Directors' Report Dear Members, Your Directors are pleased to present the 31st Annual Report on the business and operations together with the Company's audited financial statements and the auditors' report thereon for the financial year ended March 31, 2015. Business Performance During the year, your Company registered a growth of 36.5% with turnover of Rs.6,792.0 million as against Rs.4,975.7 million during the corresponding financial year. The vaccines segment registered a growth of more than 115.9% with turnover of Rs.2,763.0 million as against Rs.1,279.5 million during the previous financial year. The formulations segment registered a growth of 7.6% with turnover of Rs.3,790.7 million as against Rs.3,523.2 million during the previous financial year. The Research & Development segment registered a growth of 37.7% with turnover of Rs.238.3 million as against Rs.173.0 million during the previous year. During the year, your Company registered positive EBITDA of Rs.943.6 million as against the negative EBITDA of Rs.922.3 million in the previous financial year, with overall losses before tax & exceptional items reduced significantly from Rs.2,974.4 million to Rs.633.4 million. During the year under review, your Company has continued to supply Easyfive-TT Vaccines against long-term supply order received from UNICEF during previous financial year, for supply of vaccines for the calendar years 2014 to 2016. The Company has also won a national tender in Philippines for supply of Easyfive-TT vaccine and an order from Government of India for supply of Oral Polio Vaccines which have been the leading key drivers in the improved performance of the Company during the year under review. During the year, your Company has entered into a strategic alliance with Canada's largest pharma company, Apotex Inc., for research, development, license and supply of two drug delivery-based generic products in the US, Canada, Australia and New Zealand markets and also entered into similar deal with US-based Rising Pharmaceuticals Inc. for an oral controlled release product in the CNS space. Similar collaboration has also been entered into with a leading Indian pharma company with extensive global operations, for the development and supply of a modified release immunosuppressant generic product for the US market. A detailed discussion on operations for the year ended March 31, 2015 is given in the Management Discussion and Analysis section forming part of the Annual Report. Corporate Debt Restructuring Scheme (CDR Scheme) As the members are aware, during previous financial year, the Company had made a reference to the Corporate Debt Restructuring (CDR) Cell for comprehensive restructuring of Company's debts from consortium banks in view of difficult financial situation mainly due to the delisting of company's vaccine from WHO's list of pre-qualified vaccines in the financial year 2011-12. The CDR Empowered Group ("CDR EG") in its meeting held on September 9, 2014 has approved the CDR proposal and issued provisional Letter of Approval (LOA) dated September 24, 2014 which was later on confirmed vide letter dated October 11, 2014. Pursuant to the said LOA, the Company had executed a Master Restructuring Agreement (MRA) with all the consortium banks (except State Bank of Travancore ("SBT") which has given a negative mandate) on December 27, 2014, with cutoff date of October 1, 2013. The MRA, inter-alia, provides for waiver of certain existing obligations of the Company, restructuring of repayment terms for principal and interest, reduction in interest rates, conversion of outstanding interest amounts to Working Capital/ Funded Interest Term Loans, pledge of promoters' shareholding as additional security to lenders, promoters' undertaking to bring additional funds as promoters' contribution, monitoring oversight and certain restrictive covenants. The debt obligations, including interest thereon, have been measured, classified and disclosed in these financial statements in accordance with the MRA, as agreed by seven out of nine lender banks. As on March 31, 2015, some of the terms of CDR package were implemented and creation of security has been completed partly and the balance was in process. The Company had approached the banks for extension of time for implementation of few conditions which was considered by the banks. The banks and CDR EG had accepted few requests for modifications/ waivers and with the acceptance of such modifications/ waivers, the CDR Scheme shall stand implemented by all the banks accept SBT. The SBT, which had given a negative mandate in the CDR scheme had sent legal notices for recovery of its debts & winding up of the Company, which have suitably been replied. Simultaneously, they have been requested for reconsidering their decision. The CDR mechanism operates on the principles of super majority of 75% of the creditors by value and 60% of the creditors in number. The CDR Scheme has been approved with the consent of all the banks except one forming such super majority. The implementation of CDR scheme gives your Company critical support to tide over the present difficult