BOARD'S REPORT TO THE MEMBERS, Your Directors are pleased to present the 34"1 Annual Report and the Company's audited financial statement for the financial year ended March 31,2015. 2. Dividend: Your Directors are pleased to recommend payment of dividend @ 15% (Rs. 1.50 per Share) on the Equity Share Capital of Rs. 1,20,00,000 for the year 2014-2015 absorbing Rs. 21.05 Lacs including Tax on Dividend, which will be, if approved, paid to the Shareholders holding shares as on 25lh September, 2015, after business hours. 3. Transfer to Reserves: The Company proposes to transfer Rs. 309 lacs to the General Reserve out of the amount available for appropriation and an amount of Rs.2.82 lacs is proposed to be retained in the statement of Profit and Loss account. 4. Financial Performance and Operations Review: During the year under review, the Company yielded Gross Income of Rs. 4231.20 lacs and earned Gross Profit before depreciation, interest and tax of Rs. 690.15 lacs with Net Profit of Rs. 331.34 Lacs as against Gross Income of Rs. 4208.56 lacs, Gross Profit before depreciation and Interest and tax of Rs. 715.40 lacs with Net Profit of Rs. 322.16 Lacs of previous year, respectively, registering modest growth in Gross income and in Net Profit, as compared to previous year. 5. Future Prospects: Your company has created new world class GMP facility for all its liquids and tablets confirming requirement of WHO. The Company has increased its manufacturing capacity for tablets and liquids by four folds keeping in view the projected growth plans. The Company has been now focusing more on strategy implementation and follow up action to achieve the desired growth plan in ethical Marketing. The Company is ensuring its products availability in all corner of country by increasing C&F agents. With a view to create more ethical market, the Company has introduced various new drugs such as Teclobet, Tanolite, Clinzit, Clinzita-A, Levotryl Tablet, Levotryl-M Tablet, Levotryl Syrup, THA-4, THA-8, Pyloryl, Pangs At, Feveryl Drops, Feveryl Suspension in its Mother Child Care specialized Segment. On other side, your Company has established Institutional Business with Government institutions, Semi Government and Hospitals & Clinics. This division of the Company, is also focusing more on strategy implementation and achieving higher growth. The Company has been putting its major thrust on Export and has set higher objective of achieving 20% growth during the financial year 2015-16 with addition of new, more clients and cover new countries such as Latin America, Philippines, South Sudan, Tanzania, Zimbabwe, Zambia to name a few in addition to existing client countries such as Nigeria, Congo, Ghana, Burma, Sri Lanka, Gautmala, Costa-de rica, etc. The Company has been following its well planned strategy of deriving maximum mileage on domestic market, more particularly on ethical business, effectively and aggressively penetrating the domestic and export market, exercising regular and strong follow up over Marketing distribution net work and channels, strengthening its new institutional business of supplying products to government / semi-government institutions in the Country, with an objective to continue to excel well. With these, the Board is confident that this would result into substantial growth in the business revenue, barring unforseen circumstances. 6. Directors' Responsibility Statement Your Directors state that: a. in the preparation of annual accounts for the year ended March 31, 2015, the applicable accounting standards read with requirements set out under Schedule III to the Act, have been followed and there are no material departures from the same; 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 at March 31, 2015 and of the Profit 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 the 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; e. the Directors have laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and are operating effectively; and f. the Directors have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems are adequate and operating effectively. 7. Directors and Key Managerial Personnel During the year under review, following changes occurred in the position of Directors / KMPs of the Company: a. Pursuant to the provisions of Section 149 of the Act, Dr. DineshS.Shah, Dr.TusharP. Shah, Mr. Divyakant R. Zaveri were appointed as Independent Directors at the Annual General Meeting of the Company held on 30th September, 2014. The terms and conditions of appointment of independent directors are as per Schedule IV of the Act. They have submitted a declaration that each of them meets the criteria of independence as provided in Section 149(6) of the Act and there has been no change in the circumstances which may affect their status as independent directors during the year. b. Mr. Mukesh M. Khanna has been appointed as the Company Secretory & Compliance Office of the Company effective from 26"' July, 2014. c. Mrs. Poornima Dhirendra Karvat was appointed as a Woman Independent Director with effect from 30th March, 2015 in the nature of additional Director and pursuant to the provisions of Section 161 of the Companies Act, 2013, she holds office upto the ensuing Annual General Meeting. Being eligible, she has offered herself for appointment as an Independent Director of the Company. d. Ms. Priyanka Doshi, has been appointed as Chief Financial Officer (CFO) of the Company in place of Mr. Haresh G. Shah who resigned as the CFO of the Company, effective from 3151 March, 2015. During the year, the non-executive directors of the Company had no pecuniary relationship or transactions with the Company. Events occurring after balance sheet date - change in directorate / KMP e. Dr. Dinesh S. Shah and Dr. Tushar P. Shah resigned as Directors of the Company on 14* May, 2015 due to their other pre-occupations. f. Mr. Bharat Dhirajlal Mehta, was appointed as an Independent Director in casual vacancy caused on resignation of Dr. Dinesh S. Shah, with effect from 14th May, 2015. 