BOARD'S REPORT Dear Members, The Board of Directors take pleasure in presenting the Seventeenth Annual Report of the Company along with the Audited Financial Statements for the year ended 31st March, 2016. STATE OF COMPANY'S AFFAIRS The Company continued its focus on Research & Development during the year with its Consolidated Research expense at Rs. 498 crore (11% of Consolidated revenue). In pursuit of creating a strong Intellectual Property (IP) base, the Company as on 31* March, 2016, cumulatively filed 2,579 patents and holds 441 patents Worldwide. The Company's New Chemical Entity (NCE) research program continued to get major boost during the financial year 2015-16 with US FDA granting Qualified Infectious Disease Product (QIDP) status to WCK 4282, WCK 5222 and WCK 4873 for its Breakthrough Drug Discovery program in Anti Infectives space. WCK 4282 &WCK4873 are new class of antibiotic drugs for treatment of Community Acquired Bacterial Pneumonia (CABP). WCK 5222, a new class of antibiotic for gram negative terrain for complicated Urinary Tract Infections & Hospital Acquired Bacterial Pneumonia. Last year, Wockhardt received approval for WCK 771 and WCK 2349 making it the only Company to have five QIDP status globally. QIDP status is granted to drugs, identified by CDC (Centre for Disease Control, USA), that act against pathogens which have a high degree of unmet need in their treatment. QIDP status provides fast track clinical development and review of the drug application by US FDA for drug approval. The drug is also awarded five-year extension of market exclusivity. QIDP was constituted under Generating Antibiotic Incentives Now (GAIN) Act in 2012 as part of the FDA Safety and Innovation Act to underline the urgency in new antibiotics development. During the year, Company has undergone inspections at its L1, Chikalthana, Aurangabad manufacturing facility by UK MHRA and have received communication confirming the closure of the inspection and issuance of an unrestricted cGMP certificate. Accordingly, supplies have been resumed from L1 facility to UK Market during the year. US FDA has also recently completed inspections of our manufacturing facilities at Ankleshwar, Gujarat and Shendra, Aurangabad and made some observations for which appropriate reply has been submitted. Shendra, Aurangabad manufacturing facility is a new facility supplying only to India, UK&lrish market. During the year.WalujFacility of the Company received the Establishment Inspection Report (EIR) from US FDA which has been a signifkant progress with respect to remediation of regulatory alert. The Company's on-going efforts towards remediation and compliance measures for Chikalthana and Waluj facilities continue to be in place. CREDIT RATING During the year. Credit Analysis & Research Ltd ('CARE') has reaffirmed your Company's Rating for total Working Capital limit as "CARE AA" and "CARE A1+" for Long Term Bank Facilities (Fund Based) and Short Term Bank Facilities (Non-Fund Based) respectively. Further, India Ratings & Research Private Limited (Fitch Group) has reaffirmed the Company's Rating for Long Term loan as 'IND AA'/Stable and Working Capital Facility as 'IND AA'/Stable for Fund Based &'IND A1+'for Non-Fund Based facility. DIVIDEND AND RESERVES During theyear2015-16,the Board recommend dividend@0.01%(Rs.0.0005 perPreferenceShare ofRs.5/-each) on 47,56,59,941 Non-Convertible Cumulative Redeemable Preference Shares of Rs. 5/- each and 12,14,54,927 Optionally Convertible Cumulative Redeemable Preference Shares of Rs. 5/- each absorbing a sum of Rs. 298,557/-. No amount is proposed to be transferred to the General Reserves of the Company out of the profits for the year. SHARE CAPITAL During the year under review, the paid-up equity share capital of the Company increased from Rs. 55,03,64,515/- to Rs. 55,25,44,515/- pursuant to the allotment of 4,36,000 equity shares of Rs. 5/- each against exercise of stock options granted under Wockhardt Employees' Stock Option Scheme - 2011 ('the Scheme’). There was no issue of equity shares with differential voting rights and sweat equity shares during the year 2015-16. The Company does not have any scheme to fund its employees to purchase the shares of the Company. Further, no shares have been issued to employees of the Company except under the scheme mentioned above. DIRECTORS AND KEY MANAGERIAL PERSONNEL During the year under review, Mr. Baldev