financial situation and business environment. The decision of the banks to consider and approve CDR Scheme also reflects the faith these institutions have in the long term business model of the Company. Dividend In view of the losses during the year, the Board of Directors did not recommend any dividend on the Equity Shares of the Company. Transfer of Amounts to Investor Education and Protection Fund Pursuant to the provisions of Section 205A(5) of the Companies Act, 1956, the dividend for the year 2006-07, which remained unpaid or unclaimed for a period of 7 years, amounting to Rs.0.2 million has been transferred by the Company to the Central Government's Investors Education and Protection Fund on November 26, 2014. Similarly, the dividend for the year 2007-08, which shall remain unpaid or unclaimed for a period of 7 years, shall be transferred by the Company to the Central Government's Investors Education and Protection Fund by the due date, i.e. November 25, 2015. Details of significant and material orders impacting the going concern status and company's operations in future During the year under review, no significant and material orders were passed by any regulator or court or tribunal which may impact the going concern status and your Company's operations in future. A search operation was conducted by Income Tax department in the premises of the Company in January, 2012 and hence Company has filed the income tax returns for the Assessment Year 2006-2007 to Assessment year 2012-2013. The Income Tax department has competed the Income Tax assessment of said years and income tax demand of Rs.3,294.9 million (including interest) has been raised on various grounds. The Company has preferred appeals before the CIT (Appeals) against the Orders of Income Tax department. Your directors are pleased to inform that after several hearings in the matter and on the basis of facts of the matter, the CIT (Appeals) has granted the relief to the Company from such demand and the entire income tax demand of Rs.3,294.9 million stands dismissed except certain disallowances made in Assessment year 201011 and Assessment year 2011-12 pursuant to the Orders issued by CIT (Appeals). Share Capital and Net Worth The issued, subscribed and paid up Share Capital of the Company as on March 31, 2015, was Rs.224.3 million comprising of Rs.61.3 million equity share capital divided into 61,250,746 Equity Shares of Re.1 each and Rs.163.0 million preference share capital divided into 1,63,00,000, 0.5% Non-Convertible Cumulative Redeemable Preference Shares of Rs.10 each. During the year, the Company had issued and allotted 1,63,00,000 (One Crore Sixty Three Lac Only) 0.5% Non-Convertible Cumulative Redeemable Preference Shares ("NCCRPS") of Rs.10 each at par by converting the existing unsecured loan and/or fixed deposits (including outstanding interest thereon) aggregating to Rs.163.0 million to some of the promoters of the Company to meet the requirements of the promoters' contribution pursuant to the CDR Scheme approved by CDR EG. During the year under review, the Company had not issued any equity shares with differential rights/sweat equity shares under Rule 4 & Rule 8 of Companies (Share Capital and Debentures) Rules, 2014. As the members are aware, in view of the fact that the Company's accumulated losses as at March 31, 2013 had resulted into erosion of more than 50% of its peak net worth during the immediately preceding four financial years (as computed as per the provisions of Sick Industrial Companies (Special Provisions) Act, 1985 ("SICA")), the Company had made necessary reference on November 22, 2013 to the Board for Industrial and Financial Reconstruction (BIFR) pursuant to the provisions of SICA. The Company's accumulated losses as at March 31, 2015 continue to remain more than 50% of its peak net worth during the immediately preceding four financial years, as computed as per the provisions of SICA. As at the end of year under review, the net worth of the Company calculated as per section 2(57) of the Companies Act, 2013 ("the Act") stood at Rs.1,296.2 million as compared to Rs.1,790.9 as at the end of the previous financial year. Report on Corporate Governance Your company has always placed thrust on managing its affairs with diligence, transparency, responsibility and accountability. Your Directors support the broad principles of Corporate Governance and lays emphasis on its role to align and direct the actions of the Company in achieving its objectives. The report on Corporate Governance as stipulated under Clause 49 of the listing agreement entered with the stock exchanges ("Listing Agreement") together with a certificate from the Practicing Company Secretary confirming compliance is attached and forms part of this Annual report. Management Discussion & Analysis Report As required pursuant to Clause 49 of the Listing Agreement with the Stock Exchanges, a detailed Management Discussion and Analysis Report is attached herewith and forms part of the Annual Report. Information about the Subsidiaries / Associates/ Joint Ventures A. Subsidiaries As on the date of this report, your Company has 