8. Number of Meetings of the Board Eight Meetings of the Board were held during the year on 3rd April, 2014, 26th April, 2014,15th May, 2014 , 26th July, 2014, 14th October, 2014, 27th January, 2015, 11* February, 2015 and 30* March, 2015. For details of the meetings of the Board, please refer to the Corporate Governance Report, which forms part of this report. 9. Policy on Directors'Appointment and Remuneration and other details The Company's policy on directors' appointment and remuneration and other matters provided in Section 178(3) of the Act, may be accessed on the Company's website at the link: 10. Board Evaluation The Board of Directors has carried out an annual evaluation of its own performance, Board committees and Individual Directors pursuant to the provisions of the Act and the Corporate Governance requirements as prescribed by Securities and Exchange Board of India ("SEBI") under Clause 49 of the Listing Agreements ("Clause 49"). The performance of the Board was evaluated by the Board after seeking inputs from all the directors on the basis of the criteria such as the Board composition and structure, effectiveness of board processes, information and functioning etc. The performance of the Committees was evaluated by the Board after seeking inputs from the Committee members on the basis of the criteria such as the composition of committees, effectiveness of committee meetings, etc. The Board and the Nomination and Remuneration Committee ("NRC") reviewed the performance of the Individual Directors on the basis of the criteria such as the contribution of the individual director to the Board and committee meetings like preparedness on the issues to be discussed, meaningful and constructive contribution and inputs in meetings, etc. In addition, the Chairman was also evaluated on the key aspects of his role. 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 executive directors and non-executive directors. The same was discussed in the board meeting that followed the meeting of the independent Directors, at which the performance of the Board, its committees and individual directors was also discussed. 11. Internal Financial Control Systems and their adequacy The details in respect of internal financial control and their adequacy are included in the Management Discussion & Analysis, which forms part of this report. 12. Audit Committee The details pertaining to composition of audit committee are included in the Corporate Governance Report, which forms part of this report. 13. Share Capital The paid-up Equity Share Capital of the Company as at 318t March, 2015 is Rs. 120 Lacs. The Company currently has no outstanding shares issued with differential rights, sweat equity or ESOS. 14. Risk Management The Board of the Company has formed a Risk Management Policy to frame, implement and monitor the risk management plan for the Company. The Audit Committee is responsible for reviewing the risk management plan and ensuring its effectiveness. The Audit Committee has additional oversight in the area of financial risks and controls. Major risks identified by the businesses and functions are systematically addressed through mitigating actions on a continuing basis. 15. Safety, Environment and Health The Company considers safety, environment and health as the management responsibility. Regular employee training programs, are carried out in the manufacturing facilities on safety, environment and health. 16. Particulars of Loans, Guarantees or Investments The Company has not provided any loans and guarantees and no investments made pursuant to Section 186 of the Companies Act, 2013. 17. Particulars of contracts or 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 an arm's length basis. During the year, the Company had entered into contract with Mercury Antibiotics Pvt. Ltd., for availing the building and plant and machinery on lease for a period of 3 years on lease rent of Rs.54 Lacs per annum. The Company has also entered in to contract with Mercury Marketing & Consultancy Services (MMCS) for availing services of the professionals retained by MMCS, for a period of 3 years on fees of Rs.24 Lacs per annum. The Company had not entered into any contract /arrangement / transaction with related parties which could be considered material in accordance with the policy of the Company. The Policy dealing with related party transactions as approved by the Board may be accessed on the Company's website at the link: Prescribed form AOC - 2, pursuant to Section 134 (3) (h) of the Companies Act, 2013 & Rule 8(2) of the Companies (Accounts) Rules, 2014, is furnished as Annexure - A to this report. 