Mar 31, 2023
The Board is pleased to submit its report on the performance of the Company along with the audited standalone and consolidated financial statements for the year ended 31st March, 2023.
Financial Summary and State of Affairs |
(H in crores) |
|||
Year ended 31s |
March, 2022 |
Particulars |
Year ended 31 |
st March, 2023 |
Standalone |
Consolidated |
Standalone |
Consolidated |
|
15,380.82 |
21,763.34 |
Gross total revenue |
15,790.60 |
22,753.12 |
3,804.38 |
3,675.39 |
Profit before tax and exceptional item from continuing operations |
3,626.44 |
4,220.77 |
100.70 |
- |
Profit before tax from discontinuing/restructuring operations |
58.73 |
- |
2,882.58 |
2,516.75 |
Profit for the year (after tax and attributable to shareholders) from continuing operations |
2,469.53 |
2,801.91 |
75.35 |
- |
Profit for the year (after tax and attributable to shareholders) from Discontinuing/Restructuring Operations |
43.94 |
- |
12.56 |
111.54 |
Other Comprehensive Income for the year (not to be reclassified to P&L) from continuing operations |
(10.06) |
2.64 |
(7.01) |
272.13 |
Other Comprehensive Income for the year (to be reclassified to P&L) from continuing operations |
1.26 |
134.99 |
0.55 |
- |
Other comprehensive income for the year (not to be reclassified to P&L) from discontinuing/restructuring operations |
(0.17) |
- |
14,961.71 |
13,536.98 |
Surplus brought forward from last balance sheet |
17,534.77 |
15,669.07 |
17,938.12 |
16,072.42 |
Profit available for appropriation |
20,037.72 |
18,460.53 |
Appropriations: |
||||
(403.35) |
(403.35) |
Dividend |
(403.50) |
(403.50) |
17,534.77 |
15,669.07 |
Surplus carried forward |
19,634.22 |
18,057.03 |
The financial results and the results of operations, including major developments and statement of affairs of the Company have been discussed in detail in the Management Discussion and Analysis report.
The above information have been prepared on the basis of the standalone and consolidated financial statements.
During the year under review, the Company issued and allotted 3,36,557 equity shares of H 2/- each to its employees under the Employee Stock Option Scheme 2013-A and Cipla Employee Stock Appreciation Rights Scheme 2021. As a result, the issued, subscribed and paid-up share capital of the Company increased from H 1,61,36,28,072 (divided into 80,68,14,036 equity shares of H 2 each) as on 31st March, 2022 to H 1,61,43,01,186/- (divided into 80,71,50,593 equity shares of H 2 each) as on 31st March, 2023. The equity shares issued under the Employee Stock Option Scheme 2013-A and Cipla Employee Stock Appreciation Rights Scheme 2021 rank pari- passu with the existing equity shares of the Company.
Apart from the above, there were no other changes in the equity share capital during the year.
The Board recommends a final dividend of H 8.50/- per equity share (425% of face value) for the financial year ended 31st March, 2023. The payment of dividend is subject to the approval of members at the ensuing Annual General Meeting and deduction of income tax at source. Upon approval, the dividend will be paid to those members whose names will appear in the Register of Members as on the close of 21st July, 2023. The total dividend pay-out will be approximately H686.08 crores, resulting in a payout of 27.30 % of the Standalone profit after tax of the Company.
During the year, the Dividend Distribution Policy was amended to update it in line with the leading industry practices and to
provide more clarity on the company''s dividend philosophy. The changes are summarised below:
? Incorporated more specific quantitative parameters. As per the amended policy, the Board will endeavour to maintain dividend pay-out of upto 30% of its consolidated Profits After Tax (PAT).
? Rearranged and reworded some of the qualitative parameters to provide more clarity, and added some factors e.g. capital expenditure and working capital, investment in organic and inorganic growth opportunities, capital markets and buyback of shares etc. to present the correct philosophy.
The Policy is available on the website of the Company at https://www.cipla.com/sites/default/files/2023-05/Dividend-Distribution-Policy.pdf.
Management Discussion and Analysis Report
Pursuant to Regulation 34 of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (âListing Regulations"), the Management Discussion and Analysis Report has been presented in a separate Section on page no. 106.
Corporate Social Responsibility ("CSR")
A detailed report on the Company''s CSR initiatives has been provided in the Social Capital section of the Integrated Annual Report on page no. 88. The Annual Report on CSR initiatives including summary of the Impact Assessment Report, committee composition, salient features of the policy including change therein, etc. as required under Section 135 of the Companies Act, 2013 (âAct") is annexed as Annexure I to this report on page no. 128. Details of terms of reference of the Committee and meetings held during the year have been provided in the Report on Corporate Governance on page no. 180.
In compliance with SEBI circular dated 6th February, 2017, the Company has voluntarily published the Integrated Annual Report, which includes both financial and non-financial information and is based on the International Integrated Reporting Framework. This report covers aspects such as organisation''s strategy, governance framework, performance and prospects of value creation based on the six forms of capitals viz. financial capital, manufactured capital, intellectual capital, human capital, social capital, relationship capital and natural capital.
The Company has engaged DNV Business Assurance India Private Limited as an independent assurance partner to issue
the assurance report on the non-financial information in the Integrated Annual Report for FY 2022-23.
Business Responsibility & Sustainability Report
In compliance with Regulation 34(2)(f) of the Listing Regulations read with SEBI circular dated 10th May, 2021. The Company has presented the Business Responsibility & Sustainability Report (âBRSR"), for FY 2022-23 under a separate section on page no. 144.
In compliance with Regulation 34 read with Schedule V of the Listing Regulations, a Report on Corporate Governance for the year under review, has been presented in a separate section on page no. 165.
A certificate from M/s. BNP & Associates, Company Secretaries, confirming compliance with corporate governance requirements under the Listing Regulations, is annexed as Annexure II to this report.
Directors'' Responsibility Statement
Pursuant to Section 134(3)(c) of the Act, it is confirmed that the Directors have:
i. in the preparation of the annual accounts for the year ended 31st March, 2023, followed the applicable accounting standards and there are no material departures from the same;
ii. 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 on 31st March, 2023 and of the profit of the Company for the year ended on that date;
iii. taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;
iv. prepared the annual accounts on a going concern basis;
v. laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively; and
vi. devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.
Conservation of Energy, Technology Absorption, Foreign Exchange Earnings and Outgo
Details of Energy Conservation Technology Absorption and Foreign Exchange Earnings and Outgo as required under Section 134(3)(m) of the Act, read with Rule 8(3) of the Companies (Accounts) Rules, 2014 is annexed as Annexure III to this report.
The Company has the following share-based incentive schemes in force:
? Employee Stock Option Scheme 2013-A (âESOS 2013 - A")
? Cipla Employee Stock Appreciation Rights Scheme 2021 (âESAR Scheme 2021")
The Nomination and Remuneration Committee (âNRC") administers the ESOS 2013 - A and the ESAR Scheme 2021 (collectively referred to as âSchemes"). The Scheme are compliant with the Section 62 of the Act and Securities and Exchange Board of India (Share Based Employee Benefits and Sweat Equity) Regulations, 2021 (âSEBI SBEB Regulations"). Details of the Schemes have been provided in note no. 41 of the standalone financial statements. The disclosure containing details of options granted, number of shares allotted upon exercise of options, etc. as required under the SEBI SBEB Regulations is available on the Company''s website at https://www.cipla.com/investors/annual-reports.
In compliance with the requirements of the SEBI SBEB Regulations, a certificate from the secretarial auditor, confirming that the Schemes were implemented in accordance with the SEBI SBEB Regulations and as per the shareholder''s resolution, is uploaded on the website of the Company at https://www. cipla.com/investors/ annual-reports. The certificate will also be available for electronic inspection by the members during the Annual General Meeting (âAGM") of the Company.
Information 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 annexed as in Annexure IV to this report.
Information required under Section 197(12) of the Act read with rule 5(2) and rule 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is provided in a separate exhibit forming part of this report and is available on the website of the Company at https://www.cipla.com/ investors/annualreports.
Particulars of Loans, Guarantees and Investments
Particulars of loans, guarantees and investments under Section 186 of the Act have been provided in note no. 43 to the standa lone financial statements.
In compliance with the provisions of Section 92(3) read with Section 134(3)(a) of the Act, the Annual return of the Company i.e. E-form MGT-7 for FY 2022-23 has been uploaded on the website of the Company at https://www.cipla.com/investors/annual-reports.
The Company has a Whistle Blower Policy, which lays down the process to convey genuine concerns and seek resolution towards the same without fear of retaliation. A detailed update on the functioning of the Whistle Blower Policy including amendments made to the policy during the year, status of complaints and weblink of the Policy has been provided in the Report on Corporate Governance, on page no. 182.
Prevention of Sexual Harassment of Women at Workplace
The Company is committed to providing a safe and conducive work environment to all its employees and associates. The Company has a policy on Prevention of Sexual Harassment at Workplace, which is available on the website at https://www. cipla.com/sites/default/files/1558508425_POSH-%20Cipla.pdf.
All employees, consultants, trainees, volunteers, third parties and/ or visitors at all business units or functions of the Company, its subsidiaries and/or its affiliated or group companies are covered by the said policy. Across the organisation, adequate workshops and awareness programmers against sexual harassment are conducted.
In compliance with the provisions of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013, the Company had constituted an Internal Complaints Committee and was fully compliant of the Committee composition requirements. The complaints pertaining to sexual harassment were periodically reviewed by the Audit Committee.
Details of complaints received/disposed during FY 2022-23 have been provided in the Report on Corporate Governance on page no. 187.
A detailed note on procedure adopted by the Company in dealing with contracts and arrangements with related parties has been provided in the Report on Corporate Governance on page no. 183.
During the year, the consumer business undertaking of the Company was transferred to Cipla Health Limited (âCHL"), wholly owned subsidiary, on a slump sale basis through a Business Transfer Agreement. Since the transaction was between the holding company and its wholly owned subsidiary, and the entire economic value of the wholly owned subsidiary following the transfer of the undertaking continued to remain with the holding company, the arm''s length principle was not relevant.
Except the above referred transaction as further detailed in Form AOC-2 annexed as Annexure V, all other contracts, arrangements and transactions entered by the Company with its related parties were in the ordinary course of business and on an arm''s length basis.
During the year, the Company did not enter any transaction, contract or arrangement with related parties, that could be considered material in accordance with the Listing Regulations and the Company''s Policy on Related Party Transactions ("RPT Policy"). Details of the related party transactions as per IND AS-24 have been provided under note no. 40 of the standalone financial statements on page no. 260 and under note no. 48 of the consolidated financial statements on page no. 362
During the year, the Company amended its RPT Policy to align with the provisions of the amended Listing Regulations. The RPT policy is available on the Company''s website at https://www. cipla.com/sites/default/files/2023-02/Policy-on-Related-Party-Transaction_Revised-9620Final.pdf.
Internal Financial Controls and Their Adequacy
Cipla has laid down an adequate system of internal controls, policies and procedures for ensuring orderly and efficient conduct of the business, including adherence to the Company''s policies, safeguarding of its assets, prevention and detection of frauds and errors, accuracy and completeness of the accounting records and timely preparation of reliable financial disclosures.
The current system of internal financial controls is aligned with the statutory requirements and is in line with the globally accepted risk-based framework issued by the Committee of Sponsoring Organisations (âCOSO") of the Treadway Commission. The internal financial controls with respect to the financial statements are adequate and operating effectively.
Effectiveness of internal financial controls is ensured through management reviews, controlled self-assessment and independent testing by the Internal Audit Team.
The Statutory and Internal auditors have confirmed that there were no internal control weakness during FY 2022-23.
The Investment and Risk Management Committee ("IRMC") of the Board oversees the Enterprise Risk Management ("ERM") process. An update on ERM activities is presented and deliberated upon in the IRMC meetings on a quarterly basis and periodically at the Board level at least once a year. The Audit
Committee has an additional oversight in the area of financial risks and controls. The major risks identified by the businesses and functions are systematically addressed through mitigating actions on an ongoing basis. In terms of the provisions of Section 134 of the Act, a detailed note on Risk Management has been provided on page no. 46.
A detailed disclosure on the performance evaluation criteria and the process of Board evaluation as well as the outcome has been provided in the Report on Corporate Governance on page no. 169.
Subsidiaries, Associates and Joint Ventures
The Company had 45 subsidiaries and 8 associates as on 31st March, 2023. Changes during the year were as follows:
? Acquisition of 21.05% stake in Achira Labs Private Limited on 17th August, 2022, to enter into the business domain of designing, developing and manufacturing microfluidics-based PoC immunoassay and molecular assay technologies.
? Incorporation of Aspergen Inc., USA as a 60:40 joint venture between Cipla (EU) Limited and Kemwell Biopharma UK Limited on 30th August, 2022, for undertaking the business of developing, applying for and obtaining licenses for and manufacturing, commercialising, importing and exporting biological products.
? Divestment of entire stake held in Avenue Therapeutics Inc., an associate company, focused on development and commercialisation of intravenous (IV) Tramadol, on account of non-completion of second stage closing conditions as per the agreed timelines, with effect from 11th October, 2022.
? Cipla Medpro Holdings (Pty) Limited, wholly owned step-down subsidiary in South Africa being a dormant entity was dissolved with effect from 25th August, 2022.
? Cipla (EU) Limited, wholly owned subsidiary and Meditab Holdings Limited, wholly owned subsidiary entered a into Share Purchase Agreement ("SPA") With Africa Capital works SSA 3 on 14th March, 2023 for sale of entire 51.18% stake held in Cipla Quality Chemical Industries Limited ("CQCIL"), Uganda. Upon execution of the transaction, the CQCIL will cease to be the subsidiary of Cipla Limited.
Details of these subsidiaries and associates are set out on page no. 287. Pursuant to Section 129(3) of the Act read with
Rule 5 of the Companies (Accounts) Rules, 2014, a statement containing the salient features of the financial statements of the subsidiary and associate companies in Form AOC-1 has been presented on page no. 369. The statement also provides details of the performance and the financial position of each of the subsidiaries and associates. The consolidated financial statements presented in this annual report include financial results of the subsidiary and associate companies.
Copies of the financial statements of the subsidiary companies will be available on the Company''s website www.cipla.com.
Nomination, Remuneration and Board Diversity Policy and it''s Salient Features
The Company has in place a Nomination and Remuneration and Board Diversity (âNRC Policy") which provides for process w.r.t. selection, appointment and remuneration of directors, key managerial personnel and senior management employees including other matters as provided under Section 178(3) of the Act.
Following are the salient features of the NRC Policy:
? to provide criteria and terms and conditions with regard to identifying persons who are qualified to become directors (executive and non-executive including independent directors), key managerial personnel and persons who may be appointed in senior management positions.
? to recommend the remuneration of the directors, key managerial personnel and senior management personnel in alignment with the Company''s business strategies, values, key priorities and goals.
? to provide rewards linked directly to the effort, performance, dedication and achievement of the Company''s targets by the employees.
? to monitor and periodically review and recommend improvement in board diversity aspects and measure progress accordingly.
? undertake any other matters as the Board may decide from time to time.
The Policy is available on the website of the Company at https://www. cipla.com/sites/default/files/2021-06/NominationRemuneration-and-Board-Diversity-Policy.pdf.
Directors and Key Managerial Personnel and Board Meetings
At the 86th Annual General Meeting of the Company held on 26th August, 2022 the shareholders approved (i) the reappointment of Ms Samina Hamied as a Director liable to retire by rotation; (ii) the appointment of Dr Mandar Vaidya as an Independent Director for a period of five years with effect from 29th July, 2022.
In accordance with the provisions of the Act and the Articles of Association of the Company, Mr Umang Vohra, is liable to retire by rotation at the ensuing 87th Annual General Meeting and being eligible, has offered himself for re-appointment. On the recommendation of the NRC, the Board of Directors recommends his re-appointment as Director, liable to retire by rotation. The said re-appointment is subject to the approval of members at the ensuing AGM.
In the opinion of the Board, all directors including the directors appointed / re-appointed during the year possess requisite qualifications, experience and expertise and hold high standards of integrity. Except Dr Mandar Vaidya, all Independent Directors have passed or are exempted from passing the proficiency test. Dr Mandar Vaidya is required to pass the proficiency test within the permissible time limit. The list of key skills, expertise and core competencies of the Board is provided in the Report on Corporate Governance on page no. 167.
Criteria for determining qualification, positive attributes and independence of a director is given in the NRC Policy.
Mr Kedar Upadhye, resigned from the position of Global Chief Financial Officer and Key Managerial Personnel of the Company w.e.f. close of business hours of 3rd May, 2022. The Board placed on record its sincere appreciation for the contribution made by him over the years.
In order to fill in the interim vacancy, Mr Dinesh Jain, Senior Vice President - Head Corporate Finance was appointed as the interim Chief Financial Officer and Key Managerial Personnel, with effect from 10th May, 2022.
Mr Ashish Adukia was appointed as the Global Chief Financial Officer and Key Managerial Personnel with effect from 16th August, 2022. Upon appointment of Mr Ashish Adukia, Mr Dinesh Jain was relieved from the additional responsibility and continued with his existing responsibility as Head of Corporate Finance. The Board expressed its gratitude towards his valuable contribution as the Interim Chief Financial Officer.
Dr Peter Mugyenyi, resigned from the position of Independent Director w.e.f. 13th May, 2023. The Board placed on record its sincere appreciation for the contribution made by him over the years.
As on the date of this report, the Company has the following Key Managerial Persons as per Section 2(51) and 203 of the Act:
Name of the KMP |
Designation |
Ms Samina Hamied |
Executive Vice-Chairperson |
Mr Umang Vohra |
Managing Director and Global Chief Executive Officer |
Mr Ashish Adukia |
Global Chief Financial Officer |
Mr Rajendra Chopra |
Company Secretary and Compliance officer |
Except Ms Samina Hamied, Mr Umang Vohra, Dr Peter Mugyenyi, Mr Ashok Sinha and Mr Robert Stewart no other directors received any remuneration or sitting fees from any subsidiary of the Company during FY 2022-23.
Declaration by Independent Directors
All Independent Directors have submitted requisite declarations confirming that they (i) continue to meet the criteria of independence as prescribed under Section 149(6) of the Act and Regulation 16(1)(b) of the Listing Regulations and are independent; and (ii) continue to comply with the Code of Conduct laid down under Schedule IV of the Act. Details on the same have also been provided in the Report on Corporate Governance on page no. 171.
The Directors have further confirmed that they are not debarred from holding the office of director under any SEBI order or under the order of any such authority.
Board Committees and Number of Meetings of the Board and Board Committees
As on the date of this report the Board has the following committees:
i) Audit Committee
ii) Nomination and Remuneration Committee
iii) Corporate Social Responsibility Committee
iv) Stakeholders Relationship Committee
v) Investment and Risk Management Committee
vi) Operations and Administrative Committee
All the recommendations made by the Board committees, including the Audit Committee, were accepted by the Board.
The Board met eight times during the year under review. Details of the meetings of the Board and the Board Committees are provided in the Report on Corporate Governance on page no. 193.
Statutory Auditor and Their Reports
M/s Walker Chandiok & Co LLP, Chartered Accountants, (Firm Registration No 001076N/ N500013) were re-appointed as the Statutory Auditors of the Company at the 85th AGM held on 25th August, 2021, to hold the office till the conclusion of the 90th AGM to be held in the year 2026.
The Statutory Auditors'' Report for the standalone and consolidated financial statements does not contain any qualification, reservation, adverse remarks or observation and has been presented separately on page no. 197 and 280 respectively.
Secretarial Auditor and their Reports
M/s BNP & Associates, Company Secretaries, were appointed as the Secretarial Auditors for the financial year ended 31st March, 2023. The Secretarial Audit Report is annexed as Annexure VI to this report.
In compliance with Regulation 24A of the Listing Regulations, the Annual Secretarial Compliance Report issued by the Secretarial Auditor was submitted to the stock exchanges within the statutory timelines.
The Secretarial Audit Report and the Annual Secretarial Compliance Report did not contain any qualification, reservation, adverse remarks or observation.
The Board of Directors, on the recommendation of the Audit Committee, has re-appointed M/s BNP & Associates, Company Secretaries, who have confirmed their eligibility for the said re-appointment, to conduct the secretarial audit of the Company for FY 2023-24.
Cost Auditor and Cost Audit Report
Mr D H Zaveri, practising Cost Accountant (Fellow Membership No. 8971), was appointed as the Cost Auditor to conduct the audit of the Company''s cost records for the financial year ended 31st March, 2023. Mr Zaveri has confirmed his eligibility for the said appointment. The Cost Auditor will submit his report for FY 2022-23 by the due date.
The Cost Audit Report, for FY 2021-22, was filed with the Central Government within the statutory timelines. The Company maintains the cost records as per the provisions of Section 148(1) of the Act.
In accordance with the provisions of Section 148 of the Act read with the Companies (Audit and Auditors) Rules, 2014, since the remuneration to be paid to the Cost Auditor for FY 2023-24 is required to be ratified by the members, the Board of Directors recommends the same for ratification at the ensuing AGM. The proposal forms a part of the notice of the AGM.
During the year under review, the Statutory, Secretarial and Cost Auditors did not report any instance of fraud committed in the Company by its officers or employees under Section 143(12) of the Act, the details of which need to be mentioned in the Board''s report.
During the financial year under review:
? There was no amount proposed to be transferred to the Reserves;
? There were no changes made in the nature of business of the Company;
? The Company has complied with the applicable Secretarial Standards, i.e., SS-1 and SS-2, relating to ''Meetings of the Board of Directors'' and ''General Meetings'', respectively;
? The Company issued and allotted equity shares as per its ESOS 2013-A Scheme and the ESAR Scheme 2021 and there was no instance wherein the Company failed to implement any corporate action within the statutory time limit;
? The Company did not accept any deposit within the meaning of Sections 73 and 74 of the Act read with the Companies (Acceptance of Deposits) Rules, 2014 and accordingly no amount on account of principal or interest on public deposits was outstanding as on 31st March, 2023;
? The Company has not issued shares with differential voting rights and sweat equity shares during the year under review;
? There were no significant or material orders passed by the regulators or courts or tribunals which could impact the going concern status of the Company and its future operations;
? There were no material changes and commitments which occurred after the c lose of the year till the date of this report, which may affect the financial position of the Company.
? There are no amounts due and outstanding to be credited to Investor Education and Protection Fund as on 31st March, 2023.
We wish to place on record our appreciation to the Government of various countries where the Company has its operations. We thank the Ministry of Chemicals and Fertilisers, India; Central Government; State Government and other regulatory bodies / authorities; banks; business partners; shareholders; medical practitioners and other stakeholders for the assistance, cooperation and encouragement extended to the Company. We would also like to place on record our deep sense of appreciation to the employees for their contribution and services.
On behalf of the Board of Directors
Date: 12th May, 2023 Y. K. Hamied
Place: London Chairman
Mar 31, 2022
The Board of Directors are pleased to submit its report on the performance of the Company along with the audited standalone and consolidated financial statements for the year ended 31st March, 2022.
Financial Summary and State of Affairs |
(H in crores) |
|||
Year ended 31st March, 2021 |
Particulars |
Year ended 31st March, 2022 |
||
Standalone |
Consolidated |
Standalone |
Consolidated 1 |
|
11,302.71 |
19,159.59 |
Gross total revenue |
13,091.79 |
21,763.34 |
2,784.00 |
3,290.06 |
Profit before tax and exceptional item from continuing operations |
3,546.23 |
3,675.39 |
566.66 |
- |
Profit before tax from Discontinuing/Restructuring Operations |
358.85 |
- |
2,044.65 |
2,404.87 |
Profit for the year (after tax and attributable to shareholders) from continuing operations |
2,689.39 |
2,516.75 |
423.63 |
- |
Profit for the year (after tax and attributable to shareholders) Discontinuing/Restructuring Operations |
268.54 |
- |
13.14 |
(37.46) |
Other Comprehensive Income for the year (not to be reclassified to P&L) from continuing operations |
12.56 |
111.54 |
27.75 |
198.95 |
Other Comprehensive Income for the year (to be reclassified to P&L) from continuing operations |
(7.01) |
272.13 |
0.57 |
- |
Other Comprehensive Income for the year (not to be reclassified to P&L) Discontinuing/Restructuring Operations |
0.55 |
- |
12,479.72 |
11,117.88 |
Surplus brought forward from last balance sheet |
14,961.71 |
13,536.98 |
14,961.71 |
13,536.98 |
Profit available for appropriation |
17,938.12 |
16,072.42 |
Appropriations: |
||||
- |
- |
Dividend |
(403.35) |
(403.35) |
14,961.71 |
13,536.98 |
Surplus carried forward |
17,534.77 |
15,669.07 |
The financial results and the results of operations, including major developments have been discussed in detail in the Management Discussion and Analysis report.
The standalone, as well as the consolidated financial statements, have been prepared in accordance with the Indian Accounting Standards ("Ind AS").
Share Capital1
During the year under review, the Company issued and allotted 3,50,757 equity shares to its employees under the Employee Stock Option Scheme 2013-A. As a result, the issued, subscribed and paid-up share capital of the Company increased from H 1,61,29,26,558 (divided into 80,64,63,279 equity shares of H 2 each) to H 1,61,36,28,072 (divided into 80,68,14,036 equity shares of H 2 each). The equity shares issued under the Employee Stock Option Scheme 2013-A rank pari- passu with the existing equity shares of the Company.
In line with the Dividend Distribution Policy of the Company, we recommend a final dividend of H 5 per equity share (250% of face value) for the financial year ended 31st March, 2022. The dividend is subject to the approval of members at the ensuing Annual General Meeting and shall be subject to deduction of income tax at source.
Upon approval, the dividend will be paid to those members whose names will appear in the Register of Members as on the close of 10th August, 2022. The total dividend pay-out will be approximately H 403.41 crores, resulting in a pay-out of 13.64% of the Standalone profit after tax of the Company. The Dividend Distribution Policy is uploaded on the website and is available on the Company''s website at https://www.cipla.com/sites/ default/files/2019-01/Dividend%20Distribution%20Policy.pdf
Management Discussion and Analysis Report
Pursuant to Regulation 34 of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 ("Listing Regulations"), the Management Discussion and Analysis Report for the year under review, has been presented in a separate section on page no. 107, forming a part of this report.
Corporate Social Responsibility (CSR)
A detailed report on Company''s CSR initiatives has been provided in the Social Capital section forming a part of the Integrated Report on page no. 92 and Annual Report on CSR initiatives, as required under Section 135 of the Companies Act, 2013 ("Act") which is annexed as Annexure I to this report on page no. 130. Details of the CSR Committee composition, role and meetings, etc. have been provided in the Report on Corporate Governance on page no. 178.
The Company has voluntarily provided the Integrated Report, which includes both financial and non-financial information. The Integrated Report also covers aspects such as stakeholder engagement, enterprise risk management, materiality assessment, value creation model, strategic business objective, strategy for sustainable growth, performance and prospects of value creation based on the six forms of capitals viz. financial capital, manufactured capital, intellectual capital, human capital, social and relationship capital and natural capital.
The assurance report of DNV Business Assurance India Private Limited, an independent assurance partner is provided on page no. 193 The Report confirms that the non-financial information has been adequately presented.
Business Responsibility & Sustainability Report
The Company for FY 2021-22 has voluntarily presented a Business Responsibility & Sustainability Report ("BRSR"), in lieu of the Business Responsibility Report, provided under a separate section on page no. 145 of this report.
In compliance with Regulation 34 read with Schedule V of the Listing Regulations, a Report on Corporate Governance for the year under review, has been presented in a separate section on page no. 164 of this report.
A certificate from M/s. BNP & Associates, Company Secretaries, confirming compliance with corporate governance norms, as stipulated under the Listing Regulations, is annexed as Annexure II to this report.
Directors'' Responsibility Statement
Pursuant to section 134(3)(c) of the Act, it is confirmed that the Directors have: 1
the state of affairs of the Company as of 31st March, 2022 and of the profit of the Company for the year ended on that date;
iii. taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;
iv. prepared the annual accounts on a going concern basis;
v. laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively; and
vi. devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.
Conservation of Energy, Technology Absorption, Foreign Exchange Earnings and Outgo
The details of Energy Conservation, Technology Absorption and Foreign Exchange Earnings and Outgo as required under section 134(3)(m) of the Act, read with Rule 8(3) of the Companies (Accounts) Rules, 2014 is annexed as Annexure III to this report.
The Company has the following share-based incentive schemes in force:
o Employee Stock Option Scheme 2013-A ("ESOS 2013 - A")
o Cipla Employee Stock Appreciation Rights Scheme 2021 ("ESAR Scheme 2021")
The Nomination and Remuneration Committee ("NRC") administers the ESOS 2013 - A and the ESAR Scheme 2021 (collectively referred to as "Schemes"). The Schemes are compliant with the Securities and Exchange Board of India (Share Based Employee Benefits and Sweat Equity) Regulations, 2021 ("SEBI ESOP Regulations"). Details of the Schemes have been provided in Note No. 40 of the standalone financial statements. The disclosure in compliance with the SEBI ESOP Regulations is available on the Company''s website at https://www.cipla.com/investors/annual-reports.
