analogs (IPR) to Biocon Sdn. Bhd. Consequent to this transfer BSA recorded a net gain in its Standalone books which was offered to tax under the Swiss tax laws. The above restructuring did not have any impact on Consolidated Financial Statements, except for a tax cost of Rs 78 mn representing the tax payable by BSA locally which had been included within income tax expenses for the year ended March 31, 2017.
During FY18, the Company issued and allotted 400 mn equity shares of Rs 5 each as fully paid bonus shares in the ratio of two equity shares for every one equity share held by the Members as on the record date, June 17, 2017. Consequently, issued, subscribed and paid-up share capital of the Company has increased to Rs 3,000 mn.
Your Directors are pleased to recommend a Final Dividend of Re. 1/- (20%) per equity share for the financial year ended March 31, 2018, entailing a pay-out of Rs 600 mn. The dividend pay-out is subject to approval of Members at the ensuing Annual General Meeting (AGM).
The dividend will be paid to Members whose names appear in the Register of Members as on the Record Date to be determined by the Board, in respect of shares held in dematerialised form, it will be paid to Members whose names are furnished by National Securities Depository Limited and Central Depository Services (India) Limited as beneficial owners as on the record date.
Dividend Distribution Policy
As per the provisions of Regulation 43A of SEBI Listing Obligations and Disclosure Requirements (SEBI LODR), the top 500 listed companies shall formulate a Dividend Distribution Policy. Accordingly, the Policy was adopted to set out the parameters and circumstances that will be taken into account by the Board in determining the distribution of dividend to its shareholders and/or retaining profits earned by the Company. The Policy is appended herewith as Annexure 2 to the Boards Report and is also available on the Companys website at http://www.biocon.com/docs/Dividend_Distribution_Policy.pdf.
Transfer of Unpaid and Unclaimed Amounts to IEPF
Pursuant to the provisions of Section 124(5) of the Companies Act, 2013, dividend which remains unpaid or unclaimed for a period of seven years from the date of its transfer to unpaid dividend account is required to be transferred by the Company to Investor Education and Protection Fund (IEPF), established by the Central Government under the provisions of Section 125 of the Companies Act, 2013. During the year under review, the Company has credited unpaid/ unclaimed dividends of financial year 2009-10 amounting to Rs 546,255 lying in the unpaid dividend account to the IEPF.
Your Company has formulated a Policy for determining Material Subsidiaries pursuant to the provisions of SEBI LODR. The said Policy is available at the Companys website http://www.biocon.com/docs/PolicyDocument_MaterialSubsidiary.pdf
During the year, Syngene USA Inc., was incorporated on August 24, 2017 as a wholly owned subsidiary of Syngene International Limited and Biocon_Healthcare Sdn. Bhd. was incorporated on August 10, 2017 as a wholly owned subsidiary of your Company. As on March 31, 2018, your Company has 12 subsidiaries.
A report on the performance and financial position of each of the subsidiary and joint venture is presented below.
Syngene International Limited, India
Syngene International Limited ("Syngene"), is engaged in providing contract research and manufacturing services from lead generation to clinical supplies to pharmaceutical and biotechnology companies worldwide. Syngenes services include integrated drug discovery and development capabilities in medicinal chemistry, biology, vivo pharmacology, toxicology, custom synthesis, process R&D, cGMP manufacturing, formulation and analytical development along with Clinical development services. Syngene is a public limited company incorporated and domiciled in India and has its Registered Office in Bengaluru, Karnataka, India. The Companys shares are listed on the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE) in India.
During the year ended March 31, 2018, Syngene registered a revenue growth of 17% to Rs 14,849 mn in FY18 (FY17 - Rs 12,716 mn). The growth was led by an overall strong performance across all its businesses. EBIDTA margin for the year was 35%, with the operating margin at Rs 5,262 mn (FY17 - Rs 4,783 mn), registering a growth of 10%.
Pursuant to a fire incident on December 12, 2016, at Syngene, certain fixed assets, inventory and other contents in one of the buildings were damaged.
