Siemens Healthcare Diagnostics Ltd merged Directors Report

SIEMENS HEALTHCARE DIAGNOSTICS LIMITED ANNUAL REPORT 2009-2010 DIRECTORS REPORT The Directors have pleasure in presenting the thirty sixth Annual Report of the Company together with the Audited Accounts for the year ended September 30, 2010. 1. Financial Results: A summarised statement of the financial results of the current year and that of the previous year is given below (Rs.000) 2009-10 2008-09 Net Sales (excluding excise duty), Operating & Other Income 1,832,285 1,699,742 Profit before Depreciation/Amortisation and tax 391,655 287,797 Less: Depreciation/Amortisation 238,494 198,254 Profit Before Tax 153,161 89,543 Less: Provision for Taxation on current income 87,500 87,000 : Fringe Benefit Tax - 1,760 : Deferred Tax (31,141) (52,293) Profit After Tax 56,359 53,076 Balance brought forward 64,291 34,861 Available for Appropriation 161,093 87,937 Proposed Dividend 27,429 15,674 Tax on Proposed Dividend 4,556 2,664 Transfer to General Reserves 9,680 5,308 Carried Forward 119,428 64,291 2. Operations: The In Vitro Diagnostics (IVD) market in India kept the momentum of Growth and grew on an average of 15% CAGR. The Key Drivers are rising income and awareness, access to Healthcare Services and Healthcare Insurance, Medical Tourism and Increase in aging population. Competitive Landscape remained with aggressive presence of International as well as Local players. Competition from Low cost and generic products continued its effect of price pressures on the more established players .However, market perceives the quality of such competition as poor. Sales, Operating and Other Income were Rs. 18,322 lakh compared to Rs.16,997 lakh in the previous year registering a growth of 7%. Profit before tax was Rs. 1,532 lakh compared to the profit of Rs.895 lakh in the previous year. Similarly Profit after tax was Rs. 968 lakh compared to profit of Rs.531 Lacs in the previous year. 3. Dividend: Considering the performance and to appropriately reward the Members while conserving the resources to meet the future financial requirements, the Board of Directors recommends a dividend of Rs.17.50/- per Equity Share of Rs.10 each (175%). This dividend is subject to the approval of the Members at the forthcoming Annual General Meeting. 4. Unclaimed Dividend: Unclaimed Dividend for the year ended December 31, 2002 declared on May 26, 2003 was due for transfer to Investor Education and Protection Fund on July 25, 2010. Company had sent reminders to the shareholders whose dividend was unclaimed and the same was paid to the shareholders who claimed it. The residual amount of Rs. 77,565/- was deposited to the Investor Education and Protection Fund against unclaimed & unpaid dividend for the year ended December 31, 2002. 5. Directors Responsibility Statement: The Directors confirm that:- (i) in the preparation of the annual accounts, the applicable accounting standards have been followed; (ii) 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 as on September 30, 2010 and of the profit of the Company for that period; (iii) proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956, for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; (iv) the annual accounts are prepared on a going concern basis. 6. Directors: At the ensuing 36,h Annual General Meeting Mr. Pradip V. Nayak & CA. Anil Shankar, retire by rotation at the ensuing Annual General Meeting. Both of them, being eligible, offer themselves for reappointment. The above appointments and reappointments form part of the Notice of the 36th Annual General Meeting and the relevant Resolutions are recommended for your approval. Profiles of these Directors, as required by the Clause 49 iV G of the Listing Agreements entered into with the Stock Exchanges, are given in the Notice of the 36lh Annual General Meeting. The Auditors have qualified the Companys financial statements for the year under review to the effect that the Companys application has been rejected by the Central Government for managerial remuneration paid to an Ex Managing Director in excess of the approval earlier accorded by the central government. Your Company has accordingly initiated necessary steps in this regard consistent with its obligations. Company has also applied with Central Government for reconsidering its application to which response is awaited. 7. Auditors: M/s. S.R. Batliboi & Co., Chartered Accountants, retire as a the Statutory Auditors at the conclusion of the 36th Annual General Meeting to be held on January 27, 2011 and offer themselves for reappointment. A Certificate from them has been received to the effect that their reappointment as Statutory Auditors, if made, would be within the limits prescribed under Section 224 (IB) of the Companies Act, 1956. 8. Information Pursuant to Section 217(l)(e): Information pursuant to Section 217(l)(e) of the Companies Act, 1956 read with the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 and forming part of the Directors Report for the year ended September 30, 2010 is appended hereto as Annexure A. 9. Amalgamation of Company with Siemens Ltd., Mumbai (SL): The Petition for the amalgamation of the Company with SL has been admitted in the High Courts at Ahmedabad and Mumbai. Further, the approval for the amalgamation of the Company with SL is at different stages of the Regulatory process. The Appointed Date fixed for the amalgamation is 1st October, 2009. 