18. Corporate Social Responsibility (CSR) Though not mandatory in terms of Section 135 of Companies Act, 2013, the Company has formulated Corporate Social Responsibility (CSR) Policy in accordance with Section 135 of the Companies Act, 2013 and constituted CSR Committee with Dr. Tushar Shah, Dr. Dinesh Shah and Mr. D.R. Zaveri, three Independent Directors with Mr. Rajendra R. Shah, Managing Director of the Company. Dr. Tushar Shah was the Chairman of the CSR Committee. The CSR Committee was re-constituted by the Board of Directors of the Company on 141" May, 2015 with Ms. Poornima Karvat and Mr. Bharat Mehta as members in place of Dr. Tushar Shah, Dr. Dinesh Shah. However the Company has been pursuing CSR activities in the area of promotion of education in medical field by providing scholarship and other amenities to the medical students. The CSR policy of the Company is placed on the website of the Companywww.mercurylabs.com 19. Policy on prevention, prohibition and redressal of sexual harassment at workplace. The Company has zero tolerance for sexual harassment at workplace and has adopted a Policy on Prevention, Prohibition and Redressal of Sexual Harassment at the Workplace, in line with the provisions of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 and the Rules there under. The Policy aims to provide protection to employees at the workplace and prevent and redress complaints of sexual harassment and for matters connected or incidental thereto, with the objective of providing a safe working environment, where employees feel secure. The Company has also constituted an Internal Complaints Committee, known as the Prevention of Sexual Harassment (POSH) Committee, to inquire into complaints of sexual harassment and recommend appropriate action. The Company has not received any complaint of sexual harassment during the financial year 2014-15. The policy on Prevention, Prohibition and Redressal of Sexual Harassment of Women at work place, is placed on website of the Company www.mercurylabs.com 20. Vigil Mechanism/Whistle Blower Policy The Company has adopted a Whistle Blower Policy, to provide a formal mechanism to the Directors and employees to report their concerns about unethical behavior, actual or suspected fraud or violation of the Company's Code of Conduct or ethics policy. The Policy provides for adequate safeguards against victimization of employees who avail of the mechanism and also provides for direct access to the Chairman of the Audit Committee. It is affirmed that no personnel of the Company has been denied access to the Audit Committee. The Whistle Blower Policy is posted on the website of the Companywww.mercurylabs.com 21. Significant and material orders passed by the regulators or courts. No significant material orders have been passed by the Regulators or Courts or Tribunals which would impact the going concern status of the Company and its future operations. 22. Conservation of Energy, Technology Absorption, 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 Act read with Rule 8 of The Companies (Accounts) Rules, 2014, is annexed as Annexure B. 23. Particulars of Employees and Remuneration Pursuant to the Rule 5(2) & (3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, no employee of the Company was paid remuneration exceeding the prescribed limits, during the financial year 2014 - 2015. The information required under Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is provided in the Annexure-C forming part of the Report. None of the employees listed in the said Annexure is related to any Director of the Company. 24. Reply to Remark made by the Auditors: With reference to remark made by of the Auditors in their Report under "Other Matter", as briefed in Note-19, Rs. 53,17,983/-, the amount of Debtors outstanding for more than One year, is not considered doubtful by the Management, in view of part of them is already received and as per the assurance given, balance is likely to be received by the Company, in phased manner. 25. Auditors (1) Statutory Auditors: Pursuant to the provisions of Section 139 of the Act and the rules framed thereunder, M/s. Naresh & Co, Chartered Accountants, were appointed as statutory auditors of the Company from the conclusion of the 33rt Annual General Meeting (AGM) of the Company held on September 30,2014 till the conclusion of the 36th AGM to be held in the year 2017, subject to ratification of their appointment at every AGM. The Company has received letter from them to the effect that their appointment, if made, would be within the prescribed limits under Section 141(3)(g) of the Companies Act, 2013 and that they are not disqualified from appointment. (2) Secretarial Auditors: Pursuant to the provisions of Section 204 of the Act and The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Board of Directors of the Company had appointed M/s. Jayesh Vyas & Associates, a firm of Company Secretaries in Practice to undertake the Secretarial Audit of the Company forthe year ended March 31,2015. The Secretarial Audit Report is annexed as Annexure-D. The Auditors' Report and the Secretarial Audit Report for the financial year ended March 31,2015 do not contain any qualification, reservation, adverse remark or disclaimer. 26. Deposits: The Company has no unpaid and / or unclaimed deposit. The Company has accepted deposit from Directors and their relatives, the Shareholders and has complied with all applicable provisions of the Companies Act relating to acceptance and renewal of deposits. The details relating to deposits, covered under Chapter Vof the Act are as under: 27. Extract of Annual Return As provided under Section 92(3) of the Act, the extract of annual return is given in Annexure-E in the prescribed Form MGT-9, which forms part of this report. 28. Material Change & Commitments, if any There is no material changes and commitments, that would affect financial position of the company from the end of the financial year of the company to which the financial statements relate and the date of the directors report. 29. Acknowledgment The Board of Directors wish to place on record their appreciation for the continued support extended by the Bankers, Business Associates, clients, vendors and suppliers, Government Authorities, Employees at all levels and Stakeholders, in furthering the interest of the Company. On behalf of the Board of Directors, Rajendra R. Shah Chairman* Managing Director Date: 318t July, 2015 Place: Vadodara, |