BOARD'S REPORT Your Directors take pleasure in presenting the Eleventh Annual Report and Audited Accounts for the year ended 31st March, 2016. DIVIDEND In view of loss incurred during the year, your Directors do not recommend any dividend for the year under review EXTRACT OF ANNUAL RETURN: The extract of Annual Return as provided under sub-section (3) of section 92 of the Companies Act, 2013 in prescribed form MGT-9 is enclosed as Annexure "1" to this report. SUBSIDIARY/ JOINT VENTURE/ ASSOCIATE COMPANY The Company does not have any subsidiary, joint venture or associate company. SHARE CAPITAL & RIGHTS ISSUE The Board of Directors of the Company vide their resolution passed on 24th July, 2015, forfeited 17,093 partly paid up equity shares of the Company due to non-payment of call money. Consequent to the forfeiture, the paid-up capital of the Company was reduced to Rs. 236,687,354/- during the year 2015-16. Your Company had issued 1,02,04,081 fully paid-up equity shares of face value of Rs. 1 each ("rights issue equity shares") for cash at a price of Rs. 245 per equity share including a share premium of Rs. 244 per equity share aggregating up to Rs. 25,000 lakhs to our existing equity shareholders on a rights basis in the ratio of 5 fully paid-up equity share(s) for every 116 fully paid-up equity share(s) held by the existing equity shareholders on the record date, i.e. 17th March, 2016 ("the issue"). e was open for subscription from 28th March, 2016 to 13th April, 2016 (the Issue Closing date was extended from 11th April, 2016 to 13th April, 2016). The Rights Issue Committee, in its meeting held on 27th April, 2016 approved the allotment of 1,02,04,081 rights equity shares to the successful applicants, based on the 'basis of allotment' approved by BSE Limited, the designated Stock Exchange for the issue. The shares were listed on BSE Limited & National Stock Exchanged of India Limited and was admitted for dealing by both the exchanges with effect from 3rd May, 2016. Consequent to the allotment made by the Company on Rights basis, the paid-up share capital of the Company have increased from Rs. 236,687,354 to Rs. 24,68,91,435/-. DIRECTORS & KEY MANAGERIAL PERSONNEL Mr. Dilip Shanghvi (DIN: 00005588), retires by rotation at the ensuing Annual General Meeting, and being eligible offers himself for re-appointment. Pursuant to the resolution passed by the members in their 6th Annual General Meeting held on 8th August 2011, Mr. Dilip Shanghvi (DIN: 00005588), who is also the Managing Director of Sun Pharmaceutical Industries Limited, holds office as the Managing Director of the Company upto 28th February, 2017. The Board of Directors of the Company, in their meeting held on 6th May, 2016 approved the proposal for re-appointment Mr. Shanghvi as the Managing Director of the Company, without any remuneration, for a further period of five years w.e.f. 1st March, 2017. The members of the company had in their 9th Annual General Meeting held on 31st July, 2014 appointed Prof. Dr. Andrea Vasella (DIN: 01653058), Prof. Dr. Goverdhan Mehta (DIN: 00350615) and Mr. S. Mohanchand Dadha (DIN: 00087414) as Independent Directors of the Company for a term of two years to hold office upto the conclusion of the ensuing 11th Annual General Meeting of the Company. In view of the commendable performance by Prof. Dr. Vasella, Prof. Dr. Mehta and Mr. Dadha during their tenure as Independent Directors of the Company and based on their Performance Evaluation, it is proposed to re-appoint all three of them as Independent Directors of the Company at the ensuing Annual General Meeting of the Company for a further term of one year upto the conclusion of the 12th Annual General Meeting of the Company. During the year, Mr. Sudhir V Valia (DIN: 00005561), who is also a whole-time Director of Sun Pharmaceutical Industries Limited, was re-appointed as the Chief Financial Officer (CFO) under section 203 of the Companies Act, 2013 and consequentially a Whole-time Director of the Company, without any remuneration, for a further period of two years, to hold office from 1st January, 2016 to 31st December, 2017 without any remuneration. With effect from 6th May, 2015, Ms. Meetal S Sampat ceased to be the Company Secretary & Compliance Officer of the Company and Mr. Debashis Dey has been appointed in her place. Appropriate resolutions for the appointment/re-appointment of Directors as detailed above are being placed for your approval at the ensuing Annual General Meeting. DECLARATION BY INDEPENDENT DIRECTORS The Company has received declaration from all the Independent Directors of the Company confirming that they meet with the criteria of