4 wholly owned subsidiary (WOS) companies, viz. Radhika Heights Limited, Panacea Biotec (International) S.A., Rees Investments Limited and Panacea Biotec GmbH (under liquidation) and one subsidiary, viz. NewRise Healthcare Private Limited. Your Company also has 8 indirect WOS companies, as under: • Cabana Construction Private Limited, Radicura Infra Limited, Nirmala Buildwell Private Limited, Sunanda Infra Limited, Cabana Structures Limited and Nirmala Organic Farms Resorts Private Limited; all being WOS of Radhika Heights Limited; • Panacea Biotec Germany GmbH, the WOS of Panacea Biotec (International) S.A.; and • Kelisia Holdings Limited, the WOS of Rees Investments Limited. Radhika Heights Limited ("RHL") inter-alia, owns a prime immovable property which is being used by the Company as its Corporate Office at New Delhi and land at Pataudi Road, Gurgaon (along with its 5 WOSs). It has diversified its activities in construction and development of township as part of its growth plans. Accordingly, RHL along with its 5 WOS has signed a term sheet with a developer for development of the integrated township on its land at Pataudi Road, Gurgaon, however, a dispute has emerged among the parties and the matter is under arbitration. The Company holds 47,76,319 equity shares in RHL with an investment of Rs.3,385.6 million as on March 31, 2015. Panacea Biotec (International) S.A., Switzerland (PBS), is engaged in the business of trading of pharmaceutical products. The Company holds 6,000 equity shares of CHF 100 each with an investment of Rs.34.4 million as on March 31, 2015. Panacea Biotec Germany GmbH, WOS of PBS, is engaged in marketing of the Company's products in Germany. NewRise Healthcare Private Limited ("NewRise") has set-up a 224 bedded state-of-the-art multi super-specialty hospital at Gurgaon, Haryana. It had planned to have the full-fledged operations during the year under review and started hiring the required personnel to start operations and also obtained the necessary licenses & permissions for such operations. However, since it was requiring additional funds to start the operations as well as to fund the initial losses and working capital requirements but the funds were not available; it has decided to put the operations of hospital on hold for the time being. The efforts are also being made to dispose of the Company's stake in NewRise either in full or in part. During the year under review, NewRise had issued and allotted 33,94,915 equity shares of Rs.10 each for cash at a price of Rs.59 per share on May 28, 2014, aggregating Rs.200.3 million against the share application money pending allotment as at the end of previous financial year. The Company has also purchased 1,82,900 equity shares in NewRise at an aggregate value of Rs.15.5 million pursuant to the agreement entered into with other shareholders of NewRise during previous financial year. Your Company holds 87.4% stake in NewRise with an investment of Rs.497.8 million therein as on March, 2015. During the year under review, the Company's indirect subsidiary, Kelisia Investment Holding AG (step down subsidiary of Rees Investments Limited) has been liquidated effective as on October 7, 2014. B. Joint Ventures and Associates PanEra Biotec Private Limited ("PanEra"): PanEra, the Company's associate Company, is continuing to meet requirement of bulk antigens for the manufacture of Hib and Pentavalent Vaccines by your Company. During the year under review, PanEra has achieved a net turnover of Rs.152.3 million as compared to Rs.391.8 million during previous year. It has incurred a loss of Rs.116.3 million as compared to loss of Rs.11.5 million in previous financial year. Chiron Panacea Vaccines Private Limited (CPV) (Under Liquidation): CPV had discontinued its operations during the financial year 2012-13 pursuant to dissolution of joint venture and is currently in the process of voluntary winding up. Adveta Power Private Limited ("Adveta"): Adveta the Company's 50:50 joint venture with PanEra, has been granted in-principle approval by Govt. of Arunachal Pradesh for allotment of two Power Projects of 80 MW and 75 MW in Arunachal Pradesh in financial year 2012-13. Adveta is in the process of taking preliminary steps in connection with the implementation of projects. However, no major investment is envisaged in this regard during the current financial year. Pursuant to the provisions of Section 129, 134 and 136 of the Act read with rules framed thereunder and pursuant to clause 41 of the Listing Agreement, the Company had prepared consolidated financial statements of the Company and its subsidiaries and a separate statement containing the salient features of financial statements of subsidiaries, joint ventures and associates, in Form AOC-1, which is forming part of the Annual Report and hence not repeated here for the sake of brevity. The annual financial statements and related detailed information of the subsidiary companies shall be made available to the shareholders of the holding and subsidiary companies seeking such information on all working days during business hours. The financial statements of the