10. Employees: Information in accordance with the provisions of Section 217(2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975, as amended, forms part of the Directors Report for the year ended September 30, 2010 and is set out herein below:- 11. Management Discussion and Analysis: A detailed review of operations, performance and future outlook of the Company is given separately under the head Management Discussion and Analysis appended hereto as Annexure B. 12. Corporate Governance: As required by Clause 49 of the Listing Agreement, a detailed note on Corporate Governance is given as Annexure C to this Report. The Company is in full compliance with the requirements and disclosures that have to be made in this regard. A certificate of Statutory Auditors of the Company confirming compliance of the Corporate Governance requirements by the Company is attached to the Report on Corporate Governance. 13. Compliance Certificate: As required under the Companies (Compliance Certificate) Rules, 2001, a certificate from the practicing Company Secretary is appended hereto as Annexure D. 14. Acknowledgement: The Board of Directors takes this opportunity to express its sincere appreciation for the excellent support and co-operation extended by Siemens AG - the parent company, Siemens Diagnostics Holding II B.V., Netherlands, other Siemens affiliates, shareholders, customers, suppliers, bankers and other business associates. Yours Directors place on record their deep appreciation for exemplary contribution of the employees at all levels. Their dedicated efforts and enthusiasm has been integral to your Companys growth. On behalf of the Board of Directors Siemens Healthcare Diagnostics Ltd. New Delhi Narendra J. Jhaveri November 29, 2010 Chairman Annexure - A to Directors Report Information as per Section 217(I)(e) read with the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 and forming part of the Directors Report for the year ended September 30,2010. I. Conservation of Energy: (i) Saving of energy in terms of Electricity Consumption is our prime concern and has achieved Power Factor upto 0.99. Received rebate of Rs.32680.45 by achieving power factor from Madya Gujarat Vij Company Ltd. Well planned Preventive Maintenance has improved our operational efficiency. (ii) Water and air pollution control measures are optimum and industrial trade effluents are used for gardening after adjusting the pH. Tree plantation at the factory site is maintained properly. (iii)(A) Power and Fuel Consumption 2009-10 2008-09 1. Electricity a. Purchased Unit 306448 326,336 Total Amount (Rs.) 1,910,417 2,064,913 Rate/Unit (Rs.) 6.23 6.32 b. Own Generation i) Through D.G. Unit 1083 4,809 Unit Generated per litre of Diesel Oil 1.86 2.43 Cost/Unit (Rs.) 38.83 38.98 ii) Through Steam/Turbine Generator N.A. 2. Coal N.A. 3. Furnace Oil Quantity (Litres) 9143 8,872 Total Amount (Rs.) 330062.30 385,045 Average Rate (Rs.) 36.10 43.30 4. Others/Internal Generation N.A. (B) Consumption per Unit of Production Product (Reagent Strips, Kits and Instruments) Electricity Cannot be ascertained Furnace OilCannot be ascertained Coal N.A. N.A. Others N.A. N.A. II. Technology Absorption and Research and Development a. Main areas of emphasis include: * Acquisition of new improved laboratory equipment to further assure quality. New spectrophotometer is already on way to come, further few old equipments (burst strength tester & analytical balance) would be replaced with new one in near future. Also planned to have new tablet hardness tester. * Continuous emphasis on significant upgradation of manufacturing facility to improve product quality. There is plan to include IR band on Strips manufacturing (MSG, URX & CSG) which will enable self identification of these strips on urinalyzers. b. The Company has no R & D activities. c. The Company has not imported any technology during the last five years. III. Foreign Exchange Earnings and Outgo: * Foreign Exchange earnings through exports and commission aggregated to Rs. 176.45 lakh against outgo of Rs. 213.30 lakh, particulars of which are given in Schedule 20(iii) of the Accounts. Annexure - B to Directors Report Management Discussion and Analysis Overview: The Indian economy is the 12th largest in USD exchange rate terms. Indias GDP has touched US$1.25 trillion. India is the second fastest growing economy of the world and during the fiscal year 2009-2010 Indias GDP growth rate was nearly 9% despite rise in crude oil prices and financial turbulence. Indian economy is a diverse one, encompassing agriculture, textiles, handicrafts etc. Although many people are still dependent upon agriculture, the service sector is also playing a very important role in the Indian economy. The healthcare sector in India is on a roll. The purchasing power of the Indian middle class is rising very