Hikal Ltd Directors Report.


The Members,

The Directors are pleased to present the 31st Annual Report with the Audited Accounts for the financial year ended 31 March 2019.

Rs.in million
2018-19 2017-18
Turnover 15,896 13,001
Profit before interest & depreciation 2,981 2,418
Interest 584 491
Profit before depreciation 2,397 1,927
Depreciation 929 856
Profit before taxation 1,491 1,115
Provision for taxation
- Current tax 455 447
- Deferred tax liability / (assets) 5 (104)
Profit after tax 1,031 772
Reserves and surplus 7,3167,7,316 6,529
Dividend on equity share 136 107
Tax on dividend 28 22


The Company achieved the highest ever revenue of 3 15,896 million in FY 2018-19, 22% higher than that of 3 13,001 million in the previous year. The sales of the Pharmaceutical business grew by 25% to 3 9,391 million while the sales of the Crop Protection business grew by 19% to 3 6,505 million.

The EBIDTA margins have been steady and robust at around 19%, growing in line with the turnover to 3 2,981 million in FY 2018-19 from 3 2,418 million in the previous year. Absolute EBITDA increased by 23% amounting to 3 563 million. The Profit before Tax (PBT) has gone up by 34% to 3 1,491 million in FY 2018-19 from 3 1,115 million in the previous year. We crossed a milestone of over 3 1,000 million in Profit after Tax (PAT) which has also gone up by 34% to 3 1,031 million in FY 2018-19 from 3 772 million in the previous year. The Earning per Share (EPS) has gone up to 3 8.36 in FY 2018-19 from 3 6.26 in the previous year.

The free cash generated by the Company out of operations is healthy and growing in line with the turnover. The Company is incurring substantial capital expenditure for growth in the Pharmaceutical and Crop Protection businesses, to augment capacities for existing products and to create capacities for new products, as well as investments in Research & Technology. The Company has prudently been funding the growth capex with a mix between internal accruals and long-term loans. In doing so, the Company is ensuring it maintains a healthy liquidity position and that its financial gearing and debt service coverage are at comfortable levels. The Current Ratio of the Company is at a healthy 1.38 for FY 2018-19 as against 1.23 for the previous year. The Debt to Equity ratio has improved to 0.83 in FY 2018-19 from 0.91 in the previous year while the Debt Service Coverage Ratio (DSCR) has strengthened to 2.85 in FY 2018-19 from 2.29 in the previous year.

The Long-Term Credit Rating of the Company has been upgraded by ICRA during the FY 2018-19 from "A-" to "A" with a stable outlook while the Short Term Credit Rating has been upgraded from A2+ to A1. The rating upgrades reflect the comfortable liquidity position and the overall strong financial health of the Company.


Exports for the year are 3 11,056 million (69%of total sales) as compared to 3 9,075 million (69% of total sales) in the previous year. We have diversified our customer base which includes more local customers who in turn re-export our manufactured products.


The Management Discussion and Analysis on the operations of the company is provided in a separate section and forms a part of the report.


The Board declared an interim dividend of 30% which was paid to shareholders in February 2019 (previous year: 35%), and a final dividend of 60% including the interim dividend for the year (previous year: 60%) has been recommended for the year 2018-19.


During the year under review Company has issued Bonus Shares on 26 June 2018 in the ratio of 1:2 i.e. one bonus equity share of Rs.2 each fully paid-up for every two existing equity shares of Rs.2 each fully paid-up held by the members and therefore there is change in paid-up share capital of the Company. Accordingly, the paid-up equity share capital as at 31 March 2019 stood at Rs.246.6 million. During the year under review, the Company has not issued shares with differential voting rights nor granted any stock options or sweat equity. As on 31 March 2019 none of the Directors of the Company hold instruments convertible into equity shares of the Company.


The details forming part of the extract of the annual return in form MGT-9, as required under Section 92 of the Companies Act, 2013, is included in this Report as "Annexure - A" and forms an integral part of this Report.


In terms of the approval granted by the Government of India, Ministry of Company Affairs under Section 129 (3) of the Companies Act, 2013, copies of the balance sheet, profit and loss account, directors report and the report of the auditors of the subsidiary company Acoris Research Limited, have not been attached with the balance sheet of the Company. The Company will make available these documents / details upon request made by any shareholder of the Company interested in obtaining the documents / details, and they can also be inspected at the registered office of the Company as well as of the subsidiary. Pursuant to the approval, a statement of the summarized financials of the subsidiary is attached along with the consolidated financial statements. Pursuant to Ind AS 110 issued by the Institute of Chartered Accountants of India, the consolidated financial statements presented by the Company includes the financial information of its subsidiary.


