DIRECTORS' REPORT Your directors are pleased to present the fortieth report and audited financial statement of the Company for the year ended on March 31, 2016. 2. DIVIDEND Your directors recommend a final dividend of Re.0.50 (25%) per equity share of face value of Rs. 2. During the year, the Board of Directors declared interim dividend of Rs. 4.50 (225%) per equity share of face value of Rs. 2. The final dividend, if declared, together with interim dividend already paid would result in total outgo of Rs. 51.04 crores including dividend distribution tax. In the previous year, the Company paid dividend of Rs. 14 per equity share comprising of special dividend of Rs. 10 per share and regular dividend of Rs. 4 per share. 3. OPERATIONS/STATE OF AFFAIRS The net sales during the year at Rs. 1,119.93 crores were 7.88% higher over the previous year. The total operating revenue at Rs. 1,148.17 crores were 8.17% higher; while the total income for the year at Rs. 1,201.09 crores shows increase of 12.06% due to higher other income. The operating profit of Rs. 184.12 crores registered margin improvement of 9.57% over previous year due to favourable product mix as well as containment of costs. The profit before tax and profit after tax at Rs. 227.10 crores and Rs. 176.39 crores registered growth of 42.73% and 55.30% respectively. The domestic formulations business achieved good growth of 13.06% at sales of Rs. 423.33 crores, while contrast media products achieved growth of 14.76% at sales of Rs. 40.32 crores. The overall formulations exports at Rs. 531.65 crores registered growth of 5.96%, which is lower mainly due to depreciation of currencies against US Dollar. The exports to Rest of the World countries at Rs. 390.72 crores registered growth of 11.60% in Rupee terms. However, the other formulations exports including exports for Russia-CIS market were lower. The total sales of bulk drugs stood at Rs. 100.56 crores against Rs. 103.76 crores in the previous year. 4. RESPONSIBILITY STATEMENT The directors confirm: (i) that in the preparation of the annual accounts for the year under review, the applicable accounting standards have been followed; (ii) that they have selected appropriate 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 financial year 2015-16 and of profit of the Company for that year; (iii) that 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; (iv) that they have prepared the annual accounts for the year ended on March 31, 2016 on a going concern basis; (v) that they have laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively; and (vi) that they have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively. 5. SUBSIDIARIES During the year, the Company's subsidiary Unique Pharmaceutical Laboratories FZE ("UPL FZE") acquired 2,194,030 Ordinary Shares in Biotech Laboratories (Pty.) Ltd. ("Biotech") from Afrika Biopharma Investments (Pty). Ltd. Consequent to restructuring of existing 49% shareholding in Biotech and issue of certain shares by Biotech after the aforesaid acquisition, UPL FZE now holds 95.24% voting capital of Biotech. Accordingly, Biotech has become subsidiary of the Company. Subsequently, the Company's subsidiary J.B. Healthcare Pvt. Ltd., Jersey, has been dissolved. The report on financial performance and financial position of the subsidiary companies as on March 31, 2016 is presented in Annexure-A. 6. CORPORATE GOVERNANCE A certificate from auditors of the Company on compliance of conditions of corporate governance is annexed to this report. The management discussion and analysis report and compliance report on corporate governance as required under Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 ("the said Regulations") form part of this annual report. This annual report contains information as on and has been prepared in accordance with the provisions of the said Regulations as applicable on March 31, 2016. 7. PUBLIC DEPOSITS During the year, the Company has not accepted any deposit covered under Chapter V of the Companies Act, 2013. All the public deposits accepted prior to the commencement of the said Act have been repaid in the previous year. 8. DIRECTORS In accordance with the provisions of the Companies Act, 2013, Mr. Pranabh Mody retires by rotation at the ensuing annual general meeting. He, being eligible, has offered himself for re-appointment. All independent directors have given a declaration to the Board that they meet the criteria of independence as provided in Section 149(6) of the Companies Act, 2013 as well as in Regulation 16 of Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015. During the year, the Board appointed Mr. Shaukat H. Merchant as an additional director on February 3, 2016. He is an independent director and holds office up to the date of ensuing annual general meeting. The Company has received, pursuant to Section 160 of the Companies Act, 2013, a notice from a member proposing candidature of Mr. Shaukat H. Merchant to the office of director of the Company. It is proposed to appoint Mr. Shaukat H. Merchant as an independent director of the Company. Mr. Shaukat Merchant is a Senior Solicitor & Senior Partner of the Law Firm M/s. M&M Legal Ventures, Advocates & Solicitors, Mumbai which was established by him in the year 1993. He possesses expertise in the field of law. His detailed profile is given in notice for the ensuing annual general meeting. This profile is deemed to form part of this report. During the year, Mr. Mahesh K. Shroff, independent director, resigned from the Board due to his health reasons. Total 5 meetings of the Board of Directors of the Company were held during the year 2015-16. They were held on May 20, 2015, August 5, 2015, November 4, 2015, February 3, 2016 and March 11, 2016. 