independence as prescribed under sub-section (6) of Section 149 of the Companies Act, 2013. POLICY ON DIRECTORS' APPOINTMENT AND REMUNERATION For the purpose of selection of any Director, the Nomination & Remuneration Committee identifies persons of integrity who possess relevant expertise, experience and leadership qualities required for the position and also takes into consideration recommendation, if any, received from any member of the Board. The Committee also ensures that the incumbent fulfills such other criteria with regard to age and other qualifications as laid down under the Companies Act, 2013 or other applicable laws. The Board has, on the recommendation of the Nomination & Remuneration Committee framed a policy for selection and appointment of Directors, Senior Management and their remuneration. The summary of Remuneration Policy is disclosed in the Corporate Governance Report, which forms a part of this Report. FAMILIARISATION PROGRAMME FOR THE INDEPENDENT DIRECTORS In compliance with the requirements of the erstwhile Listing Agreement with the stock exchanges ("Listing Agreement") and SEBI (Listing Obligation and Disclosure Requirements) Regulations, 2015 ("SEBI (LORD) Regulations") the Company has put in place a Familiarisation Programme for the Independent & non - executive directors to familiarize them with the Company, their roles, rights, responsibilities in the Company, nature of the industry in which the Company operates, business model etc. The details of such programme is available on the website of the company www.sunpharma in and may be accessed through the web link <http://www>. sunpharma.in/regulatory-compliance.htm. NUMBER OF MEETINGS OF THE BOARD The Board of Directors of the Company met six times during the previous financial year on 05th May , 2015, 12th May, 2015, 1st August, 2015, 4th November, 2015, 3rd February, 2016 and 5th March, 2016. The particulars of attendance of the Directors at the said meetings are detailed in the Corporate Governance Report of the Company, which forms a part of this Report. The intervening gap between the Meetings were within the period prescribed under the Companies Act, 2013, erstwhile Listing Agreement and SEBI (LODR) Regulations. EVALUATION OF PERFORMANCE OF THE BOARD, ITS COMMITTEES AND INDIVIDUAL DIRECTORS The Board of Directors have carried out an annual evaluation of its own performance, its various committees and individual directors pursuant to the provisions of the Act and the Corporate Governance requirements as prescribed under regulation 17(10), 25(4) and other applicable provisions of the SEBI (LODR) Regulations. The performance of the Board was evaluated by the Board after seeking inputs from all the directors on the basis of various criteria such as Board Composition, Process, dynamics, quality of deliberations, strategic discussions, effective reviews, committee participation, governance reviews etc. The performance of the committees was evaluated by the board after seeking inputs from the committee members on the basis of criteria such as Committee composition, process, dynamics, deliberation, strategic discussions, effective reviews etc. The Board and the Nomination and Remuneration Committee reviewed the performance of the individual directors on the basis of the criteria such as Transparency, Analytical Capabilities, Performance, Leadership, Ethics and ability to take balanced decisions regarding stakeholders. In a separate meeting of independent directors, performance of non-independent directors, performance of the board as a whole and performance of the Chairman was evaluated, taking into account the views of the executive directors and nonexecutive directors. The same was discussed in the board meeting that followed the meeting of independent directors, at which the performance of the Board, its committee and individual Directors was also discussed. HUMAN RESOURCES As on 31st March, 2016 our Company had a dedicated team of over 350 people, of which almost 300 are highly qualified and experienced scientists. During the previous year, we considerably strengthened our team by attracting top quality scientific talent, with years of experience in drug research internationally. In addition to increasing our participation at international conferences for continuous knowledge upgradation, we have also put in place effective training and career progression plans for our team. Your Directors recognize the team's valuable contribution and place on record their appreciation for Team SPARC. Information as per Section 197 (12) of the Companies Act, 2013, read with rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014 is