All Independent Directors have given declarations that they meet the criteria of independence as laid down under Section 149 (6) of the Companies Act, 2013 and Securities and Exchange Board of India (Listing Obligations & Disclosure Requirements) Regulations, 2015.

In accordance with the provisions of Section 152 of the Companies Act, 2013 and the Companys Articles of Association, Mr. Babasaheb Kalyani, Director retires by rotation at the forthcoming Annual General Meeting, and being eligible, offers himself for re-appointment.

Details of the number of Board meetings held during 2018-19 form part of the Corporate Governance Report.


Pursuant to the provisions of the Companies Act, 2013 and Securities and Exchange Board of India (Listing Obligations & Disclosure Requirements) Regulations, 2015, a structured questionnaire was prepared after taking into consideration the various aspects of the Boards functioning, like composition of the Board and its Committees, culture, execution and performance of specific duties, obligations and governance.

Pursuant to the Special Resolution passed on 26 March 2019 by way of Postal Ballot by the members of the Company, Mr. Prakash Mehta and Mr. Kanan Unni were re-appointed as Independent Directors of the Company for a period of 5 years with effect from 1 April 2019.

The performance evaluation of the Independent Directors was completed. The performance evaluation of the Chairman and the Non-independent Directors was carried out by the Independent Directors. The Board of Directors expressed their satisfaction with the evaluation process.


The Company has a whistleblower policy to report genuine concerns or grievances. The whistleblower policy has been posted on the website of the Company (www.hikal.com).


The Board of Directors has framed a policy which lays down a framework in relation to remuneration of Directors, key managerial personnel and senior management of the Company. The Nomination and Remuneration Policy of the Company is attached as "Annexure – F" to this report. This policy also lays down criteria for selection and appointment of Board members. The details of this policy are explained in the Corporate Governance Report and also put up on the website of the Company (www.hikal.com).


All related party transactions that were entered into during the financial year were at an arms length basis and were in the ordinary course of business. There are no materially significant related party transactions made by the Company with promoters, directors, key managerial personnel or other designated persons which may have a potential conflict with the interest of the Company at large.

All related party transactions are placed before the Audit Committee as also the Board for approval.

The policy on Related Party Transactions as approved by the Board is uploaded on the Companys website https://www.hikal.com/uplods/documents/related-party-policy.pdf None of the Directors has any pecuniary relationships or transactions vis-a-vis the Company.


There are no significant and material orders passed by the regulators / courts that could impact the going concern status of the Company and its future operations.


The Company has a robust business risk management framework in place to identify and evaluate all business risks. The company recognizes that risk management is a crucial aspect of the management of the Company, and is aware that identification and management of risk effectively is instrumental to achieving its corporate objectives.

The Company has identified the business risks, and the business heads, who are termed as risk owners, assess, monitor and manage these risks on an ongoing basis. The risk owners assess the identified risks and continually identify any new risks that can affect the business. Different risks such as technological, operational, maintenance of quality, reputational, competition, environmental, foreign exchange, financial, human resource, legal compliances among others are assessed on a continuous basis. The Risk Management Committee and Audit Committee review and submit to the Board of Directors their findings in the form of risk register at regular intervals. At the Board meetings, the members have a detailed discussion to assess each risk and the measures that are in place to lower them to acceptable limits.

The strategies are reviewed, discussed and allocation of appropriate resources is done as and when necessary. The risk management program, internal control systems and processes are monitored and updated on an ongoing basis. A built-up mechanism has been established to identify, measure, control, monitor and report the risks. Business heads are responsible for rolling out the risk assessment and management plan within the organization.


The Company has an internal control system, commensurate with the size, scale and complexity of its operations. To maintain its objectivity and independence, the Internal Audit function reports to the Chairman of the Audit Committee of the Board. The Internal Audit Department monitors and evaluates the efficacy and adequacy of the internal control system in the Company, its compliance with operating systems, accounting procedures and policies at all locations of the Company and its subsidiaries. Based on the report of internal audit function, process owners undertake corrective action in their respective areas and thereby strengthen the controls. Significant audit observations and corrective actions thereon are presented to the Audit Committee of the Board.

The Audit Committee of the Board of Directors actively reviews the adequacy and effectiveness of the internal control systems and suggests improvements to strengthen them. The Company has a robust management information system, which is an integral part of the control mechanism.

During the year, a thorough audit of the internal financial controls was carried out by an independent firm of chartered accountants.