subsidiary companies shall also be kept open for inspection by any shareholder/s during working hours at the Company's registered/corporate office and that of the respective subsidiary companies concerned. Consolidated Financial Statements The consolidated financial statements of the Company and its subsidiaries, joint ventures and associates, prepared in terms of Section 129 of the Act and Clause 32 & 41 of the Listing Agreement and in accordance with Accounting Standard 21 on 'Consolidated Financial Statements' read with Accounting Standard AS-27 on 'Financial Reporting of Interest in Joint Ventures' and Accounting Standard AS-23 on 'Accounting for Investments in Associates', as issued by the Institute of Chartered Accountants of India and in accordance with the provisions of schedule III of the Act, are attached herewith and the same, together with Auditors' Report thereon, forms part of the Annual Report of the Company. Listing of Equity Shares The Equity Shares of the Company continue to be listed on National Stock Exchange of India Limited ("NSE") and Bombay Stock Exchange ("BSE"). The requisite annual listing fees have been paid to these Exchanges. Public Deposits During the year under review, your Company has not invited or accepted any deposits from the public/ members pursuant to the provisions of Section 73 and 76 of the Act. Further, the Company had paid/adjusted the outstanding balances of deposits from the Company's Directors & their relatives amounting to Rs.142.0 million as on March 31, 2014 along with interest thereon in compliance with the provisions of the Act and the Companies (Acceptance of Deposits) Rules, 2014. Directors and Key Managerial Personnel During the year under review, Mr. Sunil Kapoor (DIN: 00029133) who was earlier appointed as an independent director was not satisfying the criteria of independent director as per the provisions of the revised Clause 49 of the Listing Agreement effective from October 1, 2014 and therefore resigned from the directorship of the Company w.e.f. August 4, 2014. The Board places its sincere appreciation towards the valuable contribution received from Mr. Sunil Kapoor during his tenure as a Director of the Company. Further, pursuant to the provisions of Section 149 of the Act, Mr. Raghava Lakshmi Narasimhan (DIN: 000738736), Mr. Namdeo Narayan Khamitkar (DIN: 00017154), Mr. A.N.Saksena (DIN: 00016107) and Mr. Krishna Murari Lal (DIN: 00016166) Independent Directors were appointed as Independent Directors of the Company not liable to retire by rotation for a period of five years i.e. till March 31, 2020, in the 30th Annual General Meeting held on September 25, 2014. The terms and conditions of appointment of Independent Directors are as per Schedule IV to the Act. Your Company has received declarations from all the Independent Directors of the Company confirming that they meet with the criteria of independence provided in Section 149(6) of the Act and Clause 49 of the Listing Agreement and there has been no change in the circumstances which may affect their status as Independent Director during the year under review. Further, as required pursuant to the provisions of Section 149 of the Act, Mr. Om Prakash Kelkar (DIN:00943362) and Mrs. Manjula Upadhyay (DIN: 07137968) have been appointed as Additional Directors of the Company in the category of Independent Directors with effect from October 30, 2014 and March 30, 2015, respectively, to hold office upto the ensuing Annual General Meeting. Mr. Om Prakash Kelkar (DIN:00943362) was subsequently appointed by the shareholders by passing resolution through Postal Ballot the result whereof was declared on December 23, 2014, as an Independent Director for a period of five years, as per the provisions of Section 149 of the Act and Clause 49 of the Listing Agreement, not liable to retire by rotation and shall hold such office for the period upto October 30, 2019. Further, the Company has received a notice in writing along with requisite deposit, from a member under Section 160 of the Act, signifying his intention to propose candidature of Mrs. Manjula Upadhyay for the office of Director of the Company. Your directors recommend her appointment as an Independent Director in the ensuing Annual General Meeting of the Company for a period of five years, as per the provisions of the Act and Clause 49 of the Listing Agreement, not liable to retire by rotation and to hold office for a period of five years upto March 29, 2020. Further, on the recommendation of Nomination & Remuneration Committee, the Board of Directors of the Company had in its meeting held on July 17, 2015, re-appointed Mr. Sumit Jain (DIN: 00014236) as a Whole time Director designated as Director Operations & Projects for a period of 3 years with effect from July 22, 2015, subject to the approval of shareholders in their general meeting. The terms and conditions for his re-appointment are contained in the explanatory statement forming part of the notice of the ensuing Annual General Meeting. Further, in accordance with Section 152 of the Act and Article 112 of the Articles of Association of the Company, Mr. Soshil