Pursuant to the provisions of the SEBI ESOP Regulations and the shareholders'' approval dated 22nd August, 2013 for ESOS 2013 - A and 25th March, 2021 for ESAR Scheme 2021, the NRC, being authorised, approved the following non-material and non-detrimental amendments to the Schemes, for the welfare of employees:
o allowed vesting of unvested options / ESARs till the last working day which earlier was restricted to the date of submission of resignation;
o allowed the separated employees to exercise the vested options / ESARs within 3 months post separation which was earlier restricted to a day prior to the last working day of the employees with the Company;
o allowed immediate vesting of unvested options / ESARs on the date of retirement (subject to a minimum one-year vesting period) which were earlier lapsed on such date. The employees are allowed to exercise the vested options within 6 months post retirement.
o clarified to consider separation as formal termination and cancel all unexercised options / ESARs in case of misconduct/ breach of the Company policies/employment.
In compliance with the requirements of the SEBI ESOP Regulations, a certificate from the secretarial auditor, confirming implementation of the Schemes in accordance with the said regulations and shareholder''s resolution is uploaded on the website of the Company at https://www.cipla.com/investors/ annual-reports. The certificate will also be available for electronic inspection by the members during the AGM of the Company.
Information 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 Annexure IV to this report.
Information required under Section 197(12) of the Act read with Rule 5(2) and Rule 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is provided in a separate exhibit forming part of this report and is available on the website of the Company at https://www.cipla.com/ investors/annualreports.
Particulars of Loans, Guarantees and Investments
Particulars of loans, guarantees and investments under Section 186 of the Act have been provided in Note No. 42 to the standalone financial statements.
The Annual return for the FY 2021-22 has been placed on the website of the Company at https://www.cipla.com/investors/ annual-reports.
The Company has a Whistle Blower Policy, which lays down the process to convey genuine concerns and seek resolution towards the same without fear of retaliation.
A detailed update on the functioning of the Whistle Blower Policy and weblink of the Policy has been provided in the Report on Corporate Governance, on page no. 180.
Prevention of Sexual Harassment of Women at Workplace
The Company is committed to providing a safe and conducive work environment to all its employees and associates. The Company has
a policy on Prevention of Sexual Harassment at Workplace in place, which is available on the Company website at https://www.cipla. com/sites/default/files/1558508425_POSH-%20Cipla.pdf.
All employees, consultants, trainees, volunteers, third parties and/ or visitors at all business units or functions of the Company, its subsidiaries and/or its affiliated or group companies are covered by the said policy. Adequate workshops and awareness programmes against sexual harassment are conducted across the organisation.
The Company has constituted an Internal Complaints Committee in compliance with the provisions of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 and is fully compliant of the Committee composition requirements. The Audit Committee periodically reviews the complaints.
Details of complaints received/disposed during FY 2021-22 are provided in the Report on Corporate Governance on page no. 184.
A detailed note on procedure adopted by the Company in dealing with contracts and arrangements with related parties has been provided in the Report on Corporate Governance on page no. 181.
All contracts, arrangements and transactions entered by the Company with related parties during FY 2021-22 were in the ordinary course of business and on an arm''s length basis. During the year, the Company did not enter into any transaction, contract or arrangement with related parties, which could be considered material, in accordance with the Company''s Policy on dealing with Related Party Transactions (âRPT Policyâ). Accordingly, the disclosure of related party transactions in Form AOC-2 is not applicable. The disclosure on related party transactions as per Ind AS-24 has been provided under Note No. 39 of the standalone financial statements on page no. 262 and Note No. 48 of the consolidated financial statements on page no. 368
During the year, the Company revised its RPT Policy to align it with amendments in the RPT framework under the Listing Regulations. The RPT policy is available on the Company''s website at https://www.cipla.com/sites/default/files/2022-05/ Policy-on-Related-Party-Transaction.pdf.
Internal Financial Controls and their adequacy
Cipla has laid down an adequate system of internal controls, policies and procedures for ensuring orderly and efficient conduct of the business, including adherence to the Company''s policies, safeguarding of its assets, prevention and detection of frauds and errors, accuracy and completeness of the accounting records and timely preparation of reliable financial disclosures.
The current system of internal financial controls is aligned with the statutory requirements and is in line with the globally-accepted risk-based framework issued by the Committee of Sponsoring Organisations ("COSO") of the Treadway Commission. The internal financial controls are adequate and operating effectively.
Effectiveness of internal financial controls is ensured through management reviews, controlled self-assessment and independent testing by the internal audit team.
The Board of Directors has an Investment and Risk Management Committee ("IRMC") which oversees the Enterprise Risk Management ("ERM") process. An update on ERM activities is presented and deliberated upon in the IRMC meetings on a quarterly basis and periodically at the Board level at least once a year. The Audit Committee has an additional oversight in the area of financial risks and controls. The major risks identified by the businesses and functions are systematically addressed through mitigating actions on a continuing basis. In terms of the provisions of Section 134 of the Act, a detailed note on Risk Management has been provided on page no. 42 of this report.
A detailed disclosure on the parameters and the process of Board evaluation as well as the outcome has been provided in the Report on Corporate Governance on page no. 168.
Subsidiaries, Associates and Joint Ventures
At the beginning of the year, the Company had 46 subsidiaries and 5 associates as against 45 subsidiaries and 8 associates as on 31st March, 2022. Changes during the year were as follows:
o Acquisition of 32.49% stake in AMP Energy Green Eleven Private Limited and 33% partnership interest in Clean Max Auriga Power LLP, in line with Cipla''s commitment to enhance the share of renewable power source in its operation and to comply with regulatory requirement for being a captive user under Indian electricity laws.
o Incorporation of Cipla Digital Health Limited as a wholly-owned subsidiary of the Company on 25th February, 2022 for creation of patient-facing Digital Therapeutics platform.
o On 3rd May, 2021, GoApptiv Private Limited, existing
associate of Cipla, incorporated wholly-owned subsidiary - Iconphygital Private Limited for providing manpower staffing services.
o The following wholly-owned step down subsidiaries
were voluntarily deregistered /dissolved as these were operationally inactive and not required:
o Cipla Biotec South Africa (Pty) Limited with effect from 3rd February, 2022.
o Inyanga Trading 386 (Pty) Limited with effect from 10th December, 2021.
Details of these subsidiaries and associates are set out on page no. 292 of the Annual Report. Pursuant to Section 129(3) of the Act read with Rule 5 of the Companies (Accounts) Rules, 2014, a statements containing the salient features of the financial statement of the subsidiary and associate companies in Form no. AOC-1 is provided on page no. 377 of the Annual Report.
The statement also provides details of the performance and the financial position of each of the subsidiaries and associates. The consolidated financial statements presented in this annual report include financial results of the subsidiary and associate companies.
Copies of the financial statements of the subsidiary companies will be available on the Company''s website www.cipla.com.
Transfer of undertaking by way of a slump sale on a going concern basis
The Board approved a draft scheme of arrangement ("Scheme") which entailed the following:
(i) Demerger of the India-based US business undertaking (Demerged Undertaking 1) of Cipla Limited (Demerged Company) into its wholly-owned subsidiary, Cipla Pharma and Life Sciences Limited (formerly known as Cipla BioTec Limited) (herein after referred to as "CPLS") and
(ii) Demerger of the Consumer Business Undertaking (Demerged Undertaking 2) of Cipla Limited into its wholly-owned subsidiary, Cipla Health Limited (herein after referred to as "CHL").
Post approval, due to certain regulatory developments which made it feasible for this transaction to be effected through an alternate option, the Audit Committee and the Board approved to effect the above transfer of undertakings by way of a slump sale on a going concern basis instead of a Scheme of Arrangement.
The details of the proposed transactions are disclosed in Note No. 36 to the standalone financial statements.
Nomination, Remuneration and Board Diversity Policy
The Board has on the recommendation of the NRC, framed a Nomination Remuneration and Board Diversity Policy (''NRC Policy'') for selection, appointment and remuneration of directors, key managerial personnel and senior management employees and other matters as provided under Section 178(3) of the Act.
During the year under review, the Board, based on the recommendation of the NRC Committee, revised the NRC Policy for including the revised sitting fees for non-executive directors for attending the board and board committee meetings.
The salient features of the NRC Policy are as follows:
o To provide criteria and terms and conditions with regard to identifying persons who are qualified to become directors (executive and non-executive including independent directors), key managerial personnel and persons who may be appointed in senior management positions.
o To recommend the remuneration of the directors, key managerial personnel and senior management personnel and align with the Company''s business strategies, values, key priorities and goals.
o To provide rewards linked directly to the effort, performance, dedication and achievement of the Company''s targets by the employees.
o To monitor and periodically review the Board Diversity and recommend to the Board to improve one or more aspects of its diversity and measure progress accordingly.
o Undertake any other matters as the Board may decide from time to time.
The Policy is available on the website of the Company at https://www.cipla.com/sites/default/files/2021-06/Nomination-Remuneration-and-Board-Diversity-Policy.pdf.
Directors and Key Managerial Personnel
At the 85th Annual General Meeting of the Company held on 25th August, 2021 the shareholders approved (i) the reappointment of Mr M K Hamied as Non-executive Director liable to retire by rotation, (ii) the re-appointment of Mr Umang Vohra as Managing Director and Global Chief Executive Officer for a period of five years with effect from 1st April, 2021 (iii) the appointment of Mr Robert Stewart as an Independent Director for a period of five years with effect from 14th May, 2021 (iv) the appointment of Mr P R Ramesh as an Independent Director for a period of five years with effect from 1st July, 2021.
In accordance with the provisions of the Act and the Articles of Association of the Company, Ms Samina Hamied, is due to retire by rotation at the ensuing 86thAnnual General Meeting and being eligible, has offered herself for re-appointment. Based on the recommendation of the NRC, the Board of Directors recommends her re-appointment as Director, liable to retire by rotation.
In the opinion of the Board, all the directors, as well as the directors appointed / re-appointed during the year possess the requisite qualifications, experience and expertise and hold high standards of integrity. All Independent Directors, except Mr Robert Stewart, are exempt from the requirement of passing the proficiency test. Unless exempted, Mr Robert Stewart will be required to pass the proficiency test within the permissible time limit. The list of key skills, expertise and core competencies of the Board of Directors is provided in the Report on Corporate Governance at page no. 166 of this Annual Report.
Criteria for determining qualification, positive attributes and independence of a director is given under the NRC Policy.
Ms Naina Lal Kidwai resigned from the position of Independent Director of the Company w.e.f close of business hours on 31st March, 2022. The Board placed on record its sincere appreciation for the contribution made by her as a member of the Board.
Mr Kedar Upadhye, resigned from the position of Global Chief Financial Officer and Key Managerial Personnel of the Company w.e.f. close of business hours on 3rd May, 2022. The Board placed on record its sincere appreciation for the contribution made by him over the years.
Mr Dinesh Jain, Senior Vice-President and Head - Corporate Finance, was appointed by the Board as the Interim Chief Financial Officer, effective 10th May, 2022
As on the date of this report, the Company has the following Key Managerial Persons as per section 2(51) and 203 of the Act:
Sr. No. |
Name |
Designation |
1 |
Ms Samina Hamied |
Executive Vice-Chairperson |
2 |
Mr Umang Vohra |
Managing Director & Global Chief Executive Officer |
3 |
Mr Dinesh Jain* |
Interim Chief Financial Officer |
4 |
Mr Rajendra Chopra |
Company Secretary & Compliance officer |
* Mr Dinesh Jain appointed as Interim Chief Financial Officer w.e.f. J0lh May 2022
Ms Samina Hamied, Mr Umang Vohra, Dr Peter Mugyenyi, Mr Ashok Sinha, Mr Robert Stewart and Mr S Radhakrishnan received remuneration/sitting fees from the Company''s subsidiaries during FY 2021-22.
Declaration by Independent Directors
All Independent Directors have submitted requisite declarations confirming that they (i) continue to meet the criteria of independence as prescribed under Section 149(6) of the Act and Regulation 16(1)(b) of the Listing Regulations and are independent; and (ii) continue to comply with the Code of Conduct laid down under Schedule IV of the Act. Details on the same have also been provided in the Report on Corporate Governance, which forms a part of this report.
The Directors have further confirmed that they are not debarred from holding the office of director under any SEBI order or any other such authority.
Board Committees and number of meetings of the Board and Board Committees
As on the date of this report the Board has the following committees:
i) Audit Committee
ii) Nomination and Remuneration Committee
iii) Corporate Social Responsibility Committee
iv) Stakeholders Relationship Committee
v) Investment and Risk Management Committee
vi) Operations and Administrative Committee
The Committee of Independent Directors was constituted specifically for the purpose of the Scheme of Arrangement in FY 2020-21. The Committee was dissolved on 25th January, 2022 since it was approved to effect the transaction by way of slump sale and hence, no longer required.
All the recommendations made by the Board committees, including the Audit Committee, were accepted by the Board.
The Board met seven times during the year under review. The details of the meetings are provided in the Report on Corporate Governance, which forms a part of this report.
Statutory Auditor and their report
M/s Walker Chandiok & Co LLP, Chartered Accountants, (Firm Registration No 001076N/ N500013) were re-appointed as the Statutory Auditor of the Company at the 85th AGM held on 25th August, 2021, to hold the office till the conclusion of the 90th AGM to be held in year 2026.
The Statutory Auditor''s Report does not contain any qualification, reservation, adverse remarks or observation.
Secretarial Auditor and their reports
M/s BNP & Associates, Company Secretaries, was appointed as the Secretarial Auditor for the financial year ended 31st March, 2022. The Secretarial Auditors have furnished their report annexed as Annexure V to this report.
Further, in compliance with Regulation 24A of the Listing Regulations, the Annual Secretarial Compliance Report issued by the Secretarial Auditor, was submitted to the stock exchanges within the statutory timelines.
The Secretarial Audit Report and the Secretarial Compliance Report does not contain any qualification, reservation, observation or adverse remarks.
The Board of Directors, on the recommendation of the Audit Committee, has re-appointed M/s BNP & Associates, Company Secretaries, to conduct the secretarial audit of the Company for FY 2022-23. They have confirmed their eligibility for the said re-appointment.
Mr D H Zaveri, practising Cost Accountant (Fellow Membership No. 8971), was appointed as the Cost Auditor to conduct the audit of Company''s cost records for the financial year ended 31st March, 2022. Mr Zaveri has confirmed his eligibility for the said appointment.
The Cost Auditor will submit their report by the due date. The Cost Audit Report, for the year ended 31st March, 2021, was filed with the Central Government within the prescribed time. The Company maintains the cost records as per the provisions of Section 148(1) of the Act.
In accordance with the provisions of Section 148 of the Act read with the Companies (Audit and Auditors) Rules, 2014, since the remuneration to be paid to the Cost Auditor for FY 2022-23 is required to be ratified by the members, the Board of Directors recommends the same for approval by members at the ensuing AGM. The proposal forms a part of the notice of the AGM.
During the year under review, the Statutory, Secretarial and Cost Auditors have not reported to the Audit Committee, under Section 143(12) of the Act, any instances of fraud committed against the Company by its officers or employees, the details of which need to be mentioned in the Board''s report.
During the financial year under review:
o There was no amount proposed to be transferred to the Reserves;
o There were no changes made in the nature of business of the Company;
o The Company has complied with the applicable Secretarial Standards, i.e., SS-1 and SS-2, relating to ''Meetings of the Board of Directors'' and ''General Meetings'', respectively;
o The Company issued and allotted equity shares as per its ESOS 2013-A Scheme and there was no instance wherein the Company failed to implement any corporate action within the statutory time limit;
o The Company did not accept any deposit within the meaning of Sections 73 and 74 of the Act read with the Companies (Acceptance of Deposits) Rules, 2014 and accordingly no amount on account of principal or interest on public deposits was outstanding as on 31st March, 2022;
o The Company has not issued shares with differential voting rights and sweat equity shares during the year under review;
o There were no significant or material orders passed by the regulators or courts or tribunals which could impact the going concern status of the Company and its future operations;
o There were no material changes and commitments which occurred after the close of the year till the date of this report, which may affect the financial position of the Company.
We wish to place on record our appreciation to the Government of various countries where the Company has its operations. We thank the Ministry of Chemicals and Fertilisers, India; Central Government; State Government and other regulatory bodies / authorities; banks; business partners; shareholders; medical practitioners and other stakeholders for the assistance, cooperation and encouragement extended to the Company. We would also like to place on record our deep sense of appreciation to the employees for their contribution and services.
On behalf of the Board of Directors
Date: 10th May, 2022 Y K Hamied
Place: London Chairman
in the preparation of the annual accounts for the year ended 31st March, 2022, followed the applicable accounting standards and there are no material departures from the same;
ii. 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
Mar 31, 2021
The Board of Directors is pleased to submit its report on the performance of the Company along with the audited standalone as well as consolidated financial statements for the year ended 31st March, 2021.
Financial Summary and State of Affairs |
H in Crore |
||||
Year ended 31st |
March, 2020 |
Particulars |
1 |
Year ended 31st |
March, 2021 |
Standalone |
Consolidated |
Standalone |
Consolidated |
||
12,659.15 |
17,131.99 |
Gross total revenue |
13,900.58 |
19,159.59 |
|
2,964.31 |
2,178.18 |
Profit before tax and exceptional items |
3,350.66 |
3,290.06 |
|
2,318.17 |
1,546.52 |
Profit for the year (after tax attributable to shareholders) |
and |
2,468.28 |
2,404.87 |
(15.30) |
(9.42) |
Other comprehensive income for year (not to be reclassified to P&L) |
the |
13.71 |
(37.46) |
(49.13) |
(119.98) |
Other comprehensive income for year (to be reclassified to P&L) |
the |
27.75 |
198.95 |
10,828.56 |
10,251.31 |
Surplus brought forward from balance sheet |
last |
12,479.72 |
11,117.88 |
13,131.43 |
11,782.08 |
Profit available for appropriation |
14,961.71 |
13,536.98 |
|
Appropriations: |
|||||
(564.26) |
(564.26) |
Dividend |
- |
- |
|
(87.45) |
(99.94) |
Tax on dividend |
- |
- |
|
12,479.72 |
11,117.88 |
Surplus carried forward |
14,961.71 |
13,536.98 |
The financial results and the results of operations, including major developments have been discussed in detail in the Management Discussion and Analysis Report.
The standalone as well as the consolidated financial statement have been prepared in accordance with the Indian Accounting Standards (Ind AS).
Share Capital
During the year under review, the Company issued and allotted 2,27,950 equity shares to its employees under the Employee Stock Option Scheme 2013-A. As a result, the issued, subscribed and paid-up share capital of the Company increased from H 1,61,24,70,658/-(divided into 80,62,35,329 equity shares of H 2/- each) to H 1,61,29,26,558/- (divided into 80,64,63,279 equity shares of H 2 each). The equity shares issued under the Employee Stock Option Scheme 2013-A rank pari-passu with the existing equity shares of the Company.
Dividend
In line with the Dividend Distribution Policy of the Company, we recommend a final dividend of H 5/- per equity share (i.e. 250% of face value) for the financial year ended 31st March, 2021. The dividend, if approved at the Annual General Meeting (AGM), will be paid to those members whose names appear in the Register of Members as on close of Tuesday, 10th August, 2021. The total dividend payout will be approximately H 403.23 crores, 16.34 % of the standalone profit after tax of the
Company. The Dividend Distribution Policy is uploaded on the website at https://www.cipla.com/sites/default/ files/2019-01/Dividend%20Distribution%20Policy.pdf
During the year, as per provisions under IndAS 102 -Share-based Payment, the Company has transferred an amount of H 2.02 crores to the General Reserve from the Share Based Payment Reserve, due to lapse of vested options under the Cipla Employee Stock Scheme 2013 - A.
The Company is engaged in the business of development, manufacturing, sale and distribution of pharmaceutical generic medicines, branded generic medicines, specialty medicines, and OTC consumer wellness products. The Company also offers in-licensed patented medicines and in-licensed diagnostics kits for
COVID-19. During the year, there has been no change in the nature of business of the Company.
Management Discussion and Analysis Report
Pursuant to Regulation 34 of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 ("Listing Regulations"), the Management Discussion and Analysis Report for the year under review, has been presented in a separate section on page 129, forming part of this report.
Corporate Social Responsibility (CSR)
A detailed report on Cipla''s various CSR initiatives has been provided in the Social Capital section forming part of Integrated Report on page 108 and Annual Report on CSR initiatives, as required under Section 135 of the Companies Act, 2013 (Act) which is annexed as Annexure I to this report on page 160. Details of the CSR Committee composition, role and meetings, etc. have been provided in the Report on Corporate Governance on page 200.
Business Responsibility Report
In compliance with the provisions of Regulation 34 of the Listing Regulations, the Business Responsibility Report (BRR) is presented in a separate section on page 176 of this report. Since the Company has adopted International Integrated Reporting Council (IIRC) framework for publishing the Annual Report, reports on the nine principles of the National Voluntary Guidelines on social, environmental and economic responsibilities of business as framed by the Ministry of Corporate Affairs (MCA), Government of India, is provided in relevant sections of the Integrated Report with suitable references in the BRR.
In compliance with Regulation 34 read with Schedule V of the Listing Regulations, a Report on Corporate Governance for the year under review, is presented in a separate section on page 183 of this report.
A certificate from M/s. BNP & Associates, Company Secretaries, Mumbai confirming compliance with the conditions of corporate governance, as stipulated under the Listing Regulations, is annexed as Annexure II to this report.
Directors'' Responsibility Statement
Pursuant to Section 134(3)(c) of the Act, it is confirmed that the directors have:
i. Followed applicable accounting standards in the preparation of the annual accounts and there are no material departures for the same;
ii. Selected such accounting policies and applied them consistently and made judgements 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 on 31st March, 2021 and of the profit of the Company for the year ended 31st March, 2021;
iii. Taken proper and sufficient care for 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;
iv. Prepared the annual accounts on a going concern basis;
v. Laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively; and
vi. Devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.
Conservation of Energy, Technology Absorption, Foreign Exchange Earnings and Outgo
The details of Energy Conservation, Technology Absorption and Foreign Exchange Earnings and Outgo as required under Section 134(3)(m) of the Act, read with Rule 8(3) of the Companies (Accounts) Rules, 2014 is annexed as Annexure III to this report.
Cipla Employee Stock Option Scheme 2013-A
The Company has an Employee Stock Option (ESOP) Scheme, namely "Employee Stock Option Scheme 2013-Aâ (ESOP Scheme) that acts as a retention tool and helps to promote a culture of ownership among employees of the Company and its subsidiary companies. There was no change in the ESOP scheme during the financial
year under review and no employee was granted options equal to or exceeding 1% of the issued share capital of the Company.
Cipla Employee Stock Appreciation Rights Plan 2021
In order to align employee rewards with the Company''s long-term growth and shareholder value creation and also to attract, retain and motivate the best available talent, pursuant to the shareholder''s approval dated 25th March, 2021 the "Cipla Employee Stock Appreciation Rights Scheme 2021" (ESAR Scheme) for issue of stock appreciation rights was implemented by the Board during FY 2020-21. Under the Scheme, the ESAR grantees are entitled to receive appreciation in the value of vested ESARs in the form of equity shares. During the year, no ESARs were granted under the scheme.
The NRC administers the ESOP Scheme and the ESAR Scheme (collectively referred to as ''Schemes''). The Schemes are in compliance with the Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, 2014 (SBEB Regulations). Details of the Schemes have also been provided in Note No. 42 of the standalone financial statement. The disclosure in compliance with SBEB Regulations, is available on the Company''s website at https://www.cipla.com/ investors/annual-reports.
In compliance with the requirements of the SBEB Regulations, a certificate from auditors, confirming implementation of the ESOP Scheme and the ESAR Scheme in accordance with the said regulations and shareholder''s resolution, will be available for electronic inspection by the members during the AGM of the Company.
Information 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 Annexure IV to this report.
Information required under Section 197(12) of the Act read with rule 5(2) and rule 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is provided in a separate exhibit forming part of this report and is available on the website of the Company at https://www.cipla.com/ investors/annual-reports.
Particulars of Loans, Guarantees and Investments
Particulars of loans, guarantees and investments under Section 186 of the Act have been provided in Note No. 44 to the standalone financial statements.
The Annual Return as on 31st March, 2021 has been placed on the website of the Company and can be accessed at https://www.cipla.com/investors/annual-reports.
The Company is committed to foster an environment of honest and open communication and discussion, consistent with our values. The Company has formulated a Whistle-Blower Policy, which lays down the process to convey genuine concerns to the Management and seek resolution towards the same without fear of retaliation. This policy covers reporting of any violation, wrongdoing or non-compliance, including without limitation, those relating to the Code of Conduct, policies and standard procedures of the Company, and any incident involving leak or suspected leak of unpublished price sensitive information (UPSI) or unethical use of UPSI in accordance with (or under) the SEBI (Prohibition of Insider Trading) Regulations, 2015.
Directors, employees and external stakeholders can report their genuine concerns either in writing or by email to the Chairperson of the Ethics Committee or to the Chief Internal Auditor at ethics@cipla. com or to the Chairperson of the Audit Committee at [email protected]. An Ethics Committee comprising of the Global Chief People Officer (GCPO) as Chairperson, the Global Chief Financial Officer (GCFO), the Global General Counsel (GC) and the Global Chief Internal Auditor as members, investigates whistle-blower complaints. A report on the functioning of the mechanism, including the complaints received and actions taken, is presented to the Audit Committee on a quarterly basis. The Whistle-Blower Policy is available on the Company''s website at https://www. cipla.com/sites/default/files/2020-02/Whistle%20 Blower%20Policy%20V3-%20Final.pdf.
Detailed update on the functioning of the Whistle-Blower Policy and compliance with the Code of Conduct has also been provided in the Report on Corporate Governance, on page 204.
Prevention of Sexual Harassment of Women at Workplace
The Company is committed to providing a safe and conducive work environment to all its employees and associates. The Company has a Policy on Prevention of Sexual Harassment at Workplace, which is available on the Company website at https://www.cipla.com/ sites/default/files/1558508425_POSH-%20Cipla.pdf. All employees, consultants, trainees, volunteers, third parties and/or visitors at all business units or functions of the Company, its subsidiaries and/or its affiliated or group companies are covered by the said policy. Adequate workshops and awareness programmes against sexual harassment are conducted across the organisation.
The Company has constituted an Internal Complaints Committee in compliance with the provisions of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 and is fully compliant. The Audit Committee oversees compliance at regular intervals.
Details of complaints received/disposed during FY 2020-21 are provided in the Report on Corporate Governance on page 207.
A detailed note on procedure adopted by the Company in dealing with contracts and arrangements with related parties has been provided in the Report on Corporate Governance on page 206.
All contracts, arrangements and transactions entered by the Company with related parties during FY 2020-21 were in the ordinary course of business and on an arm''s length basis. During the year, the Company did not enter into any transaction, contract or arrangement with related parties, that could be considered material in accordance with the Company''s Policy on Dealing with Related Party Transactions. Accordingly, the disclosure of related party transactions in Form AOC-2 is not applicable. However, disclosure on related party transactions as per IND AS-24 has been provided under Note No. 41 of the standalone financial statements on page 290 and Note No. 48 of the consolidated financial statements on page 409.
During the year, the Company amended the Policy on Dealing with Related Party Transactions (''RPT Policy'') to simplify the process of transaction approval sought from the Audit Committee. The RPT Policy is available on the Company''s website at https://www.cipla.com/sites/ default/files/2020-06/Policy%20on%20dealing%20 with%20Related%20Party%20Transactions.pdf
Internal Financial Control and its adequacy6
Cipla has laid down an adequate system of internal controls, policies and procedures for ensuring orderly and efficient conduct of the business, including adherence to the Company''s policies, safeguarding of its assets, prevention and detection of frauds and errors, accuracy and completeness of the accounting records and timely preparation of reliable financial disclosures.
The current system of IFC is aligned with the statutory requirements and is in line with the globally accepted risk-based framework issued by the Committee of Sponsoring Organizations (COSO) of the Treadway Commission. The IFC are adequate and operating effectively.
Effectiveness of IFC is ensured through Management reviews, controlled self-assessment and independent testing by the Internal Auditor.
The Board of Directors has formed an Investment and Risk Management Committee (IRMC) which oversees the Enterprise Risk Management (ERM) process. An update on ERM activities is presented and deliberated upon in the IRMC meetings on quarterly basis and periodically at the Board level from time to time but at least once a year. The Audit Committee has additional oversight in the area of financial risks and controls. The major risks identified by the businesses and functions are systematically addressed through mitigating actions on a continuing basis. In terms of the provisions of Section 134 of the Act, a detailed note on Risk Management has been provided on page 52 of this report.
In order to ensure that the Board and board committees are functioning effectively and to comply with statutory requirements, the annual performance evaluation of the Board, board committees and individual directors was conducted during the year. The evaluation was carried out based on the criteria and framework approved by the NRC. A detailed disclosure on the parameters and the process of Board evaluation as well as the outcome has been provided in the Report on Corporate Governance on page 189.