The Company has appointed the following persons as key managerial personnel. Mr. Jai Hiremath, Chairman & Managing Director Mr. Sameer Hiremath, Joint Managing Director & CEO (Whole time Director) Mr. Sham Wahalekar, Chief Financial Officer & Company Secretary


The details under Section 186 of the Companies Act, 2013 are given in the notes to the financial statements.


Your Directors state that:

(i) In the preparation of the annual accounts, the applicable accounting standards read with requirements set out under Schedule III to the Companies Act, 2013 (the Act), have been followed and there are no material departures from the same;

(ii) The Directors 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 ended 31 March 2019 and of the profit of the Company for that year;

(iii) The Directors have 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 and detecting fraud and other irregularities;

(iv) The annual accounts have been prepared on a going concern basis;

(v) The Directors have laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and are operating effectively; and (vi) The Directors have devised a proper system to ensure compliance with the provision of all applicable laws and that such systems are adequate and are operating effectively.


M/s. B S R & Co. LLP, Chartered Accountants were appointed for a term of five years commencing 2014-15 to 2018-19. Term of existing Statutory Auditors is valid up to this i.e. 31st Annual General Meeting. Accordingly, under Section 139 of the Companies Act, 2013, it is necessary to appoint new Statutory Auditors in place of retiring Auditors i.e. B S R & Co. LLP.

On the Basis of recommendations made by Audit Committee, the Board of Directors has recommended the appointment of M/s. S R B C & Co LLP, Chartered Accountants, Mumbai, (FRN : 324982E/E300003), as Statutory Auditors of the Company to hold office from the conclusion of 31st Annual General Meeting of the Company till the conclusion of 36th Annual General Meeting to be held in the year 2024.

The Auditors report prepared by M/s. B S R & Co. LLP, to the members on the accounts of the Company for the year ended 31 March, 2019 does not contain any qualifications, adverse or disclaimer remarks.


The Company has re-appointed M/s. V. J. Talati & Co., as the Cost Auditor to carry out the audit of cost accounts for the financial year 2019-20. The cost audit report for the financial year 2017-18 was filed with the Ministry of Corporate Affairs, Government of India, on 3 September 2018.


The Board has appointed M/s. Ashish Bhatt & Associates, Practicing Company Secretaries, to conduct a secretarial audit for the financial year 2018-19.

The secretarial audit report for the financial year ended 31 March 2019 is annexed herewith as "Annexure - B" to this Report. The secretarial audit report does not contain any qualifications, reservations or adverse remarks.


The Corporate Social Responsibility Committee (CSR Committee) has formulated and recommended to the Board, a Corporate Social Responsibility Policy (CSR Policy) indicating the activities to be undertaken by the Company, which has been approved by the Board. The CSR Policy may be accessed on the Companys website at: https:/www.hikal.com/uploads/documents/corporate-social-responsibility-polic-srijan.pdf

Policy Statement:

As a socially responsible corporate member of the world community with long-term relationships, we believe that the future of our business is best served by respecting the interests of society at large. Through our efforts, we shall strive to improve the living standards of the community. Our CSR activities shall aim to make a difference to the lives of the needy, underprivileged members of society including children, women and senior citizens, and the environment.

The key philosophy of all CSR initiatives of the Company are guided by three core commitments of Scale, Impact and Sustainability. The Company has identified six focus areas of engagement which are as under:

• Health: Affordable solutions for healthcare through improved access, awareness and sanitation

• Education: Access to quality education, training, skill enhancement, enhancement of vocation skills

• Environment: Environmental sustainability, ecological balance, conservation of natural resources

• Protection of national heritage, art and culture: Protection and promotion of traditional art, culture and heritage

• Overall development activities in surrounding areas of Hikals manufacturing sites for the benefit of society

• Contribution to Prime Ministers National Relief Fund or any other fund set up by the Central Government for socio-economic development or welfare

Implementation of the CSR Program

1. Project activities identified under CSR are to be implemented either by personnel of the Company or through a registered trust or a registered society.

2. The time duration of each project / program shall depend on its nature and intended impact.

The Company also undertakes other need-based initiatives in compliance with Schedule VII of the Act. During the year, the Company has spent Rs.18.24 million on CSR activities. Pursuant to the provisions of the Companies Act, 2013, the Company should have spent Rs.15.30 million (being 2% of the average net profits of the last three financial years), during the financial year 2018-19. The Annual Report on CSR activities is annexed herewith marked as "Annexure - C".