Kumar Jain (DIN: 00012812) & Mr. Sumit Jain (DIN: 00014236), directors of the Company are also liable to retire by rotation. Being eligible, they have offered themselves for re-appointment as director. The brief resumes of the Directors who are to be appointed/ re-appointed in the ensuing Annual General Meeting, the nature of their expertise in specific functional areas, names of companies in which they have held directorships, committee memberships/chairmanships and their shareholding, etc. are furnished in Corporate Governance Report forming part of the Annual Report. The Board recommends their appointment / re-appointment of the above said directors in the ensuing Annual General Meeting. During the year under review, Mr. Partha Sarathi De resigned from the position of Chief Financial Officer of the Company with effect from November 30, 2014. Mr. Devender Gupta has been appointed as Chief Financial Officer and Head Information Technology of the Company with effect from May 29, 2015. Mr. Vinod Goel, Company Secretary of the Company has also been elevated as Group Chief Financial Officer and Head Legal & Company Secretary of the Company with effect from May 29, 2015. Board Meetings During the year under review, six (6) Board Meetings were held on May 30, 2014, August 1, 2014, October 31, 2014, December 9, 2014, February 13, 2015 and March 30, 2015. The details pertaining to the attendance are provided in the Corporate Governance Report. The intervening gap between two Board Meetings was within the period prescribed under the Act. Audit Committee The Audit Committee of the Board of Directors consists entirely of Independent Directors. The details of the constitution, composition and number of meetings of the Audit Committee are furnished in the Corporate Governance Report. During the year, all recommendations made by the Audit Committee were accepted by the Board. Policy on Directors' appointment & remuneration Pursuant to the provisions Section 178(3) of the Act and Clause 49(IV)(B) of the Listing Agreement and as per the recommendations of the Nomination and Remuneration Committee, the Board has adopted a policy for selection & appointment of Directors and Key Managerial Personnel of the Company and their remuneration. The components of remuneration policy are briefly stated in the Corporate Governance Report. Board Evaluation In terms of the provisions of the Act and Clause 49 of the Listing Agreement, the Board had adopted a formal mechanism for evaluating its performance as well as that of its Committees and individual Directors, including the Chairman of the Board. The exercise was carried out through a structured evaluation process covering various aspects such as Board composition & quality, strategic & risk management, board functioning, etc. Performance evaluation of Independent Directors was conducted by the Board of Directors excluding the Director being evaluated on the criteria such as ethics and values, knowledge and proficiency, behavioural traits, etc. Auditors Pursuant to the provisions of Section 139 of the Act and the rules framed thereunder, M/s. Walker Chandiok & Co. LLP, Chartered Accountants (Regn. No. 001076N/N500013), were appointed as statutory auditors of the Company for a period of five years to hold office from the conclusion of the 30th Annual General Meeting ("AGM") of the Company held on September 25, 2014 till the conclusion of the 35th AGM, subject to ratification of their appointment at every AGM. Accordingly, the appointment of M/s. Walker Chandiok & Co. LLP, Chartered Accountants, as statutory auditors of the Company, is placed for ratification by the shareholders. in this regard, the Company has received a certificate from the auditors to the effect that if they are re-appointed, it would be in accordance with the provisions of Section 141 of the Act. Auditors' Report The management response to the matters of emphasis and observations/ comments contained in the Auditors' Report and Annexure thereto, are given below: i. Amount of advance received as research fees from a customer amounting to Rs.197.2 million which has been accounted for as income from research and development: In Auditor's opinion, the recognition of such advances as income is not consistent with the revenue recognition principles as prescribed under the Accounting Standard - 9 (AS-9) 'Revenue Recognition'. Had the Company followed the principles of AS-9 with respect to these amounts, the revenue for the year ended March 31, 2015 would have been lower by Rs.197.2 million and the loss would have been higher by Rs.197.2 million. Further, the reserves and surplus as at that date would have been lower by Rs.197.2 million and current liabilities as at that date would have been higher by Rs.197.2 million. The Company has received Research & Development (R&D) fees from a customer and such fees is non-refundable subject to certain pre-conditions (as defined in the agreement) and most of the conditions are being complied by the Company. As the product is already available in the domestic market, the management is reasonably certain of meeting the remaining preconditions