Raj Arora (DIN: 00194168) and Ms. Tasneem Mehta (DIN: 05009664) were appointed as an Independent Director for a term upto 27th May, 2020 and 29* September, 2019 respectively. Ail the Independent Directors have furnished Declaration of Independence stating that they meet the criteria of independence as provided under Section 149(6) of the Companies Act, 2013 and Regulation 16 of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 ('SEBI Listing Regulations') and there has been no change in the circumstances which may affect their status as Independent Directors during the year. Pursuant to the provisions of Section 152 of the Companies Act, 2013, Dr. Huzaifa Khorakiwala, Executive Director (DIN : 02191870) retires by rotation as Director at the ensuing AGM and being eligible, offers himself for the re-appointment. The Board recommends his re-appointment. A brief resume and other details of Dr. Huzaifa Khorakiwala seeking re-appointment are provided in the Notice. In accordance with the provisions of Section 2(51) and 203 of the Companies Act, 2013 read with the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, Dr. Murtaza Khorakiwala, Managing Director, Mr. Manas Datta, Chief Financial Officer and Mr. Narendra Singh, Company Secretary and Compliance Officer are the Key Managerial Personnel (KMP) of your Company. Mr. Narendra Singh was appointed as Company Secretary and Compliance Officer on 28th May, 2015. MEETINGS During the financial year 2015-16, the meetings of the Board of Directors and Audit Committee were held 4 (four) times each. Details of these meetings and other Committees/General Meeting are given in the Report on Corporate Governance forming part of this Annual Report. AUDIT COMMITTEE As on 31st March, 2016, the Audit Committee comprises of Mr. Shekhar Datta, Chairman, Mr. Aman Mehta, Mr. Davinder Singh Brar, Dr. Sanjaya Baru, Ms. Tasneem Mehta and Mr. Baldev RajArora as its Members. Ail the Members of the Committee are Independent Directors and recommendations made by the Audit Committee were accepted by the Board of Directors of the Company. Further, the Committee has carried out the role assigned to it. Other details about the Audit Committee and other Committees of the Board are provided in the Report on Corporate Governance forming part of this Annual Report. DIRECTORS' RESPONSIBILITY STATEMENT Pursuant to the provisions of Section 134(3)(c) of the Companies Act, 2013, the Directors state that: (a) in the preparation of Annual Accounts for the year ended 31st March, 2016, the applicable Accounting Standards have been followed and that no material departures have been made from the same; (b) such Accounting Policies as mentioned in the Notes to the Financial Statements for the year ended 31st March, 2016 have been selected and applied consistently and judgments and estimates have been made 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 of the Company for the year ended 31st March, 2016; (c) proper and sufficient care has been taken 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; (d) the Annual Accounts for the year ended 31st March, 2016 have been prepared on a going concern basis; (e) the internal financial controls to be followed by the Company have been laid down and that such internal financial controls are adequate and operating effectively; and (f) proper Systems to ensure compliance with the provisions of ail applicable laws have been devised and that such Systems are adequate and operating effectively. STATUTORY AUDITORS AND AUDITORS' REPORT At the Annual General Meeting ('AGM') of the Company held on 15th September, 2014, Haribhakti & Co. LLP, Statutory Auditors of the Company were appointed for a term of five years i.e. till the conclusion of 20* AGM subject to ratification of their appointment at every AGM of the Company. The resolution for ratification of their appointment is placed for approval of Members of the Company at the ensuing AGM. The Company has received a letter from Statutory Auditors confirming that they are eligible for ratification of their appointment. The reports of the Statutory Auditors on Standalone and Consolidated Financial Statements forms part of this Annual Report. The Auditors' Report does not contain any qualification, reservation, adverse remark, disclaimer or emphasis of matter. COST AUDIT Pursuant to the provisions of Section 148 of the Companies Act, 2013 ('the Act') read with the