Subsidiaries, Associates and Joint Ventures
At the beginning of the year, the Company had 51 subsidiaries and 4 associates, as against 46 subsidiaries and 5 associates as on 31st March, 2021. During the year, the following companies were incorporated, acquired, liquidated or divested:
o Incorporation of Cipla Therapeutics Inc., USA, to expand business in specialty segment in the US market.
o Acquisition of 21.85% stake in GoApptiv Private Limited to enable wider reach of key brands in the tier 3 towns through GoApptiv''s solutions for end-to-end brand marketing and channel engagement.
o Amalgamation of Cipla Pharma Lanka (Private) Limited with Breath Free Lanka (Private) Limited to eliminate duplication resulting in operational synergies and reduction of costs together with focused operational efforts, rationalisation, standardisation and simplification of business processes.
o Divestment of stake in the following subsidiaries:
o Anmarate (Pty) Limited, South Africa by Cipla Medpro South Africa (Pty) Limited, South Africa (wholly owned subsidiary) as a part of over-all group simplification process.
o Quality Chemicals Limited, Uganda, for eliminating complexity and enhancing focus by exiting non-core business.
o Voluntary liquidation of following wholly-owned subsidiaries as a part of internal reorganisation:
o Cipla (Mauritius) Limited, Mauritius
o Cape to Cairo Exports (Pty) Limited, South Africa
o Cipla (UK) Limited, UK
Details of these subsidiaries and associates are set out on page 355 of the Annual Report. Pursuant to Section 129(3) of the Act read with Rule 5 of the Companies (Accounts) Rules, 2014, a statement containing salient features of the financial statement of the subsidiary and associate companies in form no. AOC-1 is given on page 417 of the Annual Report. The statement also provides details of the performance and the financial position of each of the subsidiaries and associates. The consolidated financial statements presented in this Annual Report include financial results of the subsidiary and associate companies.
Copies of the financial statements of the subsidiary companies are available on the Company''s website https://www.cipla.com/investors/annual-reports.
During the year, the Board of Directors had approved the Scheme of Arrangement ("Scheme") between the Company ("Demerged Company"), Cipla BioTec Limited ("Resulting Company 1") and Cipla Health Limited ("Resulting Company
2") and their respective shareholders for the transfer of India based US business undertaking ("Demerged Undertaking 1") of the Demerged Company into the Resulting Company 1 and transfer of consumer business undertaking ("Demerged Undertaking 2") of the Demerged Company to Resulting Company 2 by way of demerger. The Company has received all necessary approvals and is in the process of filing an application before the National Company Law Tribunal for approval of the Scheme.
The Scheme details, rationale and benefits, along with other documents, are available on the Company''s website at https://www.cipla.com/investors/scheme-arrangement
Directors and Key Managerial Personnel
At the 84th AGM of the Company held on 27th August, 2020, the shareholders approved the (i) re-appointment of Ms Naina Lal Kidwai as Independent Director for a second term of five years effective 6th November, 2020, (ii) re-appointment of Ms Samina Hamied as Executive Vice-Chairperson for a period of five years effective 10th July, 2020, and (iii) re-appointment of Mr S Radhakrishnan as non-executive director liable to retire by rotation.
On the recommendation of the NRC, the Board recommends the following appointments /
re-appointment: (i) re-appointment of Mr M K
Hamied, who retires by rotation and being eligible has offered himself for re-appointment as director liable to retire by rotation (ii) re-appointment of Mr Umang Vohra as Managing Director and Global Chief Executive Officer for a period of five (5) years commencing from 1st April, 2021 till 31st March, 2026 (iii) appointment of Mr Robert Stewart as Independent Director of the Company for a for a period of five (5) years commencing from 14th May, 2021 to 13th May, 2026.
In the opinion of the Board, all the directors, as well as the directors proposed to be appointed / re-appointed, possess the requisite qualifications, experience and expertise and hold high standards of integrity. All of the independent directors except Mr. Robert Stewart, are exempt from the requirement of passing the proficiency test. Unless exempted, Mr. Robert Stewart will be required to pass the proficiency test within the permissible time limit. The list of key skills, expertise and core competencies of the Board of Directors is provided in the Report on Corporate Governance at page 186 of this Annual Report.
Details such as brief resumes, nature of expertise in specific functional areas, names of companies in which the above-named directors hold directorships, committee memberships/ chairpersonships, shareholding in Cipla, etc. are furnished in the Notice of the AGM.
Sr. |
Key Managerial |
Designation |
No |
Personnel |
|
1 |
Ms Samina Hamied |
Executive ViceChairperson |
Managing Director and |
||
2 |
Mr Umang Vohra |
Global Chief Executive Officer |
3 |
Mr Kedar Upadhye |
Global Chief Financial Officer |
4 |
Mr Rajendra Chopra |
Company Secretary and Compliance Officer |
The criteria for determining qualification, positive attributes and independence of a director are given in the Nomination, Remuneration and Board Diversity Policy, disclosed as Annexure E to the Report on Corporate Governance. During the year, the Board, on the recommendation of the NRC, amended the policy twice to add the evaluation criteria while appointing any Key Managerial Personnel or Senior Management Personnel, and to modify the sitting fees for nonexecutive directors.
As on 31st March, 2021, the Company has the following Key Managerial Persons (KMP) as per Section 2(51) of the Act:
Except Dr Peter Mugyenyi and Mr S Radhakrishnan, none of the other directors, including the Managing Director and Global CEO and the Whole-Time Director, received any remuneration or commission from any of the Company''s subsidiaries.
Declaration by Independent Directors
All independent directors have submitted requisite declaration confirming that they (i) continue to meet the criteria of independence as prescribed under Section 149(6) of the Act and Regulation 16(1)(b) of the Listing Regulations; and (ii) are compliant of the Code of Conduct laid down under Schedule IV of the Act.
All the directors have confirmed that they are not debarred from holding the office of director by virtue of any SEBI order or any other such authority.
Board Committees and Number of Meetings of the Board and Board Committees
The Board has following committees:
i) Audit Committee
ii) Nomination and Remuneration Committee
iii) Corporate Social Responsibility Committee
iv) Stakeholders Relationship Committee
v) Investment and Risk Management Committee
vi) Operations and Administrative Committee
The Board constituted one special committee i.e. Committee of Independent Directors pursuant to the requirement of the SEBI Circular No. SEBI/HO/CFD/ DIL1/CIR/P/2020/249 dated 22nd December 2020. All the independent directors were appointed as the members of the Committee.
All the recommendations of the board committees, including the Audit Committee, were accepted by the Board.
The Board met eight times during the year under review. The maximum gap between two consecutive board meetings did not exceed 120 days. A detailed disclosure on the Board, its committees, its composition, the detailed charter and brief terms of reference, number of board and committee meetings held, and attendance of the directors at each meeting is provided in the Report on Corporate Governance, which forms part of this report.
M/s. Walker Chandiok & Co LLP, Chartered Accountants were appointed as Statutory Auditors of the Company at the Annual General Meeting (AGM) held on 28th September, 2016, for a term of five consecutive years i.e. upto the conclusion of ensuing 85th AGM.
As per the provisions of Section 139 of the Act, the Board of Directors of the Company, on the recommendation of the Audit Committee, recommends re-appointment of M/s. Walker Chandiok & Co LLP, Chartered Accountants for a further period of five years i.e. upto the conclusion of 90th AGM.
M/s. Walker Chandiok & Co LLP, Chartered Accountants, (i) have expressed their willingness to be reappointed for a further term, (ii) have submitted their confirmation to the effect that they continue to satisfy the criteria provided in Section 141 of the Act and (iii) that their appointment is within the limits prescribed under Section 141 (3)(g) of the Act.
A resolution proposing re-appointment of M/s. Walker Chandiok & Co LLP as the Statutory Auditor of the Company and their remuneration pursuant to Section 139 of the Act, along with the explanatory statement, forms part of the Notice of 85th AGM.
The Auditor''s Report for FY 2020-21 does not contain any qualification, reservation, adverse remark or disclaimer. Further, there are no instances of any fraud reported by the Auditors to the Audit Committee or to the Board pursuant to Section 143(12) of the Act.
Secretarial Auditor and Secretarial Audit Report
The Secretarial Audit Report for the financial year ended 31st March, 2021 is annexed as Annexure V to this report.
The Board of Directors, on the recommendation of the Audit Committee, has re-appointed M/s BNP & Associates, Company Secretaries, Mumbai to conduct the secretarial audit of the Company for FY 2021-22. They have confirmed their eligibility for the re-appointment.
The Secretarial Audit Report does not contain any qualification, reservation, disclaimer or adverse remark.
Cost Auditor and Cost Audit Report
The Board of Directors, on the recommendation of the Audit Committee, had appointed Mr D H Zaveri, practising Cost Accountant (Fellow Membership No. 8971) as Cost Auditor to conduct the audit of Company''s cost records for the financial year ended 31st March, 2021. The Cost Auditor has confirmed that they are not disqualified pursuant to the provisions of Section 141 of the Act read with Section 139 and 148 of the Act. The Cost Auditor will submit their report for the FY 2020-21 on or before the due date. The Cost Audit Report, for the year ended 31st March, 2020, was filed with the Central Government within the prescribed time. The Company maintains the Cost Records as per the provisions of Section 148(1) of the Act.
In accordance with the provisions of Section 148 of the Act read with the Companies (Audit and Auditors) Rules, 2014, since the remuneration to be paid to the Cost Auditor for FY 2021-22 is required to be ratified by the members, the Board of Directors recommends the same for approval by members at the ensuing AGM. The proposal forms part of the Notice of the AGM.
Key Initiatives with respect to Stakeholder Relationship, Customer Relationship, Environment, Sustainability, Health and Safety
The key initiatives taken by the Company with respect to stakeholder relationship, customer relationship, environment, sustainability, health and safety are provided separately in various Capitals in the Integrated Report section of the report.
During the financial year under review:
o the Company has complied with the applicable Secretarial Standards, i.e. SS-1 and SS-2, relating to ''Meetings of the Board of Directors'' and ''General Meetings'', respectively.
o the Company issued and allotted equity shares under the ESOP scheme and there were no instances wherein the Company failed to implement any corporate action within the statutory time limit.
o the Company did not accept any deposit within the meaning of Sections 73 and 74 of the Act read with the Companies (Acceptance of Deposits) Rules, 2014 and accordingly no amount on account of principal or interest on public deposits was outstanding as on 31st March, 2021.
o the Company has not issued shares with differential voting rights and sweat equity shares during the year under review.
o no significant or material orders were passed by the regulators or courts or tribunals which could impact the going concern status of the Company and its future operations.
o no material changes and commitments have occurred after the close of the year till the date of this report which may affect the financial position of the Company.
We wish to place on record our appreciation of the Governments of the countries where the Company has its operations. We also thank the Ministry of Chemicals & Fertilizers, India; the Central Government; State Governments and other regulatory bodies / authorities; banks; business partners; shareholders; medical practitioners and other stakeholders; for the assistance, co-operation and encouragement extended to the Company. We would also like to place on record our deep sense of appreciation to the employees for their contribution and services.
On behalf of the Board
Date: 14th May, 2021 Y K Hamied
Place: Mumbai Chairman
Mar 31, 2019
Dear Members,
The Board of Directors are pleased to submit its report on the performance of the Company along with the audited Standalone as well as Consolidated financial statements for the year ended 31st March, 2019.
Financial Summary and State of Affairs
Rs. in Crore
Year ended 31st |
March, 2018 |
Particulars |
Year ended 31st |
March, 2019 |
Standalone |
Consolidated |
Standalone |
Consolidated |
|
11444.81 |
15219.25 |
Gross Total revenue |
12374.01 |
16362.41 |
1988.92 |
1746.98 |
Profit before tax and exceptional item |
2492.83 |
2079.14 |
1468.52 |
1410.53 |
Profit for the year (after tax and attributable to shareholders) |
1888.41 |
1527.70 |
1.77 |
24.30 |
Other Comprehensive Income for the year (not to be reclassified to P&L) |
7.81 |
34.91 |
0.47 |
369.23 |
Other Comprehensive Income for the year (to be reclassified to P&L) |
31.75 |
(324.85) |
7933.29 |
7774.11 |
Surplus brought forward from last balance sheet |
9214.31 |
8988.78 |
9403.58 |
9188.05 |
Profit available for appropriation |
11110.53 |
10535.40 |
Appropriations: |
||||
(160.94) |
(160.94) |
Dividend |
(241.57) |
(241.57) |
(28.33) |
(28.33) |
Tax on Dividend |
(40.40) |
(42.52) |
9214.31 |
8998.78 |
Surplus carried forward |
10828.56 |
10251.31 |
The financial results and the results of operations, including major developments have been further discussed in detail in the Management Discussion and Analysis section.
The Standalone as well as the Consolidated financial statements have been prepared in accordance with the Indian Accounting Standards (âInd ASâ).
Share Capital
During the year under review, 582102 equity shares were issued and allotted under Employee Stock Option Scheme. Consequently, the issued, subscribed and paid up share capital of the Company as on 31st March, 2019 stood at RS.1,61,14,02,532/- divided into 805701266 equity shares of RS.2/- each. The equity shares issued under the Employee Stock Option Scheme 2013-A rank pari-passu with the existing equity shares of the Company.
Dividend
In line with the Dividend Distribution Policy of the Company, we recommend a final dividend of RS.3/- per equity share (i.e. 150 % of face value) for the FY 18-19. The dividend, if approved at the Annual General Meeting (AGM), will be paid to those members whose names will appear in the Register of Members as on close of Thursday, 1st August, 2019. The total dividend pay-out will amount to approximately RS.241.71 crore (excluding dividend distribution tax of RS.49.69 crore) resulting in a pay-out of 12.80% of the Standalone profit after tax of the Company.
Reserve
The Company has not transferred any amount to the Reserve for the financial year ended 31st March, 2019.
Management Discussion and Analysis Report
Pursuant to Regulation 34 of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, (Listing Regulations) the Management Discussion and Analysis Report for the year under review, is presented in a separate section, forming part of the Annual Report.
Corporate Social Responsibility (CSR)
At Cipla, we consider it as our responsibility to support underprivileged people, to live a life with dignity and quality. Cipla undertake its CSR activities primarily in quality health, education and skilling. A detailed report on Ciplaâs various CSR initiatives has been provided in a separate section âCorporate Social Responsibilityâ. The Corporate Social Responsibility Report also contains the Annual Report on CSR initiatives as required under section 135 of the Companies Act, 2013 (the Act) which is annexed as Annexure I to this report.
Business Responsibility Report
As mandated by the Securities and Exchange Board of India (SEBI), the Business Responsibility Report (BRR) forms part of the Annual Report. Since the Company is publishing Annual Report under International Integrated Reporting Council (IIRC) framework, report on the nine principles of the National Voluntary Guidelines on social, environmental and economic responsibilities of business as framed by the Ministry of Corporate Affairs is provided in relevant sections of the IR with suitable references to the BRR.
Corporate Governance
In compliance with the provisions of the Listing Regulations, the Report on Corporate Governance for the year under review, is presented in a separate section, forming part of the Annual Report.
A certificate from M/s. BNP & Associates, confirming compliance of conditions of Corporate Governance, as stipulated under the Listing Regulations, is annexed as Annexure II to this report.
Directorsâ Responsibility Statement
Pursuant to section 134(3)(c) of the Act, it is confirmed that the Directors have:
i. Followed applicable accounting standards in the preparation of the annual accounts and there are no material departures for the same;
ii. Selected such accounting policies and applied them consistently and made judgements 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 on 31st March, 2019 and of the profit of the Company for the year ended 31st March, 2019;
iii. Taken proper and sufficient care for 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;
iv. Prepared the annual accounts on a going concern basis;
v. Laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively; and
vi. Devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.
Conservation of Energy, Technology Absorption, Foreign Exchange Earnings and Outgo
The details of Energy Conservation, Technology Absorption and Foreign Exchange Earnings and Outgo as required under section 134(3)(m) of the Act, read with Rule 8(3) of the Companies (Accounts) Rules, 2014 is annexed to this report as Annexure III.
Employee Stock Option Scheme
The Company has an Employee Stock Option (ESOP) scheme, namely âEmployee Stock Option Scheme 2013-Aâ (ESOP Scheme) which helps the Company to retain and attract right talent. The Nomination and Remuneration Committee (NRC) administers the Companyâs ESOP scheme. There were no changes in the ESOP scheme during the financial year under review. The ESOP scheme is in compliance with the Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, 2014 [SEBI (SBEB) Regulations, 2014].
In compliance with the requirement of SEBI (SBEB) Regulations, 2014, a certificate from auditor, confirming implementation of ESOP Scheme in accordance with the said regulations and shareholderâs resolution, will be placed at the ensuing annual general meeting of the Company.
The requisite applicable disclosures under the SEBI (SBEB) Regulations, 2014 as on 31st March, 2019 will be uploaded on the Companyâs website at www.cipla.com.
Details of the Employee Stock Option Scheme 2013-A have also been provided under Note No. 42 of the Standalone financial statement.
Human Resources
Details of remuneration 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 annexed as Annexure IV.
Particulars of employee remuneration as required under section 197(12) of the Act read with rule 5(2) and rule 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 forms part of this report. In terms of the provisions of section 136 of the Act, the Annual Report is being sent to members excluding the aforementioned information. The information will be available on the Companyâs website www.cipla.com and is also available for inspection at the registered office of the Company during working hours for a period of 21 days before the Annual General Meeting. Any member interested in obtaining such information may write to the Company Secretary at the Registered Office of the Company.
Particulars of Loans, Guarantees and Investments
Particulars of loans, guarantees and investments under section 186 of the Act are provided in Note No. 44 to the Standalone financial statements.
Extract of Annual Return
An extract of the annual return of the Company has been placed on the website of the Company and can be accessed at www.cipla.com under the investor information section. The extract of the annual return for FY 18-19 is given as Annexure V.
Vigil Mechanism
The Company has formulated a Whistle-Blower Policy, which serves as a mechanism for its directors, employees and external stakeholders to report genuine concerns regarding unethical behaviour, actual or suspected fraud or violation of the Code of Conduct without fear of reprisal. An Ethics Committee consisting of the Global Chief People Officer (GCPO) as Chairperson, the Global Chief Financial Officer (GCFO), the Global General Counsel (GC) and the Global Chief Internal Auditor has been constituted to investigate whistle-blower complaints. Directors, employees and external stakeholders can report their genuine concerns either in writing or by an email to the Chairperson of Ethics Committee or to the Chief Internal Auditor at [email protected] or to the Chairperson of Audit Committee at [email protected]. The complaints, reports and actions taken are presented to the Audit Committee on a quarterly basis. The WhistleBlower Policy is available on the Companyâs website at https://www.cipla.com/7uploads/investor/1530187336_ Whistle%20Blower%20Policy%20V1%20fc.pdf
A brief note on the highlights of the Whistle-Blower Policy and compliance with the Code of Conduct has also been provided in the Report on Corporate Governance, which forms part of this Annual Report.
Failure to implement any Corporate Action
There were no instances where the Company failed to implement any corporate action within the specified time limit.
Prevention of Sexual Harassment of Women at Workplace
The Company has in place a policy on Prevention of Sexual Harassment at Workplace, which is available on the Company website at https://www.cipla.com// uploads/investor/1558508425_POSH-%20Cipla.pdf. All employees, consultants, trainees, volunteers, third parties and/or visitors at all business units or functions of the Company, its subsidiaries and/or its affiliated or group companies are covered by the said policy.
The Company is in compliance with the provisions relating to the constitution of an Internal Complaints Committee under the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013.
Contract and Arrangements with Related Parties
A detailed note on procedure adopted by the Company in dealing with contracts and arrangements with related parties has been provided in the Report on Corporate Governance, which forms part of this Annual Report.
All contracts, arrangements and transactions entered by the Company with related parties during FY 18-19 were in the ordinary course of business and on an armâs length basis. During the year, the Company did not enter into any transaction, contract or arrangement with related parties, that could be considered material in accordance with the Companyâs policy on related party transactions. Accordingly, the disclosure of related party transactions in Form AOC-2 is not applicable. However, detailed disclosure on related party transactions as per IND AS-24 containing name of the related party and details of the transactions entered with such related party have been provided under Note No. 41 of the Standalone financial statements.
The policy on dealing with related party transactions is available on the Companyâs website at https://www. cipla.com//uploads/investor/1532683654_Cipla%20 Limited%20-%20Policy%20on%20Dealing%20with%20 Related%20Party%20Transactions.pdf
Material changes and commitments affecting financial position between end of financial year and date of report
No material changes and commitments have occurred after the close of the year till the date of this report which may affect the financial position of the Company.
Significant and Material Orders passed by regulators or courts or tribunals
No significant or material orders were passed by the regulators or courts or tribunals which could impact the going concern status of the Company and its future operations.
Internal Financial Controls and its Adequacy
Cipla has an adequate system of internal controls that is commensurate with the nature of our business and the size and complexity of our operations. The Company has adopted policies and procedures covering all financial and operating functions. These controls have been designed to provide reasonable assurance over:
o Effectiveness and efficiency of operations
o Prevention and detection of frauds and errors
o Safeguarding of assets from unauthorised use or losses
o Compliance with applicable laws and regulations
o Accuracy and completeness of accounting records
o Timely preparation of reliable financial information
The current system of internal financial controls is aligned with the requirements of the Act, and is in line with the globally accepted risk-based framework issued by the Committee of Sponsoring Organisations (COSO) of the Treadway Commission.
The Company has an internal audit function, which is supported by dedicated outsourced teams. The internal audit plan is approved by the Audit Committee at the beginning of every year. Every quarter, the Audit Committee is presented with key control issues and the actions taken on issues highlighted in the previous reports.
The Audit Committee deliberates with the management, considers the systems as laid down, and meets the internal auditors and statutory auditors to ascertain their views on the internal financial control systems. The Company recognises the fact that any internal control framework would have some inherent limitations and hence has inculcated a process of periodic audits and reviews to ensure that such systems and controls are updated at regular intervals.
Risk Management
The Company has put in place an Enterprise Risk Management (ERM) framework. Every quarter, a detailed update on ERM is presented and deliberated upon in the meetings of the Investment and Risk Management Committee of the Board. In terms of the provisions of Section 134 of the Act, a detailed note on Risk Management has been provided on page no. 36 of this report.
Deposits
During FY 18-19, the Company did not accept any deposit within the meaning of sections 73 and 74 of the Act read together with the Companies (Acceptance of Deposits) Rules, 2014.
Board Evaluation
The evaluation of all the Directors including the Chairman, the Executive Vice-Chairperson and the Managing Director and Global CEO, Board committees and the Board as a whole was carried out based on the criteria and framework approved by the Nomination and Remuneration Committee. A detailed disclosure on the parameters and the process of Board evaluation as well as the outcome has been provided in the Corporate Governance Report.
Subsidiaries and Associates
At the beginning of the year, the Company had 49 subsidiaries and 1 associate as against 48 subsidiaries and 2 associates as on 31st March, 2019. During the year, the following companies were incorporated, acquired, liquidated or divested:
During the year, Madison Pharmaceuticals Inc. was incorporated in USA and Cipla Gulf FZ- LLC in Dubai for strengthening its business operations. In South Africa, Mirren (Pty) Limited was acquired as a part of strategy to strengthen its OTC portfolio. In USA, 33.3% stake was acquired in Avenue Therapeutics Inc. for building specialty business in USA. The Companyâs wholly owned subsidiary Goldencross Pharma Private Limited acquired minority stake i.e. 11.71% in Wellthy Therapeutics Private Limited.
During the year, 4 non-operating subsidiaries viz. Xeragen Laboratories (Pty) Limited, Galilee Marketing (Pty) Ltd, Med Man Care (Pty) Ltd in South Africa and Cipla FZE in Dubai were liquidated.
Details of these subsidiaries and associates are set out on Page 283 of the Annual Report. Pursuant to section 129(3) of the Act read with rule 5 of the Companies (Accounts) Rules, 2014, a statements containing salient features of the financial statement of the subsidiary and associate companies is given on Page 334 of the Annual Report. The statement also provides details of the performance and the financial position of each of the subsidiaries and associates. The consolidated financial statements presented in this annual report include financial results of the subsidiary and associate companies.
Copies of the financial statements of the subsidiaries will be available on the Companyâs website www.cipla.com and will also be available for inspection by the members at the registered office of the Company during business hours. Copies of the said financial statements will be made available to any member of the Company and those of the respective subsidiaries upon request.
Directors and Key Managerial Personnel
Ms lreena Vittal, Independent Director resigned from the Board of the Company effective 1st April, 2019 due to her other professional commitments resulting in her inability to devote as much time as she need to. She has confirmed that there were no other material reasons for her resignation other than the one stated above. Consequent to the said resignation, she also ceased to be the member of the Audit Committee and the Nomination and Remuneration Committee w.e.f. 1st April, 2019. The Board places on record its sincere appreciation for the contribution made by her as a member of the Board.
Mr Adil Zainulbhai was appointed as the member of Audit Committee and Dr Peter Mugyenyi was appointed as the member of Nomination and Remuneration Committee w.e.f. 7th February, 2019
The tenure of appointment of Mr Ashok Sinha, Dr Peter Mugyenyi and Mr Adil Zainulbhai as independent directors will conclude on 2nd September 2019 and the tenure of appointment of Ms Punita Lal as independent director will conclude on 12th November, 2019. Pursuant to the provisions of section 149 and 152 of the Companies Act 2013, the recommendation of the Nomination and Remuneration Committee and the report of performance evaluation, the Board recommends re-appointment of the above-mentioned Independent directors for a further term of 5 consecutive years.
Mr Umang Vohra, Managing Director and Global Chief Executive Officer, retires by rotation and being eligible, offers himself for re-appointment. The Board on the basis of recommendation of the Nomination and Remuneration Committee recommends the re-appointment of Mr Umang Vohra as Director liable to retire by rotation.
Brief resume, nature of expertise in specific functional areas, names of companies in which the above-named directors hold directorships, committee memberships/ chairmanships, shareholding in Cipla etc., are furnished in notice of the ensuing AGM.
Criteria for determining qualification, positive attributes and independence of a director is given under Nomination, Remuneration and Board Diversity Policy, disclosed as Exhibit A to the Report on Corporate Governance.
As on 31st MarcRs.2019, the Company had the following Key Managerial Personnel (âKMPâ) as per section 2(51) of the Act:
Sr. |
Name of the KMP |
Designation |
No |
||
1 |
Ms Samina Vaziralli |
Executive Vice-Chairperson |
Managing Director |
||
2 |
Mr Umang Vohra |
and Global Chief Executive Officer |
3 |
Mr Kedar Upadhye |
Global Chief Financial Officer |
Company Secretary |
||
4 |
Mr Rajendra Chopra |
& Compliance Officer |
Except Mr Peter Lankau, who received remuneration from InvaGen Pharmaceuticals Inc. a wholly owned subsidiary of Cipla Limited, none of the directors including the Managing Director and Global CEO nor the Whole-time Director, received any remuneration or commission from any of the Companyâs subsidiaries during the previous year.
Declaration by Independent Directors
All Independent Directors of the Company have submitted requisite declarations confirming that they continue to meet the criteria of independence as prescribed under section 149(6) of the Act and Regulation 16(1)(b) of the Listing Regulations. The Independent Directors have also confirmed that they have complied with Schedule IV of the Act and the Companyâs Code of Conduct.
Committees of Board, Number of Meetings of the Board and Board Committees
The Board currently has six committees, namely, the Audit Committee, the Nomination and Remuneration Committee, the Corporate Social Responsibility Committee, the Stakeholders Relationship Committee, the Investment and Risk Management Committee and the Operations and Administrative Committee. All the recommendations made by the Committees of Board including the Audit Committee were accepted by the Board.
The Board met five times during the year under review. The maximum gap between two Board meetings did not exceed 120 days. A detailed update on the Board, its Committees, its composition, detailed charter including terms of reference of various Board Committees, number of board and committee meetings held and attendance of the directors at each meeting is provided in the Report on Corporate Governance, which forms part of this report.
Secretarial Standards
The Company has complied with the applicable Secretarial Standards, i.e. SS-1 and SS-2, relating to âMeetings of the Board of Directorsâ and âGeneral Meetingsâ, respectively.
Auditor and Auditorâs Report
M/s. Walker Chandiok & Co LLP, Chartered Accountants, (Firm Registration No. 001076N/ N500013) were appointed as the Statutory Auditor of the Company at the AGM held on 28th September, 2016 to hold office till the conclusion of 85th AGM of 2021. The Company has received a certificate from the Statutory Auditor confirming that they continue to remain eligible to act as the Statutory Auditor of the Company.
There are no instances of any fraud reported by the Auditor to the Audit Committee or the Board pursuant to section 143(12) of the Act. The Auditorâs Report for FY 18-19 does not contain any qualification, reservation or adverse remark.
Secretarial Auditor & its Audit Report
The Secretarial Audit Report for the financial year ended 31st March, 2019 is annexed to this report as Annexure VI. The Report does not contain any qualification, reservation, disclaimer or adverse remark.
The Board, on the recommendation of the Audit Committee, has re-appointed M/s BNP & Associates, Company Secretaries, Mumbai to conduct the secretarial audit of the Company for the FY 19-20. They have confirmed that they are eligible for the said appointment.
Cost Auditor and Cost Audit Report
The Cost Records of the Company are maintained in accordance with the provisions of section 148(1) of the Act as specified by the Central Government. The Cost Audit Report, for the year ended 31st March, 2018, was filed with the Central Government within the prescribed time.