and therefore believes that the said fees should be accounted for as income. ii. Payment of managerial remuneration exceeding the limits prescribed under Section 198 and 309 read with Part II of Schedule XIII to the Companies, Act, 1956 by Rs.13.5 million and Rs.13.2 million in previous financial years ended March 31, 2014 and 2013 respectively, (Emphasis of Matter in the Auditors' Report): The Company has incurred losses in the respective years mainly due to the delisting of company's vaccine from WHO's list of pre-qualified vaccines in the financial year 2011-12. The Managerial Personnel have already voluntarily reduced their salary by 30-53% in the referred years. The Company has taken various measures as explained elsewhere in this report to regain its business. Further, the Company has already filed applications with Ministry of Corporate Affairs to obtain requisite approvals from Central Government in respect of such excess remuneration and requisite approvals are awaited. iii. The Company has incurred a net loss of Rs.652.3 million during the year ended March 31, 2015. Further as of that date, the Company's current liabilities exceeded its current assets by Rs.3,835.3 million. These conditions along with other matters as set forth in aforesaid note indicate the existence of a material uncertainty that may cast significant doubt about the Company's ability to continue as a going concern. (Emphasis of Matter - clause 11 of Auditors Report): The Company has undertaken several measures to mitigate this risk, which include supply to UNICEF/other customers of pentavalent vaccine; certain strategic alliances with foreign collaborators for supply of vaccines and pharma products including 3 collaboration agreements signed during the year under review. The Company has also successfully executed the Master Restructuring Agreement (MRA) with the lenders of the Company and has complied with the key conditions and successfully implemented the MRA. Based on above measures and continuous efforts to improve the business, the management believes that it would be able to generate sustainable cash flow, recover and recoup the erosion in its net worth through profitable operations, discharge its obligations as they fall due and continue as a going concern. Further, with regard to the Emphasis of Matters and observations contained in the Auditors' Report on the Consolidated Financial Statements & the management's explanations are given below: i. The Auditors' report on the financial statements of Subsidiary/Associate Company viz. NewRise Healthcare Private Limited and PanEra Biotec Private Limited, contains a qualification with respect to non-receipt of confirmations from the foreign and domestic vendors: The respective companies are in the process of reconciling these balances with its vendors and the management is of the opinion that the result of reconciliations will not have any material impact on the consolidated financial statements of the Company. ii. Unaudited Annual Accounts of the Subsidiary, Rees Investments Limited: Though the Annual Accounts were duly finalized & signed by its Board of Directors, the audit thereof could not be completed till the date on which the Company's consolidated accounts were finalized. Its auditors have since completed their audit and given their audit report on such accounts and there is no difference in the audited annual accounts thereof. iii. Slight delay in deposition of tax with appropriate authority in one case: There has been a delay of 1 day in deposition of VAT of Rs.2.3 million with concerned VAT authority at Kochi in the state of Kerala due to last day being holiday in Kerala. The notes to accounts and other observations, if any, in the Auditors' Report are self-explanatory and therefore, do not call for any further comments. Cost Auditors Pursuant to the provisions of Section 148 of the Act, M/s J.P. Gupta & Associates, Cost Accountants, were appointed as the Cost Auditors to conduct the audit of the Company's Cost Records for the year ended March 31, 2015 and the remuneration has been ratified by the shareholders in the 30th Annual General Meeting of the Company held on September 25, 2014. The cost audit for the said period has been completed and the Cost Auditors' Report will be submitted with the Central Government within the prescribed time. Based on the recommendations of the Audit Committee, the Board of Directors has appointed M/s G.T. & Co., Cost Accountants (Firm's Registration Number: 000253), (a firm formed by Mr. J.P. Gupta, proprietor of the existing cost auditors, viz. M/s. J.P. Gupta & Associates, Cost Accountants), as cost auditors of the Company for the financial year 2015-16 pursuant to Section 148 of the Act. As required, the resolution for ratification of remuneration of cost auditor has been included in the notice of the AGM for shareholders' approval. The Cost Audit Report for the financial year 2013-14 was filed on September 12, 2014, well before the last date of filing being September 30, 2014. Secretarial Audit Pursuant to provisions of Section 204 of the Act read with Rule 9 