Syngene lodged an estimate of loss with the insurance company and the survey is currently ongoing. Syngene recorded a loss of Rs 795 mn arising from such incident during the year ended March 31, 2017. During the year ended March 31, 2018, Syngene has additionally recorded losses aggregating to Rs _237 mn. Syngene also recognised a minimum Insurance claim receivable for equivalent amounts in the respective periods. The aforementioned loss and the corresponding credit arising from insurance claim receivable has been presented on a net basis ( Rs Nil) under Exceptional items in these Financial Statement. During the year ended March 31, 2018, Syngene has received an disbursement of Rs 615 mn(March 31, 2017: Rs 200mn) from the insurance company and the same has been adjusted with the amount recoverable from the insurance company.
In addition, Syngene is in the process of determining its final claim for loss of fixed assets and Business Interruption and has accordingly not recorded any further claim arising therefrom at this stage.
On April 25, 2018, the Board of Directors of Syngene recommended a dividend of Rs 1/- (10%) per equity for the financial year ended March 31, 2018, entailing a pay-out of Rs 200 mn. The dividend pay-out is subject to approval of Members of Syngene at
the ensuing Annual General Meeting (AGM).
Syngene USA Inc.
Syngene USA Inc, a wholly owned subsidiary of Syngene, incorporated on August 24, 2017, with Registered Office in the State of Delaware, United States of America (USA). The Company provides sales and business support services to the operations of Syngene in USA.
Biocon Research Limited, India
Biocon Research Limited ("BRL"), a 100% subsidiary of the Company, undertakes discovery and development research work in Biologics and provides scientific support for various development programmes of the group.
BRLs current business is directed towards the R&D services for Monoclonal Antibody molecules (mAbs) and Proteins, insulin Tregopil (formally referred to as IN-105) and other insulin products on behalf of other group companies. The research programs undertaken by BRL have made significant inroads to the next level of global clinical trials. BRL continues to hold 0.93% shareholding in Syngene.
During FY18, BRL registered a turnover of Rs 2,190 mn and reported a net profit of Rs 431 mn compared to a turnover of Rs 1,657 mn and a net profit of Rs 661 mn in FY17. FY18 revenue includes sale of export incentives to Biocon Limited for a consideration of Rs 181 mn.
Biocon Pharma Limited, India
Biocon Pharma Limited ("BPL") is a wholly owned subsidiary of the Company. BPL would be engaged in the development and manufacture of generic formulations for sale in global markets, especially opportunities in US and EU. BPL is in the process of setting up its formulations manufacturing facility for oral solid dosages at Bengaluru. During FY18, 2 mn equity shares of face value of Rs 10 were issued to Biocon Limited at face value.
As at March 31, 2018, BPL has not commenced commercial operations and has capital work-in-progress of Rs 1,862 mn (FY17 - Rs 1,130 mn).
Biocon Pharma Inc, USA
Biocon Pharma, Inc. ("BPI"), a wholly owned subsidiary of Biocon Pharma Limited was incorporated in July 2015 in the United States of America. BPI is engaged in commercialization of generic formulations in the United States.
During FY18, BPI commenced commercial operations and has registered a turnover of Rs 170 mn and reported a net loss of Rs 218 mn.
Biocon SA, Switzerland
Biocon SA ("BSA"), a wholly owned subsidiary of the Company, is primarily engaged in identifying and developing novel molecules into commercial products or licensable assets through strategic partnerships.
In the current year, BSA registered a net loss of Rs 255 mn against a net profit of Rs 684 mn in FY17 primarily due to expenditure incurred on Research and Development activities. Exceptional gains as explained below resulted in profits for FY17.
Exceptional item represents:
During FY17, BSA and Biocon Sdn. Bhd. had entered into an Assignment and License Agreement pursuant to which BSA transferred all of its rights, interests and obligations in Insulin Analogs (IPR) to Biocon Sdn. Bhd. Consequent to this transfer BSA recorded a gain of Rs 1,150 mn, net of tax Rs 78 mn.