Companies (Audit and Auditors) Rules, 2014, as amended from time to time and as recommended by the Audit Committee, the Board of Directors of the Company appointed M/s. Kirit Mehta & Co., Cost Accountants as Cost Auditors to conduct the audit of cost records of the Company for the financial year 2016-17. The Company has received consent from M/s. Kirit Mehta & Co. to act as Cost Auditors. Further, pursuant to the aforesaid provisions of the Act, the remuneration payable to M/s. Kirit Mehta & Co. for conducting the audit of cost records of the Company for the financial year ending on 31st March, 2017 needs to be ratified by the Members of the Company and resolution for the said ratification is placed for approval of Members of the Company at the ensuing AGM. The Cost Auditors' Report does not contain any qualification, reservation, adverse remark, disclaimer or emphasis of matter for the financial year ended 31st March, 2015 and the same was duly filed with the Ministry of Corporate Affairs within the due date. SECRETARIAL AUDIT Pursuant to the provisions of Section 204 of the Companies Act, 2013, the Board of Directors of the Company had appointed Mr. Virendra Bhatt, Practising Company Secretary to conduct Secretarial Audit of the Company for the year ended on 31st March, 2016. The Secretarial Audit Report issued by Mr. Virendra Bhatt does not contain any qualification, reservation, adverse remark or disclaimer and the same is annexed as Annexure I to this Report. EXTRACT OF ANNUAL RETURN An extract of the Annual Return as prescribed under Section 92(3) of the Companies Act, 2013 read with the Companies (Management and Administration) Rules, 2014 is annexed as Annexure II to this Report. EMPLOYEE STOCK OPTIONS Pursuant to SEBI (Share Based Employee Benefits) Regulations, 2014 and other applicable laws, if any, the required disclosures as on 31st March, 2016 are annexed as Annexure III to this Report. During the year under review, there were no material changes in the Employee Stock Option Scheme and the same is in compliance with the said Regulations. CORPORATE SOCIAL RESPONSIBILITY (CSR) Pursuant to provisions of Section 135 of the Companies Act, 2013 read with the Companies (Corporate Social Responsibility Policy) Rules, 2014 and pursuant to the recommendation of the CSR Committee, the Board has approved a CSR Policy and the same has been uploaded on the website of the Company www.wockhardt.com . CSR Policy contains the CSR activities which can be carried out by the Company, governance structure and implementation process etc. In accordance with the aforesaid provisions, the Average Net Profit of the Company for the immediately preceding 3 financial years calculated as per Section 198 of the Companies Act, 2013 was negative. Hence, no amount was required to be spent on CSR activities during the financial year 2015-16. However, as a continuing corporate governance practice, the Company contributed Rs. 8 crore to Wockhardt Foundation, CSR arm of the Company, which has undertaken CSR projects in the areas of healthcare and education etc. for spending on CSR activities. The details on CSR activities as required under Section 135 of the Companies Act, 2013 and the Companies (Corporate Social Responsibility Policy) Rules, 2014, as amended from time to time, is annexed as Annexure IV to this Report. POLICY ON APPOINTMENT AND REMUNERATION OF DIRECTORS The Company has been following well laid down policy on appointaient and remuneration of Directors, KMP and Senior Management personnel. The appointaient of Directors is made pursuant to the recommendation of Nomination and Remuneration Committee (NRC). The remuneration of Executive Directors comprises of Basic Salary, Perquisites & Allowances and follows applicable requirements as prescribed under the Companies Act, 2013. Approval of shareholders and the Central Government, as the case may be, for payment of remuneration to Executive Directors is sought, from time to time. The remuneration of Non-Executive Directors comprises of sitting fees & commission, if any, in accordance with the provisions of Companies Act, 2013 and reimbursement of expenses incurred in connection with attending the Board meetings, Committee meetings, General meetings and in relation to the business of the Company. A brief of the Remuneration Policy on appointment and remuneration of Directors, KMP and Senior Management is provided in the