The Board, on recommendation of the Audit Committee, had appointed Mr D. H. Zaveri, practising Cost Accountant (Fellow Membership No. 8971) as cost auditor to conduct the audit of Companyâs cost records for the financial year ended 31st March, 2019. The Cost Auditor will submit his report for the FY 18-19 on or before the due date.
In accordance with the provisions of section 148 of the Act read with the Companies (Audit and Auditors) Rules, 2014, since the remuneration payable to the Cost Auditor for FY 19-20 is required to be ratified by the members, the Board recommends the same for approval by members at the ensuing AGM.
Key initiatives with respect to Stakeholder relationship, Customer relationship, Environment, Sustainability, Health and Safety
The key initiatives taken by the Company with respect to stakeholder relationship, customer relationship, environment, sustainability, health and safety are provided separately in the Integrated Report section of the Annual Report.
Acknowledgements
We wish to place on record our appreciation to the Government of various countries where the Company has its operations. We thank the Ministry of Chemicals & Fertilizers, Central Government, State Government, and other regulatory bodies / authorities, banks, business partners, shareholders, medical practitioners and other stakeholders for the assistance, co-operation and encouragement extended to the Company. We also like to place on record our deep sense of appreciation to the employees for their contribution and services.
On behalf of the Board
Date: 22nd May, 2019 Y. K. Hamied
Place: New York Chairman
Mar 31, 2018
Dear Members,
The Board of Directors hereby submits its report on the performance of the Company along with the audited Standalone as well as Consolidated financial statements for the year ended 31st March, 2018.
Financial Summary and State of Affairs
Rs. in Crore
Year ended 31st |
March, 2017 |
Particulars |
Year ended 31st |
March, 2018 |
Standalone |
Consolidated |
Standalone |
Consolidated |
|
10974.58 |
14630.24 |
Gross total revenue |
11444.81 |
15219.25 |
1186.94 |
1222.17 |
Profit before tax and exceptional item |
1911.40 |
1746.98 |
974.94 |
1006.39 |
Profit for the year (after tax and attributable to shareholders) |
1468.52 |
1410.53 |
6.93 |
7.46 |
Other comprehensive income for the year (not to be reclassified to P&L) |
1.77 |
24.30 |
123.89 |
Other comprehensive income for the year (to be reclassified to P&L) |
0.47 |
369.23 |
|
7145.00 |
6953.84 |
Surplus brought forward from last balance sheet |
7933.29 |
7774.11 |
8126.87 |
7967.69 |
Profit available for appropriation |
9403.58 |
9188.05 |
Appropriations: |
||||
(160.87) |
(160.87) |
Dividend |
(160.94) |
(160.94) |
(32.71) |
(32.71) |
Tax on Dividend |
(28.33) |
(28.33) |
7933.29 |
7774.11 |
Surplus carried forward |
9214.31 |
8998.78 |
The financial results and the results of operations, including major developments have been further discussed in detail in the Management Discussion and Analysis section.
The Standalone as well as the Consolidated financial statement have been prepared in accordance with the Indian Accounting Standards (âInd ASâ) under the historical cost convention on accrual basis except for certain financial instruments which are measured at fair value.
Share Capital
During the year under review, the Company cancelled the unsubscribed issued equity share capital of 10,03,395 equity shares of RS.2 each, aggregating to RS.20,06,790. Upon cancellation, such unsubscribed capital became a part of the unissued share capital of the Company and is available for re-issue at a future date. 6,09,090 equity shares were issued and allotted under Employee Stock Option Schemes. The issued, subscribed and paid up share capital of the Company as on 31st March, 2018 stood at RS.161,02,38,328 divided into 80,51,19,164 equity shares of RS.2 each.
Dividend
In line with the Dividend Policy of the Company, we recommend a final dividend of RS.3 per equity share (i.e. 150% of Face Value) for the FY18. The dividend, if approved at the Annual General Meeting (AGM), will be paid to those members whose names will appear in the Register of Members on 14th August, 2018. The total dividend pay-out will amount to approximately RS.241.54 crore (excluding dividend distribution tax) resulting in a pay-out of 16.45% of the Standalone profit after tax of the Company.
Reserve
The Company has not transferred any amount to the Reserve for the financial year ended 31st March, 2018.
Management Discussion and Analysis Report
Pursuant to Regulation 34 of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (Listing Regulations) the Management Discussion and Analysis Report for the year under review, is presented in a separate section, forming part of the Annual Report.
Corporate Social Responsibility (CSR)
At Cipla, we consider it as our responsibility to support people facing challenges to live a life with dignity and quality. Cipla undertake its CSR activities primarily in quality health, education and skilling. A detailed report on Ciplaâs various CSR initiatives has been provided in a separate Section âCorporate Social Responsibilityâ. The Corporate Social Responsibility Report also contain the Annual Report on CSR initiatives as required under section 135 of the Companies Act, 2013 (Act) is annexed as Annexure I to this report.
The Companyâs CSR Policy is available on the website of the Company at https://www.cipla.com/templates/home_ tpl/images/Corporate_Social_Responsibility_Policy.pdf
Business Responsibility Report
As mandated by the Securities and Exchange Board of India (SEBI), the Business Responsibility Report (BRR) forms part of the Annual Report. Since the Company is publishing Annual Report under International Integrated Reporting Council (IIRC) framework this year, report on the nine principles of the National Voluntary Guidelines on social, environmental and economic responsibilities of business as framed by the Ministry of Corporate Affairs is provided in relevant sections of the IR with suitable references in the BRR.
Corporate Governance
Pursuant to the Listing Regulations, the Report on Corporate Governance for the year under review, is presented in a separate section, forming part of the Annual Report.
A certificate from M/s. BNP & Associates, confirming compliance of conditions of Corporate Governance, as stipulated under the Listing Regulations, is annexed as Annexure II to this report.
Directorsâ Responsibility Statement
Pursuant to section 134(3)(c) of the Act it is confirmed that the Directors have:
i. Followed applicable accounting standards in the preparation of the annual accounts and there are no material departures for the same;
ii. Selected such accounting policies and applied them consistently and made judgements 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 on 31st March, 2018 and of the profit of the Company for the year ending 31st March, 2018;
iii. Taken proper and sufficient care for 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;
iv. Prepared the annual accounts on a going concern basis;
v. Laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively; and
vi. Devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.
Conservation of Energy, Technology Absorption, Foreign Exchange Earnings and Outgo
The details of Energy Conservation, Technology Absorption and Foreign Exchange Earnings and Outgo as required under section 134(3)(m) of the Act, read with Rule 8(3) of the Companies (Accounts) Rules, 2014 is annexed to this report as Annexure III.
Employee Stock Option Scheme
The Company has an Employee Stock Option (ESOP) scheme, namely âEmployee Stock Option Scheme 2013-Aâ (ESOP Scheme) which helps the Company to retain and attract right talent. The Nomination and Remuneration Committee administers the Companyâs ESOP scheme. There were no changes in the ESOP scheme during the financial year under review. The ESOP scheme is in compliance with the Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, 2014.
As required under the Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, 2014, the applicable disclosures as on 31st March, 2018 are available on the Companyâs website at https://www. cipla.com/en/investor-information/annual-report-and-chairman-s-speech.html
Details of the Employee Stock Option Scheme 2013-A have been provided under Note No. 43 of the Standalone financial statement.
Human Resources
Details of remuneration 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 annexed as Annexure IV.
Particulars of employee remuneration as required under section 197(12) of the Act read with rule 5(2) and rule 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 forms part of this report. In terms of the provisions of the first proviso to section 136(1) of the Act, the Annual Report is being sent to shareholders excluding the aforementioned information. The information will be available on the Companyâs website www.cipla.com and is also available for inspection at the registered office of the Company during working hours 21 days before the Annual General Meeting. Any member interested in obtaining such information may write to the Company Secretary at the Registered Office of the Company.
Particulars of Loans, Guarantees and Investments
Particulars of loans, guarantees and investments under section 186 of the Act are provided in Note No. 45 to the Standalone financial statements.
Extract of Annual Return
As required under sections 92(3) and 134(3)(a) of the Act read with Rule 12 of Companies (Management and Administration) Rules, 2014, the extract of Annual Return in Form MGT-9 forms part of this report as Annexure V.
Vigil Mechanism
The Company believes in upholding professional integrity and ethical behaviour in the conduct of its business. To uphold and promote these standards, the Company has formulated a Whistle-Blower Policy which serves as a mechanism for its Directors and employees to report genuine concerns about unethical behaviour, actual or suspected fraud or violation of the Code of Conduct without fear of reprisal. The vigil mechanism consists of a dedicated email-id. Any director or employee who becomes aware of an unethical behaviour or fraud or violation of code shall report to the Ethics Committee either through email or by post. In case where directors or employees believe that such issue cannot be resolved by Ethics Committee or in exceptional cases, can be addressed directly to the Chairman of Audit Committee. An Ethics Committee consisting of the Global Chief People Officer (GCPO), Global Chief Financial Officer (GCFO), General Council (GC) and Chief Internal Auditor has been constituted to look into and investigate on the whistle-blower complaints. The complaints, reports and action taken are presented to the Audit Committee on a quarterly basis. The details of the Whistle-Blower Policy are available on the Companyâs website at https://www. cipla.com/images/cipla_pdf/Whistle-Blower.pdf
A brief note on the highlights of Whistle-Blower Policy and compliance with the Code of Conduct is also provided in the Report on Corporate Governance, which forms part of this Annual Report.
Contracts and Arrangements with Related Parties
A detailed note on procedure adopted by the Company in dealing with contracts and arrangements with related parties is provided in the Report on Corporate Governance, which forms part of this Annual Report.
All contracts, arrangements and transactions entered by the Company with related parties during FY18 were in the ordinary course of business and on an armâs length basis. During the year, the Company did not enter into any transactions, contracts or arrangements with related parties, that could be considered material in accordance with the Companyâs policy on related party transactions. Accordingly, the disclosure of related party transactions in Form AOC-2 is not applicable. However, detailed disclosure on related party transactions as per IND AS-24 containing name of the related party and details of the transactions have been provided under Note No. 42 of the Standalone financial statements on Page No. 211.
The policy is available on the Companyâs website at https://www.cipla.com//uploads/investor/1532683654_ Cipla%20Limited%20-%20Policy%20on%20Dealing%20 with%20Related%20Party%20Transactions.pdf
Material changes and commitments affecting financial position between end of financial year and date of report
No material changes and commitments have occurred after the close of the year till the date of this report which may affect the financial position of the Company.
Significant and Material Orders
No significant or material orders were passed by the regulators or courts or tribunals which could impact the going concern status of the Company and its future operations.
Internal Financial Controls and its Adequacy
We have adopted policies and procedures for ensuring orderly and efficient conduct of its business, including adherence to the Companyâs policies, safeguarding our assets, prevention and detection of frauds and errors, accuracy and completeness of the accounting records and timely preparation of reliable financial disclosures and reporting mechanism. The current systems of internal financial controls are aligned with the requirement of the Act, in line with globally accepted risk-based framework as issued by the Committee of Sponsoring Organizations (COSO) of the Treadway Commission.
Risk Management
In terms of the provisions of Section 134 of the Act a detailed note on Risk Management has been provided on page no. 36 of this report.
Deposits
During FY18, the Company did not accept any deposit within the meaning of sections 73 and 74 of the Act read together with the Companies (Acceptance of Deposits) Rules, 2014.
Board Evaluation
The evaluation of all the Directors including the Chairman, the Executive Vice Chairperson and the Managing Director and Global CEO, Board committee and the Board as a whole was carried out based on the criteria and framework approved by the Nomination and Remuneration Committee. A detailed disclosure on the parameters and the process of the Board evaluation as well as the outcome has been provided in the Corporate Governance Report.
Subsidiaries and Associate
At the beginning of the year, the Company had 53 subsidiaries and 1 associate. As on 31st March, 2018, it has 49 subsidiaries and 1 associate.
During FY18, Anmarate (Pty) Limited was acquired in South Africa as a part of strategy to strengthen OTC portfolio and Cipla Technologies LLC was incorporated in USA to build speciality product portfolio for Cipla.
During FY18, two non-operating companies viz., Meditab Specialities New Zealand Ltd and Cipla Pharma Nigeria Ltd were deregistered. As a part of strategy, the Company has divested its entire stake in Cipla Croatia d.o.o., Croatia, Al Jabal For Drugs And Medical Appliances Company Ltd, Yemen, Cipla Agrimed Proprietary Ltd and Cipla Vet Proprietary Ltd., in South Africa.
Details of these subsidiaries and associate are set out on Page 250 of the Annual Report. Pursuant to section 129(3) of the Act read with rule 5 of the Companies (Accounts) Rules, 2014, a statement containing salient features of the financial statement of the subsidiary and associate companies is given on Page 300 of the Annual Report. The statement also provide details of the performance and the financial position of each of the subsidiaries and associate. The Consolidated financial statements presented in this annual report include financial results of the subsidiary and associate companies.
Copies of the financial statement of the subsidiary and associate companies will be available on the Companyâs website www.cipla.com and will also be available for inspection by the members at the registered office of the Company during business hours. Copies of the said financial statements will be made available to any member of the Company and those of the respective subsidiary companies upon request.
The Policy for Determining Material Subsidiaries is available on the Companyâs website at https://www. cipla.com//uploads/investor/1443000071_Policy-for-determining-Material-Subsidiaries.pdf
Directors and Key Managerial Personnel
Mr Adil Zainulbhai was designated as the Lead Independent Director w.e.f 11th August, 2017 for a period of two years from the date of appointment, with an authority to the Board of Directors to renew his appointment for a further term of two years.
Ms Punita Lal was designated as the Chairperson of the Nomination and Remuneration Committee in place of Mr Adil Zainulbhai, who relinquished the Chairmanship of the Committee to take charge as Lead Independent Director.
Mr S. Radhakrishnan completed his term as a Whole-time Director on 11th November, 2017 and w.e.f 12th November, 2017, he continues as a Non-Executive Director of the Company, liable to retire by rotation, in terms of re-appointment approved by the Members at the 81st Annual General Meeting (AGM) held on 11th August, 2017.
Pursuant to the recommendation of the Kotak Committee, the SEBI has recently amended the Listing Regulations. The amended Listing Regulations inter alia require every listed entity to seek consent of its members by way of special resolution for appointment / continuation of the nonexecutive directors on attaining the age of 75 years. In case of existing directors such consent is required to be taken before 1st April, 2019. Since both Dr Y. K. Hamied, NonExecutive Chairman and Mr M. K. Hamied, Non-Executive Vice-Chairman have attained the age of 75 years, consent of the shareholders by way of special resolution is required for their continuation as non-executive directors. The Board recommends the resolutions regarding continuation of Dr Hamied and Mr Hamied as the non-executive directors of the Company for approval of the shareholders.
Ms Samina Vaziralli retires by rotation and, being eligible, offers herself for re-appointment. The Board recommends the re-appointment of Ms Samina Vaziralli as Director liable to retire by rotation.
A brief resume of the Directors seeking re-appointment / continuation is provided in the Notice of AGM.
The criteria for determining qualification, positive attributes and independence of a Director is given under Nomination, Remuneration and Board Diversity Policy.
Neither the Managing Director and Global CEO nor the Whole-time Directors, received any remuneration or commission from any of the Companyâs subsidiaries during the previous year.
The Nomination, Remuneration and Board Diversity Policy has been disclosed as Exhibit A to the Report on Corporate Governance.
Declaration by Independent Directors
All Independent Directors of the Company have submitted requisite declarations confirming that they continue to meet the criteria of independence as prescribed under section 149(6) of the Act and Regulation 16(1)(b) of the Listing Regulations. The Independent Directors have also confirmed that they have complied with the Companyâs Code of Conduct.
Committees of Board, Number of Meetings of the Board and Board Committees
The Board currently has six committees, namely, the Audit Committee, the Nomination and Remuneration Committee, the Corporate Social Responsibility Committee, the Stakeholders Relationship Committee, the Investment and Risk Management Committee and the Operations and Administrative Committee. All the recommendations made by the Committees of Board including the Audit Committee were accepted by the Board.
During the year under review, the Board met five times. A detailed update on the Board, its composition, detailed charter including terms of reference of various Board Committees, number of Board and Committee meetings held during FY18 and attendance of the Directors at each meeting is provided in the Report on Corporate Governance, which forms part of this report.
Auditor and Auditorâs Report
Walker Chandiok & Co LLP, Chartered Accountants was appointed as the Statutory Auditor of the Company at the AGM held on 28th September, 2016 to hold the office till the conclusion of 85th AGM of 2021. The Company has received a certificate from the Statutory Auditor confirming their appointment continues to be in accordance with the provisions of section 141 of the Act.
The Auditorâs Report for FY18 does not contain any qualification, reservation or adverse remark.
Secretarial Auditor and Secretarial Audit Report
The Board, on the recommendation of the Audit Committee, had appointed M/s BNP & Associates, Company Secretaries, Mumbai as the Secretarial Auditor for FY18. The Secretarial Audit Report for the financial year ended 31st March, 2018 is annexed to this report as Annexure VI. The Report does not contain any qualification, reservation, disclaimer or adverse remark
Cost Auditor
The Board, on the recommendation of the Audit Committee, had appointed Mr D. H. Zaveri, practising Cost Accountant (Fellow Membership No. 8971) as cost auditor to conduct the audit of Companyâs cost records for the financial year ended 31stMarch, 2018. The Cost Auditors will submit their report for the FY18 on or before the due date.
The Cost Audit Report, for the year ended 31st March, 2017, was filed with the Central Government within the prescribed time.
In accordance with the provisions of section 148 of the Act read with the Companies (Audit and Auditors) Rules, 2014, since the remuneration payable to the Cost Auditors for FY19 is required to be ratified by the shareholders, the Board recommends the same for approval by shareholders at the ensuing AGM.
Acknowledgements
We wish to place on record our appreciation to the Government of various countries where the Company has its operations. We thank the Ministry of Chemicals & Fertilizers, Central Government, State Government, and other regulatory bodies / authorities, banks, business partners, shareholders, medical practitioners and other stakeholders for the assistance, co-operation and encouragement extended to the Company. We also like to place on record our deep sense of appreciation to the employees for their contribution and services.
On behalf of the Board
Date: 22nd May, 2018 Y. K. Hamied
Place: Mumbai Chairman
Mar 31, 2017
The Directors take pleasure in presenting the 81st Annual Report of the Company along with the audited financial statements for the year ended 31st March, 2017.
Company Overview
Cipla is a leading global pharmaceutical company which uses cutting-edge technology and innovation to meet the everyday needs of all patients. For over eight decades, the Company has emerged as one of the most respected pharmaceutical companies in India as well as in over 80 countries. The Companyâs portfolio includes over 1500 products across a wide range of therapeutic categories with one uniform global standard of quality.
Whilst delivering a long-term sustainable business, the Company recognises its duty to provide affordable medicines. The Companyâs pioneering role in HIV/ AIDS treatment in 2001 was recognised globally when it became the first pharmaceutical company to offer a triple combination anti-retroviral (ARV) therapy in Africa at less than a dollar a day, thereby ensuring access to life-saving medicines for millions of patients. The Companyâs R&D focuses on developing innovative products and drug delivery systems.
Financial Summary and Company Affairs
(Rs. in Crore)
Year ended 31st March, 2016 |
Year ended 31st March, 2017 |
|||
Standalone |
Consolidated |
Standalone |
Consolidated |
|
12117.72 |
13790.10 |
Gross total revenue |
10974.58 |
14630.24 |
1743.97 |
1727.03 |
Profit before tax |
1186.94 |
1222.17 |
1462.30 |
1359.99 |
Profit for the year |
974.94 |
1006.39 |
(7.00) |
(8.21) |
Other comprehensive Income for the year (not to be reclassified to P&L) |
6.93 |
7.46 |
5870.61 |
5782.98 |
Surplus brought forward from last balance sheet |
7145.00 |
6953.84 |
- |
- |
Adjustment of tax on dividend of previous year |
- |
- |
7325 92 |
7134 76 |
Profit available for appropriation |
8126 87 |
796769 |
Appropriations |
||||
(160 62) |
(160 62) |
Dividend |
(160 84) |
(160 84) |
(20.30) |
(20.30) |
Tax on dividend |
(32 74) |
(32 74) |
7145.00 |
6953.84 |
Surplus carried forward |
7933 29 |
7774 11 |
The details of the Companyâs operations have been further discussed in detail in the Management Discussion and Analysis Report.
The Company adopted Indian Accounting Standards (âInd ASâ) from 1st April, 2016 as prescribed under section 133 of the Companies Act, 2013 read with the relevant rules issued thereunder and other accounting principles generally accepted in India. The adoptions were carried out in accordance with Ind AS 101, First-time Adoption of Indian Accounting Standards
Share Capital
During the year under review, 11,25,792 equity shares were issued and allotted under Employee Stock Option Schemes. Accordingly, the issued share capital of the Company as on 31st March, 2017 stood at Rs.161.10 crore divided into 80,55,13,469 equity shares of Rs.2/- each. The subscribed and paid-up share capital of the Company as on 31st March, 2017 stood at Rs.160.90 crore divided into 80,45,10,074 equity shares of Rs.2/- each.
Dividend
The Board recommend a final dividend of Rs.2/- per equity share (i.e. 100%) for the FY 2016-17. The dividend, if approved at the Annual General Meeting (AGM), will be paid to those members whose names appear in the Companyâs Register of Members on Thursday, 27th July, 2017. The total dividend pay-out will amount to approximately Rs.161 crore (excluding dividend distribution tax) resulting in a pay-out of 16.50% of the standalone profit after tax of the Company.
General Reserve
The Company has not transferred any amount to the General Reserve for the financial year ended 31st March, 2017.
Management Discussion and Analysis Report
Pursuant to Regulation 34 of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, (SEBI Listing Regulations) the Management Discussion and Analysis Report for the year under review, is presented in a separate section, forming part of the Annual Report.
Corporate Social Responsibility (CSR)
Cipla has remained both patient-centred and community-focused. Cipla Foundation upholds the OneCipla Credo of âCaring for Lifeâ, to empower the most vulnerable in society. As a vibrant and thriving global foundation, it endeavours to minimise gaps in access and affordability in quality healthcare, education, skill advancement and disaster response initiatives. Across geographies, Cipla Foundation is united and aligned with Ciplaâs commitment and approach to enhance the quality of life.
The Companyâs CSR Committee complies with the requirements of the Companies Act, 2013. The composition and terms of reference of the CSR Committee are provided in the Report on Corporate Governance, which forms part of the Annual Report. The Companyâs Corporate Social Responsibility Policy, is available on the Companyâs website at http://www.cipla.com/templates/ home tpl/images/Corporate Social Responsibility Policy.pdf
The Annual Report on CSR initiatives 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 forms part of this report as Annexure I.
Business Responsibility Report
As mandated by the Securities and Exchange Board of India (SEBI), the Business Responsibility Report (BRR) forms part of the Annual Report. The BRR contains a detailed report on business responsibilities vis-a-vis the nine principles of the National Voluntary Guidelines on Social, Environmental and Economic Responsibilities of Business framed by the Ministry of Corporate Affairs.
Corporate Governance
Pursuant to the SEBI Listing Regulations, the Report on Corporate Governance for the year under review, is presented in a separate section, forming part of the Annual Report. A certificate from M/s. BNP & Associates, confirming compliance of conditions of Corporate Governance, as stipulated under the SEBI Listing Regulations, is annexed as Annexure II to this report.
Directorsâ Responsibility Statement
Pursuant to section 134(3)(c) of the Companies Act, 2013 it is confirmed that the Directors have:
i. Followed applicable accounting standards in the preparation of the annual accounts and there are no material departures for the same;
ii. Selected such accounting policies and applied them consistently and made judgements 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 on 31st March, 2017 and of the profit of the Company for that period;
iii. Taken proper and sufficient care for 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;
iv. Prepared the annual accounts on a going concern basis;
v. Laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively; and
vi. Devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.
Conservation of Energy, Technology Absorption, Foreign Exchange Earnings and Outgo
The details of Energy Conservation, Technology Absorption and Foreign Exchange Earnings and Outgo as required under section 134(3)(m) of the Companies Act, 2013, read with Rule 8(3) of the Companies (Accounts) Rules, 2014 is annexed to this report as Annexure III.
Employee Stock Option Scheme
Presently the Company has one Employee Stock Option (ESOP) scheme, namely âEmployee Stock Option Scheme 2013-A" which helps the Company to retain and attract the right talent. The Nomination and Remuneration Committee monitors the Companyâs ESOP scheme. There is no change in the ESOP scheme during the financial year under review. The ESOP scheme is in compliance with the Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, 2014.
As required under the Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, 2014, the applicable disclosures as on 31st March, 2017 are available on the Companyâs website at http://www.cipla.com/en/ investor-information/shareholder-information.html
Human Resources
Details of 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 annexed as Annexure IV.
Particulars of employee remuneration as required under section 197(12) of the Companies Act, 2013 read with Rule 5(2) and Rule 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 forms part of this report. However pursuant to the provisions of the first proviso to section 136(1) of the Companies Act, 2013, the Annual Report is being sent to shareholders excluding the aforementioned information. The information will be available on the Companyâs website www.cipla.com and is available for inspection at the registered office of the Company during working hours 21 days before the Annual General Meeting. Any member interested in obtaining such information may write to the Company Secretary at the Registered Office of the Company.
Particulars of Loans, Guarantees and Investments
Particulars of loans, guarantees and investments under section 186 of the Companies Act, 2013 are provided in Note No. 48 to the standalone financial statements.
Extract of Annual Return
As required under sections 92(3) and 134(3)(a) of the Companies Act, 2013 read with Rule 12 of Companies (Management and Administration) Rules, 2014, the extract of Annual Return in Form MGT-9 forms part of this report as Annexure V.
Secretarial Audit Report
The Board had appointed M/s. BNP & Associates, Company Secretaries, Mumbai as the Secretarial Auditor for FY 201617. The Secretarial Audit Report for the financial year ended 31st March, 2017 is annexed to this report as Annexure VI. The report, confirms that the Company is in compliance with the applicable laws and does not contain any qualification, reservation or adverse remark.
Vigil Mechanism
The Company believes in upholding professional integrity and ethical behaviour in the conduct of its business. To uphold and promote these standards, the Company has formulated a Vigil Policy which serves as a mechanism for its Directors and employees to report genuine concerns about unethical behaviour, actual or suspected fraud or violation of the Code of Conduct without fear of reprisal. The details of the Vigil Policy are available on the Companyâs website at http://www.cipla.com/templates/ home tpl/images/Vigil Policy.pdf
A brief note on the highlights of the Vigil Policy and compliance with the Code of Conduct is also provided in the Report on Corporate Governance, which forms part of this Annual Report.
Contract and Arrangements with Related Parties
A detailed note on procedure adopted by the Company in dealing with contracts and arrangements with related parties is provided in the Report on Corporate Governance, which forms part of this Annual Report.
All contracts, arrangements and transactions entered by the Company with related parties during FY 2016-17 were in the ordinary course of business and on an armâs length basis. During the year, the Company did not enter into any transaction, contract or arrangement with related parties, that could be considered material in accordance with the Companyâs policy on related party transactions. Accordingly, the disclosure of related party transactions in Form AOC-2 is not applicable. However detailed disclosure on related party transactions as per IND AS-24 containing name of the related party and details of the transactions have been provided under Note No. 45 of the standalone financial statements on Page No. 150.
The policy on materiality of and dealing with Related Party transactions is available on the Companyâs website at http://www.cipla.com/uploads/investor/1443000127 Policy-on-Related-Party-Transactions.pdf
Material changes and commitments affecting financial position between end of financial year and date of report
No material changes and commitments have occurred after the close of the year till the date of this report which may affect the financial position of the Company.
Significant and Material Orders
No significant or material orders were passed by the regulators or courts or tribunals which could impact the going concern status of the Company and its future operations.
Internal Financial Controls
The Board has adopted policies and procedures for ensuring orderly and efficient conduct of its business, including adherence to the Companyâs policies, safeguarding its assets, prevention and detection of frauds and errors, accuracy and completeness of the accounting records and timely preparation of reliable financial disclosures.
Cipla has aligned its current systems of internal financial control with the requirement of Companies Act, 2013, on lines of globally accepted risk-based framework as issued by the Committee of Sponsoring Organizations (COSO) of the Treadway Commission. The Internal Control -Integrated Framework (2013) is intended to increase transparency and accountability in an organisationâs process of designing and implementing a system of internal control. The framework requires a company to identify and analyse risks and manage appropriate responses. The Company has successfully laid down the framework and ensured its effectiveness. During testing of such controls no reportable material weaknesses in the design or operation were observed.
During the year under review, there were no instances of fraud reported by the auditors under section 143(12) of the Companies Act, 2013 to the Audit Committee or the Board of Directors.
Risk Management
Risk Management is embedded in Ciplaâs operating framework. The Company has a duly approved Risk Management Policy, which lays down broad guidelines for the appropriate authority to identify, assess, categorise and prioritise risks in a timely manner and formulate plans for mitigation of such risks.
The Risk Management framework is reviewed periodically by the Board and the Investment & Risk Management Committee, which includes discussing the overall risk management framework, key risks, mitigation plans etc, with the Management. The Internal Audit function is responsible for assisting the Investment & Risk Management Committee on an independent basis with a full status of the risk assessments and management. Operationally, management process to identify key risks across the organisation and prioritise relevant action plans to mitigate these risks.