Biocon Biologics Limited, UK
Biocon Biologics Limited ("BUK") is a wholly owned subsidiary of the Company. Incorporated in the United Kingdom in March 2016, BUK houses Biocons Biosimilar Biologics business. Biocon Sdn. Bhd. and Biocon Biologics India Limited are wholly owned subsidiaries of BUK. In December 2017, the US Food and Drug Administration approved Ogivri, a biosimilar Trastuzumab co-developed by Biocon and Mylan.
During the year ended March 31, 2018, BUK earned Rs 852 mn as revenue and reported a net loss of Rs 201 mn as against revenue of Rs 1,826 mn and net loss of Rs 189 mn in FY17, primarily due to higher expenditure incurred on Research and Development activities.
Biocon Sdn. Bhd. Malaysia
Biocon Sdn. Bhd Malaysia is a step down subsidiary of the Company, wholly owned by BUK. Biocon Sdn. Bhd. was established with an objective to set up the groups first overseas manufacturing facility at Malaysia. The facility is located within BioXcell, a biotechnology park in Iskandar Puteri, Johor.
The facility is approved for manufacture of Human insulin and glargine drug product from National Pharmaceutical Regulatory Authority ("NPRA"), Malaysia. During the current year the facility received cGMP certification from HPRA (EMA). With the receipt of product approval from EMA for our Insulin Glargine, Biocon Sdn. Bhd. is set to commence export of products to EU. Biocon Sdn. Bhd. also received the product approval from NPRA, Malaysia for its BASALOG cartridges.
Biocon Sdn. Bhd. holds the commercial and development rights of human insulin and analogs and continues the related Research and Development activities.
Currently in the second year of commercial operations, Biocon Sdn. Bhd. reported a total revenue of Rs 2,716 mn and net loss of Rs 697 mn in FY18 against a total revenue of Rs 998 mn and a net profit of Rs 5 mn in FY17.
Biocon Biologics India Limited, India
Biocon Biologics India Limited ("BBIL") is a step down subsidiary of the Company, wholly owned by BUK. BBIL was incorporated on June 08, 2016 in India with an objective to set up greenfield biosimilar biologics facilities. During the current year, the Board and shareholders of BBIL have approved the acquisition of existing Biosimilars business from Biocon Limited for a consideration of Rs 5,787 mn, subject to regulatory approvals.
As at March 31, 2018, BBIL has not commenced commercial operations and has capital work-in-progress of Rs 152 mn.
Biocon FZ LLC, UAE
Biocon FZ LLC is a wholly owned subsidiary of the Company based in Dubai. Incorporated in June 2015, Biocon FZ LLC was established as a marketing entity for pharmaceutical products to target markets in the Middle East and GCC. During the year ended March 31, 2018, Biocon FZ LLC earned Rs 1,760 mn as revenue and reported a net loss of Rs 13 as against a revenue of Rs 1,328 mn and a net loss of Rs 21 mn in the immediately preceding year.
Biocon Healthcare Sdn. Bhd., Malaysia
Biocon Healthcare Sdn Bhd ("BHSB"), a 100% owned subsidiary of Biocon Ltd, incorporated in August 2017 in Malaysia. BHSB proposes to carry on the business as importers and distributors in active pharmaceutical and biopharmaceutical ingredients, drugs and devices in the Malaysian market. As at March 31, 2018, BHSB has not commenced commercial operations.
Biocon Academy, India
Biocon Academy, established in 2014, spearheads Biocons Corporate Social Responsibility (CSR) initiatives in the area of advanced learning, aimed at creating a globally competitive Biotech ecosystem in India through skill development. Biocon Academy leverages rich industry experience and subject matter expertise of Biocon as well as international Education Partners, such as Keck Graduate Institute, California, USA and BITS, Pilani, India to deliver industry-oriented advanced learning and skill building programs for pharma and biotech graduates. Our Programs are aimed at empowering the students with industrial proficiency through job-skills development essential to build a promising career in the Biopharma industry.
Management Discussion and Analysis
In terms of the provisions of Regulation 34 of the SEBI LODR, the Management Discussion and Analysis is set out in this Annual Report.