rapidly. So they can afford quality healthcare. It is estimated that by 2012 the healthcare sector will rise up to US$40 billion. Today most of the Indians can buy western medicines and so the healthcare sector in India is growing rapidly. Due to its very bright prospects people are also inclined to invest in the healthcare sector. The booming healthcare sector in India is also spurring industries such as healthcare equipment and information technology in healthcare. Information technology plays an important role in health care, and according to a report, India has the fastest growing healthcare IT market in India. The Indian healthcare sector is also attracting many foreigners to India, to access the healthcare facilities. Indian Healthcare Sector: In the recent past India Healthcare sector has attained greater heights and the facts given below are clear indicators of such a success * On par with the International Standards, Indian Specialists have performed over 500,000 complex surgeries in the areas of cardiology, neurology and oncology with enormous success rates. * Statistics indicate that 98.7% of cardiac surgeries performed in India are successful and it is estimated that this success rate is significantly higher than that of USA. * Estimates show that success rates in renal transplantation is close to 95% Government of India is taking several steps to promote medical tourism and in fact patients visiting India for such medical interventions are provided visa under a special category call Medical Visa. Activities: The Company continues to develop further: With the acquisition of Indian businesses of Dade Behring Diagnostics (I) Pvt. Ltd., New Delhi effective August 1, 2008 your Company has extended its lead in Diagnostics Industry, especially in Clinical Chemistry, Microbiology & Plasma Protein offerings. By integrating Dade Behring, the Company has broadened the diagnostic spectrum for In vitro testing requirements. With Siemens Medical Division having technologies for in vivo testing, this makes your Company the first integrated diagnostics company. It combines under one roof imaging diagnostics, laboratory diagnostics, clinical information technology, consulting, and comprehensive services. The Company, being in the Diagnostics business continued to focus on Immunodiagnostics & Clinical Chemistry business and maintained its leadership in Urinalysis business. The Company has also significant presence in critical care, Hematology, Microbiology & Plasma protein business. In the Immunodiagnostics business, new instrument and Assays were launched to expand the menu offered by the Company. Demographic change and increasing cost pressure in healthcare today require comprehensive and broad-based solutions that improve quality while reducing cost at the same time. As an innovation leader and one of the worlds largest solutions providers in healthcare, Siemens Healthcare acts on these challenges. Industry Structure & Development: Diagnostic Industry maintained its high Compound Annual Growth Rate (CAGR) of 15%. The trends favouring such a high CAGR are fast growing household income, accelerated urbanisation, increase in life style diseases, increase public awareness and focus on healthcare due to rise in income levels and education. Setting up of Chain labs have become the order of the day. More and more laboratories are opting for automization to increase their efficiency. High growth is being achieved by setting up satellite labs and increase in collection points. This is resulting into more and more Hospital outsourcing their diagnostics activities to these labs. The major Healthcare facilities are appearing in private hospitals, independent labs and private chain labs and public hospitals continue to serve the masses. Opportunities, Threats & Risks: Since the Company has significant presence in key business areas of Immunochemistry, Clinical Chemistry, Hematology, Urinanalysis and Critical care, favourable conditions are prevalent for Company to leverage its product portfolio in laboratories segment. Extensive sales and marketing, customer support, services and distribution network on all Indian basis is providing an excellent opportunity to the Company to achieve its targeted growth momentum. Diagnostics market is highly competitive - both in terms of cost perspective and number of competitors. Local and new Tow cost competitors are entering the market applying price pressures on the more established players. However, the market perception of such low cost technologies and low cost competitors remains that of poor quality. Customer landscape is highly fragmented and volume driven businesses are getting consolidated. Product registration protocols and uncertainty over application of Diagnostics specific FDA regulations continue to exist. Internal Control Systems: The Company has adequate internal control systems for its financial reporting and asset management. The Company, being part of Siemens Group follows the group policies and has established Code of conduct for Directors, management and employees. The Companys internal control systems are regularly reviewed by