Detailed discussion on Risk Management is part of the âThreats, Risks and Concernsâ section of the Management Discussion and Analysis, which forms part of this Annual Report. At present, in the opinion of the Board of Directors, there are no risks which may threaten the existence of the Company. However, the top risks and their mitigation plans are set out in the Management Discussion and Analysis Report.
Deposits
During FY 2016-17, the Company did not accept any deposit within the meaning of sections 73 and 74 of the Companies Act, 2013 read together with the Companies (Acceptance of Deposits) Rules, 2014 and therefore no amount of principal or interest was outstanding, as on the balance sheet closure date.
Board Evaluation
Pursuant to the provisions of the Companies Act, 2013 and the SEBI Listing Regulations, the Board has carried out an annual performance evaluation of its own performance, the Directors individually and that of its Committees. A detailed disclosure on the manner of the Board evaluation undertaken by the Board has been provided in the Corporate Governance Report.
Subsidiaries, Associates and Joint Ventures
The Company had 54 subsidiaries, joint ventures and associates as on 31st March, 2017. Details of these subsidiaries, joint ventures and associates are set out on Page 270 of the Annual Report. Pursuant to section 129(3) of the Companies Act, 2013 read with Rule 5 of the Companies (Accounts) Rules, 2014, a statement containing salient features of the financial statement of the subsidiary, associate and joint venture companies is given on Page 270 of the Annual Report. The statement also provides details of the performance and the financial position of each of the subsidiaries, joint ventures and associates. The consolidated financial statements presented in this Annual Report include financial results of the subsidiary companies.
During FY 2016-17, Cipla BioTec South Africa (Pty) Limited and CIPLA Algerie became subsidiaries of the Company and Four M Propack Pvt. Ltd., Cipla Canada Inc. and Cipla Medpro Research and Development Proprietary Ltd., ceased to be subsidiaries of the Company.
There was no change in the joint venture / associate companies during FY 2016-17.
Copies of the financial statement of the subsidiary companies will be available on the Companyâs website www.cipla.com and will also be available for inspection by any member at the registered office of the Company during business hours. Copies of the said financial statements will be made available to any member of the Company and those of the respective subsidiary companies upon request.
The Policy for Determining Material Subsidiaries is available on the Companyâs website at http://www.cipla.com/ uploads/investor/1443000071 Policy-for-determining-Material-Subsidiaries.pdf
Directors and Key Managerial Personnel
Ms. Samina Vaziralli was elevated to the position of Executive Vice-Chairperson by the Board w.e.f. 1st September, 2016. In view of the change in her role and responsibilities, the Board on the recommendation of the Nomination and Remuneration Committee and subject to the approval of the shareholders, had approved revision to the terms of her appointment including remuneration structure. The Board recommends the revision in the terms of appointment of Ms. Samina Vaziralli including remuneration structure for approval of shareholders.
During the year, Mr. Subhanu Saxena resigned as Managing Director and Global Chief Executive Officer w.e.f. close of business hours on 31st August, 2016. Mr. Umang Vohra relinquished office as Global Chief Financial Officer w.e.f. 1st August, 2016 and was appointed as Managing Director and Global Chief Executive Officer w.e.f. 1st September, 2016.
Ms. Ireena Vittal and Mr. Peter Lankau were appointed as Additional Directors of the Company to hold office as Independent Directors with effect from 1st December, 2016 and 10th January, 2017, respectively. They hold office up to the date of the ensuing AGM. The Company has received requisite notice from a member proposing the appointment of Ms. Ireena Vittal and Mr. Peter Lankau as Independent Directors of the Company for a period of five years with effect from the date of their respective appointment. Mr. S. Radhakrishnan retires by rotation and, being eligible, offers himself for re-appointment. The Board recommends the appointment of Ms. Ireena Vittal and Mr. Peter Lankau as Independent Directors and re-appointment of Mr. S. Radhakrishnan as Director liable to retire by rotation.
A brief resume of the Directors seeking appointment/ re-appointment is provided in the Notice of AGM.
Mr. Kedar Upadhye was appointed as Global Chief Financial Officer w.e.f. 1st August, 2016. Mr. Mital Sanghvi relinquished office as Company Secretary w.e.f. 9th February, 2017, as part of the planned transition and has now moved into a senior business finance role in the Company. Mr. Rajendra Chopra was appointed as Company Secretary w.e.f. 9th February, 2017.
The criteria for determining qualification, positive attributes and independence of a Director have been set out as Annexure VII.
The Remuneration Policy has been disclosed in the Report on Corporate Governance.
Declaration by Independent Directors
All Independent Directors of the Company have submitted requisite declarations confirming that they continue to meet the criteria of independence as prescribed under section 149(6) of the Companies Act, 2013 and Regulation 16(1)(b) of the SEBI Listing Regulations. The Independent Directors have also confirmed that they have complied with the Companyâs Code of Conduct.
Neither the Managing Director nor the Whole-time Directors, received any remuneration or commission from any of the Companyâs subsidiaries during the previous year.
Committees of Board, Number of Meetings of the Board and Board Committees
The Board currently has six committees, namely, Audit Committee, Nomination and Remuneration Committee, Corporate Social Responsibility Committee, Stakeholders Relationship Committee, Investment and Risk Management Committee and Securities Issuance Committee. All the recommendations made by the Committees of Board including the Audit Committee were accepted by the Board.
During the year under review, the Board met seven times. A detailed update on the Board, its composition, detailed charter including terms of reference of various Board Committees, number of Board and Committee meetings held during FY 2016-17 and attendance of the Directors at each meeting is provided in the Report on Corporate Governance, which forms part of this report.
Cost Auditor
Pursuant to the provisions of section 148 of the Companies Act, 2013, Mr. D. H. Zaveri, practising Cost Accountant (Fellow Membership No. 8971) has been re-appointed to conduct the audit of Companyâs cost records for the financial year ended 31st March, 2017. Pursuant to section 148(6) of the Companies Act, 2013 and Rule 6(6) of the Companies (Cost Records and Audit) Rules, 2014, the Cost Audit Report, for the year ended 31st March, 2016, was filed with the Central Government within the prescribed time.
In accordance with the provisions of section 148 of the Companies Act, 2013 read with the Companies (Audit and Auditors) Rules, 2014, since the remuneration payable to the Cost Auditors for FY 2017-18 is required to be ratified by the shareholders, the Board recommends the same for approval by shareholders at the ensuing AGM.
Auditor
Walker Chandiok & Co LLP, Chartered Accountants was appointed as the Statutory Auditor of your Company at the last AGM held on 28th September, 2016 to hold the office till the conclusion of 85th AGM. As per the provisions of section 139 of the Companies Act, 2013, the appointment of Statutory Auditor is to be ratified by members at every AGM. The Company has received a certificate from the Statutory Auditor confirming that ratification of their appointment if made, will be in accordance with the provisions of section 141 of the Companies Act, 2013. The Board recommends the ratification of the appointment of Walker Chandiok & Co LLP, Chartered Accountants as the Statutory Auditor of the Company.
The Auditorâs Report for FY 2016-17 does not contain any qualification, reservation or adverse remark.
Acknowledgements
The Board wishes to place on record its appreciation to government authorities, banks, business partners, shareholders, medical practitioners and other stakeholders for the assistance, co-operation and encouragement extended to the Company. The Board would also like to place on record its deep sense of appreciation to the employees for their contribution and services.
On behalf of the Board
Date: 25th May, 2017 Y. K. Hamied
Place: Mumbai Chairman
Mar 31, 2016
The Directors take pleasure in presenting the Eightieth Annual Report
of the Company along with the audited financial statements for the
financial year ended 31st March 2016.
Financial Summary Rs. in core
Year ended Year ended
31st March 2015 31st March 2016
Stand
alone Consoli
dated Stand
alone Consoli
dated
10373 11620 Gross total revenue 12445 14067
1540 1654 Profit before tax 1740 2007
1181 1181 Profit for the year 1398 1506
5330 5412 Surplus brought forward
from last balance sheet 6277 6358
- - Adjustment of tax on
dividend of previous year 13 13
6511 6593 Profit available for
appropriation 7688 7877
Appropriations:
161 161 Dividend 161 161
33 33 Tax on dividend 33 33
- - Transfer to general reserve - -
40 41 Adjustment of depreciation - -
6277 6358 Surplus carried forward 7494 7683
Dividend
The Directors recommend a dividend of Rs.2 per equity share (100%) for
the year 2015-16. The dividend, if sanctioned at the Annual General
Meeting, will be paid to those members whose names appear in the
Company''s Register of Members on Wednesday, 14th September 2016. In
respect of shares held in dematerialised form, the dividend will be
payable on the basis of beneficial ownership as per details furnished
by National Securities Depository Limited and Central Depository
Services (India) Limited.
MANAGEMENT DISCUSSION AND ANALYSIS: 2015-16
Global Business Review
With a vibrant presence globally, Cipla is well-poised for growth that
advances its goal of ensuring affordable access to healthcare for all.
To build a concrete foundation for sustainable long-term growth, the
Company is investing heavily in its pipeline, making choices with
respect to its operating model in certain markets and exploring
initiatives to simplify the business. The financial year under review
has been important for the Company to drive execution of these choices
and enhance the resilience of its business model.
The Company''s revenue from operations on a consolidated basis during
the financial year 2015-16 amounted to Rs.13,678 crore against
Rs.11,345 crore in the previous year, recording a growth of 20.6%. The
income from operations for the Company''s domestic business increased by
5.9%, from Rs.4,825 crore in the previous financial year to Rs.5,111
crore in the financial year under review. Total exports increased by
36.4% during the year to Rs.8,261 crore. During the year under review,
EBIDTA margin reduced by 0.8 percentage points. This was primarily due
to the change in product mix, higher investments in research and
development, and ongoing complexity reduction initiatives. Profit for
the year increased by 27.5% to Rs.1,506 crore from Rs.1,181 crore in
the previous financial year.
India Ratings and Research Private Limited, a Fitch Group Company,
assigned a Long-Term Issuer Rating of IND AAA with a stable outlook to
the Company. The rating is the highest assigned in Fitch''s rating scale
and indicates the highest degree of safety regarding timely servicing
of financial obligations and lowest credit risk.
No material changes and commitments have occurred after the close of
the year till the date of this Report, which affect the financial
position of the Company.
India
As one of India''s leading pharmaceutical companies, Cipla is in a
strong position to fulfill its commitment to provide modern and
affordable medicines to patients. This year, despite pricing challenges
and the impact of a weak monsoon, Cipla''s domestic revenues for its
prescription business grew by 16% compared to the industry growth of
14%, as per IMS Health data.
The India business contributed ~40% to overall Company revenues, with
new products contributing 4.5% of total India business revenues. The
prescription business accounted for 81% of India business revenues and
market share for this segment currently stands at 5.3%. The Company
grew faster than the market in Anti- infectives, Gastrointestinal and
Urology. The respiratory business saw strong uptake with over 20%
growth in the COPD portfolio.
Cipla continues to focus on high-value opportunities to build out its
specialty portfolio, through a mix of in-licensing and in-house
innovation and development. In-licensing gained momentum in FY 2015-16
with 6 deals executed in oncology, respiratory and dermatology
segments. The Company also initiated several high value innovation
projects, of which a few are likely to be commercialized in FY 2016-17.
With the successful launch of Sofosbuvir in India for the treatment of
Hepatitis-C, Cipla has expanded access to the drug with nearly 10,000
patients being treated under the brand name HepCvir in its first 12
months. Cipla continues to build out its Hepatitis franchise in order
to improve access to breakthrough therapies for patients with HepCvir
Ledipasvir / Daclatasvir combinations.
Cipla also entered new areas through a partnership model - Cutisera in
cosmetology, Nasovac S in vaccines and Reteplase in the
Anti-Thrombolytic segment.
In the coming years, the domestic business will continue to focus on
enhancing depth of portfolio in priority therapy areas, and increasing
sales force productivity with the rollout of Customer Relationship
Management (CRM) and Sales Force Automation (SFA) systems.
Through this, Cipla aims to grow above market rate of growth and
strengthen leadership position in priority therapy areas in the Indian
market.
South Africa
Cipla is one of the largest pharmaceutical companies in South Africa,
with a private market share of more than 5%. South Africa contributed
11.5% to the overall revenues on a consolidated basis. The business
however was impacted due to the depreciation of the South African Rand
in FY 2015-16. In local currency terms, South Africa business revenue
has grown at ~25% in FY 2015-16 against the previous year. Cipla''s
private market business has grown at 14% for the same period, with
market leadership in the Respiratory, CNS and Oncology segments, and
contributes over 60% of South Africa business revenue. The sales and
distribution arrangement with Teva Pharmaceuticals (Pty) Ltd, an
affiliate of Teva Pharmaceutical Industries Ltd., has gained traction
through FY 2015-16 with strong performance on products such as
Copaxone, further cementing the Company''s status as a preferred
"Partner of Choice". Cipla has also introduced low cost vaccines in the
South African market through an exclusive agreement with the Serum
Institute of India. This is in line with the Company''s goal to advance
healthcare for all in South Africa.
Cipla also won Government tenders in antiretrovirals (ARV), respiratory
and newer areas such as mental health, cardiovascular and women''s
health categories, achieving significant growth in the tender business
over the previous year. The newly set up state-of-the-art distribution
centre facility has doubled the Company''s existing capacity and
conferred competitive advantage by helping to improve customer service
levels, enhance compliance, and reduce the cost of distribution.
Capitalizing on its defined future portfolio, key development and
in-licensing projects, and streamlined global organizational structure,
Cipla South Africa will continue to leverage synergies from its
international family. The Cipla brand inspires trust and has become a
household name among consumers, pharmacies, prescribers and key opinion
leaders. Going forward, several Sub-Saharan markets will also be
covered by the South African organization.
North America
In the last quarter of financial year 2015-16, Cipla successfully
completed the acquisition of two US-based entities, InvaGen
Pharmaceuticals Inc. and Exelan Pharmaceuticals Inc. in a transaction
valued at US$ 550 mn. InvaGen Pharmaceuticals is a high volume
generics business platform that provides Cipla with a strong US-based
manufacturing setup and access to large wholesalers/ retailers in the
US. The platform includes 42 approved ANDAs and ~30 pipeline products
that are expected to be approved over the next 4 years. It also has
filed 5 potential first-to-file products which is expected to bring
tremendous value in the coming 5-6 years. There are no material
overlaps in the business, and the current portfolio and the pipeline is
largely complementary to Cipla''s products. InvaGen Pharmaceuticals''
manufacturing footprint spans ~350,000 sq.ft. of GMP area with 3 units
located in Long Island, New York, and a total production capacity of 12
billion tablets.
Exelan Pharmaceuticals is a sales and marketing company with a focus on
generic pharmaceuticals for the government and institutional market.
Both companies together had annual revenues of over US$ 230 mn as of
December 2015.
This acquisition is aligned with Cipla''s global growth strategy to grow
its presence in the US pharmaceutical market and increase its position
amongst key pharmaceutical wholesalers and retailers. Having its own
manufacturing base and supply chain will further strengthen Cipla''s
presence in the US and its commitment to make high quality medication
accessible to patients in the country. Cipla''s strategy in the US is to
deliver its complex generics and respiratory portfolio of products.
The North American business contributed 15% to overall revenues
(including the impact of acquisitions) and recorded 117% growth for the
year. Growth was driven primarily by the Company''s partnership with
Teva Pharmaceutical Industries Ltd. for Esomeprazole and the successful
launch of its own label products in the US market.
Cipla currently has over 165 ANDAs filed in the US. Of these, the
Company has approval for over 85.
As Cipla scales its US business next year it will target launch of five
to seven products from the InvaGen pipeline and eight to ten products
from Cipla''s pipeline, including some in limited competition areas. In
parallel, the Company will continue to build on its successful
partnerships for launch of first-to- market and differentiated generics
such as Nexium and Pulmicort.
Cipla has already established a strong US team which has been deeply
involved in Cipla''s launch of its own label products in the US as well
as in the evaluation of inorganic growth opportunities such as InvaGen.
This team shall drive the transition and integration work streams along
with key InvaGen personnel. Cipla has a full integration plan in place
that draws on its experience of a number of successful recent
integrations such as in South Africa.
Europe
The European business contributed 4% to the overall revenues, recording
a growth of 30% in revenues for the year on the back of its performance
in both front-end and B2B markets.
Cipla is focused on adding innovative elements to products, services
and information through research and partnerships. The Company''s
flagship product, the salmeterol-fluticasone MDI, is now in the market
in Sweden, Romania, Netherlands, Germany, Croatia, Czech Republic,
Slovakia, Belgium and Hungary. The Company has further strengthened its
respiratory platform with the launch of Mometasone, Fluticasone,
Ipratropium Salbutamol respules and Ipratropium MDI across multiple
European markets in FY 2015-16.
The Company continues to evolve its business model in Europe with the
intention of balancing its portfolio with the best commercial options.
International - Rest of the World
International is defined as all export markets for Cipla excluding
North America, Europe and South Africa. With a diverse range of more
than 1,000 products and over 150 global partners across 100 countries,
Cipla has a presence in Africa, the Middle East, Latin America, Asia
Pacific, China, and Russia. International contributes 25% of Company
revenues and grew by 14% over the last year.
In recent years, Cipla has implemented a business model change in 15
countries including Morocco, Algeria, Yemen, Sri Lanka and Uganda,
adopting the direct-to-market (DTM) approach. DTM markets had robust
growth of ~25% in FY 2015-16, over the previous year. This growth rate
has been achieved despite continuing challenges related to the
situation in Yemen and currency devaluation in several emerging
markets. The Company now holds a leadership position in several
markets such as Uganda, Sri Lanka, Yemen and North Africa.
Cipla''s business in partnership-led markets (B2B) saw a growth of 8% in
FY 2015-16 over the previous year. The Company is proactively
simplifying its businesses, rationalising markets where necessary, and
focusing only on high-growth markets where it holds a leadership
position.
The Cipla Global Access business recorded growth of 12% over the
previous year and reflects Cipla''s continued commitment to the cause of
ensuring access to life-saving medicines for patients worldwide.
STRATEGIC BUSINESS UNITS
Core areas of competence
Active Pharmaceutical Ingredients (APIs)
Cipla''s API legacy spans over five decades of having serviced the
world''s largest pharmaceutical companies with more than 200 generic and
complex APIs. Cipla takes pride in its state-of- the-art API plants
which meet stringent quality and current good manufacturing practices
(cGMP) requirements, all approved by the US FDA and other major
international regulatory agencies.
With a total API manufacturing capacity of 1000 MT, the Company
continues to be one of the significant API players in the industry,
supporting internally as well as global customers. A substantial
portion of the APIs manufactured by Cipla are consumed internally with
a significant increase in consumption due to the new launches and front
ending in several markets globally.
Revenue from external customers registered a year-on-year growth of 7%.
More than 70% of the total sales were from regulated markets and over
one-third of our API sales in FY 2015-16 were to the top generics
players in the world. The gastroenterology and antiretroviral segments
continue to be major contributors to the business.
Cipla continues to build its future pipeline of complex products with
its established robust portfolio selection process, providing early
launch capabilities along with Intellectual Property (IP) advantages.
Deep vertical integration, scale and more importantly its investments
in manufacturing and quality have helped the Company build a quality
product pipeline.
Cipla APIs cover a broad spectrum of therapeutic categories with 23
Drug Master Files (DMF) filed in FY 2015-16 in various countries.
Cipla is also ramping up its filings for regulated markets with a
robust pipeline of over 40 APIs at various stages of development
anticipated to be commercialised starting 2018. The Company is expected
to continue the strong pipeline building momentum in the coming years
as well.
Respiratory
Cipla Respiratory continues to bring effective and affordable therapy
to patients suffering from diseases such as Asthma, COPD, PAH and
Allergic Rhinitis. This year, Cipla Respiratory provided patients in
100 countries, the world''s largest portfolio of inhalation products
with 28 drug formulations across a range of devices, to suit individual
patient needs. In Europe, we launched several inhalation products,
including the ICS-LABA, Salmeterol Fluticasone in a pMDI (metered dose
inhaler). Cipla''s Respiratory Center of Excellence also made
significant progress on the development of critical new products for
the US and other priority markets.
Over the last 40 years, Cipla has invested significantly in creating
three dedicated manufacturing sites for Respiratory. The Company
manufactures four major dosage forms i.e. metered dose inhalers
(pMDIs), dry powder inhalers (DPIs), nasal sprays and nebulisers in
addition to a range of inhalation devices. This year, the Company was
amongst the largest manufacturers of pMDIs with capacity to produce
over 100 million inhalers. In addition, the Company has built a team of
world-class specialists across Manufacturing, Quality Control, Quality
Assurance, Supply-Chain who continue to collaborate seamlessly across
functions.
Cipla Respiratory has unique end- to-end capability covering the value
chain from API, formulation, device development and manufacturing to
doctor and patient initiatives. The Company has played a leading role
across countries in patient awareness, acceptance, compliance and
usage, physician training, medical camps and counselling. In India,
Cipla Respiratory has played a pioneering role in driving the
conversion of patients from oral to inhaled therapy for the treatment
of Respiratory disease. This year, the Company further strengthened and
adapted where necessary its pioneering "BreatheFree" patient awareness
and education programs across key markets outside India such as South
Africa and Sri Lanka.
Cipla Respiratory has grown to almost ~US$ 400 mn, accounting for ~25%
of the company''s revenues. Despite aggressive competition, the Company
remains focused to retain leadership in serving patients suffering from
Respiratory diseases across the world.
Cipla Global Access
Since its inception, Cipla''s ethos has been firmly rooted in the vision
"None shall be denied". The Company strongly believes that access to
high quality, affordable medicines is a basic human right.
Cipla Global Access (CGA) is an international tender based
institutional business that concentrates on four key therapy areas:
HIV/AIDS, Malaria, Multi drug-resistant tuberculosis, and Reproductive
health.
Cipla is among the leading manufacturers of Anti-retroviral drugs in
the world. In 2001, Cipla was the first pharmaceutical company to
supply ARVs to countries with a high HIV burden at less than a dollar a
day. Today Cipla has the highest number of Anti-retroviral products
approved for the treatment of both children and adults. Recently a new
manufacturing facility has been set up to meet the growing demand for
ARV products and expect the plant to start commercial production by
June 2016.
Cipla has developed the taste- masked Lopinavir/Ritonavir pellets (FDA
approved in June 2015) and is going to be available shortly in 20
countries in the first year of launch in 2016. In parallel with this
development, Cipla, in collaboration with DNDi (Drugs for Neglected
Diseases initiative) and with funding support of UNITAID, is working to
develop 4-in-1 taste- masked sprinkles formulations of the combination
LPV/r (Lopinavir/ Ritonavir), 3TC (Lamivudine) and ABC (Abacavir) or
AZT (Zidovudine). The clinical trials of the 4-in-1 formulation are run
in Uganda and Kenya (Chapas study) to assess the clinical efficacy of
the product and combination and the results will be made available in
the coming years. However, to respond to the needs of the paediatric
population and ensure that LPV/r-based products are on the market
before 4-in-1 products become available, the LPV/r pellets are an
alternative and a currently available option.
Cipla is also one of the largest suppliers of antimalarial drugs in the
world. This portfolio covered treatment for over 80 million malaria
patients across all the affected countries. The coverage is increasing
every year and thus saving millions of lives. Cipla anti- malarial
treatment costs less than a dollar for the entire course. Cipla has
always been at the forefront in initiatives to identify, develop,
manufacture and supply low cost treatment with artemisinin-based
combination therapies (ACTs). Cipla is endeavouring to expand its
portfolio to include more potent and safer anti-malarials, using novel
drug delivery systems, such as Rectal Artesunate for which Cipla is
submitting dossiers in several emerging markets. Rectal Artesunate is
indicated in cases of severe malaria in children between 6 months to 6
years of age. It is a life-saving drug in cases where there are no
health facilities offering parenteral treatment.
Reproductive health and family planning is an emerging segment. Cipla
has aligned its strategy with international development initiatives to
provide safe and effective contraceptive drugs to enable reach to over
120 million women.
Cipla has a strong second line TB drug portfolio for treating
multidrug-resistant TB (MDR TB).
It is also aggressively expanding its MDR TB portfolio to meet the
challenges of resistance fast developing among TB patients due to the
high rate of dropouts. Till now, Cipla''s SLTB (Second Line
Tuberculosis) drugs catered to a moderate patient base globally, but
this is likely to increase significantly with the use of new diagnostic
methods of detection of drug-resistant TB. Future development in the
MDR TB therapy area will be focused on newer molecules which can
significantly reduce treatment timelines. Currently, Cipla services
around 70 countries in this area.
Cipla Global Access also caters to the developing world requirement for
essential medications for infections caused by helminths,
schistosomiasis and kala azar, which pose major health threats in low
and middle income countries (LMIC).
In FY 2015-16, Cipla, as part of its access initiatives signed various
non-exclusive, royalty based/ free licensing agreements with innovator
companies such as Gilead, ViiV, BMS and Janssen. It allows for the
manufacturing of generic active pharmaceutical ingredient and finished
formulations of Anti-retroviral and drugs for treatment of Hepatitis C,
a silent killer which till the introduction of the current treatment
was difficult and expensive to treat.
Cipla has developed and fostered robust relationships with all the
major global organizations, regulatory bodies, public institutions and
funding agencies that work towards this common cause. Additionally,
Cipla has partnered with several global scientific research
organizations to develop innovative, effective and affordable
formulations for these four therapeutic areas.
CIPLA NEW VENTURES
CNV continues to nurture exciting businesses with a high innovation
quotient, preparing Cipla for a future beyond generics. It had notable
achievements during the year, across its portfolio - a testimony to the
care and attention that the company is devoting to its medium to
long-term sustainability. In Cipla health, it has sowed the seeds of a
FMCG enterprise focused on Good Science, Good Medicine. Cipla BioTec
has a disruptive Biosimilar story.
Cipla BioTec
Less than 8% of patients eligible for biopharmaceutical treatment
worldwide receive therapy. Access is not just a developing world issue;
in the US and Europe less than 30% receive treatment. In many cases,
patients are not treated due to the cost of biopharmaceuticals which
can approach US$ 75,000 per year for treating cancer and autoimmune
diseases. Biosimilars are now approved in all major world markets,
however high prices still limit access.
Cipla BioTec (CBT) is building on Cipla''s heritage of affordability and
access by developing biosimilars which will be approved in global
markets and usher in a new wave of affordable products. CBT goal is to
treat a million patients. The first product CBT124 is starting human
clinical trials. CBT''s second product CBT127 is in development. CBT
leverages the latest biopharmaceutical production technology to make
its products affordable. This approach allows CBT to enable local
production to make these life changing products. CBT is constructing
commercial manufacturing capacity in two countries to implement its
"World Class Products at Affordable Prices" and "Be Local" philosophy.
In line with this strategy, the Company in July 2016 announced the
signing of a memorandum of understanding (MOU) between Cipla BioTec Pvt
Ltd and Dube Tradeport Corporation for setting up South Africa''s first
state-of- the-art biotech manufacturing facility, for the production of
biosimilars, at a cost of a R1.3 bn. The factory, which will be
located in the Department of Trade and Industries Special Economic Zone
of Dube Tradeport in Durban, will manufacture biosimilar drugs made
from living organisms and used in the treatment of cancer and other
diseases. Construction is scheduled to start in early 2017, with full
operations expected to commence in the third quarter of 2018.
Stempeutics
Regenerative Medicine is one of the new frontiers of treatment. Cipla
through its strategic investment in Stempeutics, is making Regenerative
Medicine a reality. Stempeutics received Limited Marketing Approval in
India for Stempeucel® Stem Cell therapy to treat Buerger''s Disease.
This is only the 5th Stem Cell Product approved worldwide and the first
novel biologic product ever to be completely developed in India.
Stempeucel® is covered by an extensive patent estate with issued
patents in the US, EU, ANZ, Japan and India among other territories.
Cipla in collaboration with Stempeutics has also launched CutiseraÂ, a
novel skin care product using growth factors to help reduce wrinkles
and dark spots.
CipTec
CipTec has initiated efforts to build a specialty pharmaceutical
business in the US for Cipla. The CipTec team has evaluated several
broad therapy areas such as oncology, neurology, dermatology,
ophthalmology and gastrointestinal disorders before picking neurology
as the therapy area of choice for further exploration.
Another key focus area for CipTec in 2015 was to support and build out
Cipla''s first US venture investment - Chase Pharmaceuticals. Chase''s
focus for 2015 was clinical validation of its lead asset CPC-201 for
Alzheimer''s disease. CPC-201 was in a Phase 2a clinical trial
throughout 2015.
This trial will complete in April 2016. The preliminary data shows that
the drug has demonstrated vastly better tolerability and dose, and has
also demonstrated promising signs regarding cognitive improvement and
functional improvement in Alzheimer''s patients. CipTec participated in
two additional rounds of funding for Chase to support clinical programs
as well as key management hires.
Cipla Health - A Cipla initiative towards improving lives of Indian
Consumers
The consumer healthcare business was spun-out into a separate company,
Cipla Health Ltd (CHL), effective March 2016. CHL also attracted
investment from a leading private equity fund, Fidelity (FIL Capital
Investments) in April 2016.