Your Company is committed to maintain the highest standards of corporate governance. We believe sound corporate governance is critical to enhance and retain investor trust. Our disclosures seek to attain the best practices in corporate governance as prevalent globally. We have implemented several best corporate governance practices in the Company to enhance long-term shareholder value and respect minority rights in all our business decisions. Corporate Governance Report for FY 2017-18 forms part of this Annual Report.
The requisite certificate from the auditors of the Company confirming compliance with the conditions of corporate governance as stipulated under SEBI_LODR is annexed to the corporate Governance Report.
Business Responsibility Report
The Business Responsibility Report ("BRR") of your Company for the year 2017-18 forms part of this Annual Report as required under Regulation 34(2) (f) of the SEBI LODR.
Employee Stock Option Plan (ESOP)
Nomination and Remuneration Committee of the Board, inter alia administers and monitors the Companys employees stock option plan (Plan) in accordance with SEBI (Share Based Employee Benefits) Regulations, 2014 (SBEB Regulations). The Plan is implemented through Biocon India Limited Employees Welfare Trust (ESOP Trust).
During the year ended March 31, 2018, a total of 1,894,439, shares were transferred from the ESOP Trust to the eligible employees under the Companys prevailing ESOP plan. As at March 31, 2018, the ESOP Trust held 9,005,047 equity shares of the Company. During the year ended March 31, 2018, there has been no material change in the Companys existing plan and the plan is in compliance with SBEB Regulations. Information as required under SBEB Regulations read with SEBI Circular CIR/CFD/POLICY CELL/2/2015 dated June 16, 2015 have been uploaded on the Companys website and can be accessed at the web-link: http://www.biocon.com/biocon_invrelation_annualreports.asp?subLink=finance
The applicable disclosures as stipulated under the SBEB Regulations as on March 31, 2018 is appended herewith as Annexure 3 to the Boards 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.
Your Company has not accepted any deposit and as such no amount of principal and interest were outstanding as at the Balance Sheet date.
Loans, Guarantees or Investments
Details of loans, guarantees and investments covered under the provisions of Section 186 of the Companies Act, 2013 form part of the notes to the Financial Statements.
Policy on Directors Appointment and Remuneration
The Companys current policy is to have an appropriate mix of Executive and Independent Directors to maintain the independence of the Board and separate its functions of governance and management. As on March 31, 2018 the Board consists of 10 Directors, majority of them being Independent Directors. Besides the Chairperson and Managing Director who is a Promoter, the Board comprises of Vice Chairman who is a Non-Executive Director, CEO & Joint Managing Director, a Non-Executive Director and 6 Independent Directors. The Board periodically evaluates the need for change in its composition and size. The Policy of the Company on Directors Appointment and Remuneration, including criteria for determining qualifications, positive attributes, independence of a Director and other matters as required under sub-section (3) of Section 178 of the Companies Act, 2013 are formulated by the Nomination and Remuneration Committee. The Policy of the Company on Directors Appointment and Remuneration is appended herewith as Annexure 4 to the Boards Report.
A diverse Board enables efficient functioning through differences in perspective and skill, and also fosters differentiated thought processes at the back of varied industrial and management expertise, gender, knowledge and geographical background. The Board recognises the importance of a diverse composition and has adopted a Board Diversity Policy which sets out the approach to diversity. The Policy is available at the web-link: http://www. biocon.com/docs/PolicyDocument_BoardDiversity.pdf
Declaration by Independent Directors
The Company has received necessary declaration from each Independent Director under Section 149(7) of the Companies Act, 2013, that he/she meets the criteria of independence laid down in Section 149(6) of the Companies Act, 2013 and Regulation 25 of SEBI LODR.
Pursuant to the provisions of the Companies Act, 2013 and Regulation 19 of SEBI LODR, the Board has carried out the Annual Performance Evaluation of its own performance, the Directors individually as well as the evaluation of the working of its various committees. A structured questionnaire was prepared after taking into consideration inputs received from the Directors, covering various aspects of the Boards functioning such as adequacy of the composition of the Board and its Committees, Board culture, execution and performance of specific duties, obligations, independence, governance, ethics and values, adherence to corporate governance norms, interpersonal relationships, attendance and contribution at meetings etc.
