DIRECTORS REPORT TO THE MEMBERS, Your Directors are pleased to present the Twenty Eighth (28th) Annual Report and the Company's audited financial statements for the financial year ended 31st March, 2015. 2. DIVIDEND & APPROPRIATIONS Your Directors are pleased to recommend dividend of Rs. 1.00/- (i.e. 10%) on each Equity Share of Rs.10/- each, thereby absorbing an amount of Rs. 1.28 Crores excluding Dividend Distribution Tax of Rs. 0.26 Crores. The balance amount of profit is retained as surplus in the Statement of Profit and Loss, forming part of Reserves and Surplus. 3. SHARE CAPITAL: The Company has allotted 17,60,984 Equity Shares of Rs. 10/- each for consideration of Rs. 21/- each on 16th April, 2014 up on conversion of warrants. With this allotment the paid up Equity Share capital of the Company has increased to Rs. 12,87,23,720/-. During the period under review, the Company has not issued shares with differential voting rights nor granted stock options nor sweaty Equity Shares. 4. MANAGEMENT DISCUSSION AND BUSINESS ANALYSIS: Indian Pharmaceutical Industry scenario and opportunities: The Indian Pharma market is dominated majorly by branded generics which constitute nearly 70 to 80 per cent of the market share. Considered once to be a highly fragmented industry, consolidation has increasingly become an important feature of the Indian pharmaceutical market. India continues to maintain its eminent global position in Pharma sector during 2014-15 by retaining its third position in terms of volume and thirteen positions in terms of value. The country also has a huge pool of scientists, pharmacists and engineers who have the potential to take the industry to the next level. Indian Pharma market continues to proliferate with increase in its population in the age bracket of 60 + , growing awareness on health insurance and improvement in the standard of living of the Indian middle class. The Government of India has unveiled 'Pharma Vision 2020' aimed at making India a global leader in end-to-end drug manufacture. It has reduced approval time for new facilities to boost investments. Further, the government has also put in place mechanisms such as the Drug Price Control Order and the National Pharmaceutical Pricing Authority to address the issue of affordability and availability of medicines. Bal Pharma during the year under review has aimed at strengthening its presence both in terms of its manufacturing capabilities and market share. The Company has ear marked an budget of Rs. 31.27 Crores for the modernization and expansion of its manufacturing facilities located at Bangalore (Unit 1&2) and Pant Nagar, Uttarakhand (Unit 4). Modernization process is underway and expected to be completed by FY 2016.17. This will give a big boost to the Company's manufacturing capabilities, which helps in consolidating its position in Indian Pharma Industry. The Company is also investing on strengthening its marketing and sales force, both in terms of adding to the head count and also by enhancing the parcapita output of its sales force by adopting & implementing attractive incentive policies. The Company has floated Lifezen Healthcare Private Limited during the year as its subsidiary with an objective of marketing OTC (Over the Counter) branded products, which are high margin products. This Company is expected to be operating in a niche market segment with ample marketing and publicity support, so that several brands can be launched/built and in the process will contribute handsomely to the revenues of the Company. The Companies venture into heath care sector during the year through its subsidiary i.e. Balance Clinics LLP is also yielding encouraging results and consolidation of this business may happen in the next 3to4 years. The Company has launched an exclusive research foundation i.e. Bal Research Foundation which is a nonprofit making Company incorporated as per the provisions of Section 8 of the Companies Act,2013, with an objective for promoting research and development in the field of Allopathic, Ayurvedic, herbal formulations and API's ( Active Pharma Ingredients). 5. BUSINESS OPERATIONS (i) Turnover and Net profit: During the financial year20l4-l5, your Company has achieved a gross turnover of Rs. 190.67 Crores as againstRs. 182.01 Crores achieved during the previous financial year, thus registering a top line growth of 5%. The net profit after tax of the Company during the financial year 2014-15 stands at Rs. 4.02 Crores as against the net profit of Rs. 5.07 Crores achieved in the previous financial year, 2013-14. The decline in profits is due to additional provision for depreciation of Rs. 1.73 Crores, which was resended as for Schedule II of Companies Act, 2013. (ii) Formulations' Business: The formulations business of the Company has contributed a total revenue of Rs. 115.40 Crores, during the F.Y 14-15 as comparedto 119.75 Crores, duringthe FY 13-14. The turnover from export of formulations during the year under review stands at Rs. 73.51 Crores as against Rs. 72.24 Crores achieved during the previous financial year, thus registering an moderate growth of 2%. In the domestic market, Branded formulations of the Company, consisting of mainly Diabetic, Gynecology and Cardiac drugs have contributed to a revenue of Rs. 22.49 Crores during the year under review as against Rs. 24.93 Crores achieved during the previous year. (Hi) Bulk Drug Business: Bulk drug business continue to show its momentum in sales with a revenue of Rs. 75.26 Crores during the year under review as compared to Rs. 62.25 Crores achieved during the previous financial year, thereby registering a healthy growth of 17%. Exports sales of bulk drugs during the year under review stands at Rs. 48.02 Crores as against Rs. 35.42 Crores registered during the previous financial year. Domestic sales of the bulk drugs have registered a revenue of Rs. 27.24 Crores as against the revenue of Rs. 26.75 Crores registered during the previous financial year. (iv) Export Performance: The overall exports of the Company during the year under review has increased to Rs. 121.53 Crores from Rs. 107.66 Crores achieved during the previous financial year, thus registering a growth of 12%. Revenues from the export sales continue to consistently dominate the Company's overall turnover. Your Company has won a prestigious award for its outstanding export performance during the year 2014-15 from Federation of Karnataka Chamber of Commerce and Industry (FKCCI). The Management wishes to attribute this honor to its employees, vendors, suppliers etc who are instrumental in achieving this award. (v) Domestic Performance: Revenue from sales to Govt. Institutional business registered a turnover of Rs. 3.92 crores during the year under review as against Rs. 2.88 crores achieved during the previous financial year. The Ayurvedic products division has contributed to a turnover of Rs. 4.31 crores, during the year under review as against Rs. 3.19 crores registered during the previous year. Over all domestic turnover is Rs. 64.64 crores as compared to Rs. 68.88 crores during previous year 13-14. Diabetic and Cardiac drugs of the company continue to prove their prominence in the Indian markets. 6. MATERIAL CHANGES & COMMITMENTS AFFECTING THE FINANCIAL POSITION OF THE COMPANY, BETWEEN THE END OF THE FINANCIAL YEAR AND THE DATE OF THE REPORT: There are no material changes and commitments between the end of the Financial Year and the date of the Report, which affect the financial position of the Company. 7. RESEARCH & DEVELOPMENT During the year under review, Bal Research Foundation was incorporated as per the provisions of Section 8 of the Companies Act, 2013, with the following main objectives: I. To initiate, carry out, execute, implement, aid and assist in research and study in Allopathic, Ayurvedic and Herbal formulations. ii. To initiate, conduct study and research in Active Pharmaceutical Ingredients (API's) and in other allied fields of scientific research. iii. To collaborate with the existing research institutions, labs, government departments and research departments in educational institutions for sharing of knowledge, skill, study materials, manpower and other intellectual properties. iv. To conduct seminars, lectures, classes and other training programmes in the field of Pharma research at the educational institutions, universities for developing the skilled manpower in research activities. v. To dedicate its resources either tangible or intangible, for study and research in Pharma and allied fields. 8. AUDIT COMMITTEE The Audit Committee, a sub-committee of Board consists of Dr G.S.R Subba Rao, Independent Director, Mr. Shrenik Siroya, Non-executive Director, Mr. Pramod Kumar S Independent Director. This Committee is chaired by Dr.GSR Subba Rao. Audit Committee has been discharging its duties under SEBI Guidelines read with the Listing Agreement. The said Committee is also functioning as Audit Committee under Section 177 of the Companies Act, 2013. 9. AUDITORS AND AUDITORS REPORT : Statutory Auditors: Messrs T.D Jain and D I Sakaria, Chartered accountants will hold the office of the statutory auditors till the conclusion of ensuing annual general meeting of the Company and are eligible for reappointment. The Company has received a certificate under Section 141 of the Companies Act, 2013 from them stating that their appointment would be within the limits specified therein. There are no qualifications or reservations or adverse remarks by the auditors in their report. Cost Auditors: The Board has appointed Mr. MR Krishna Murthy, Cost Accountant as Cost auditor for conducting audit of cost records of the Company, for the financial year 2014-15. Secretarial Auditors: The Board has appointed Mr. Parameshwar G Bhat,Practising Company Secretary to conduct Secretarial Audit of the Company for the F.Y 2014-15. The Secretarial Audit Report for the F.Y. 201415 is annexed to this report. The Secretarial Audit Report does not contain any qualifications, reservations or adverse remarks. Internal Auditors: Messrs Abhishek Jain and Dheeraj Bafna, Chartered Accountants were appointed as Internal Auditors of the Company for the financial year 2014-15 and their Internal Audit Reports are periodically reviewed by the Audit Committee and recommends to the Board for its noting. The Internal Audit Reports do not contain any qualifications, reservations or adverse remarks. Risk Management: During the year under review, The management of the Company has constituted a Risk Assessment and Minimization Committee with functional heads and the Company Secretary as its members. The Committee will submit its periodical report to the Board about the measures taken for mitigation of risk in the organization. The Risk Management Policy devised by the Committee is available on our website i.e.www.balpharma.com 10. INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY: Your Company has adequate system of internal controls with clearly defined authority limits. They ensure that the Company's assets are protected against loss from unauthorised use or disposition and all transactions are authorized, recorded and reported in conformity with generally accepted accounting principles. These systems are designed to ensure accuracy and reliability of accounting data, promotion of operational efficiency and adherence to the prescribed management policies. These policies are periodically reviewed to meet current business requirements. 