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014, your Company engaged the services of M/s R&D Company Secretaries, Practicing Company Secretaries, to conduct the Secretarial Audit of the Company for the financial year ended March 31, 2015. The Secretarial Audit Report (in Form MR-3) is attached as Annexure F to this Report. The Secretarial Audit Report contains observation in respect of excess remuneration paid to Managing Director during the financial year 2014-15 and in this respect, the Company has decided to seek the approval of Central Government pursuant to shareholders' approval being sought in the ensuing Annual General Meeting of the Company. Material changes and commitments affecting the financial position of the Company which have occurred between March 31, 2015 and date of the Report Except as disclosed elsewhere in the Annual Report, there have been no material changes and commitments which can affect the financial position of the Company between the end of the financial year and the date of report. As required under Section 134(3) of the Act, the Board of Directors inform the members that during the financial year, there have been no material changes, except as disclosed elsewhere in report: • in the nature of Company's business, • in the Company's subsidiaries or in the nature of business carried out by them, and • in the classes of business in which the Company has an interest. Energy Conservation, Technology Absorption & Foreign Exchange Particulars required pursuant to Section 134(3)(m) of the Act, read with Rule 8(3) of the Companies (Accounts) Rules, 2014, regarding conservation of energy, technology absorption and foreign exchange earnings & outgo, are given in Annexure A hereto and forms part of this Report. Extract of Annual Return In accordance with the provisions of section 134(3)(a) of the Act, the extract of Annual Return in Form MGT-9 as on March 31, 2015 is attached as Annexure B hereto and forms a part of this Report. Directors' Responsibility Statement The Directors hereby confirm: a) that in the preparation of the annual financial statements for the financial year ended March 31, 2015 the applicable Accounting Standards had been followed along with proper explanation relating to material departures; b) that for the financial year ended March 31, 2015, such accounting policies as mentioned in the Notes to the financial statements have been applied consistently and judgments and estimates that are reasonable and prudent have been made so as to give a true and fair view of the state of affairs of the Company and of the profit and loss of the Company for the year ended March 31, 2015; c) that proper and sufficient care has been taken 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; d) that the annual accounts have been prepared on a going concern basis; e) that proper internal financial controls were followed by the Company and that such internal financial controls are adequate and were operating effectively; and f) that proper systems to ensure compliance with the provisions of all applicable laws were in place and that such systems were adequate and operating effectively. Particulars of loans, guarantees or investments under Section 186 of the Act Details of loans, guarantees and investments covered under the provisions of Section 186 of the Act are given in the notes to the financial statements. Risk management The Company has formulated a Risk Management Policy and monitors the risk management plan on a periodic basis. The Company has defined a structured approach to manage uncertainty and to make use of these in the decision making in all business decisions and corporate functions. Insurance Risk mitigation continues to be a key area of concern for the Company, which has regularly invested in insuring itself against unforeseen risks. The Company's stocks and insurable assets like building, plant & machinery, computer equipments, office equipments, furniture & fixtures, lease hold improvements and upcoming projects have been adequately insured against major risks. The Company has also taken appropriate product liability insurance policies for conducting clinical trials and for insuring its products (manufactured & sold) with an extension of unnamed vendor liability and add on cover of public liability inclusive of pollution liability to cover the risk on account of claims, if any, filed against the Company. Internal Control System Your Company has established a system of internal controls to ensure that assets are safeguarded and transactions are appropriately authorised, recorded and reported. The Company's internal control system comprises internal audit carried out by independent firms of Chartered Accountants and periodical review by the management. The Audit Committee of the Board of Directors addresses significant issues raised by both the Internal Auditors and the Statutory Auditors. The Board has adopted the policies and procedures for ensuring the orderly and efficient conduct of its business, including adherence to the Company's policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial disclosures. The management believes that the