A separate exercise was carried out to evaluate the performance of individual Directors including the Chairperson of the Board, who were evaluated on parameters such as participation and contribution by a Director, commitment, including guidance provided to the senior management outside of Board / Committee meetings, effective deployment of knowledge and expertise, effective management of relationship with various stakeholders, independence of behaviour and judgment etc. The Performance Evaluation of the Independent Directors were carried out by the entire Board. The Performance Evaluation of the Chairperson and Managing Director was carried out by the Independent Directors. The evaluation process has been explained in the Corporate Governance Report. The Board reviewed the evaluation results as collated by the Nomination and Remuneration Committee.
Appointment of Directors and Key Managerial Personnel
The Members at the 39th AGM held on July 28, 2017 re-appointed Mr. Russell Walls, Ms. Mary Harney and Mr. Daniel Bradbury as Independent Directors for 5 years. The Members at the said AGM also appointed Prof. Ravi Mazumdar, as a Director liable to retire by rotation. We thank the Members for their support in confirming the above mentioned appointments.
Mr. Rajiv Balakrishnan has ceased to hold office as Company Secretary and Compliance Officer effective March 2, 2018.
Retirement and Re-appointment
As per the provisions of Section 152(6) of Companies Act, 2013, Mr. John Shaw, Non-Executive Non-Independent Director, retires by rotation at the ensuing AGM and being eligible, seeks re-appointment. The Board recommends his re-appointment.
The current term of appointment of Mr. Jeremy Levin and Mr. Vijay Kuchroo, Independent Directors of the Company shall come to an end at the ensuing AGM. Based on the outcome of the Performance Evaluation, the Nomination and Remuneration Committee has recommended to continue the term of appointment of the Independent Directors and nominated to the Board, re-appointment of Mr. Jeremy Levin and Mr. Vijay Kuchroo as Independent Directors for an additional term of five consecutive years. A brief profile of Mr. Jeremy Levin and Mr. Vijay Kuchroo is given in the Notice of AGM dated June 22, 2018. The Company has received declarations from both the Independent Directors confirming that they meet the criteria of independence as prescribed under sub-section (6) of Section 149 of the Companies Act, 2013 and Regulation 25 of SEBI LODR. The Company has also received requisite notices in writing from Members signifying the candidatures of Mr. Jeremy Levin and Mr. Vijay Kuchroo as Independent Directors of the Company.
The Board recommends the re- appointment of Mr. Jeremy Levin and Mr. Vijay Kuchroo as Independent Directors.
Committees of the Board
Currently, the Board has four Committees: Audit and Risk Committee, Nomination and Remuneration Committee, Stakeholders Relationship Committee and Corporate Social Responsibility (CSR) Committee. As required under the provisions of Section 177(8) of the Companies Act, 2013, the composition of the Audit Committee is disclosed as under:
Mr. Russell Walls, Chairman, Mr. Daniel M Bradbury, Dr. Jeremy M Levin and Mr. M. Damodaran.
A detailed note on the composition of the Board and other Committees is provided in the Corporate Governance Report section of this Annual Report.
Meetings of the Board
The meetings of the Board are scheduled at regular intervals to decide and discuss on business performance, policies, strategies and other matters of significance. The schedule of the meetings are circulated in advance, to ensure proper planning and effective participation in meetings. In certain exigencies, decisions of the Board are also accorded through circulation.
The Board during the financial year 2017-18 met five times. The maximum interval between any two meetings did not exceed 120 days, as prescribed in the Companies Act, 2013. Detailed information regarding the meetings of the Board are included in the report on Corporate Governance, which forms part of the Boards Report.
Related Party Contracts or Arrangements
All transactions entered into with Related Parties as defined under Companies Act, 2013 during the year were in the ordinary course of business and on an arms length basis. The Company has formulated a Policy on "Materiality of Related Party Transactions" and the process of dealing with such transactions, which are in line with the provisions of the Companies Act, 2013 and SEBI LODR. The same is also available on the web-link: https://www.biocon.com/ biocon_invrelation_cor_keygovernance.asp?subLink=gover.