external firm of auditors and as stated by Statutory Auditors in their report, considered adequate. Operational audits are conducted under the ISO 9000 certification process and risk based process controls are reviewed during the internal management meetings. All audit findings are reviewed by the management and Audit Committee of the Board and the suggestions and recommendations agreed by the Company are implemented with defined responsibilities and time lines. Material Development in Human Resources and Industrial Relations: The Company, being in Diagnostics Industry which is knowledge base and technical in nature, regularly imparts training to its various employees to update their knowledge and skills. Investments are made to upgrade facilities available to employees to carry out their tasks more efficiently. Global and Regional Human Resources initiatives are adopted to strengthen company specific efforts. The Company continues to maintain cordial and harmonious industrial relations. Annexure D - to Compliance Certificate: CIN: L85910GJ1974PLV002595 Nominal Capital: Rs.40,000,000/- Paid Up Capital: Rs.15,673,500/- To, The Members Siemens Healthcare Diagnostics Ltd. 589 Sayajipura, Ajwa Road, Vadodara-390 019 We have examined the registers, records, books and papers of Siemens Healthcare Diagnostics Ltd. (hereinafter referred to as the Company) as required to be maintained under the Companies Act, 1956, (hereinafter referred to as the Act) and the rules made thereunder and also the provisions contained in the Memorandum and Articles of Association of the Company for the financial year ended on 30th September, 2010. In our opinion and to the best of our information and according to the examinations carried out by us and explanations furnished to us by the Company, its officers and agents, we certify that in respect of the aforesaid financial year: 1. The Company has kept and maintained all registers as stated in Annexure A to this certificate, as per the provisions of the Act and the rules made there under and all entries therein have been duly recorded. 2. The Company has duly filed the forms and returns as stated in Annexure B to the certificate, with the Registrar of Companies, Regional Director, Central Government, Company Law Board or other authorities within the time prescribed under the Act and the rules made there under. 3. The Company, being a Public Limited Company, has the minimum prescribed paid up capital. 4. The Board of Directors duly met six times on 29lh October, 2009, 26th November, 2009, 30lh November, 2009, 28lh January, 2010, 30th April, 2010 and 6th August, 2010 in respect of which meetings, proper notices were given and the proceedings were properly recorded and signed in the Minutes Book maintained for the purpose. 5. The Company closed its Register of Member from 25lh January, 2010 to 28th January, 2010 (both days inclusive). However, no record in respect of publication of Advertisment in the newspaper as required u/s 154 of the Act has been produced to us. 6. The Annual General Meeting for the financial year ended on 30th September, 2009 was held on 28th January, 2010 after giving due notice to the members of the Company and the resolutions passed thereat were duly recorded in Minutes Book maintained for the purpose. 7. One Extraordinary General Meeting was held during the financial year on 28th January, 2010 pursuant to the directions of Honble High Court of Guj arat for approving scheme of amalgamation with Siemens Ltd. after giving due notice to the members of the Company and the resolutions passed thereat were duly recorded in Minutes Book maintained for the purpose. 8. The Company has not advanced any loan to its directors or persons or firms or companies referred in the Section 295 of the Act. 9. The Company has not entered into any contracts falling within the purview of Section 297 of the Act. 10. The Company has made necessary entries in the register maintained under Section 301 of the Act. 11. As there was no instance falling within the purview of Section 314 of the Act, the Company has not obtained any approval from the Board of Directors, members or Central Government. 12. The Company has not issued any duplicate certificates during the financial year. 13.(i) There was no allotment of securities during the financial year. However, the Company has delivered all the certificates on lodgement thereof for transfer/transmission or any other purpose in accordance with the Act. (ii) The Company has deposited necessary dividend amounts in separate bank account within five days from the date of declaration of dividend. (iii) The Company has posted warrants to all member of the Company within a period of 30 days from the date of declaration and that all unclaimed/unpaid dividend has been transferred to Unpaid Dividend Account of the Company. (iv) The Company has transferred the amounts in unpaid dividend account and the interest accrued thereon which have remained unclaimed or unpaid for a period of seven years to Investor Education and Protection Fund. However, there was no application money due for refund, matured deposits, matured debentures or interest accrued thereon. (v) The Company has duly complied with the requirements of Section 217 of the Act. 14. The Board of Directors of the Company is duly constituted. There was no appointment of Alternate director, Additional director, and Director to fill up casual vacancies during the financial year. 15. No appointment of Managing Director/Whole time Director/ Manager has been made pursuant to Section 269 read with Schedule XIII of the Act during the year. The appointment of Whole time Director has been approved by the Central Government. 