overall internal control system is dynamic and reflects the current requirements at all times, hence ensuring that appropriate procedures and controls are in place. Your Company is proactively identifying the areas for further improvement which shall remain an ongoing process. Vigil Mechanism/Whistle Blower Policy Your Company has adopted a Whistle Blower Policy with a view to provide its employees an avenue to raise any sensitive concerns regarding any unethical behaviour or wrongful conduct and to provide adequate safeguard for protection from any victimization. Further, the Act and revised Clause 49 of the Listing Agreement mandated every listed Company to establish a vigil mechanism, accordingly the Company has amended the policy to align the same with the provisions of Section 177(9) of the Act read with Rule 7 of the Companies (Meetings of Board and its Powers) Rules, 2014 and Clause 49 of the Listing Agreement and the same is available on the website of the Company. This Policy inter-alia provides a direct access to the Chairman of the Audit Committee. Your Company hereby affirms that no Director/ employee have been denied access to the Chairman of the Audit Committee and that no complaints were received during the year. Corporate Social Responsibility The provisions of Section 135 of the Act, regarding Corporate Social Responsibility are not attracted to the Company as the Company does not fall under the threshold limit of networth of Rs.500 crore or turnover of Rs.1,000 crore or a net profit of Rs.5 crore during the financial year. However, the Company has been, over the years, pursuing Corporate Social Responsibility by putting continuous efforts in the areas of health, education and patient awareness/assistance programs towards the development of happier and healthier society. Related Party Transactions As per the provisions of the Act and the Listing Agreement, your Company has formulated a Policy on Related Party Transactions which is also available on Company's website at <http://www.panacea-biotec.com/statutorypolicies>. The Policy intends to ensure that proper reporting, approval and disclosure processes are in place for all transactions between the Company and Related Parties. This Policy specifically deals with the review and approval of Material Related Party Transactions keeping in mind the potential or actual conflicts of interest that may arise because of entering into these transactions. All Related Party Transactions are placed before the Audit Committee for review and approval. Wherever applicable, prior omnibus approval is obtained for related party transactions on a quarterly basis for transactions which are of repetitive nature and / or entered in the ordinary course of business and are at arm's length basis. During the year, all the related party transactions entered into were on an arm's length basis. The Company has not entered into any material related party transactions, i.e. transactions exceeding 10% of the annual consolidated turnover as per the last audited financial statements. Suitable disclosures as required under AS-18 have been made in the notes to the financial statements. Information on transactions with related parties pursuant to Section 134(3)(h) of the Act read with Rule 8(2) of the Companies (Accounts) Rules, 2014 are given in Annexure C as per the prescribed Form AOC-2 and the same forms part of this report. Particulars of Employees and Related disclosures In terms of the provisions of Section 197(12) of the Act read with Rules 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, a statement showing the names and other particulars of the employees drawing remuneration in excess of the limits set out in the said Rules is provided in the Annexure D forming part of the Annual Report. Disclosures pertaining to remuneration and other details as required under Section 197(12) of the Act read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is provided in the Annexure E forming part of the Annual Report. Prevention of Sexual Harassment at Workplace As per the requirement of The Sexual Harassment of Women at Workplace (Prevention, Prohibition & Redressal) Act, 2013 ('Act') and Rules made thereunder, your Company has constituted Internal Complaints Committees (ICC). During the year, one complaint was received and the same has been satisfactorily resolved by the said Committee. Acknowledgements Your Directors acknowledge with gratitude the co-operation and assistance received from the UN Agencies, Central Government, State Governments and all other Government agencies and encouragement they have extended to the Company. Your Directors also thank the shareholders, Financial Institutions, Banks/ other lenders Customers, Vendors and other business associates for their confidence in the Company and its management and look forward for their continuous support. The Board wishes to place on record its appreciation for the dedication and commitment of your Company's employees at all levels which has continued to be our major strength. For and on behalf of the Board Soshil Kumar Jain Chairman Place: New Delhi Dated: August 13, 2015 |