Report on Corporate Governance forming part of this Annual Report. NRC have also formulated criteria for determining qualifications, positive attributes and independence of a director and the same have been provided in the Report on Corporate Governance forming part of this Annual Report. PERFORMANCE EVALUATION OF DIRECTORS The Nomination and Remuneration Committee of the Board of Directors of the Company have laid down criteria for performance evaluation of the Board of Directors including Independent Directors. Pursuant to the requirement of the Companies Act, 2013 and the SEBI Listing Regulations, the Board has carried out the annual performance evaluation of entire Board, Committee and ail the Directors based on the parameters specified in the Report on Corporate Governance forming part of this Annual Report. The parameters of performance evaluation were circulated to the Directors in the form of questionnaire. INTERNAL FINANCIAL CONTROLS WITH REFERENCE TO FINANCIAL STATEMENTS M/s. KPMG was engaged to review and comment on adequacy of Internal Financial Control ('IFC') process of the Company in accordance with the requirement of the Companies Act, 2013 and there have been no material observations. The Company has adequate internal financial control procedures commensurate with its size and nature of business. These controls include well defined policies, guidelines. Standard Operating Procedures ('SOPs'), authorization and approval procedures and technology intensive processes. The internal financial controls of the Company are adequate to ensure the accuracy and completeness of the accounting records, timely preparation of reliable financial information, prevention and detection of frauds and errors, safeguarding of the assets and that the business is conducted in an orderly and efficient manner. The Company has laid down the procedure for risk assessment and their mitigation through an internal Risk Committee. Key risks and their mitigation arising out of periodic reviews by the Committee are assessed and reported to the Audit Committee, on a periodic basis. The current key risk relates to regulatory risk on overseas operations and business. This is arising out of regulatory audits at Company's manufacturing locations, which is being adequately addressed through strengthening of current processes and controls by Company's internal quality assurance and manufacturing teams and through the help of reputed external consultants. There are no risks which in the opinion of the Board threaten the existence of your Company. Other details about Risk Management have been elaborated in the Report on Corporate Governance forming part of this Annual Report. PARTICULARS OF LOANS, INVESTMENTS AND GUARANTEES UNDER SECTION 186 OF THE COMPANIES ACT, 2013 In accordance with the approval sought from the shareholders under Section 186 of the Companies Act, 2013, the Company can give loans, guarantees and/or providing security(ies) and/or make investments upto Rs. 3,000 crore. The particulars of loans, investments and guarantees are provided under Note 32 in the Notes to the Financial Statements. PARTICULARS OF CONTRACTS/ARRANGEMENTS WITH RELATED PARTIES Ail contracts/arrangements/transactions entered into by the Company during the financial year 2015-16 with its related parties were reviewed and approved by the Audit Committee. Prior omnibus approvals were obtained from the Audit Committee for related party transactions which were of repetitive nature, entered in the ordinary course of business and on an arm's length basis. The particulars of contracts/arrangements with related parties in Form AOC-2 are provided in Annexure V to this Report. VIGIL MECHANISM Pursuant to the requirements laid down under Regulation 22 of the SEBI Listing Regulations and Section 177 of the Companies Act, 2013, the Company has well laid down Vigil Mechanism. The details of the same are provided in the Report on Corporate Governance forming part of this Annual Report. PARTICULARS OF EMPLOYEES AND RELATED DISCLOSURES Disclosure pertaining to the remuneration as required under Section 197(12) of the Companies Act, 2013 read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is provided in Annexure VI to this Report. In terms of the requirement 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, a statement showing the names and other particulars of the employees drawing remuneration in excess of