11. DIRECTORS' RESPONSIBILITY STATEMENT In compliance to the provisions of Section 134(5) of the Companies Act, 2013, your Directors wish to confirm with reference to Statement of Accounts for the financial year ended on 31st March, 2015: a) that in preparing the Annual Accounts, all the applicable Accounting Standards have been followed; b) that the Directors had selected such accounting policies and applied them consistently and made judgments 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 &Loss of the Company for that period. c) thatthe 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/detecting fraud and other irregularities; d) that the Directors have prepared the annual accounts on 'going concern basis.' e) that the Directors have laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and operating effectively. f) that the Directors have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively. 12. CONTRACTS AND ARRANGEMENTS WITH RELATED PARTIES: All contracts/arrangements/transactions entered by the Company during the financial year with related parties were in the ordinary course of business and on arm's length basis. During the year, the Company had not entered into any contract/arrangement/ transaction with related parties that could be considered material (5% of turn over or 25% of the net worth of the Company) as defined in the Listing Agreement. Companies Policy on the related party transactions as approved by the Board can be accessed from our website i.e.www.balpharma com. Please refer to the note # 34 to the financial statements, which sets out related party disclosures. 13. SUBSIDIARY, JOINT VENTURE AND ASSOCIATE COMPANIES: During the year under review, the companies listed below have become Company's subsidiaries, joint ventures or associate companies. A report on the performance and financial position of each of the subsidiaries, associates, joint venture companies as per the Companies Act,20l3 is provided as Annexure - A to the consolidated financial statement and hence not repeated here for the sake of brevity. c14. DIRECTORS AND KEY MANAGERIAL PERSONNEL: In accordance with the provisions of the Companies Act and the Articles of Association of the Company, Dr. Subba Rao Prasanna, Whole Time Director of the Company retires by rotation and being eligible offer himself for reappointment. The Board has appointed Mrs. Sarika Bhandari as an Additional and Independent Director of the Company on 27.03.2015 in compliance with the provisions of Section 149(1) of Companies Act,2013 and Clause 49 II A of the Listing agreement. It is proposed to appoint her as regular Director and also as Independent Director of the Company for the tenure of 5 years, at the ensuing Annual General Meeting of the Company. The Company has received declarations from all the Independent Directors of the Company confirming that they meet the criteria of independence as prescribed under Section 149 (6) of the Companies Act, 2013 and Clause 49 of the Listing Agreement. The Company has devised a policy for familiarization of Independent Directors with the Company, their roles, rights, responsibilities in the Company etc and the same is put up on the website of the Company i.e.www.balpharma.com The Company has also devised a policy for Nomination and Remuneration of KMP's, Senior Managerial personnel and Directors of the Company in compliance with Section 178 of the Companies Act, 2013 and Clause 49 of the Listing Agreement. The said policy is available on the website of the Company. 15. VIGIL MECHANISAM: The vigil mechanism of the Company, which also incorporates a whistle blower policy as per the Listing Agreement, includes compliance task force comprising of senior executives of the Company. The complete text on the vigil mechanism and whistle blower policy can be accessed from the Company's website i.e.www.balpharma.com 16. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND FOREIGN EXCHANGE OUTGO: As per provisions of Section 134(m) of the Companies Act, 2013, read with the rule 8 of the Companies (Accounts) Rules, 2014, details relating to the Conservation of Energy and Technology Absorption and Foreign Exchange Earnings and Outflow are given in Annexure which forms part of the Board's Report. 17. PARTICULARS OF EMPLOYEES: Details of employees as per Section 197 of the Companies Act, 2013 and rule 5 (1) and (2) of the Companies (Appointment & remuneration of managerial personnel) Rules, 2014, is furnished as annexure to this report. 