Prior omnibus approval from the Audit and Risk Committee are obtained for transactions which are repetitive and also normal in nature. Further, disclosures on related party contracts and arrangements are made to the Audit and Risk Committee and the Board on a quarterly basis.
During the year under review, there were no material related party transactions under Regulation 23 (4) of SEBI LODR entered into by the Company, which necessitates approval of shareholders. Particulars of contracts or arrangements with related parties referred to in Section 188(1) of the Companies Act, 2013, in the prescribed Form AOC 2, is appended herewith as Annexure 5 to the Boards Report.
ICRA and CRISIL continued to reafirm their rating of AA+/ Stable and A1+, respectively, for various banking facilities throughout the year enabling your Company to avail facilities from banks at attractive rates indicating a very strong degree of safety for timely payment of financial obligations.
Conservation of Energy, Technology Absorption, Foreign Exchange Earnings & Outgo
The particulars as prescribed under sub-section (3)(m) of Section 134 of the Companies Act, 2013, read with the Companies (Accounts) Rules, 2014, is appended herewith as Annexure 6 to the Boards Report.
M/s B S R & Co. LLP, Chartered Accountants (ICAI Registration No. 101248W/W-100022) were appointed as the Statutory Auditors of the Company to hold office from the conclusion of the 38th AGM held on June 30, 2016 until the conclusion of the 43rd AGM of the Company to be held in the calendar year 2021 (subject to ratification of their appointment by the Members at every AGM).
As required under the provisions of Section 139(1) of the Companies Act, 2013, the Company had received a written consent from M/s B S R & Co. LLP,
Chartered Accountants to their appointment and a certificate, to the effect that their appointment, if made, would be in accordance with the Companies
Act, 2013 and the Rules framed thereunder and that they satisfy the criteria provided in Section 141 of the Companies Act, 2013.
The Members are requested to ratify the appointment of the Statutory Auditors at the ensuing AGM.
The Auditors Report on the Financial Statements of the Company for the year ending March 31, 2018 is unmodified i.e. it does not contain any qualification, reservation or adverse remark. The Auditors Report is enclosed with the Financial Statements forming part of the Annual Report.
The Board of Directors on the recommendation of the Audit and Risk Committee, appointed M/s Rao & Murthy, Cost Accountants (Firm Registration Number 000065), as the Cost Auditors of the Company for the Financial Year 2017-18 under Section 148 of the Companies Act, 2013. M/s Rao & Murthy, Cost Accountants, have confirmed that their appointment is within the limits of Section 141(3) (g) of the Companies Act, 2013 and have also certified that they are free from any disqualifications specified under Section 141(3) and proviso to Section 148(3) read with Section 141(4) of the Companies Act, 2013.
The Audit and Risk Committee has also received a certificate from the Cost Auditors certifying their independence and arms length relationship with the Company.
As per the provisions of the Companies Act, 2013, the remuneration payable to the Cost Auditors is required to be placed before the Members in a General Meeting for their ratification. Accordingly, a resolution seeking Members ratification for the remuneration payable to M/s Rao & Murthy, Cost Accountants is included in the Notice convening the 40th AGM.
Pursuant to the provisions of Section 204 of the Companies Act, 2013 and Rules thereunder, M/s M. Damodaran & Associates, Practicing Company Secretaries were appointed to conduct the secretarial audit of the Company for the FY 2017-18. The Secretarial Audit Report for FY 2017-18 is appended herewith as Annexure 7 to the Boards Report. The Secretarial Audit Report does not contain any qualification, reservation or adverse remark.
The Board has appointed M/s. V. Sreedharan & Associates, Practising Company Secretaries as Secretarial Auditor of the Company for the financial year 2018-19.
Risk Management Policy
The Company has put in place an enterprise wide Risk Management Framework with an object of timely identification of risks, assessment and evaluation of the same in line with overall business objectives and define adequate mitigation strategy. On a quarterly basis, the Audit and Risk Committee reviews critical risks on a rotation basis in line with the mitigation progress/ effectiveness and its impact on overall risk exposure of the Company, all the critical risk areas are covered at least once a year. Annually, all critical risk areas identified are re-evaluated.