Cipla incubated its consumer healthcare business two years ago with a
vision to improve the lives of Indian consumers and leverage the trends
of shifting focus in health from illness to wellness. A dedicated team
was formed with professionals from diverse background of healthcare and
FMCG, to lead this business. The first consumer brand Nicotex, a
smoking cessation product, was first piloted in South India in January
2015 and was launched nationally in October 2015. The launch has been a
great success, with Nicotex helping thousands of consumers towards
quitting smoking.
Currently CHL is on a good momentum on business, with the Nicotex
marketing campaign winning prestigious awards such as Effie Gold, Goa
Fest - a big win for such a young brand. CHL aims to foray into other
categories in the consumer healthcare space and offer a series of
wellness products to Indian consumers in the coming years.
INTEGRATED PRODUCT DEVELOPMENT (IPD)
Investing for Future
Cipla''s Integrated Product Development (IPD) majorly includes
development of APIs, formulations development, Analytical, Clinical,
Regulatory, Device, Quality by Design and Pharmacovigilance functions.
Cipla''s R&D expense increased from 5.6% of total revenue in FY 2014-15
to 6.3% in FY 2015-16. As we invest for the future, our total project
R&D spend has been rising steadily.
On the Development portfolio front, we have over 200 formulations
development projects underway of which the top 50 projects address a
market size of US$ 30 bn based on innovator sales. Of these top 50
projects, most projects account for the US and also include inhalation
and injectable delivery forms including complex & first-to-file
opportunities. Our new filings in formulation segment in FY 2015-16
stand at 7 ANDAs for North America, 19 filings (187 MAs) for Europe and
over 700 filings for International markets in addition to 1000
renewals. We expect to file 20 to 25 ANDAs in FY 2016-17 including some
respiratory and oncology filings with some potential first to file
opportunities.
This year, Cipla has also received approvals of 4 ANDAs including
Celecoxib. More than 100 MAs approval in Europe includes key approval
of Fluticasone Salmeterol-MDI, Fluticasone MDI, Ipra Sal (Ipratropium
Bromide Salbutamol Sulphate) Respules, Ipratropium in key EU Markets
and more than 200 approvals in International (rest of the world)
markets.
The Company has enhanced the depth of its respiratory offering this
year with new product launches for Fluticasone Salmeterol, Mometasone,
Fluticasone, Ipratropium Salbutamol Respules and Ipratropium MDI across
multiple markets in Europe.
Cipla has completed expansion of its R&D Centre with new buildings and
major laboratory facilities at Vikhroli, Mumbai. IPD has also expanded
R&D applications across multiple technology platforms. These includes
Implants, Ready to Dilute (RTD) injections, Depot injections,
nanotechnology, unit dose nasal sprays, and spray patches. The Company
is also investing in various API technologies like Green chemistry,
Flow chemistry & Peptide synthesis.
Cipla has consistently enhanced efficiency across all IPD Functions
through "Jagruti" transformation programmes, resulting in reduced
timelines, development costs and more timely regulatory approvals.
MANUFACTURING
Cipla expanded its manufacturing footprint through the acquisition of
InvaGen''s facility in the US, adding capacity of 12 billion units of
oral solids.
In India, Cipla continued its focus on domestic and international
markets through increased capacity of 3.2 billion units, out of which a
state- of-the-art modern technology plant with a capacity of 1.2
billion units is dedicated for ARVs (Anti-retroviral) in sync with the
organization''s vision of "None shall be denied". All manufacturing
sites continued to focus on project improvement across asset and
material productivity, energy efficiency and manpower utilization.
Serviceability of formulation products was significantly improved
through releasing capacities by network balancing within units. The
organization continued its focus on reducing process and product
complexities by applying lean tools for business process
simplification. Cipla''s Uganda plant increased portfolio capability to
reduce the turn- around time for the African market.
Cipla commissioned additional API manufacturing capacity of 50 Metric
Tonne/year specifically for Hydrogenation Process. The company
scaled-up 15 key APIs, with continued focus on yield improvement, cycle
time reduction and cost improvement projects. Cipla is continuously
working on reduction of Volatile Organic Compounds by reducing solvent
losses across Cipla sites.
The Company continues to upgrade its manufacturing facilities in terms
of technology, automation, safety, environment and systems as well as
procedures for energy and water conservation.
Quality
Cipla Quality as a centre of excellence assures a culture of compliance
and follows systematic interventions to consistently meet or exceed
quality standards.
Cipla''s focus during the year has been to enhance its Quality
Management Systems to meet and/or exceed the current expectations of
Regulatory Bodies such as US FDA, MHRA, TGA, MCC, APVMA, WHO, etc.
Cipla has all state-of-the-art manufacturing facilities that are cGMP
compliant in conformity with national and international standards.
Several dosage forms and APIs manufactured at the Company''s facilities
continue to be approved by major international regulatory agencies.
These agencies include the US FDA, MHRA (UK), TGA (Australia), PIC
(Germany), MCC (South Africa), APVMA (Australia), the Department of
Health (Canada), ANVISA (Brazil), the Danish Medical Agency, and the
WHO.
In addition, during the year, the first phase of Laboratory Information
Management System (LIMS) has been completed across all Cipla
Laboratories which significantly improves compliance in our
laboratories.
Threats, Risks, Concerns
The pharmaceutical industry has always been under intense scrutiny by
various regulatory authorities, both Indian and international. This
trend continues resulting in regulatory standards being upgraded all
the time.
The Company continues to track all these changes, increase vigilance,
and strives to maintain the highest quality standards. Recent changes
by the price regulator in India have resulted in significant challenges
for the pharma industry. There is a lot of confusion in the
interpretation of provisions of the Drugs (Prices Control) Order, 2013
and its implementation and this has affected the availability of some
drugs. The Company is very concerned about these developments and is
taking steps to resolve the issues through various forums.
Cipla has some pending legal cases related to alleged "overcharging" in
respect of certain drugs under the Drugs (Prices Control) Order, 1995.
The status of these cases as of the date of approval of financial
statements have been summarised in the Notes to the accounts.
Further, vide Order dated 20th July 2016, the Hon''ble Supreme Court
have transferred back the writ petitions to Hon''ble Bombay High Court
along with directions that 50% of the alleged "overcharged" amount
mentioned in its earlier Order dated 1st August 2003 should be
deposited by the Petitioners in the Bombay Petitions, within 6 weeks.
Accordingly, the Company will be depositing a sum of Rs.175.07 crore on
or before 31st August 2016. The Company has been legally advised that
on the merits of the cases that there is very little likelihood of
these demands crystallising. Hence no provision is considered necessary
in respect of notices of demand received by the Company up to date
aggregating to Rs.1768.51 crore. However, any unfavourable outcome in
these proceedings could have an adverse impact on the Company.
The Industry is concerned about the recent actions by the Ministry of
Health in banning a large number of Fixed Dose Combinations, and this
led to various litigations being filed by the industry associations and
several companies in the court. A final judgment is still awaited.
Cipla operates in a number of markets where geo-political risks exist.
No significant or material orders have been passed by the Regulators or
Courts or Tribunals which may impact the going concern status of the
Company and its future operations.
Health Safety & Environment (HSE)
HSE measures remain a priority for Cipla. The company continues to
upgrade HSE standard at all locations. ISO 50001 is implemented at
Patalganga, Kurkumbh, Bengaluru, Goa and Indore locations, to benchmark
energy conservation threshold levels for a greener environment.
Cipla''s manufacturing facilities at Goa, Bengaluru, Baddi, Indore,
Kurkumbh, Patalganga and Sikkim are certified for ISO 14001 and OHSAS
18001 standards.
Hazards and risk associated with site activities are identified across
all manufacturing locations and risk control and mitigation measures
are continuously implemented. Our facilities have been regularly
audited and HAZOP studies of new products have been done as part of
continuous improvement in HSE systems. Online systems are in place to
monitor applicable legal compliances. The Company organised specialised
safety training such as process safety, road safety and behavioural
safety to increase safety awareness at all working levels.
Safety week and electrical safety day were celebrated and fire service
day was observed at the manufacturing units to create awareness among
the employees. Fire safety and road safety training is conducted in
schools nearby to our manufacturing facilities.
World Environment Earth Day were celebrated by conducting green drive
programme of mass tree plantation. The Company continues to maintain
modern, well-equipped effluent treatment plants and effluent testing
system at its manufacturing facilities. Treated water from this
facilities is recycled and used for utility or gardening.
The Company''s various locations have received HSE awards including best
environment, health and safety practices, National award for Excellence
in Energy Management and Greenco (Silver rating) award for Kurkumbh
facility.
Internal Control Systems and their adequacy
The Company''s internal control procedures are adequate to ensure
compliance with various policies, practices and statutes in keeping
with the organization''s pace of growth and increasing complexity of
operations.
The Company maintains a system of internal controls designed to provide
reasonable assurance regarding the following:
- Effectiveness and efficiency of operations
- Adequacy of safeguards for assets
- Prevention and detection of frauds and errors
- Accuracy and completeness of the accounting records
- Timely preparation of reliable financial information
Key controls have been tested during the year and corrective and
preventive actions are taken for any weakness.
The internal controls and governance process are duly reviewed for
their adequacy, effectiveness through periodic audits by Cipla''s
independent internal audit function supported by various internal
auditors and are found to be adequate. Risk based internal audit plan
is approved by the Audit Committee which also reviews adequacy and
effectiveness of the Company''s internal financial controls. The Audit
Committee is periodically briefed on the corrective and preventive
action taken to mitigate identified risks. During the year under
review, no fraud was reported by the auditors to the Audit Committee /
Board of Directors.
Corporate Social Responsibility (CSR)
The CSR policy is available on the Company''s website at
http://www.cipla.com/templates/ home_tpl/images/Corporate_Social_
Responsibility_Policy.pdf.
The Annual Report on CSR initiatives 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 forms
part of this Report as Annexure I.
Business Responsibility Report
As mandated by the Securities and Exchange Board of India (SEBI), a
standalone Business Responsibility Report (BRR) forms part of the
Annual Report and is available on the Company''s website at
www.cipla.com. The BRR contains a detailed report on Business
Responsibilities vis-Ã -vis the nine principles of the National
Voluntary Guidelines on Social, Environmental and Economic
Responsibilities of Business framed by the Union Ministry of Corporate
Affairs. Any shareholder interested in obtaining a copy may write to
the Company Secretary at the Registered Office of the Company.
CORPORATE MATTERS
Directors'' Responsibility Statement
Pursuant to section 134(3)(c) of the Companies Act, 2013 it is
confirmed that the Directors have:
i. followed applicable accounting standards in the preparation of the
annual accounts and there are no material departures for the same;
ii. selected such accounting policies and applied them consistently
and made judgements 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 profit of the Company for that period;
iii. taken proper and sufficient care for 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;
iv. prepared the annual accounts on a going concern basis;
v. laid down internal financial controls to be followed by the Company
and that such internal financial controls are adequate and were
operating effectively; and
vi. devised proper systems to ensure compliance with the provisions of
all applicable laws and that such systems were adequate and operating
effectively.
Corporate Governance
A report on Corporate Governance along with a certificate from Dr. K.
R. Chandratre, Practising Company Secretary, regarding compliance with
Clause 49 of the erstwhile Listing Agreement and SEBI (Listing
Obligations and Disclosure Requirements) Regulations, 2015 ("SEBI
Listing Regulations") forms part of this report.
Conservation of Energy, Technology Absorption, Foreign Exchange
Earnings and Outgo
As required under Section 134(3)(m) of the Companies Act, 2013 read
with Rule 8(3) of the Companies (Accounts) Rules, 2014, the relevant
information and data are annexed to this report as Annexure II.
Disclosure under The Sexual Harassment of Women at Workplace
(Prevention, Prohibition and Redressal) Act, 2013
The Company has in place a Policy on Prevention, Prohibition and
Redressal of Sexual Harassment at workplace in line with the
requirements of The Sexual Harassment of Women at Workplace
(Prevention, Prohibition and Redressal) Act, 2013. An Internal
Complaints Committee (ICC) has been set up to redress complaints
received regarding sexual harassment.
The policy has set guidelines on the redressal and enquiry process that
is to be followed by complainants and the ICC, whilst dealing with
issues related to sexual harassment at the workplace towards any
employee. All employees (permanent, temporary, contractual and
trainees) are covered under this policy. All employees are treated with
dignity with a view to maintain a work environment free of sexual
harassment whether physical, verbal or psychological.
A total of 14 cases were reported under the Prevention of Sexual
Harassment Policy during the financial year 2015-16, out of which 2
cases were under investigation at the end of financial year.
Subsequently, all the cases were satisfactorily addressed and
appropriate action was taken.
Employee Stock Option Scheme
As required under the Securities and Exchange Board of India (Share
Based Employee Benefits) Regulations, 2014, the applicable disclosures
as on 31st March 2016 are available on the Company''s website at
http://www.cipla.com/en/ investor-information/shareholder-
information.html.
There is no material change in the Employee Stock Option Schemes during
the financial year under review and the Employee Stock Option Schemes
are in compliance with the Securities and Exchange Board of India
(Share Based Employee Benefits) Regulations, 2014.
Human Resources
The Human Resources function contributes to Cipla''s growth story by
working as a strategic partner to the business. The technical and
quality demands of pharma combined with our own vision to grow
significantly over the next few years are driving the need for us to
build an agile, engaged, and energized work force. While doing this,
your Company continues to retain focus on Cipla values and its core
philosophy of placing people before profits. Our core objective has
been to build organizational capability through skill enhancement
across levels, sales force training and enhancing competencies in line
with changing business needs.
There has also been a focus on strengthening existing, middle and
senior leadership.
The Company has institutionalized a robust performance management
process; individual goals and key performance indicators have been
aligned to organizational goals and imperatives.
In making "Caring for Life" translate to "Caring for employees",
various employee centric interventions like people friendly policies
and work- life balance have been launched. While serving global
customers, employing people across the globe is an equally important
aspect of our vision thereby building a truly global company. Employees
are motivated through various skill-development, engagement and
voluntary programs. We also ensure that employees are aligned with our
organizational culture and values whilst never losing sight of our
business objectives.
Details of 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 annexed as
Annexure III.
Particulars of employee remuneration as required under section 197(12)
of the Companies Act, 2013 read with Rule 5(2) and (3) of the Companies
(Appointment and Remuneration of Managerial Personnel) Rules, 2014
forms part of this Report. Having regard to the provisions of the first
proviso to section 136(1) of the Companies Act, 2013, the Annual Report
excluding the said information is being sent to the members of the
Company. The said information is available for inspection at the
registered office of the Company during working hours and any member
interested in obtaining such information may write to the Company
Secretary at the Registered Office of the Company. The said information
is also available on the Company''s website www.cipla.com.
Particulars of loans, guarantees or investments
Particulars of loans, guarantees and investments under section 186 of
the Companies Act, 2013 are provided in Notes 13 and 40 to the
financial statements.
Extract of Annual Return
As required under section 92(3) of the Companies Act, 2013, the extract
of Annual Return in Form No. MGT-9 forms part of this Report as
Annexure IV.
Secretarial Audit Report
The Board had appointed M/s. BNP & Associates as the secretarial
auditor for the financial year 2015-16. The secretarial audit report
for the financial year ended 31st March 2016 is annexed to this report
as Annexure V. The report does not contain any qualification,
reservation or adverse remark.
Vigil Mechanism
The Company believes in upholding professional integrity and ethical
behavior in the conduct of its business. To uphold and promote these
standards, the Company has formulated a Vigil Policy which serves as a
mechanism for its directors and employees to report genuine concerns
about unethical behavior, actual or suspected fraud or violation of the
Code of Conduct without fear of reprisal. The details of Vigil Policy
is available on the Company''s website at http://www.
cipla.com/templates/home_tpl/ images/Vigil_Policy.pdf.
Contract and Arrangements with Related Parties
All contracts / arrangements / transactions entered by the Company with
related parties during the financial year 2015-16 were in the ordinary
course of business and on an arm''s length basis. During the year, no
material related party transactions were entered into by the Company,
the details of which are required to be provided under section
134(3)(h) of the Companies Act, 2013.
The policy on materiality of and dealing with related party
transactions is available on the Company''s website at
http://www.cipla.com/uploads/ investor/1443000127_Policy-on-
Related-Party-Transactions.pdf.
Internal Financial Controls
The Board has adopted policies and procedures for ensuring 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 timely preparation of reliable financial disclosures.
Cipla has aligned its current systems of internal financial control
with the requirement of Companies Act, 2013, on lines of globally
accepted risk based framework as issued by the Committee of Sponsoring
Organisations (COSO) of the treadway commission. The Internal Control -
Integrated Framework (the 2013 framework) is intended to increase
transparency and accountability in an organisation''s process of
designing and implementing a system of internal control. The framework
requires a company to identify and analyse risks and manage appropriate
responses. The Company has successfully laid down the framework and
ensured its effectiveness, some of which are outlined below:
Cipla has a well-defined delegation of power with authority limits for
approving revenue as well as expenditure. Processes for formulating and
reviewing annual and long term business plans have been laid down.
The Company has adopted accounting policies which are in line with the
Accounting Standards prescribed in the Companies (Accounting Standards)
Rules, 2006 that continue to apply under section 133 and other
applicable provisions, if any, of the Companies Act, 2013 read with
Rule 7 of the Companies (Accounts) Rules, 2014 and relevant provisions
of the Companies Act, 1956, to the extent applicable. These are in
accordance with generally accepted accounting principles in India.
Changes in policies, if any, are approved by the Audit Committee in
consultation with the Statutory Auditors.
Cipla uses a SAP ® (ERP) system to record data for accounting and
management information purposes. The ERP system is configured to ensure
all transactions are integrated seamlessly with the underlying books of
account. It has continued its efforts to align all its processes and
controls with global best practices.
The Management periodically reviews the financial performance of the
Company against the approved plans across various parameters and takes
action, wherever necessary.
Risk Management
The Company has constituted a Risk Management Committee under the
Chairmanship of Mr. Subhanu Saxena, Managing Director and Global Chief
Executive Officer. There are no risks which in the opinion of the Board
threaten the existence of the Company. However, some of the risks which
may pose challenges are set out in the Management Discussion and
Analysis which forms part of this Report.
Deposits
During the financial year 2015-16, your Company has not accepted any
deposit within the meaning of sections 73 and 74 of the Companies Act,
2013 read together with the Companies (Acceptance of Deposits) Rules,
2014.
Board Evaluation
Pursuant to the provisions of the Companies Act, 2013 and SEBI Listing
Regulations, the Board has carried out an annual performance evaluation
of its own performance, the directors individually and that of its
Committees. The manner in which the evaluation has been carried out is
stated in the Corporate Governance Report.
Subsidiaries, Associates and Joint Ventures
The Company had 55 subsidiaries/ step-down subsidiaries and Associates
as on 31st March 2016. The consolidated financial statements presented
in this annual report include financial results of the subsidiary
companies. The names of companies which have become or ceased to be
Company''s subsidiaries or associates or joint ventures during the year
under review is attached as Annexure VI.
The policy for determining material subsidiaries is put up on the
website at http://www.cipla.com/uploads/
investor/1443000071_Policy-for- determining-Material-Subsidiaries.pdf.
A report on the performance and financial position of each of the
subsidiaries, associates and joint venture forms part of Consolidated
Financial Statement.
The financial statement of the Company including consolidated financial
statements, financial statements of subsidiary companies are available
on Company''s website www.cipla. com. These documents will also be
available for inspection by any member at the Registered Office of the
Company during business hours. The copy of the said financial
statements will be made available to any member of the Company seeking
such information.
Directors and Key Managerial Personnel
During the year under review, the members approved the appointment of
Ms. Samina Vaziralli as a Whole-time Director designated as "Executive
Director" for a period of five years with effect from 10th July 2015.
Dr. Nachiket Mor resigned from the Board of Directors effective 7th
August 2015 due to his other commitments. The Directors place on record
their appreciation of the contributions made by him as a member of the
Board.
Ms. Naina Lal Kidwai has been appointed as an Additional Director with
effect from 6th November 2015 and holds office up to the date of the
ensuing Annual General Meeting.
Mr. S. Radhakrishnan has been re-appointed by the Board of Directors as
a Whole-time Director for a period of two years with effect from 12th
November 2015, subject to the approval of members at the ensuing Annual
General Meeting.
Mr. M. K. Hamied retires by rotation and, being eligible, offers
himself for re-appointment.
Mr. Subhanu Saxena is stepping down as the Director, Managing Director
and Global Chief Executive Officer of the Company with effect from
close of business hours on 31st August 2016.
At the meeting of the Board of the Directors held on 12th August 2016,
Mr. Umang Vohra has been appointed as an Additional Director and
Managing Director and Global Chief Executive Officer for a period of
five years with effect from 1st September 2016, subject to the approval
of members at the ensuing Annual General Meeting.
A brief resume of the Directors seeking appointment/ re-appointment is
provided in the Notice.
Pursuant to the provisions of section 203(1) of the Companies Act,
2013, the Key Managerial Personnel of the Company during the year were
as follows:-
- Mr. Subhanu Saxena - Managing Director and Global Chief Executive
Officer
- Mr. Rajesh Garg - Director, Whole-time Director and Chief Financial
Officer (Demitted office w.e.f. close of business hours on 12th June
2015.
Mr. Umang Vohra - Global Chief Operating Officer and Global Chief
Financial Officer (Appointed w.e.f. 1st October 2015)
- Mr. Mital Sanghvi - Company Secretary
All Independent Directors of the Company have given declarations that
they meet the criteria of independence as prescribed under section
149(6) of the Companies Act, 2013 and Regulation 16(1)(b) of the SEBI
Listing Regulations.
The criteria for determining qualifications, positive attributes and
independence of a director are attached as Annexure VII.
The salient aspects of Remuneration Policy have been outlined in the
Report on Corporate Governance.
Neither the Managing Director nor the Whole-time Directors received any
remuneration or commission from any of the Company''s subsidiaries.
Number of meetings of the Board
During the year under review, 8 Board Meetings were held. The details
of the Board Meetings are stated in the Report on Corporate Governance.
Composition of Audit Committee
The details pertaining to composition of Audit Committee are included
in the Report on Corporate Governance.
Cost Auditor
Pursuant to the provisions of section 148 of the Companies Act, 2013,
Mr. D. H. Zaveri, a practising Cost Accountant (Fellow Membership No.
8971) has been appointed to conduct the audit of cost records of
pharmaceutical products for the financial year ended 31st March 2016.
Pursuant to section 148(6) of the Companies Act, 2013 and Rule 6(6) of
the Companies (Cost Records and Audit) Rules, 2014, the Cost Audit
Report, in Form CRA-4 (in XBRL mode), for the year ended 31st March
2015, under the head ''Drugs and Pharmaceuticals Industry'' was filed
with the Central Government within the prescribed time.
Auditors
M/s. V Sankar Aiyar & Co. and M/s. R.G.N. Price & Co., joint statutory
auditors of the Company, retire at the conclusion of the ensuing Annual
General Meeting (AGM). In accordance with the provisions of section 139
of the Companies Act, 2013 and the mandatory rotation of auditor
requirement, it is proposed to appoint Walker Chandiok & Co LLP,
Chartered Accountants, as statutory auditors of the Company to hold
office from the conclusion of ensuing 80th AGM till the conclusion of
85th AGM.
The Auditors'' Report for the financial year 2015-16 does not contain
any qualification, reservation or adverse remark.
On behalf of the Board
Y. K. Hamied
Chairman
12th August 2016
Mar 31, 2015
Dear Members,
The Directors take pleasure in presenting the Seventy-Ninth Annual
Report of the Company along with the audited financial statements for
the financial year ended 31st March 2015.
Financial Summary Rs. in crore
Year ended
31st March 2014
Standalone Consolidated
9836 10556 Gross total revenue
1818 1880 Profit before tax
1389 1389 Profit for the year
4269 4351 Surplus brought forward from last
balance sheet
5658 5740 Profit available for appropriation
Appropriations:
161 161 Dividend
27 27 Tax on dividend
140 140 Transfer to general reserve
- - Adjustment of depreciation
5330 5412 Surplus carried forward
Year ended
31st March 2015
Standalone Consolidated
Gross total revenue 10373 11620
Profit before tax 1540 1654
Profit for the year 1181 1181
Surplus brought forward from last 5330 5412
balance sheet
Profit available for appropriation 6511 6593
Appropriations:
Dividend 161 161
Tax on dividend 33 33
Transfer to general reserve - -
Adjustment of depreciation 40 41
Surplus carried forward 6277 6358
DIVIDEND
The Directors recommend a dividend of Rs. 2 per equity share (100%) for
the year 2014-15. The dividend, if sanctioned at the Annual General
Meeting, will be paid to those members whose names appear in the
Company's Register of Members on Wednesday, 12th August 2015. In
respect of shares held in dematerialised form, the dividend will be
payable on the basis of beneficial ownership as per details furnished
by National Securities Depository Limited and Central Depository
Services (India) Limited.
Particulars of loans, guarantees or investments
Particulars of loans, guarantees and investments under Section 186 of
the Companies Act, 2013 are provided in Notes 39 and 13 to the
financial statements.
Extract of Annual Return
Extract of Annual Return in the prescribed format under the Companies
Act, 2013 forms part of this Report as Annexure V.
Secretarial Audit Report
The Board had appointed M/s. BNP & Associates as the secretarial
auditor for the financial year 2014-15. The secretarial audit report
for the financial year ended 31st March 2015 is annexed to this report
as Annexure VI. The report does not contain any qualification,
reservation or adverse remark.
Vigil Mechanism
The Company believes in upholding professional integrity and ethical
behavior in the conduct of its business. To uphold and promote these
standards, the Company has formulated a Vigil Policy which serves as a
mechanism for its directors and employees to report genuine concerns
about unethical behavior, actual or suspected fraud or violation of the
Code of Conduct without fear of reprisal. The details of Vigil Policy
is available on the Company's website at http://www.
cipla.com/CiplaSite/Media/PDF/ code_of_conduct/Vigil_Policy.pdf.
Contract and Arrangements with Related Parties
All contracts / arrangements / transactions entered by the Company with
related parties during the financial year 2014-15 were in the ordinary
course of business and on an arm's length basis. No material related
party transactions were entered into by the Company during the year
under review.
The policy on materiality of and dealing with related party
transactions is available on the Company's website at http://www.
cipla.com/CiplaSite/Media/PDF/ Policy/Policy_on_Related_Party_
Transactions.pdf.
Internal Financial Controls
The Company has in place adequate 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.
Risk Management
As required under Clause 49 of the Listing Agreement, the Company has
constituted a Risk Management Committee comprising of executive
directors under the Chairmanship of Mr. Subhanu Saxena.
There are no risks which in the opinion of the Board threaten the
existence of your Company. However, some of the risks which may pose
challenges are set out in the Management Discussion and Analysis which
forms part of this Report.
Deposits
During the financial year 2014-15, your Company has not accepted any
deposit within the meaning of Sections 73 and 74 of the Companies Act,
2013 read together with the Companies (Acceptance of Deposits) Rules,
2014.
Board Evaluation
Pursuant to the provisions of the Companies Act, 2013 and Clause 49 of
the Listing Agreement, the Board has carried out an annual performance
evaluation of its own performance, the directors individually and that
of its Committees. The manner in which the evaluation has been carried
out is stated in the Corporate Governance Report.
Subsidiaries, Associates and Joint Ventures
The Company had 62 subsidiaries/ step-down subsidiaries, Associates and
Joint Ventures as on 31st March 2015. The consolidated financial
statements presented in this annual report include financial results of
the subsidiary companies.
The names of companies which have become or ceased to be Company's
subsidiaries or associates or joint ventures during the year under
review is attached as Annexure VII.
The policy for determining material subsidiaries is put up on the
website at http://www.cipla.com/CiplaSite/
Media/PDF/Policy/Policy_on_Material_ Subsidiary.pdf.
A report on the performance and financial position of each of the
subsidiaries, associates and joint venture forms part of Consolidated
Financial Statement.
The financial statement of the Company including consolidated financial
statements, financial statements of subsidiary companies are available
on Company's website www.cipla.com. These documents will also be
available for inspection by any member at the Registered Office of the
Company during business hours. The copy of the said financial
statements will be made available to any member of the Company seeking
such information.
Directors and Key Managerial Personnel
Mr. Pankaj Patel resigned from the Board of Directors effective 3rd
September 2014 due to his increasing professional commitments. Dr. H.
R. Manchanda resigned from the Board of Directors effective 13th
November 2014 due to his advancing age. Mr. V. C. Kotwal resigned from
the Board of Directors effective 13th November 2014 due to his
commitments. The Directors place on record their appreciation of the
contributions made by them as members of the Board.
During the year under review, the members approved the appointments of
Mr. Ashok Sinha, Dr. Peter Mugyenyi and Mr. Adil Zainulbhai as
Independent Directors who are not liable to retire by rotation.
The members through Postal Ballot approved appointment of Ms. Punita
Lal and Dr. Nachiket Mor appointed as Independent Directors effective
13th November 2014 who are not liable to retire by rotation.