the limits set out in the said rules forms part of this Report. Pursuant to the provisions of Section 136(1) of the Companies Act, 2013, the Board's Report is being sent to the shareholders of the Company excluding the said statement. Any shareholder interested in inspection or obtaining a copy of the statement may write to the Company Secretary and the same will be furnished on request. ENERGY CONSERVATION, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO The particulars in relation to conservation of energy, technology absorption and foreign exchange earnings and outgo stipulated under Section 134(3)(m) of the Companies Act, 2013 read with Rule 8 of the Companies (Accounts) Rules, 2014 is provided in Annexure VII to this Report. SUBSIDIARIES During the year, the Company's Subsidiary, Wockhardt Bio AG, has formed subsidiaries namely Wockhardt Bio (R), Wockhardt Bio Pty Ltd. and Wockhardt Bio Ltd. in Russia. Australia and New Zealand respectively. Hence, as on 31st March, 2016, the Company had total 31 subsidiaries. There were no companies who ceased to be subsidiaries of the Company during the financial year under review. However, Swiss Biosciences AG ceased to be an associate of the Company during the financial year under review. Pursuant to Section 129(3) of the Companies Act, 2013, a statement containing salient features of the subsidiaries of the Company is provided in Form AOC-1 attached as Annexure VIII to this Report and other details of the subsidiaries are also provided in the said Annexure. CONSOLIDATED FINANCIAL STATEMENT The Consolidated Financial Statement of your Company for the financial year 2015-16 are prepared in compliance with applicable provisions of the Companies Act, 2013 read with the Rules issued thereunder, applicable Accounting Standards and provisions of the SEBI Listing Regulations. A copy of the Audited Financial Statements of the subsidiaries shall be made available for inspection at the Registered Office of the Company during business hours. The Audited Financial Statement of the Company including Consolidated Financial Statement and Financial Statements of its subsidiaries are also available on the website of the Company. Further, any shareholder interested in obtaining a copy of the separate Financial Statement of the subsidiary(ies) shall make specifies request in writing to the Company Secretary. DEPOSITS The Company has not accepted any deposits under Chapter V of the Companies Act, 2013 during the year under review. SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS/COURT There are no significant and material orders passed by the Regulators or Courts or Tribunals which impact the going concern status and operations of the Company during the year under review. However, Member's attention is drawn on the following development: Ministry of Health and Family Welfare vide its various Notifications dated 10* March, 2016 prohibited manufacture for sale, sale and distribution for human use some of the Fixed Dose Combination ('FDC') with immediate effect. The said Notification includes some of the Products of the Company. However, the Hon'ble Delhi High Court allowed the stay on the said Notifications and further ordered that Till then, the effect of the Notifications aforesaid impugned in these petitions qua the petitioners shall remain stayed and no coercive steps be taken in pursuance thereto against the petitioners and their stockists, agents, retailers and distributors. As on date, the matter is pending in Hon'ble Delhi High Court. CORPORATE GOVERNANCE AND MANAGEMENT DISCUSSION & ANALYSIS REPORT Pursuant to the requirement of the SEBI Listing Regulations, a Report on Corporate Governance along with a Certificate from Practicing Company Secretary confirming the compliance of the conditions of Corporate Governance and Management Discussion and Analysis Report forms part of this Annual Report. ACKNOWLEDGEMENTS Your Directors appreciate and acknowledge the unstinted commitment and valuable contribution made by the employees of the Company at ail levels. The Directors also take this as an opportunity to express their gratitude to ail the Stakeholders of the Company viz. customers, members of medical profession, investors, banks, regulators for their continued support during the year under review. For and on behalf of the Board of Directors Dr. H. F. KHORAKIWALA DIN: 00045608 Chairman Place : Mumbai, Date : 6th May, 2016 |