9. POLICY ON DIRECTORS' APPOINTMENT AND REMUNERATION POLICY The Company's policy on directors' appointment is set out in Annexure-B. The Company's policy on directors' remuneration including criteria for determining qualifications, positive attributes and independence of a director as well as policy relating to remuneration of Key Managerial Personnel and other employees is set out in Annexure-C. 10. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO The particulars as required under Section 134(3)(m) of the Companies Act, 2013 read with the Companies (Accounts) Rules, 2014 are given in Annexure D. 11. CORPORATE SOCIAL RESPONSIBILITY Pursuant to the requirement of Section 135 of the Companies Act, 2013, the Board of the Company has constituted Corporate Social Responsibility (CSR) Committee comprising of Dr. Satyanarain Agarwala, independent director, Mr. Bharat P. Mehta and Mr. Pranabh Mody. The CSR Committee has formulated and recommended CSR Policy of the Company to the Board, which the Board has approved. The details and contents of CSR policy and annual report on CSR in the prescribed form are set out in Annexure-E. The Company spent Rs. 243.58 lakhs on prescribed CSR projects/ activities during 2015-16 as against Rs. 274.78 lakhs being 2% of the average net profits of the Company made during the three immediately preceding financial years. Pursuant to second proviso to Section 135(5) of the Companies Act, 2013, Board has to specify that the Company could not spend the entire amount of Rs. 274.78 lakhs as it did not come across other deserving activity/projects for the benefit of needy section of the society. 12. AUDIT COMMITTEE AND VIGILANCE MECHANISM The Board has constituted Audit Committee comprising of Mr. Durga Dass Chopra, Dr. Satyanarain Agarwala, Mr. Dinesh Mody, Dr. N.N. Maniar and Ms. Krupa Gandhi. There has been no instance of non-acceptance of recommendation of Audit Committee by the Board. The Board of directors has established vigil mechanism in the form of Whistle Blower Policy to enable directors, employees and other stakeholders to make written Protected disclosures (as defined in the policy) to the Chairman of the Redressai Committee for evaluation and investigation. The Policy empowers the Redressal Committee to investigate if the issue raised constitutes Protected disclosure, complete the investigation in a time bound manner and recommend, after consultation with the Audit Committee, necessary corrective action to the concerned manager for implementation. The Policy provides for access of whistle blower to the Chairman of the Audit Committee in appropriate or exceptional circumstances. The Policy provides for adequate safeguards of whistle blowers against any kind of victimisation or unfair treatment but also provides for taking stern disciplinary action against who abuses the protection so granted. This functioning of vigil mechanism is periodically reviewed by the Audit Committee. The Company has posted the Whistle Blower Policy on its website www.jbcpl.com . 13. ANNUAL PERFORMACE EVALUATION The Board of Directors has laid down the criteria for evaluation of performance of individual directors, Board of Directors and Committees of the Board. The Nomination and Remuneration Committee first carried out evaluation of performance of each director during 2015-16 against the criteria. The result of this process was placed before the Board at its meeting held on May 20, 2016, which (excluding the director being evaluated) also independently carried out evaluation of performance of each director. The Board at the said meeting also carried out performance evaluation of each Board constituted committee (excluding the members of the Committee being evaluated) against the criteria. The Board's own performance was also evaluated by each individual director based on the criteria. The Chairman of the Board then reviewed the outcome of entire performance evaluation process and shared the same with the Board members. 14. CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES All the transactions entered into by the Company with the related parties during the year were pursuant to the contract or arrangement approved by the Audit Committee and the Board of Directors. The transactions so entered into were in the ordinary course of business of the Company and on arm's length basis. The contract or arrangement or transactions were neither material in terms of the Policy on materiality of related party transactions adopted by the Company nor it exceeded the threshold limit prescribed pursuant to first proviso to Section 188(1) of the Companies Act, 2013. Therefore, there is no information to be furnished in Form AOC-2. However, every contract or arrangement entered into pursuant to Section 188(1) of the Companies Act, 2013 is referred to in Annexure-F pursuant to Section 188(2) of the Companies Act, 2013. The terms of these contracts or arrangements are on arm's length basis and in ordinary course of business, and have been approved by the Audit Committee and the Board of Directors. 15. EXTRACT OF ANNUAL RETURN Pursuant to Section 134(3)(a) of the Companies Act, 2013, the extract of the Annual Return as provided under Section 92(3) of the Companies Act, 2013, as on March 31, 2016 is given in Annexure-G. 16. PARTICULARS OF EMPLOYEES AND OTHER REMUNERATION RELATED DISCLOSURES. A statement showing name and other particulars of the employees 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, is given in Annexure-H. The remuneration related and other disclosure required 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, are given in Annexure-I. 17. EMPLOYEE STOCK OPTION PLAN The disclosure of details in respect of the Company's Employee Stock Option Plan, as required under the Companies (Share Capital and Debentures) Rules, 2014 are set out in Annexure-J to this report. 