The following officers have been designated as the Key Managerial
Personnel of the Company pursuant to section 203(1) of the Companies
Act, 2013 read with the Companies (Appointment and Remuneration of
Managerial Personnel) Rules, 2014:
* Mr. Subhanu Saxena - Managing Director and Global Chief Executive
Officer
* Mr. Rajesh Garg - Executive Director and Global Chief Financial
Officer
* Mr. Mital Sanghvi - Company Secretary
During the year under review, there was no change in the Key Managerial
Personnel of your Company.
Mr. Rajesh Garg demitted office as a Director, Whole-time Director and
Chief Financial Officer with effect from close of business hours on
12th June 2015.
Ms. Samina Vaziralli has been appointed as an Additional Director with
effect from 10th July 2015 and holds office up to the date of the
ensuing Annual General Meeting. She has been appointed as Whole-time
Director designated as "Executive Director" for a period of five years
with effect from 10th July 2015 subject to the approval of the members
at the ensuing Annual General Meeting.
Mr. Subhanu Saxena retires by rotation and, being eligible, offer
himself for re-appointment. A brief resume of the Directors seeking
appointment/re-appointment is provided in the Notice.
All Independent Directors of the Company have given declarations that
they meet the criteria of independence as prescribed under Section
149(6) of the Companies Act, 2013 and Clause 49 of the Listing
Agreement.
The details of familiarisation programme for Independent Directors are
put up on the website at http://www.cipla.com/CiplaSite/
Media/PDF/Policy/Familiarisation_ programme_for_Independent_
Directors.pdf.
The Nomination and Remuneration Committee have also formulated criteria
for determining qualifications, positive attributes and independence of
a director. The said criteria is attached as Annexure VIII.
The Board of Directors approved the Remuneration Policy on the
recommendation of the Nomination and Remuneration Committee. The
salient aspects of Remuneration Policy have been outlined in the Report
on Corporate Governance.
Neither the Managing Director nor the Whole-time Directors received any
remuneration or commission from any of the Company's subsidiaries.
Number of meetings of the Board
During the year under review, 8 Board Meetings were held. The details
of the Board Meetings are stated in the Report on Corporate Governance.
Composition of Audit Committee
The details pertaining to composition of Audit Committee are included
in the Report on Corporate Governance.
Cost Auditor
Pursuant to the provisions of Section 148 of the Companies Act, 2013,
Mr. D.H. Zaveri, a practising Cost Accountant (Fellow Membership No.
8971) has been appointed to conduct the audit of cost records of
pharmaceutical products for the financial year ended 31st March 2015.
The due date for filing Cost Audit Report for the year ended 31st March
2014 was 27th September 2014 and the same was filed on 27th September
2014.
Auditors
Messrs V. Sankar Aiyar & Co. and Messrs R.G.N. Price & Co., joint
statutory auditors of the company, retire at the conclusion of the
forthcoming Annual General Meeting and are eligible for re-appointment.
The Auditors' r eport does not contain any qualification, reservation or
adverse remark.
on behalf of the Board
Y. K. Hamied
Chairman
9th July 2015
Mar 31, 2014
Dear Shareholders,
I would like to take this opportunity to reiterate some fundamental
values of your Company. For Cipla, ensuring access to medicines at
affordable prices is essential. Most leading countries have realised
that despite government support, medicines are becoming increasingly
more expensive and therefore difficult to buy. This present trend
offers an opportunity for a pharmaceutical company like Cipla. At the
same time it places a great responsibility on us to supply reliable,
good quality medicines on a long-term sustainable basis. We need to
demonstrate clearly our willingness to promote affordable medicines so
that no one should be denied medication. Companies like ours, must
promote efficient and well-run businesses but at the same time have a
humanitarian approach to healthcare. We are one of the few industries
directly involved in prolonging and saving lives.
We have always believed that free competition is the only way to ensure
fair prices and better availability of drugs. Over the years, Cipla has
overcome innumerable hurdles in many areas and we will continue to
navigate the path ahead as best possible. We strongly believe that
there should be no monopolies in healthcare; and in that context, India
should adopt a pragmatic Intellectual Property Rights (IPR) policy
including in-licensing within the present framework of our
international obligations.
Many countries such as Brazil,Thailand, Indonesia and Malaysia have
already introduced compulsory licensing provisions. The Republic of
South Africa is seriously reconsidering their position on IPR in order
to promote affordable healthcare. India must also examine the monopoly
position of drugs and build safeguards to ensure that this does not
happen. India has always stood for the promotion of knowledge and
consideration for the greater good. Both our nation and our Company
have deep-rooted foundations based on human values. We sincerely
believe that Cipla has the opportunity to show this to the world.
Dr.Y.K.Hamied
The Directors take pleasure in presenting the Seventy-Eighth Annual
Report of the Company along with the Audited Accounts for the financial
year ended 31st March 2014.
Financial Summary
Rs. in crore
Year ended Year ended
31st March 2013 31st March 2014
Standalone Consolidated Standalone Consolidated
8524 8610 Gross total
revenue 9760 10483
2012 2095 Profit before tax 1818 1880
1507 1545 Profit for the year 1389 1389
3110 3154 Surplus brought
forward from last
balance sheet 4269 4351
4617 4699 Profit available
for appropriation 5658 5740
Appropriations:
161 161 Dividend 161 161
27 27 Tax on dividend 27 27
160 160 Transfer to general
reserve 140 140
4269 4351 Surplus carried
forward 5330 5412
DIVIDEND
The Directors recommend a dividend of Rs.2 per share on 80,29,21,357
equity shares of Rs.2 each for the year 2013-14 amounting to
Rs.160,58,42,714.
MANAGEMENT DISCUSSION AND ANALYSIS: 2013-14 Global Business Review
With a footprint across five continents, Cipla is moving fast towards
its goal of making affordable healthcare available to all.
The Company''s revenue from operations on a consolidated basis during
the financial year 2013-14 amounted to Rs.10,218 crore against Rs.8,388
crore in the previous year, recording a growth of 21.8%. The income
from operations for domestic business increased by 14.7%, from Rs.3,569
crore in the previous financial year to Rs.4,094 crore in the financial
year under review. Total exports increased by 25.0% during the year to
Rs.5,659 crore.
During the year under review, operating margin reduced by 5.4%. This
was primarily due to the change in product mix, higher investments in
R&D and talent acquisition. Asa result, profit for the year reduced by
10.1% toRs. 1,389 crore from Rs.1,545 crore in the previous financial year.
India Ratings and Research Private Limited, a Fitch Group Company,
assigned a Long-Term Issuer Rating of ''IND AAA'' with a stable outlook
to the Company. The rating is the highest assigned in Fitch''s rating
scale and indicates the highest degree of safety regarding timely
servicing of financial obligations and lowest credit risk.
Global Roundup
1. Robust revenue from operations growth (22% vs. previous year);
crossed Rs.10,000 crore mark
2. Strong operating cash flow of more than 60% of operating profit for
the year
3. More than 1,000 global filings
4. Completed three acquisitions
5. New organisation structure in place
6. Increase in efficiency and productivity levels in R&D and
manufacturing India
As India''s second largest pharmaceutical company, Cipla is in a strong
position to fulfil its commitment to provide modern medicine to
everyone in the country. This year, despite the challenges, Cipla''s
domestic branded generics business revenues grew 15.5% versus industry
growth of 9%. The generics business also performed well.
Over the last six months the market share for Cipla''s branded generics
grew 5.3%, rising steadily from the previously recorded 4.7%. Cipla
continues to maintain its leadership in respiratory, paediatric and
urology therapies. Legacy brands continue to perform well. The
progressive product portfolio grew 23%, while the share of new product
launches increased from 1.5% in Q1, 2012-13 to 3.5% in Q4, 2013-14.
India business contributed 39.4% to overall revenues.
Cipla successfully launched Etacept, the Company''s first biosimilar for
the treatment of rheumatoid arthritis. As part of an in-licensing
transaction, Cipla entered into a strategic alliance to market MSD''s
HIV drug, raltegravir, in India. Raltegravir is an important part of
the third-line salvage regimen for HIV patients. It should be available
to patients from mid-2015.
In the coming years, the domestic business will continue to focus on
these themes:
- Growth ahead of market growth
- Strengthen our leadership in therapy and geography by empowering our
people
- Increase sales force productivity with the rollout of Customer
Relationship Management (CRM) and Sales Force Automation (SFA) systems.
South Africa
The Company completed the acquisition of 100% of the share capital of
Cipla Medpro in South Africa at ZAR 10 per share amounting to a total
investment of Rs.2,757 crore. This investment is aimed at further
strengthening the Company''s commitment to the African continent, and is
aligned with the strategy of ascending the value chain by managing a
front- end sales force in a market outside India. The acquisition
enables Cipla to strengthen Medpro''s position in the South African
pharmaceutical market, support the optimisation of Medpro''s
manufacturing capability and drive Medpro''s expansion into other
African markets.
As one of the largest pharmaceutical companies in South Africa, Cipla
Medpro has a market share of more than 5%. South Africa now
contributes 13.2% to overall Cipla revenues on a consolidated basis.
The Company has grown at 12% in the private market over the last three
years. The Cipla brand inspires trust and has become a household name
among consumers, pharmacies, prescribers and key opinion leaders.
The Company''s revolutionary three-in-one antiretroviral treatment has
helped Cipla entrench itself at the forefront of the fight against
HIV/AIDS in South Africa. Its manufacturing facility at Durban provides
the Company a competitive edge and is the first Pharmaceutical
Inspection Convention (PIC) compliant facility in the country.
Capitalising on its defined future portfolio, key development and
in-licensing projects, and streamlined global organisational structure,
Cipla will leverage synergies from its international family. Plans are
on track and the integration across manufacturing supply chain, finance
and human resources is complete. The Company has leveraged its skill
and scale to drive down costs in areas such as procurement.
Europe
Cipla is making innovative, affordable medication accessible in over 30
countries across Europe. The European business contributed 5.7% to the
overall revenues and recorded 40.9% growth for the year. As part of its
European growth strategy, Cipla acquired Celeris, a pharmaceutical
distribution company based in Croatia.
Cipla is focused on adding innovative elements to products, services
and information through research and partnerships.
North America
In 2013-14 the Company''s active pipeline has expanded from 36 to more
than 50 products including several key respiratory products and other
complex generics. Cipla has 16 filings in North America this year and
received 13 approvals.
Cipla intends to bring its intellectual capacity and range of product
technologies directly to the US market both under the Cipla label and
those of its partner organisations. North America business contributed
6.8% to overall revenues and recorded 18.2% growth for the year,
excluding a one-off impact in FY 2012-13.
International (rest of the world)
With a diverse range of more than 1,000 products and 180 global
partners across 120 countries, Cipla has a presence in Africa, the
Middle East, Latin America, Asia Pacific, China, and Russia.
International contributes 24.5% of global organisation revenues and
grew 30.3% over last year. Cipla''s products are currently helping more
than 1.7 million HIV patients, 55 million malaria patients, and 0.3
million patients in the area of reproductive and women''s health.
This year saw us increase our shareholding in Quality Chemical
Industries Limited (QCIL), Uganda to 51%. The Company also strengthened
its pan-African network of partners.
Strategic Business Units Core Areas of Competence
Restructuring the Company''s core business areas into Strategic Business
Units presents an opportunity to streamline and innovate across Cipla''s
global operations
Active Pharmaceutical Ingredients (API)
As the company that showed the way in manufacturing active
pharmaceutical ingredients (APIs) in India, Cipla has expanded its
portfolio to more than 200 products. Cipla''s state-of-the-art API
plants meet stringent quality and current good manufacturing practices
(cGMP) requirements and environment and safety standards. All of them
are approved by various international regulatory agencies including US
Food and Drug Administration (USFDA).
With the capacity to manufacture nearly 1,000 metric tonnes of APIs
annually, the plants are geared to meet the diverse needs of both
Indian and international customers. _
A significant portion of the APIs manufactured by Cipla are consumed
internally. The third-party API business contributed 7.5% to the
overall revenue and recorded 29% growth for the year.
Cipla has key strategic alliances in place with big pharmaceutical
companies to support the development of new entities as an additional
focus area. It has a robust portfolio process to create a pipeline of
complex products.
The gastroenterology and antiretroviral segments continue to be major
contributors to the business. By building deeper engagements, Cipla
will develop and strengthen its key relationship with existing and new
partners.
Respiratory
Cipla has delivered treatments for chronic obstructive airway diseases
through innovative delivery mechanisms for over 30 years. This has
resulted in the Company''s ability to meet diverse needs of various
patient types all over the world. Cipla has further strengthened its
capabilities in development and commercialisation and now has a
dedicated team of world- class specialists focused on driving
Respiratory care.
The Company offers more than 65 different inhaled products and has the
world''s largest range of inhaled medications and devices. Across
markets, Cipla offers a selection of metered dose inhalers (pMDIs) with
dose indicators, innovative dry powder inhalers, nasal sprays,
nebulisers, non-electrostatic spacers, and infant and baby masks.
Today, the Company is one of the largest producers of pMDIs in the
world.
Ensuring access and affordability is key to our mission, and over the
years we have developed and implemented an operating model in several
markets. This focuses on patient awareness and education, physician
training, patient clinics, and counselling.
Global Access
Since its inception, Cipla''s ethos has been firmly rooted in the "None
shall be denied" philosophy. The Company strongly believes that access
to high quality, affordable medicines is a basic human right, and not
just a privilege for a few.
Cipla Global Access (C-GA) concentrates on four key therapy areas: HIV/
AIDS, Malaria, Multi Drug-Resistant Tuberculosis, and Reproductive
Health. In FY 2013-14, Cipla''s medicines in these therapies touched
nearly 58 million lives. The Company aims to reach out to 80 million
patients in these four therapies by 2020. Cipla has developed and
fostered robust relationships with all the major global organisations
and funding agencies that work toward this common cause. Additionally,
Cipla has partnered with several global scientific research
organisations to develop innovative, effective and affordable
formulations for these four therapy areas.
Cipla is among the leading manufacturers of ARV drugs in the world. In
2001, we were the first pharmaceutical company to supply ARVs to
countries with a high HIV burden at less than a dollar a day. In
financial year 2013-14 alone, Cipla covered around 1.7 million HIV
patients in 32 countries across the globe. Currently, we have 22 ARVs
in our portfolio and about a dozen more in the development pipeline.
Cipla is one of the largest suppliers of antimalarial drugs in the
world. We supplied nearly 55 million malaria treatments across all
malaria endemic countries in FY 2013-14. Cipla has managed to quickly
identify, develop, manufacture and supply low cost and state-of-the-art
artemisinin-based combination therapy (ACTs) drugs in order to meet the
challenge of drug-resistant malaria. All the ACTs supplied by Cipla are
approved by WHO, and we are currently developing more antimalarials
coupled with novel drug delivery systems.
The Company also has a strong second line TB (SLTB) portfolio, and is
expanding its product portfolio for HIV/MDRTB co-infected patients. In
FY 2013-14, Cipla''s SLTB drugs catered to a moderate patient base
globally, and this base is likely to increase significantly with the
arrival of new diagnostic methods. Future development in the TB therapy
area will be focused on newer molecules which can significantly reduce
treatment timelines. Cipla''s initiative also provides medication to 0.3
million patients in the area of reproductive and women''s health. Cipla
has aligned its strategy with international development initiatives to
provide safe and effective contraceptive drugs for 120 million more
women by 2020. Cipla also makes medications for infections such as
hepatitis and schistosomiasis which pose major health threats in the
Least Developed Countries (LDC).
Cipla New Ventures (CNV) Incubators of Growth
This year Cipla launched its business-incubating unit, Cipla New
Ventures (CNV). The division is aimed at bringing to Cipla a long-term
direction for research and innovation in future therapies. Through
Cipla New Ventures, the Company has started to build more
innovation-led business streams with investments in biologicals,
regenerative medicine, and consumer health. As an example, the Company
recently invested in Chase Pharmaceuticals, an early stage drug
development company in the US, focused on creating novel approaches to
improve treatments for Alzheimer''s.
Integrated Product Development (IPD) Investing in Knowledge
Cipla''s IPD organisation includes formulations and API R&D, clinical,
analytical, and regulatory functions.
Cipla''s R&D expense increased from 5.1% of total revenue in FY2012-13
to 5.4%in FY2013-14.TheCompany has undertaken a major expansion of its
R&D Centre with new buildings and facilities at Vikhroli, Mumbai.
Overall Cipla made significant progress across these priority areas:
- Development and regulatory approval processes were on track.
Currently, there are over 200 development projects underway indicating
a robust pipeline. In FY 2013-14, we had over 90 filings for
formulations in Europe and North America and over 1,000 filings in
other international markets. We also received more than 50 approvals in
Europe and North America and more than 800 approvals in other
international markets.
- Cipla has increased efficiency across all teams resulting in reduced
timelines, development costs and more timely regulatory approvals.
Process improvements in R&D, analytics, regulatory, procurement and the
new project management division have helped improve turnaround time and
throughput levels.
- Cipla has filed several formulation patent applications and is
working on developing nanotechnology-based oral systems,
microsphere-based and suspension-based depot injections, and sprinkle
technology.
- To help identify and define our portfolio priorities a portfolio
screening process was established to evaluate high potential
opportunities, evaluate product rationalisation opportunities and
assess high return innovations, and in-licensing opportunities. Cipla''s
Innovation Board, which was established with the intent of evaluating
new and innovative opportunities has now completed a full year of
operation.
Manufacturing
Taking it to the next level
Cipla''s productivity improved significantly in the past year. The
manufacturing division delivered 25% more by volume as compared to FY
2012-13, while keeping costs at levels similar to last year.
In order to build a strong foundation for growth, Cipla launched
Jaagruti, a programme for transformation across various functions. This
programme is aimed at reducing business complexity and strengthening
operations. Under this initiative the manufacturing division freed up
valuable resources using strategies of network optimisation, energy
efficiency, better management of human resources, and a review of
capital and operational expenses.
This also involved conducting sustainability reviews for Cipla''s Goa
and Kurkumbh operations with recommendations
being made in areas that could be improved. Jaagruti initiatives have
also been extended to Cipla''s subsidiary locations in Satara, Kundaim
and Sikkim.
Cipla''s operations in Cipla Medpro, South Africa and in Cipla QCIL,
Uganda were also aligned with practices in India for greater uniformity
across the Company''s global operations.
During the year under review, the Company has set up additional
capacity for Active Pharmaceutical Ingredients (APIs) at Patalganga and
Kurkumbh in Maharashtra. In particular, at Kurkumbh, Cipla has recently
increased API capacity for antiretrovirals (ARVs). Besides the new
facilities, all the existing facilities are upgraded regularly to meet
current cGMP, safety and environmental standards. The Company has also
scaled up its anti-cancer formulations facility at Goa.
Regulatory approvals: Several dosage forms and APIs manufactured at the
Company''s facilities continue to enjoy the approval of major
international regulatory agencies. These agencies include the US FDA,
MHRA (UK), PIC (Germany), MCC (South Africa), TGA (Australia), the
Department of Health (Canada), ANVISA (Brazil), SIDC (Slovak Republic),
the Ministry of Health (Kingdom of Saudi Arabia), the Danish Medical
Agency, and the WHO.
Threats, Risks, Concerns
The pharmaceutical industry is subject to constant scrutiny by
regulatory authorities, both Indian and international. The Company
continues to be vigilant in maintaining the highest quality standards.
The implementation of the new pricing regulations has impacted Cipla''s
domestic business and the Company continues to take all measures to
mitigate its effect.
With the recent change of the Central Government, the Indian
pharmaceutical industry is eagerly awaiting new forward- looking
policies which will encourage growth.
Cipla has some pending legal cases related to alleged overcharging in
respect of certain drugs under the Drugs (Prices Control) Order, 1995.
The aggregate amount of the demand notices received is about ^1,768.51
crore (inclusive of interest). The Company has been legally advised
that based on several High Court decisions and considering the totality
of facts and circumstances, these demand notices may not be
enforceable. However, any unfavourable outcome in these proceedings
could have an adverse impact on the Company.
Health, Safety & Environment (HSE)
HSE measures remain an utmost priority for Cipla. During the year under
review, no major hazardous accident at the workplace was recorded. HSE
benchmarking at Cipla is achieved by strict adherence to national and
international standards.
Cipla''s manufacturing facilities including Goa, Bengaluru, Baddi,
Indore, Kurkumbh, Patalganga and Sikkim, are certified for ISO 14001
and OHSAS 18001 standards. The Company continues to upgrade HSE
standards at all locations. Specialised safety training programmes
such as process safety, road safety, and behavioural safety are
regularly imparted to increase safety awareness at all working levels.
Safety Week, Fire Service Day and Electrical Safety Day are celebrated
at the manufacturing units to create awareness among employees.
Learning visits across different industrial sectors are conducted with
a view to strengthen the HSE knowledge base and implement best HSE
practices.
Villagers and school children living around the Company''s units across
India also participate in such programmes. A well-equipped ambulance
service is also made available to nearby villages in emergency
situations. Medical camps covering various aspects like polio, asthma,
blood donation, and dental are conducted in the surrounding villages.
World Environment Day and Earth Day are celebrated by conducting a
green drive programme of mass tree-plantation. The Company continues to
maintain modern, well-equipped effluent treatment plant and effluent
testing systems at its manufacturing facilities. Treated water from
these zero-discharge facilities is recycled for utility purpose.
Internal Control Systems
The Company''s internal control procedures ensure compliance with
various policies, practices and statutes in keeping with the
organisation''s pace of growth and increasing complexity of operations.
Cipla''s internal audit team carries out extensive audits throughout the
year across all functional areas, and submits its reports to the Audit
Committee of the Board of Directors.
CORPORATE SOCIAL RESPONSIBILITY (CSR)
Cipla''s Corporate Responsibility policy is aligned to the nine
principles of the National Voluntary Guidelines on Social, Economic and
Environmental Responsibilities, a global ISO 26000 accredited standard,
endorsed by the Government of India.
The Company''s Corporate Responsibility policy seeks to ensure
compliance with ethical standards in business practices, research and
development, and marketing; addressing the challenges of improved
access to medicines and their affordability; minimising environmental
impacts and waste; and helping underprivileged communities to become
resilient and self-reliant.
Initiatives executed in 2013-14 were grouped into five central themes
of education, public health, occupational health and safety,
environmental compliance, and employee welfare. The Company has an
on-going drive to increase sustainability practices in energy, water
conservation and waste minimisation across all its ISO 14001 certified
plants. It supports health, welfare and educational activities in the
communities around its facilities.
In the reporting period, Cipla donated medicines as a part of the
relief work following the floods and landslides that hit Uttarakhand in
northern India in June 2013.
In the last one year, Cipla offered grants to 23 NGOs, mainly engaged
in education and health. The foundation helped with the construction of
an English-medium school to provide education to more than 400 children
of marginalised and vulnerable communities including those living with
HIV/AIDS. Cipla extended financial support to underprivileged patients
including children with thalassaemia needing bone marrow transplants.
Cipla employees are encouraged to contribute to society through a
volunteering programme. Last year employees helped to rebuild a school
and distribute solar lanterns to households in the village of Papra in
Uttarakhand.
The Cipla Palliative Care and Training Centre in Pune has been offering
free palliative care since 1997 and has provided care to more than
8,500 patients.
Cipla was recognised at the Global CSR Excellence & Leadership Awards
2014 in the category of ''Organisations with Best Corporate Social
Responsibility Practices''.
As mandated by the Securities and Exchange Board of India (SEBI), a
standalone Business Responsibility Report (BRR) forms part of the
Annual Report and is available on the Company''s website -
www.cipla.com. The BRR contains a detailed report on Business
Responsibilities vis-a-vis the nine principles of the National
Voluntary Guidelines on Social, Environmental and Economic
Responsibilities of Business framed by the Union Ministry of Corporate
Affairs. Any shareholder interested in obtaining a copy may write to
the Company Secretary at the Registered Office of the Company.
CORPORATE MATTERS
Responsibility Statement
Pursuant to section 217(2AA)of the Companies Act, 1956 it is confirmed
that the Directors have:
i. followed applicable accounting standards in the preparation of the
annual accounts;
ii. selected such accounting policies and applied them consistently and
made judgements and estimates that are reasonable and prudent so as to
give a true and fair view of the state of affairs of the Company at the
end of the financial year ended 31st March 2014 and of the profit of
the Company for that period;
iii. taken proper and sufficient care for maintenance of adequate
accounting records in accordance with the provisions of the Companies
Act, 1956 for safeguarding the assets of the Company and for preventing
and detecting fraud and other irregularities;
iv. prepared the annual accounts on a going concern basis.
Particulars of employees
Particulars of employees required to be furnished under section 217(2A)
of the Companies Act, 1956, read with the Companies (Particulars of
Employees) Rules, 1975 as amended, form part of this report. Any
shareholder interested in obtaining a copy may write to the Company
Secretary at the Registered Office of the Company.
Change of Registered Office
The Registered Office of the Company was shifted from Mumbai Central,
Mumbai-400 008 to Cipla House, Peninsula Business Park, Ganpatrao Kadam
Marg, Lower Parel, Mumbai-400 013, effective 1n April 2014
Subsidiary Companies
The Company had 49 subsidiaries/step-down subsidiaries as on 31st March
2014. In accordance with the general circular issued by the Ministry of
Corporate Affairs, the Balance Sheets, including annexures and
attachments thereto of the Company''s subsidiaries, are not being
attached with the annual report of the Company. The annual accounts of
the subsidiary companies and the related detailed information will be
made available to any member of the Company seeking such information.
These documents will also be available for inspection by any member at
the Registered Office of the Company and that of the respective
subsidiary companies. The consolidated financial statements presented
in this annual report include financial results of the subsidiary
companies. A statement containing information on the Company''s
subsidiaries is included in this annual report.
Corporate Governance
The Company is committed to good corporate governance practices. The
report on corporate governance as stipulated under Clause 49 of the
Listing Agreement forms part of this report.
Energy Conservation; R&D and Technology Absorption, Adaptation &
Innovation; and Foreign Exchange Earnings & Outgo
As required by the Companies (Disclosure of Particulars in the Report
of Board of Directors) Rules, 1988, the relevant information and data
are annexed to this report.
Disclosure under The Sexual Harassment of Women at Workplace
(Prevention, Prohibition and Redressal) Act, 2013
The Company has in place a Policy on Prevention, Prohibition and
Redressal of Sexual Harassment at workplace in line with the
requirements of The Sexual Harrasment of Women at Workplace
(Prevention, Prohibition and Redressal) Act, 2013. An Internal
Complaints Committee (ICC) has been set up to redress complaints
received regarding sexual harassment. The policy has set guidelines on
the redressal and enquiry process that is to be followed by
complainants and the ICC, whilst dealing with issues related to sexual
harassment at the work place towards any women employees. All women
employees (permanent, temporary, contractual and trainees) are covered
under this policy. All employees are treated with dignity with a view
to maintain a work environment free of sexual harassment whether
physical, verbal or psychological.
The following is a summary of sexual harassment issues raised, attended
and dispensed during the year 2013-14:
- No. of complaints received: 4
- No. of complaints disposed off: 4
- No. of cases pending for more than 90 days: Nil
- No. of workshops or awareness programme against sexual harassment
carried out: 4
- Nature of action taken by the employer or District Officer: Out of 4
cases, one respondent was suspended, second was warned, third has
resigned and the fourth was a contract employee who has also resigned.
Employee Stock Option Scheme
As required under the Securities and Exchange Board of India (Employee
Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines,
1999, the applicable disclosures as on 31st March 2014 are annexed to
this report.
Directors
In March 2014, Mr. M.K. Hamied decided to move from an Executive
position to the role of Non-Executive Vice-Chairman. He has
contributed immensely to the company over the last 30 years and he will
continue to contribute and support the Company.
Mr. Rajesh Garg was appointed as an Additional Director with effect
from 1st April 2014 and holds office up to the date of the ensuing
Annual General Meeting. He was appointed as Whole-time Director
designated as "Executive Director and Global Chief Financial Officer"
for a period of five years with effect from 1st April 2014 subject to
the approval of the shareholders at the ensuing Annual General Meeting.
Dr. Peter Mugyenyi and Mr. Adil Zainulbhai were appointed as Additional
Directors with effect from 12th February 2014 and 23rd July 2014
respectively. They hold office up to the date of the ensuing Annual
General Meeting.
Dr. Ranjan Pai resigned from the Board of Directors effective 30th
August 2013, due to his increasing business commitments. Mr. M.R.
Raghavan resigned from the Board of Directors effective 23rd July 2014,
due to increase in workload owing to various initiatives on the social
front that he has been associated with. The Directors place on record
their appreciation of their contributions as members of the Board.
A brief resume of the Directors seeking appointment/re-appointment is
provided in the Notice.
Cost Auditors
Pursuant to the provisions of section 233B of the Companies Act, 1956
and with the prior approval of the Central Government, Mr. D.H. Zaveri,
a practising Cost Accountant (Fellow Membership No. 8971) has been
appointed to conduct the audit of cost records of pharmaceutical
products for the financial year ended 31st March 2014. The due date for
filing the Cost Audit Report for the year ended 31st March 2014 is 27th
September 2014
The due date for filing Cost Audit Report for the year ended 31st March
2013 was 27th September 2013 and the same was filed on 27th September
2013.
Auditors
Messrs. V. Sankar Aiyar & Co. and Messrs. R.G.N. Price & Co., joint
statutory auditors of the company, retire at the conclusion of the
forthcoming Annual General Meeting and are eligible for re-appointment.