provided in a separate annexure forming part of this report. Further, pursuant to the proviso to section 136 (1) of the Companies Act, 2013, the report and the accounts are being sent to the members excluding the information under rule 5(2) & 5(3) aforesaid. In terms of section 136 of the Act, the said annexure is open for inspection at the Registered Office of the Company. Any shareholder interested in obtaining a copy of the same may write to the Company Secretary at Mumbai office or Registered office address of the Company. DISCLOSURE UNDER THE SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION AND REDRESSAL) ACT, 2013 Your Company strongly believes in providing a safe and harassment free workplace for each and every individual working for the Company through various interventions and practices. It is the continuous endeavor of the Management of the Company to create and provide an environment to all its employees that is free from discrimination and harassment including sexual harassment. During the year ended 31st March, 2016, no complaint pertaining to sexual harassment was received by the Company. AUDITORS Statutory Auditors The Company's Auditors, Messrs. Deloittee Haskins & Sells LLP, Chartered Accountants, Mumbai (Firm's Regn No. 117366W/W-100018), were appointed as the Statutory Auditors of the Company for a period of three years, upto the conclusion of the 12th Annual General Meeting of the Company, subject to ratification by members at every Annual General Meeting of the Company. The Auditors have confirmed their eligibility under Section 141 of the Companies Act, 2013 and the Rules framed thereunder for reappointment as the Statutory Auditors of the Company. As required under regulation 33 (1) (d) of the SEBI (LODR) Regulations, the auditors have also confirmed that they hold a valid certificate issued by the Peer Review Board of the Institute of Chartered Accountants of India. Secretarial Auditors Pursuant to the provisions of Section 204 of the Companies Act, 2013 and the rule 9 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Company has appointed Messrs C J Goswami & Associates, Company Secretaries, Mumbai to undertake the Secretarial Audit of the Company. The Report of the Secretarial Audit Report is annexed herewith as "Annexure 4". The Audit Report and the Secretarial Audit Report for the financial year 2015-16 does not contain any qualification, reservation or adverse remarks by the Auditors. LOANS, GUARANTEES & INVESTMENTS The particulars of loans, guarantees and investments have been disclosed in the financial statements. RELATED PARTY TRANSACTIONS The policy on Related Party Transactions as approved by the Board is available on the website of the company www. sunpharma.in and may be accessed through the web link <http://www.sunpharma.in/regulatory-compliance.htm>. All contracts/arrangements entered by the Company during the previous financial year with the related parties were in the Ordinary Course of business and on arm's length basis. During the previous financial year the Company did not enter into any new contract/ arrangement with the related parties which could be considered material in accordance with the policy of the Company or Listing Agreement or SEBI (LODR) Regulations. Appropriate resolutions for the approval for certain contracts entered into/proposed to be entered into with related parties, transactions pursuant to which may become material during the future years, are being placed for your approval at the ensuing Annual General Meeting. AUDIT COMMITTEE COMPOSITION The details pertaining to composition of audit committee are included in the Corporate Governance Report which forms a part of this Report. RISK MANAGEMENT The Board of Directors have developed & implemented a robust risk management policy which identifies the key elements of risks that threatens the existence of the Company. The Audit Committee reviews the status of key risks and steps taken by the Company to mitigate such risks at regular intervals. INTERNAL FINANCIAL CONTROLS The Company has in place a well-defined organizational structure and adequate internal controls for efficient operations which is cognizant of applicable laws and regulations, particularly those related to protection of intellectual property, resources and assets, and the accurate reporting of financial transactions in the financial statements. The Company continually upgrades these systems. The internal control system is supplemented by extensive internal audits, conducted by independent firms of chartered accountants. CORPORATE SOCIAL RESPONSIBILITY (CSR) In compliance with the requirements of section 135 of