16. The Company has not appointed any Sole-Selling Agent during the financial year. 17. The Company was not required to obtain any approval of Company Law Board, Regional Director, Registrar of Companies and/or such authorities prescribed under the Act. However, the Company - has made application for appointment of and remuneration payable to its Whole time Director which is approved. The application for for waiver of excess remuneration to former Managing Director is rejected. Company has initiated necessary actions consistent with its obligations in this regard. 18. The Directors have disclosed their interest in other firms/Companies to the Board of Directors pursuant to the provisions of the Act and the rules made thereunder. 19. The Company has not issued any shares, debentures or other securities during the financial year. 20. The Company has not bought back any share during the financial year. 21. There was no redemption of preference shares or debentures during the financial year as the company has issued neither of them. 22. There was no transaction necessitating the Company to keep in abeyance the rights to dividend, rights shares and bonus shares pending registration of transfer of shares. 23. The Company has not invited/accepted any deposits including any unsecured loans falling within the purview of Section 58A during the financial year. 24. The amount borrowed by the Company during the financial year ended 30th September, 2010 is within the borrowing limit of the Company within the meaning of Section 293(i)(d) of the Act. 25. The Company has not made any loans or advances or given guarantees or provided securities to other bodies corporate during the financial year and consequently no entries have been made in register kept for the purpose. 26. The Company has not altered the provisions of the Memorandum with respect to situation of the Companys registered office from one State to another during the year under scrutiny. 27. The Company has not altered the provisions of the Memorandum with respect to the Objects of the Company during the year under scrutiny. 28. The Company has not altered the provisions of the Memorandum with respect to Name of the Company during the year under scrutiny. 29. The Company has not altered the provisions of the Memorandum with respect to share capital of the Company during the year under scrutiny. 30. There was no prosecution initiated against or show cause notice received by the Company during the financial year for offences under the Act. 31. The Company has not received any money as security from its employees during the financial year. 32. Provisions of Section 418 of the Act are not applicable to the Company, as the Company has not constituted separate Provident Fund within the meaning of Section 418 of the Act. For D. Pathak & Associates Practising Company Secretaries Place: Vadodara CS Devesh A. Pathak Date : November 29, 2010 C.P. No.: 2306 ANNEXURE- A Registers as maintained by the Company, 1) Register of Charges u/s 143 2) Register of Members u/s 150 3) Register of Transfers 4) Books of Account u/s 209 5) Register of Directors, Managing Director, Manager and Secretary u/s 303. 6) Register of Directors shareholding u/s 307. 7) Register of Investments or loans made, guarantee given or security provided u/s 372A. 8) Register of Renewed and Duplicate Certificate under Rule 7 of the Companies (Issue of Share Certificate) Rule, 1960. 9) Minutes Book of Board Meeting u/s 193. 10) Minutes Book of General Meeting u/s 193. ANNEXURE B Forms and Returns as filed by the Company with the Registrar of Companies, Regional Director, Central Government or other authorities during the financial year ended on 30,h September, 2010. 1. Form 23AC (Balance Sheet) & 23 ACA (Profit & Loss A/c) for the year ended 30.09.2009 filed u/s. 220 vide SRN No. P46047486 on 25/02/2010. 2. Form 20 B (Annual Return) as at 28lh January, 2010 filed u/s 159 & 161vide SRN No. P46783478 on 29/03/2010. 3. Form 66 (Compliance Certificate) filed u/s. 383 vide SRN No. P45857653 on 18/02/2010. 4. Form 1 pursuant to Rule 3 of the Investors Education And Protection Fund (Awareness and Protection of Investors) Rules, 2001 vide SRN No. A89927594 on 26/07/2010. 5. Form 23B for period 01/01/2010 to 03/02/2010 filed on 16/2/2010. 6. Form 32 in respect of cessation of Mr. P. Shivakumar as a Director w.e.f. 30/11/2009 filed u/s 303(2) on 31/12/2009. 7. Form 23 in respect of special resolution for approval to payment to non- executive Directors on 28/01/2010 filed u/s 309 read with Section 192 on 20/02/2010, vide SRN A78970662.