18. LOANS, GUARANTEES AND INVESTMENTS The particulars of loans and guarantees given and investments made under Section 186 of the Companies Act, 2013 during the year and outstanding as at the year-end are given in Annexure-K. 19. RISK MANAGEMENT The Board of Directors has developed and implemented risk management policy for the Company. The Board periodically monitors the risk management plan and reviews mitigation measure taken in relation thereto. 20. INTERNAL FINANCIAL CONTROLS The Board has adopted internal financial controls encompassing policies and procedures for ensuring the orderly and efficient conduct of the business, including adherence to Company's policies, the safeguarding of the Company's assets, prevention and detection of fraud and errors, the accuracy and completeness of the accounting records and timely preparation of reliable financial information. The specific internal financial controls with reference to financial statements include internal audit of important activities and processes relating to preparation of financial statements, adoption of well defined standard operating procedure for business transactions and compliance relating thereto, use of ERP for accuracy and control, review of periodically prepared financial statements with objective to ensure that financial statements present true and fair view and are correct, sufficient, credible and in compliance with legal and regulatory requirement. Neither management of the Company has come across any instance of fraud during the year 2015-16 nor the auditors of the Company has reported any such instance to the Audit Committee. 21. ORDER OF NATIONAL GREEN TRIBUNAL In proceeding instituted by certain NGOs, National Green Tribunal, Pune Bench ("Tribunal"), by its judgement and Order dated 8-1-2016 ("the said Order"), inter alia, held that grant of ex-post facto environmental clearance by the Ministry of Environment and Forests ("MoEF") under Circular dated 14-5-2002 issued by MoEF was not in accordance with the provisions of the Environment (Protection) Act, 1986. Accordingly, the environmental clearance granted to the Company on 23-12-2002 in respect of its bulk drugs unit at Panoli, Gujarat ("the said unit") and such clearance granted to certain other respondents companies under EIA Notification dated 27-1-1994 has been held to be bad in law and the Tribunal consequently ordered closure of industrial activities of all the respondents' industrial units including the Company's said unit. The Company filed Application before the Tribunal for review of its said Order on the ground that the Company has another environmental clearance dated 8-8-2007 issued by MoEF under EIA Notification dated 14-9-2006 and Consolidated Consent and Authorisation dated 2-11-2013 issued by Gujarat Pollution Control Board. The Tribunal has, however, not allowed the Company's Review Application by judgement and Order dated 17-5-2016. The Tribunal has stayed its said judgement and Order dated 17-5-2016 for a period of two months by an Order passed on 18-5-2016. The Company is now in the process of filing an appeal before the Supreme Court. This Order does not impact going concern status of the Company. Your Directors believe that the Company holds valid and subsisting clearance and consent for running of the said unit. 22. AUDITORS AND AUDITORS REPORT The Board of Directors recommends re-appointment of M/s J.K. Shah & Co., Chartered Accountants, as auditors of the Company, to hold office after conclusion of ensuing annual general meeting until conclusion of the next annual general meeting. M/s J.K. Shah & Co., being eligible, has submitted their written consent and certificate of eligibility. In respect of the auditors' observation contained in paragraph (i) (c) of Annexure-A to the Auditors' report, your directors have to inform the members that the said observation pertain to a residential flat in Kolkata purchased on May 15, 1992 at cost of Rs. 2.64 lakhs (w.d.v. as on March 31, 2016 Rs. 1.62 lakhs), which is being used by the Company in the ordinary course of business. The purchase agreement in respect of this premise could not be then registered due to unavailability of the Seller. However, the Company is in continuous possession. The Company has re-initiated efforts to get the said document registered. 23. SECRETARIAL AUDIT REPORT Ashish Bhatt & Associates, Practising Company Secretaries, Secretarial Auditor of the Company, carried out secretarial audit for the financial year 2015-16 as provided under Section 204 of the Companies Act, 2013 and the rules made there under. The secretarial audit report given by the said auditor is annexed to this report as Annexure-L. 24. HEALTH AND SAFETY The Company continues to accord high priority to health and safety of employees at all manufacturing locations. During the year under review, the Company conducted safety training programmes for increasing disaster preparedness awareness among all employees at the plants. Training programmes and mock drills for safety awareness were also conducted for all employees at the plants. 25. APPRECIATION Your Directors record their sincere gratitude to the banks for their assistance and shareholders, business associates, medical professionals and customers for their continued support and faith in the Company, and to employees of UNIQUE FAMILY for their valuable services and commitment. For and on behalf of the Board of Directors J. B. Mody Chairman & Managing Director Place : Mumbai Date : May 20, 2016 |