Internal Financial Control
The Company has laid down certain guidelines, processes and structures, which enable implementation of appropriate internal financial controls across the organisation. Such internal financial controls encompasses policies and procedures adopted by the Company for ensuring the orderly and efficient conduct of business, including adherence to its policies, safeguarding of its assets, prevention and detection of frauds and errors, the accuracy and completeness of accounting records and the timely preparation of reliable financial information. These include control processes both on manual and IT applications including the ERP applications wherein the transactions are approved and recorded. Appropriate review and control mechanisms are built in place to ensure that such control systems are adequate and are operating effectively.
Because of the inherent limitations of internal financial controls, including the possibility of collusion or improper management override of controls, material misstatements in financial reporting due to error or fraud may occur and not be detected. Also, evaluation of the Internal Financial Controls are subject to the risk that the internal financial control may become inadequate because of changes in conditions, or that the compliance with the policies or procedures may deteriorate.
The Company has, in all material respects, an adequate Internal Financial Controls System and such internal financial controls were operating effectively based on the internal control criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Control over Financial Reporting issued by the Institute of Chartered Accountants of India.
The Vigil Mechanism as envisaged in the Companies Act, 2013, the Rules prescribed thereunder and SEBI LODR is implemented through the Companys Whistle Blower Policy to enable the Directors, employees and all stakeholders of the Company to report genuine concerns, to provide for adequate safeguards against victimisation of persons who use such mechanism and make provision for direct access to the Chairman of the Audit and Risk Committee.
Whistle Blower Policy of your Company is available on the Companys website and can be accessed at the web-link:https://www.biocon.com/docs/ Biocon_Group_Integrity_Whistle_Blower_Policy.pdf.
Directors Responsibility Statement
Pursuant to the requirement under Section 134 (3) (c) of the Companies Act, 2013, your Directors confirm that:
(a) In the preparation of the annual accounts, the applicable Accounting Standards had been followed along with proper explanation relating to material departures.
(b) they have selected such accounting policies and applied them consistently and made judgements 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) they have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities.
(d) they have prepared the annual accounts on a going concern basis.
(e) they have laid down Internal Financial Controls based on internal controls framework established by the Company, which were adequate and are operating effectively and
(f) they have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.
Particulars of Employees
The statement containing particulars in terms of Section 197(12) of the Companies Act, 2013 read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 forms part of this Annual Report and is appended herewith as to the Boards report.
The statement containing particulars in terms of Section 197(12) of the Companies Act, 2013 read with Rule 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 forms part of this Annual Report.
Considering the first proviso to Section 136(1) of the Companies Act, 2013, the Annual Report, excluding the aforesaid information, is being sent to the Members of the Company and others entitled thereto. The said information is available for inspection at the Registered Office of the Company during business hours on working days of the Company up to the date of the ensuing Annual General Meeting. Any shareholder interested in obtaining a copy thereof, may write to the Secretarial Team of the Company in this regard.
Corporate Social Responsibility (CSR)
At Biocon, CSR has been an integral part of our business since its inception. With the incorporation of Biocon Foundation in 2004, the Company formally structured its CSR activity. Today, the Company span its CSR efforts through Biocon Foundation, Biocon Academy and some partnership programs with like-minded private organizations and government. The Company promotes social and economic inclusion for the marginalized communities with its integrated system focussing largely in the following areas:
Primary Healthcare- The Company believes that the most cost-efficient method of ensuring the health of a community is by preventing disease from occurring in the first place. The Company is providing affordable primary and preventive healthcare services of assured quality. The initiative provides cushion to low and middle income groups from health shocks, caused by a high out-of-pocket health expenditure and it is catering to healthcare needs of a population of more than 10 Lakhs living predominantly in rural areas, peri-urban areas and slums in Karnataka & Rajasthan.
Promotion of Education- The Company believes in ensuring inclusive and equitable quality education for all. An afterschool enrichment program on English and Phonics, Life Skills, Art and Craft, Digital Literacy and games for children of Government schools is also ongoing successfully. Biocon Academy is an initiative to create a globally competitive Biotech ecosystem in India.