the Companies Act, 2013 read with the Companies (Corporate Social Responsibility) Rules, 2014, the Board of Directors have constituted a Corporate Social Responsibility Committee. The details of membership of the Committee & the meetings held are detailed in the Corporate Governance Section of the Annual Report. The contents of the CSR Policy of the Company as approved by the Board on the recommendation of the Corporate Social Responsibility Committee is available on the website of the company www.sunpharma.in and may be accessed through the web link compliance.htm Since the average net profits of the Company made during the three immediately preceding financial years was negative, the Company was not required to spend any money on CSR activities during the previous year. PUBLIC DEPOSITS The Company has not accepted any deposit from the Public during the year under review, under the provisions of the Companies Act, 2013 and the rules framed thereunder. MANAGEMENT DISCUSSION AND ANALYSIS The Management Discussion and Analysis on the operations of the Company as prescribed under Schedule V read with regulation 34(3) of the SEBI (LODR) Regulations, is provided in a separate section and forms a part of this report. CORPORATE GOVERNANCE REPORT Report on Corporate Governance and Certificate of the Auditors of your Company regarding compliance of the conditions of Corporate Governance as stipulated in Schedule V read with regulation 34(3), is provided in a separate section and forms a part of this report. BUSINESS RESPONSIBILITY REPORT The Business Responsibility Report of the Company for the year ended 31st March, 2016, as required under Clause 34 (2) (f) of the SEBI (LODR) Regulations, forms part of the Annual Report and is made available on the website of the Company www.sunpharma.in and may be accessed through the web link <http://www.sunpharma.in/regulatory-compliance.htm>. The same is also kept at the Registered office of the Company for inspection. Any shareholder interested in obtaining a copy of the same may write to the Company Secretary at Mumbai office or Registered office address of the Company. CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO The information on 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 annexed herewith as "Annexure 3". SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS OR TRIBUNALS No significant or material Orders were passed by the Regulators or Courts or Tribunals during the previous year which may impact the Going Concern Status of the Company's operations in the future. WHISTLE BLOWER POLICY/ VIGIL MECHANISM To create enduring value for all stakeholders and ensure the highest level of honesty, integrity and ethical behaviour in all its operations, the Company has formulated a Vigil Mechanism named as 'SPARC Whistle Blower Policy' in addition to the existing code of conduct that governs the actions of its employees. This Whistle-blower Policy aspires to encourage all employees to report suspected or actual occurrence(s) of illegal, unethical or inappropriate events (behaviours or practices) that affect Company's interest / image. A copy of the Policy is available on the website of the Company and may be accessed through the web link <http://> www.sunpharma.in/regulatory-compliance.htm <http://www.sunpharma.in/regulatory-compliance.htm>. DIRECTORS' RESPONSIBILITY STATEMENT Pursuant to the requirements under section 134(5) read with section 134(3) (c) of the Companies Act, 2013, with respect to Directors Responsibility Statement, it is hereby confirmed that: a) in the preparation of the annual accounts for the financial year ended 31st March, 2016, the applicable accounting standards have been followed along with proper explanation relating to material departures; b) the Directors have 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 as at 31st March, 2016 and of the loss of the Company for the year ended on that date; c) the Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; d) the Directors have prepared the annual accounts on a going concern basis; and e) the Directors have laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively. f) 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. ACKNOWLEDGEMENTS Your Directors wish to thank all stakeholders and business partners-your Company's bankers, medical profession and business associates for their continued support and valuable co-operation. The Directors also wish to express their gratitude to investors for the faith that they continue to repose in the Company. For and on behalf of the Board of Directors Dilip S. Shanghvi Chairman & Managing Director Place: Mumbai Date: May 6, 2016 |