Pursuant to the provisions of the Prevention of Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 ("POSH Act"), the Company has adopted a "Policy on Appropriate Social Conduct at Workplace". The policy is applicable for all employees of the organization, which includes corporate office and manufacturing units etc. The policy is also applicable to non-employees as well i.e. business associates, vendors, trainees etc.

A Complaints Committee has also been set up to redress complaints received on sexual harassment as well as other forms of verbal, physical, written or visual harassment.

During the financial year under review, the Company did not receive any complaints of sexual harassment and no cases were filed under the POSH Act.


• Transfer of Unclaimed Dividend to IEPF

During the year under review, dividend amounting to Rs.502,218 that had not been claimed by the shareholders for the year ended 31 March 2011, was transferred to the credit of IEPF as required under Sections 124 and 125 of the Act.

• Unclaimed dividend as on 31 March 2019

The Shareholders are requested to lodge their claims with the Registrar and Share Transfer Agents of the Company i.e. Universal Capital Securities Pvt. Ltd., for unclaimed dividend.

Pursuant to the provisions of Investor Education and Protection Fund (Uploading of Information regarding unpaid and unclaimed amounts lying with Companies) Rules, 2012, the Company has uploaded the details of unpaid and unclaimed amounts lying with the Company on 8 August 2018 (date of the last Annual General Meeting) on the website of the Company, www.hikal.com. The same are also available on the website of the Ministry of Corporate Affairs, www.mca.gov.in.

• Transfer of Equity Shares As required under Section 124 of the Act, 235,057 Equity Shares, in respect of which dividend has not been claimed by the members for seven consecutive years or more, have been transferred by the Company to the IEPF Authority. Details of such shares transferred have been uploaded on the website of the Company, www.hikal.com. The same are also available on the website of the Ministry of Corporate Affairs, www.mca.gov.in.


The Company continued to maintain the highest standards in environment, health and safety. The Company has become the first Indian life sciences company to receive the Responsible Care certification. It is applicable to all manufacturing and research sites of the Company. Continuous training and awareness programs for the employees are undertaken on a frequent basis.


The Company has not accepted any deposits and as such there are no overdue deposits outstanding as on 31 March 2019.


The Company considers its human capital as an invaluable asset. The Company continued to have cordial relationships with all its employees. Management and employee development programs and exercises were conducted at all sites. Employees had various team building exercises and were sponsored for various external seminars and other developmental programs to enhance their skill sets. The total workforce of the Company stood at 1,587 as on 31 March 2019.

The information as required by the provisions of Section 197 (12) of the Companies Act, 2013, read with Rule 5 (1) of the Companies (Appointment and Remuneration of Management Personnel) Rules, 2014, as amended, from time to time, is enclosed herewith as "Annexure – D."

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 forms part of this report. Further, the report and the financial statements are being sent to the members, excluding the aforesaid statement. In terms of Section 136 of the Companies Act, 2013, the said statement is open for inspection by the members 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 member interested in obtaining such particulars may write to the Company Secretary at the registered office of the Company.


In accordance with the requirements of Section 134 (3) (m) of the Companies Act, 2013, read with rule 8 (3) of the Companies (Accounts) Rules, 2014, a statement showing particulars with respect to conservation of energy, technology absorption and foreign earnings and outgo forming part of the Directors Report, is given in the enclosed "Annexure E" which forms part of this report.


A report on Corporate Governance along with a certificate from the Auditors of the Company regarding the compliance of the code of Corporate Governance as also the Management Discussion and Analysis Report as stipulated under the provisions of Regulation 34 of the Securities and Exchange Board of India (Listing Obligations & Disclosure Requirements) Regulations, 2015 are annexed to this Report.


The Board of Directors place on record their appreciation of the contribution and sincere support extended to the Company by our bankers, financial institutions and valued customers and suppliers.

The Board also places on record its appreciation for the impeccable service and generous efforts rendered by its employees at all levels, across the Board towards the overall growth and success of the Company.


Statements in the Boards Report and the Management Discussion and Analysis describing the Companys objectives, expectations or forecasts may be forward-looking within the meaning of applicable securities laws and regulations. Actual results may differ materially from those expressed in the statement. Important factors that could influence the Companys operations include global and domestic demand and supply conditions affecting selling prices of finished goods, input availability and prices, changes in government regulations, tax laws, economic developments within the country and other factors such as litigation and industrial relations.

For and on behalf of the Board of Directors
Jai Hiremath
Date: 9 May 2019 Chairman & Managing Director
Place: Mumbai DIN: 00062203