Promotion of Art & Culture- The Company gives a lot of emphasis on protection of national heritage, art and culture and our sincere effort to provide grants to restore many institutions of great public importance including India Foundation for the Arts, Bengaluru are steps in that direction.
Gender Equality & Empowerment of Women- Promoting gender equality and empowering women is one of the major objectives of the Company. Biocon Foundation has set up hostels for women who comes from weaker sections of the society. Donation of patrol vehicles to a special cell of Hebbagodi Police for ensuring safety of women is another initiative undertaken towards providing a safe environment.
Technology Incubation- The Company is keenly aware of the power of technology in transformation of the development indicators and therefore we support technology incubators which are approved by the Central Government. Under this initiative, Biocon Foundation has provided grants to The Institute of Bioinformatics and Applied Biotechnology (IBAB), Team Indus & Science Gallery, Bengaluru.
Rural Development- The Company works towards combatting the social and economic problems to ensure the prosperity of rural India. Biocon Foundation has undertaken many projects to bridge the rural-urban divide in terms of infrastructure. Some of our initiatives include construction of roads, school buildings, community centre, community toilets, drinking water facilities and so on. In an effort to ensuring rejuvenation of lakes in Bengaluru, Biocon Foundation has treated Hebbagodi lake by Bio-remediation processes and the similar work on revival of Yarandahalli Lake is undergoing.
In compliance with the provisions of Section 135 of the Companies Act, 2013, the Board has formed a CSR Committee, which monitors and oversees various CSR initiatives and activities of the Company. The CSR Committee comprises of Ms. Mary Harney (Chairperson), Ms. Kiran Mazumadar-Shaw, Dr. Vijay Kuchroo and Prof. Ravi Mazumdar.
A detailed report regarding CSR is appended herewith as Annexure 9 to the Boards report.
Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal), Act, 2013
The Company has in place an Anti-Sexual Harassment Policy in line with the requirements of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. Internal Complaints Committee (ICC) has been set up to redress complaints received regarding sexual harassment. All employees (permanent, contractual, temporary, trainees) are covered under this Policy. The Policy is gender neutral. During the year under review, 3 complaints with allegations of sexual harassment were filed, 2 of which were disposed-off as per the provisions of Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013.
Significant and Material Orders
There are no significant and material orders passed during the year by the regulators, courts or tribunals impacting the going concern status and Companys operations in the future.
None of the Directors of your Company are disqualified as per the provisions of Section 164(2) of the Companies Act, 2013. Your Directors have made necessary disclosures, as required under various provisions of the Companies Act, 2013 and SEBI LODR.
Material changes and commitments
No material changes and commitments affecting the financial position of the Company have occurred between March 31, 2018 and the date of this Annual Report.
Change in nature of business
There has been no change in the nature of business of the Company. Your Company continues to be a pioneer biopharmaceutical company engaged in manufacturing active pharmaceutical ingredients and formulations, including biosimilar drugs for diabetics, oncology and autoimmune diseases with sales in markets across the globe.
Extract of Annual Return
In accordance with the provisions of Section 134(3) (a) of the Companies Act, 2013, an extract of the Annual Return in the prescribed format is appended herewith as Annexure 10 to the Boards Report.
We place on record our appreciation for the committed services by every member of the Biocon family globally whose contribution was significant to the growth and success of the Company. We would like to thank all our clients, partners, vendors, investors, bankers and other business associates for their continued support and encouragement during the year.
We also thank the Government of India and Malaysia, Government of Karnataka, Government of Telangana, Government of AP, Ministry of Information Technology and Biotechnology, Ministry of Health, Ministry of Commerce and Industry, Ministry of Finance, Department of Pharmaceuticals, Department of Scientific and Industrial Research, Ministry of Corporate Affairs, Central Board of Indirect Taxes and Customs, Income Tax Department, CSEZ, and all other regulatory agencies for their assistance and co-operation during the year and look forward to their continued support in the future.
|For and on behalf of the Board|
|April 26, 2018||Chairperson and Managing Director|