18. CORPORATE GOVERNANCE AND SHARE HOLDERS INFORMATION: A detailed report on the Corporate Governance System and practices of the Company are given in a separate section in this Annual Report. Outstanding Un-paid dividend amount for the financial year 2006-07 that is due for transfer to the Investor Education and Protection Fund has been duly transferred, during the year. 19. PARTICULARS OF LOANS GIVEN, INVESTMENTS MADE, GUARANTEES GIVEN OR SECURITY PROVIDED BY THE COMPANY: The Company has not given any loan or guarantees covered under the provisions of Section 186 of the Companies Act, 2013 20. EXTRACT OF ANNUAL RETURN: Extract of the Annual Return of the Company for FY 2014-15 in Form MGT-9 is annexed to this report. 21. CORPORATE SOCIAL RESPONSIBILITY: The Board has constituted a Corporate Social Responsibility Committee consisting of Dr. G.S.R Subba Rao, Mr. Pramod Kumar. S, Dr. S. Prasanna and Mr. Shailesh Siroya as its members. The Committee has formulated a Corporate Social Responsibility Policy and the Board has approved the Policy for its implementation. The CSR policy may be accessed from the Company's website i.e.www.balpharma.com. You Directors wish to place on record that during the year under review, due to inadequate time and avenues and this being the first year of this requirement, the Company could not spent any amount under CSR activities as specified in Section 135 of Companies Act,20l3. But the Company continued its socially beneficial activities like conducing free health checkups, distribution of medicines for the flood affected victims of Uttarakh and etc. 22. DISCLOSURE UNDER THE 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 the Workplace (Prevention, Prohibition & 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 following is a summary of sexual harassment complaints received and disposed off during the year 2014-2015: No of complaints received: NIL No of complaints disposed off: NIL 23. NUMBER OF MEETINGS OF THE BOARD OF DIRECTORS: The Meetings of the Board are held at regular intervals with a time gap of not more than 120 days between two consecutive Meetings. Additional Meetings of the Board of Directors are held when necessary. During the year under review 8 (Eight) Board Meetings were held on 28th May, 2014, 11th August, 2014, 20th October, 2014, 8th November, 2014, 12th January, 2015, 12th February, 2015, 20th March, 2015 and 27th March, 2015. The Agenda of the Meeting is circulated to the Directors in advance. Minutes of the Meetings of the Board of Directors are circulated amongst the Members of the Board for their perusal. Members are requested to refer to page no. 26 of this Annual Report for a report on Corporate Governance. 24. HUMAN RESOURCES: The human resources of the Company continue to contribute its share in the growth of the Company. Human Resource agenda of the company for the year continued to focus on building a talent pipeline, enhancing individual and organizational capabilities for future readiness, driving greater employee engagement, and strengthening employee relations though progressive people management. There was no complaint lodged by any woman employee under Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressel) Act, 2013, with the Company during the period under report. 25. CEO & CFO CERTIFICATION: The Board has acknowledged the Managing Director as the CEO of the Company and AVP Finance & Accounts as the CFO for the purpose of compliance under the Listing Agreement. The CEO and CFO have certified to the Board, in terms of Clause 49 of the Listing Agreement that the financial statements present a true and fair view of the company's affairs and are in compliance with accounting standards. 26. INSURANCE COVERAGE: The Board of Directors reports that your Company has adequate and comprehensive insurance cover on all the movable and immovable assets of the Company. 27. MATERIAL ORDER PASSED BY ANY COURT OR REGULATOR OR TRIBUNALS IMPACTING GOING CONCERN STATUS OF COMPANY: No order was passed by any court or regulator or tribunal during the period under review which impacts going concern status of the Company. 28. GENERAL: Your Directors state that no disclosure or reporting is required in respect of the following items as there were no transactions on these items during the year under review: 1. Details relating to deposits covered under Chapter V of the Act. 2. Issue of equity shares with differential rights as to dividend, voting etc. 3. Issue of shares (including sweat equity shares) to the employees of the Company under any scheme. 4. Neither the Managing Director nor the whole time Directors of the Company receive any remuneration or commission from any of its subsidiaries. 5. No significant or material orders were passed by the regulators or courts or tribunals which impact the going concern status and Company's operations in the future. 29. APPRECIATION: Your Directors wish to express their sincere appreciation on significant contributions made by the employees through their dedication, hard work and commitment. Your Directors also place on record their sincere thanks on the trust reposed on the Company by the medical fraternity and the patients. We also acknowledge the support extended by Canara Bank, Punjab National Bank, EXIM Bank, Corporation Bank and other Banks & financial institutions, government agencies, shareholders and investors at large. We look forward to the continued support from all the quarters in our endeavor to help people lead healthier lives. For and on behalf of the Board of Directors Dr. S. Prasanna Whole Time Director Shailesh D Siroya Managing Director Place ; Bangalore Date ; 13th August 2015 |