On behalf of the Board,
Y.K. Hamied
23rd July 2014 Chairman
Mar 31, 2013
The Directors take pleasure in presenting the Seventy-Seventh Annual
Report of the Company along with the Audited Accounts for the financial
year ended 31st March 2013.
Financial Summary
Year ended Year ended
31st March 2012 31st March 2013
7223 Gross total revenue 8524
1421 Profit before tax 2012
1124 Profit after tax 1507
2298 Surplus brought forward from last
balance sheet 3111
3422 Profit available for appropriation 4618
Appropriations:
160 Dividend 160
26 Tax on dividend 28
125 Transfer to general reserve 160
3111 Surplus carried forward 4270
Rs. in crore
DIVIDEND
The Directors recommend a dividend of Rs.2 per share on 80,29,21,357
equity shares of Rs.2 each for the year 2012-13 amounting to Rs.160.58
crore.
CORPORATE SOCIAL RESPONSIBILITY
''Caring for Life'' is the chief purpose of doing business at Cipla.
Corporate Social Responsibility (CSR) in the Company is, therefore,
seamlessly integrated into its products, processes and people - the
three key essentials for doing responsible business.
Pursuing its commitment to make its products affordable and accessible,
the Company, in November 2012, announced a breakthrough price reduction
on its three generic anti-cancer drugs - Erlotinib (Erlocip), Docetaxel
(Docetax) and Capecitabine (Capegard) - by up to 64%. The drugs are
used for treating lung and pancreatic cancer, breast cancer, head &
neck cancer, gastric cancer, bladder, colorectal and colon cancers.
Earlier in May 2012, Cipla had slashed prices by up to 76% on Sorafenib
(Soranib), Gefitinib (Gefticip) and Temozolomide (Temoside), used in
treating cancers of the kidney, lung and brain. Also, Cipla extends its
commitment to product responsibility by manufacturing drugs for rare
diseases.
Further, the state-of-the-art ''Cipla Palliative Care and Training
Centre'' in Pune is a specialised endeavour to contribute to the cause
of cancer treatment, especially to those terminally ill cancer patients
who suffer from unbearable pain and need palliative care. The Centre
has been offering free palliative care to such patients for the last 16
years. It has so far provided comfort and solace to more than 8500
patients.
Sustainability is an important parameter of the growth journey at
Cipla. Our sustainability initiatives, arising out of environmental
concerns, include continuous efforts and improved practices in energy
and water conservation and waste minimisation across the organisation.
Caring for communities is central to our CSR strategies. Under the
social development plan, the Company continues to support several
community welfare, health and educational activities essentially in
communities surrounding the Company''s factories both directly and
through charitable foundations. Our manufacturing plants located in the
states of Maharashtra, Goa, Karnataka, Himachal Pradesh, Madhya Pradesh
and Sikkim have initiated a wide spectrum of human development
activities. The community projects implemented in the vicinity of the
plants are done in response to the identified needs of the communities
which are shared with the Company by the local stakeholders. The
Company has not laid any boundary towards limiting its social
commitments and thereby remains flexible in accommodating almost all
legitimate requests being made by the local stakeholders. CSR
initiatives in the Company, by and large, are underpinned by five
pillars - Education, Public Health, Occupational Health & Safety,
Environmental Compliance and Employee Welfare.
The Company goes beyond its immediate business areas and lends support
to NGOs engaged in care & service management of HIV/AIDS and cancer
anywhere in the country. The Company supports Manavaya, a Pune based
NGO engaged in the caring and rehabilitation of abandoned children
living with HIV/AIDS. Manavaya is supported for running a mobile health
care unit which reaches out to the poor and disadvantaged communities
of 10 villages in the outskirts of Pune. Snehalaya, an NGO working with
destitute women including sex workers and their children living with
HIV/AIDS in Ahmednagar, Maharashtra is being financially supported for
the construction of an English medium school which will provide
education to more than 400 children of marginalised and vulnerable
communities including children living with HIV/AIDS.
As mandated by the Securities and Exchange Board of India (SEBI), a
standalone Business Responsibility Report (BRR) forms part of the
Annual Report and is available on the Company''s website
http://www.cipla.com/Home/About-Us/Caring- for-the-Enviroment.aspx. The
BRR contains a detailed report on Business Responsibilities vis-a-vis
the nine principles of the National Voluntary Guidelines on Social,
Environmental and Economic Responsibilities of Business framed by the
Union Ministry of Corporate Affairs. Any shareholder interested in
obtaining a copy may write to the Company Secretary at the Registered
Office of the Company.
CORPORATE MATTERS
Responsibility Statement
Pursuant to section 217(2AA) of the Companies Act, 1956 it is confirmed
that the Directors have:
i. followed applicable accounting standards in the preparation of the
annual accounts;
ii. selected such accounting policies and applied them consistently
and made judgements and estimates that are reasonable and prudent so as
to give a true and fair view of the state of affairs of the Company at
the end of the financial year ended 31st March 2013 and of the profit
of the Company for that period;
iii. taken proper and sufficient care for maintenance of adequate
accounting records in accordance with the provisions of the Companies
Act, 1956 for safeguarding the assets of the Company and for preventing
and detecting fraud and other irregularities; and
iv. prepared the annual accounts on a going concern basis.
Subsidiary Companies
The Company had 14 subsidiaries/step-down subsidiaries at the beginning
of the year. During the financial year ended 31st March 2013, Cipla USA
Inc., Cipla Kenya Limited and Cipla Malaysia Sdn. Bhd. became step-down
subsidiaries of the Company.
In accordance with the general circular issued by the Ministry of
Corporate Affairs, the Balance Sheets, including annexures and
attachments thereto of the Company''s subsidiaries, are not being
attached with the Annual Report of the Company. The annual accounts of
the subsidiary companies and the related detailed information will be
made available to any member of the Company seeking such information.
These documents will also be available for inspection by any member at
the Registered Office of the Company and that of the respective
subsidiary companies. The consolidated financial statements presented
in this Annual Report include financial results of the subsidiary
companies. A statement containing information on the Company''s
subsidiaries is included in this Annual Report.
Corporate Governance
The Company is committed to good corporate governance practices. The
report on corporate governance as stipulated under Clause 49 of the
Listing Agreement forms part of this report.
Disclosure of Particulars
As required by the Companies (Disclosure of Particulars in the Report
of Board of Directors) Rules, 1988, the relevant information and data
are annexed to this report.
Directors
Mr. Subhanu Saxena was appointed as an Additional Director with effect
from 16th July 2013 and holds office up to the date of the ensuing
Annual General Meeting. He was appointed as Managing Director
designated as "Managing Director and Global Chief Executive Officer"
for a period of five years with effect from 16th July 2013 subject to
the approval of the shareholders at the ensuing Annual General Meeting.
Consequent to the appointment of Mr. Subhanu Saxena as Managing
Director, Mr. M.K. Hamied has been appointed as Whole-time Director
designated as "Executive Vice- Chairman" for a period of two years with
effect from 16th July 2013. As required under Schedule XIII to the
Companies Act, 1956 an application will be made to the Central
Government for the approval of appointment of Mr. Subhanu Saxena as
Managing Director.
In February 2013, Dr. Y.K. Hamied decided to step-down as Managing
Director of Cipla. Dr. Y.K. Hamied joined Cipla at the age of 24 and
completed 52 years of distinguished service with the Company. From
setting up the first ever API manufacturing facility in India, to
getting first US FDA approval in the country, Dr. Y.K. Hamied pioneered
the growth and development of the Indian Pharmaceutical industry. He
has influenced several policy changes that have shaped public health
and access across the world. He has been instrumental in making
healthcare affordable by launching generic versions of AIDS, cancer and
other life-saving medicines. In 2001, Dr. Y.K. Hamied reduced the
prices of ARV drugs to ''a dollar a day'', providing access to millions
of HIV patients across the world. Dr. Y.K. Hamied will continue to
contribute and support Cipla as the Non-Executive Chairman of the
Company.
Mr. Ramesh Shroff, liable to retire by rotation at the ensuing Annual
General Meeting of the Company, has expressed his intention not to seek
re-appointment due to his advancing age. The Directors place on record
their appreciation of Mr. Shroff''s contribution as a member of the
Board and Chairman of Audit Committee.
Mr. Ashok Sinha was appointed as an Additional Director with effect
from 16th July 2013. He holds office up to the date of the ensuing
Annual General Meeting.
Notices have been received from some members, proposing appointment of
Mr. Subhanu Saxena and Mr. Ashok Sinha as Directors.
Mr. M.R. Raghavan and Mr. Pankaj Patel retire by rotation and, being
eligible, offer themselves for re-appointment.
A brief resume of the Directors seeking appointment/re-appointment is
provided in the Notice.
Cost Auditors
Pursuant to the provisions of section 233B of the Companies Act, 1956
and with the prior approval of the Central Government, Mr. D. H. Zaveri
(Fellow Membership No. 8971) practising Cost Accountant, has been
appointed to conduct the audit of cost records of pharmaceutical
products for the financial year ended 31st March 2013. The due date for
filing the Cost Audit Report for the year ended 31st March 2013 is 27th
September 2013.
In terms of the circulars issued by Ministry of Corporate Affairs, the
due date for filing the Cost Audit Report for the year ended 31st March
2012 with the Central Government was 28th February 2013. The Cost Audit
Report was filed on 28th February 2013.
Auditors
Messrs. V. Sankar Aiyar & Co. and Messrs. R.G.N. Price & Co., joint
statutory auditors of the Company, retire at the conclusion of the
forthcoming Annual General Meeting and are eligible for re-appointment.
On behalf of the Board,
Y.K. Hamied
15th July 2013 Chairman
Mar 31, 2012
The Directors take pleasure in presenting the Seventy-Sixth Annual
Report of the Company along with the Audited Accounts for the financial
year ended 31st March 2012.
Financial Summary
Year ended Year ended
31st March 2011 31st March 2012
6490 Gross total revenue 7223
1151 Profit before tax 1421
960 Profit after tax 1124
1699 Surplus brought forward
from last balance sheet 2298
2659 Profit available for
appropriation 3422
Appropriations:
64 Interim dividend -
160 Dividend 160
37 Tax on dividend 26
100 Transfer to general reserve 125
2298 Surplus carried forward 3111
Rs.in crore
DIVIDEND
The Directors recommend a dividend of Rs.2 per share on 80,29,21,357
equity shares of Rs.2 each for the year 2011-12 amounting to Rs.160.58
crore.
CORPORATE SOCIAL RESPONSIBILITY
Cipla launched the first-ever painless, non-invasive and radiation-free
breast scanning technology called the 'No Touch Breast Scan' (NTBS) for
detecting breast cancer at an early stage. The NTBS would be
exclusively marketed by Cipla across various diagnostic centres and
hospitals in India and has been already installed at Mumbai, Pune and
Indore. This initiative would increase awareness, in particular among
younger women, and facilitate regular scanning.
The Company had recently announced a breakthrough price reduction on
select cancer drugs towards its commitment to make medicines affordable
and accessible, particularly to cancer patients. Drugs constitute a
significant proportion of the overall cost of cancer treatment and a
reduction in costs can greatly relieve the burden. This initiative of
price reduction is a humanitarian approach by Cipla to support cancer
patients.
The Cipla Palliative Care and Training Centre in Pune continues to
provide care to terminally-ill cancer patients and their families. As
of date, the Centre has provided comfort and solace to more than 7,700
patients. The focus is on reaching out to more cancer patients who need
palliative care and on integrating palliative medicine with curative
therapy.
In addition, the Company continues to support several community
welfare, health and educational activities, essentially in communities
surrounding the Company's factories both directly and through its
charitable trusts, by providing healthcare education, improvement of
community infrastructure, scholarships, etc.
CORPORATE MATTERS Responsibility Statement
Pursuant to section 217(2AA) of the Companies Act, 1956 it is confirmed
that the Directors have:
i. followed applicable accounting standards in the preparation of the
annual accounts;
ii. selected such accounting policies and applied them consistently
and made judgements and estimates that are reasonable and prudent so as
to give a true and fair view of the state of affairs of the Company at
the end of the financial year ended 31st March 2012 and of the profit
of the Company for that period;
iii. taken proper and sufficient care for maintenance of adequate
accounting records in accordance with the provisions of the Companies
Act, 1956 for safeguarding the assets of the Company and for preventing
and detecting fraud and other irregularities; and
iv. prepared the annual accounts on a going concern basis.
Subsidiary Companies
The Company had 13 subsidiaries/step-down subsidiaries at the beginning
of the year. During the financial year ended 31st March 2012, Cipla
ilag Ticaret Anonim çirketi became a step-down subsidiary of the
Company.
In accordance with the general circular issued by the Ministry of
Corporate Affairs, the Balance Sheets, including annexures and
attachments thereto of the Company's subsidiaries, are not being
attached with the Annual Report of the Company. The annual accounts of
the subsidiary companies and the related detailed information will be
made available to any member of the Company seeking such information.
These documents will also be available for inspection by any member at
the Registered Office of the Company and that of the respective
subsidiary companies. The consolidated financial statements presented
in this Annual Report include financial results of the subsidiary
companies. A statement containing information on the Company's
subsidiaries is included in this Annual Report.
Corporate Governance
Your Company is committed to good corporate governance practices. The
report on corporate governance as stipulated under Clause 49 of the
Listing Agreement forms part of this report.
Disclosure of Particulars
As required by the Companies (Disclosure of Particulars in the Report
of Board of Directors) Rules, 1988, the relevant information and data
are annexed to this report.
Directors
Dr. Ranjan Pai was appointed as an Additional Director with effect from
14th November 2011. He holds office upto the date of the ensuing Annual
General Meeting. Notices have been received from some members,
proposing his appointment as a Director.
Dr. H. R. Manchanda and Mr. V. C. Kotwal retire by rotation and, being
eligible, offer themselves for re-appointment.
A brief resume of the said Directors is provided in the Notice.
Cost Auditors
Pursuant to the provisions of section 233B of the Companies Act, 1956
and with the prior approval of the Central Government, Mr. D.H. Zaveri
(Fellow Membership No. 8971), practising Cost Accountant, has been
appointed to conduct audit of cost records of bulk drugs and
formulations for the financial year ended 31st March 2012. The Cost
Audit Reports would be submitted to the Central Government within the
prescribed time.
The Cost Audit Reports for bulk drugs and formulations for the year
ended 31st March 2011 were filed with the Central Government on 1st
October 2011.
Auditors
Messrs. V. Sankar Aiyar & Co. and Messrs. R.G.N. Price & Co., joint
statutory auditors of the Company, retire at the conclusion of the
forthcoming Annual General Meeting and are eligible for re-appointment.
On behalf of the Board,
Y.K. Hamied
Mumbai, 7th June 2012 Chairman & Managing Director
Mar 31, 2011
Dear Members,
The Directors take pleasure in presenting the Seventy-Fifth Annual
Report of the Company along with the Audited Accounts for the financial
year ended 31st March 2011.
Financial Summary
Year ended Year ended
31st March
2010 31st March
2011
5,765 Sales and other income 6,483
1,230 profit before exceptional item and tax 1,151
95 Add: Exceptional item -
1,325 profit before tax 1,151
1,081 profit after tax 960
955 Surplus brought forward from last balance sheet 1,699
2,036 profit available for appropriation 2,659
Appropriations:
- Interim dividend 64
160 Final dividend 160
27 Tax on dividend 37
150 Transfer to general reserve 100
1,699 Surplus carried forward 2,298
Rupees in crore
DIVIDEND
On the occasion of its 75th anniversary, Cipla declared a special
interim dividend of 80 paise per equity share (face value of Rs.2 each)
in August 2010 amounting to Rs.74.90 crore (inclusive of dividend tax).
The Directors recommend a final dividend of Rs.2 per share on
80,29,21,357 equity shares of Rs.2 each for the year 2010-11 amounting to
Rs.160.58 crore.
The total dividend payout for the year 2010-11 inclusive of dividend
tax would aggregate to Rs.261.53 crore.
MANAGEMENT REVIEW: 2010-11 Industry Structure and Development
The financial year 2010-11 marked a resurgence in growth post the f
nancial crisis. Higher investment spending, specially in the emerging
markets, is pushing growth in the global economy. As a result, several
countries are gradually returning to normal macroeconomic policies.
However, the economic health in parts of Europe and the fiscal trends
in some other countries is cause for concern and continues to impact
the world economy.
The forecast for the Indian economy is positive with growth expected to
touch 8.5 per cent in the current fiscal year. Yet, constant inflation
in the country is taking its toll and rising global commodity prices is
only compounding the problem.
The pharmaceutical industry in India retains its position of strength
as the pharmacy capital of the world. It supplies an estimated
one-third of all global pharmaceutical produce in terms of volume. In
the financial year 2010-11, the Indian pharmaceutical industry grew
more than 14 per cent, according to ORG IMS, though this growth was
mainly driven by the top 50 companies.
A growing trend was that more Indian pharmaceutical companies focussed
on semi-urban and rural markets for incremental growth opportunities.
During the year, the industry also witnessed Indian pharma companies
selling out to the multinationals.
Performance Review
During the year under review, the Company's total income from
operations increased by 12 per cent. Domestic turnover rose by 12 per
cent while export income went up by 16 per cent. profit after tax for
the year was Rs.960 crore compared to Rs.1081 crore last year, excluding
the one-time sale of the I-pill brand last year.
This year, there was a dip in operating margins of about 3 per cent, as
a percentage of total revenue. This was mainly due to lower technical
fees (Rs.60 crore compared to Rs.150 crore last year), as the development
stage of several projects reached completion and the products have
either been commercially launched or will be launched by the Company's
partners. Another major reason for the decline is that the Indore SEZ
factory is in its first year of operations and is still to reach its
optimum capacity levels. Besides, the Rupee has appreciated compared to
the US dollar which has in turn reduced earnings by about 4 per cent.
Products
The Company introduced many new drugs and formulations during the year.
Some significant products are mentioned below:
- Entavir (entecavir tablets) - antiviral for hepatitis B
- Febucip (febuxostat tablets) - drug for gout
- Flosoft (fluorometholone acetate ophthalmic suspension) - topical
steroid for eye inflammation
- Foracort (formoterol and budesonide autohaler) - asthma controller
therapy in a new easy-to-use breath actuated inhaler
- Furamist AZ (fluticasone furoate and azelastine hydrochloride nasal
spray) - new combination nasal spray for allergic rhinitis
- Imudrops (cyclosporine eye drops) - immunomodulatory drug for severe
dry eye
- Lacsyp (lactitol monohydrate liquid syrup) - lactulose analogue for
constipation and hepatic encephalopathy
- Levolin (levosalbutamol tartarate autohaler) - asthma reliever in an
easy-to-use breath actuated inhaler
- Montair FX (montelukast and fexofenadine tablets) - antiallergic
combination for rhinitis
- Moxicip KT (moxif oxacin and ketorolac eye drops) - topical
combination for eye inflammation
- Panstal (pancreatin capsules) - digestive enzyme for pancreatic insufi
ciency
- Paracip (paracetamol infusion) - for pain and fever management in
intensive care units and hospitals
- Phosome (liposomal amphotericin injection) - high potency antifungal
in a new targeted drug delivery system
- Pirfenex (pirfenidone tablets) - the first and only approved drug for
idiopathic pulmonary f brosis (IPF)
- Prandial M (voglibose and metformin tablets) - combination
antidiabetic
- Prasuvas (prasugrel tablets) - antiplatelet drug
- Pulmopres (tadalaf l tablets) - the first once-daily therapy for
pulmonary arterial hypertension
- Rixmin (rifaximin tablets) - locally acting antibacterial for
infectious diarrhoea
- Rokfos (zoledronic infusion) - once-yearly treatment for osteoporosis
- Rosulip-F (rosuvastatin and fenof brate tablets) - combination drug
for mixed dyslipidemia
- Soranib (sorafenib tablets) - breakthrough drug for liver cancer
- Sornip (boswellic acid cream) - topical non-steroidal formulation for
psoriasis
- Synthivan (atazanavir sulphate and ritonavir tablets) - two-drug
combination antiretroviral for HIV/AIDS
- Triohale (formoterol fumarate, ciclesonide and tiotropium bromide
rotacaps) - world's first triple-drug dry powder inhalation for COPD
- VC-15 (vitamin C serum) - antioxidant for dermatological conditions
- Vertipress (betahistine hydrochloride tablets) - therapy for vertigo
- Xovatra (travoprost eye drops) - prostaglandin analogue for glaucoma
- Zolmist (zolmitriptan nasal spray) - rapid-acting drug for migraine
Manufacturing Facilities
In April 2010, the Company commenced commercial production of
pharmaceutical formulations at the Special Economic Zone (SEZ) project,
at Indore, Madhya Pradesh. This project includes facilities for the
manufacture of aerosols, respules, liquid orals, pre-filled syringes
(PFS), nasal sprays, large volume parenterals (LVP), eye drops, tablets
and capsules. The total investment for this project is about Rs.900
crore.
The Company is setting up API facilities at Bengaluru and Kurkumbh. It
is also upgrading the API facilities at Patalganga. The total
investment for these projects is about Rs.400 crore.
Regulatory Approvals
Several dosage forms and APIs manufactured at the Company's plants
continued to enjoy the approval of major international regulatory
agencies. These agencies included the US FDA, MHRA (UK), PIC (Germany),
MCC (South Africa), TGA (Australia), Department of Health (Canada),
ANVISA (Brazil), SIDC (Slovak Republic), Ministry of Health (Kingdom of
Saudi Arabia), the Danish Medical Agency and the WHO.
Opportunities
Domestic Markets
According to ORG IMS, Cipla is one of the largest pharmaceutical
companies in India. New technology and new products, including dosage
forms, which are being introduced every year, offer significant growth
opportunities for the Company.
Cipla is increasing its focus in various segments to meet the growing
market needs in the future. The Company is giving a renewed focus to
two therapeutic segments namely, oncology and neuropsychiatry.
The Company's venture on biotechnology products is making significant
progress and the regulatory process is underway.
International Markets
Cipla's international business continues to be a major revenue driver
for the Company. During the year under review, almost 55 per cent of
the total income originated from international markets. As a result,
Cipla contributed significant net foreign exchange earnings to the tune
of USD 420 million.
The Company is in the process of consolidating and rationalising its
international business and strategies are being reviewed to optimize
value for its technology and product range.
The Company continues to forge partnerships and alliances with large
generic pharmaceutical companies for product development and supply in
developed markets.
Cipla continues its humanitarian mission of making afiordable medicines
available to the entire world. It is today the largest single supplier
of HIV and anti-malarial drugs in the world in terms of volume.
Threats, Risks, Concerns Patents
The Company is currently involved in a number of patent litigations at
the pre grant, post grant, appellate board and at the level of the
judicial courts. As anticipated, the number of patent litigations has
gone up dramatically post Patents Amendment Act, 2005 and more so
because companies are f ling frivolous patent applications and multiple
applications with almost identical claims. The Appellate Board is
saddled with a huge backlog of pending cases. Cipla, so far, has been
successful in challenging a number of patent applications at different
stages in the grant process.
The government is yet to decide conclusively on the issues of Data
Exclusivity and Data Protection which are both "Trips Plus" measures.
The European Union government is pushing for Trips Plus provisions and
dilution of the Patents Act through bilateral agreements. There is a
lot of uncertainty with regard to the government's position on these
two vital issues.
Taking advantage of the new patents regime, the Company is witnessing
an increase in the number of patented products being launched in India
by multinational companies. A number of these products have been
launched at exorbitant prices. Cipla has sought a voluntary license on
anti-HIV drugs, Raltegravir and Rilpivirine and will continue to pursue
the in-licensing route to bring the latest products to the Indian
consumers at afiordable prices. The Government of India must also
clearly spell out its policy on how it plans to control the prices of
patented products which enjoys a monopoly.
India is considered the pharmaceutical hub of the world and the
Government of India must try to preserve and promote the Indian
industry in every which way.
In the light of these threats, Cipla is continuously fighting these
issues on various fronts, not only to protect the interest of the
Company but also of the Indian patients.
Drug Pricing
It is well over 15 years since the last drug policy was implemented
which resulted in the Drugs Price Control Order 1995. The Government
should re-haul the drug policy and bring it in line with the current
market conditions. It must be fair, transparent and non-ambiguous. The
drug policy should only seek to bring under price control, drugs which
are not manufactured in India and those which enjoy 100 per cent
monopoly.
The Indian market is highly dynamic and competitive and it is believed
that market competition will ensure that drug prices are within the
reach of the common man. Drug prices today in India are the lowest in
the world even when compared to neighbouring countries like Bangladesh,
Pakistan, etc.
As per newspaper reports, it appears that the Government of India is
planning to bring under price control all the drugs which are listed in
the National List of Essential Medicines. More than 350 drugs are
expected to be covered. This will have an adverse impact on the Indian
Pharmaceutical Industry which is already reeling under high inf
ationary pressures. The proposed move will destroy the country's
self-sufficiency in medicines.
Cipla has some pending legal cases on account of alleged overcharging
in respect of certain drugs under the Drug Price Control Order. The
aggregate amount of the demand notices received is about Rs.1230 crore
(inclusive of interest). The Company has been legally advised that
based on the directions given by the Supreme Court, there is no
probability of the demand becoming payable by the Company. Any
unfavourable outcome in these proceedings could have an adverse impact
on the Company.
Regulatory Approvals
Our manufacturing facilities are regularly monitored and approved by
various regulatory authorities across the globe. These authorities
have become more vigilant and strict with respect to compliance.
Periodically, the US FDA conducts routine audits of all approved
facilities and accordingly several of our plants including Goa,
Patalganga, Kurkumbh and Bengaluru were inspected by the US FDA.
Currently, all facilities continue to be approved by the US FDA.
Exchange Rate Movements
During the year, the Indian Rupee appreciated by more than 3-4 per cent
compared to the US Dollar. Such severe fluctuations in foreign currency
exchange rates can have a significant impact on the Company's
operations and financial results.
Safety Measures
The Company believes in Safety first à whether for its patients, plants
and employees. Periodical safety audits are conducted at all units and
regular reviews are done by safety committees with an objective of
enhancing safety measures.
As always, the Company kept up high standards of occupational health,
safety and environment preservation practices at all its manufacturing
units. Various health, safety and environment awareness programmes
were organised for employees, villagers and school children living
around the Company's units at Sikkim, Baddi (Himachal Pradesh),
Patalganga (Maharashtra), Kurkumbh (Maharashtra), Verna (Goa) and
Bengaluru (Karnataka) with the objective of achieving and maintaining
safety, health and environment standards. Training was imparted to
school children, teachers and nearby villagers on road safety, home
safety, hygiene and environment.
On World Environment Day and Earth Day, employees and government
authorities went on a ÃGreen Drive' at the factory premises to plant
trees and reduce pollution. The Company continued to maintain modern,
well-designed effluent treatment plants at its factories. Treated water
from these "zero discharge" facilities is used for maintaining a green
belt at all the locations.
Internal Control Systems
The Company's internal control procedures ensure compliance with
various policies, practices and statutes in keeping with the
organisation's pace of growth and increasing complexity of operations.
Cipla's internal audit team carries out extensive audits throughout the
year, across all functional areas and submits its reports to the Audit
Committee of the Board of Directors.
Human Resources
Particulars of employees required to be furnished under section 217(2A)
of the Companies Act, 1956, read with the Companies (Particulars of
Employees) Rules, 1975 as amended, form part of this report. Any
shareholder interested in obtaining a copy may write to the Company
Secretary at the Registered office of the Company.
CORPORATE SOCIAL RESPONSIBILITY
On the occasion of Cipla's Platinum Jubilee, the Company announced
setting up of the Cipla Foundation by contributing a sum of Rs.5 crore.
The Foundation will aim to provide care and financial support to people
in need of healthcare in India.
The Cipla Palliative Care and Training Centre in Pune continues to
provide care to terminally ill cancer patients. As of date, the Centre
has provided comfort and solace to more than 7000 patients. The focus
is on reaching out to more cancer patients who need palliative care and
on integrating palliative medicine with curative therapy.
The Cipla Palliative Care and Training Centre is recognised as a
training resource by the Indian Association of Palliative Care (IAPC).
Besides an IAPC certified training course for doctors and nurses,
learning modules in palliative care are available for caregivers,
volunteers and other interested groups. The Centre also runs a school
for training nursing assistants which is offered free-of-charge to
young boys and girls from economically weaker sections with the
objective of providing an opportunity for skill development, leading to
gainful employment.
Being in the forefront of the crusade against HIV/AIDS, the Company has
supported Manavya, a Pune based organization which runs a home for
children with HIV infection. Manavya operates a mobile dispensary in
villages on the outskirts of Pune and this project is fully funded by
the Company.
In addition, the Company continued to support several community
welfare, health and educational activities essentially in communities
surrounding the Company's factory locations, both directly and through
its charitable trusts by providing healthcare education, improvement of
community infrastructure, scholarships, etc.
CORPORATE MATTERS Responsibility Statement
Pursuant to section 217(2AA) of the Companies Act, 1956 it is confirmed
that the Directors have:
i. followed applicable accounting standards in the preparation of the
annual accounts;
ii. selected such accounting policies and applied them consistently and
made judgements and estimates that are reasonable and prudent so as to
give a true and fair view of the state of Affairs of the Company at the
end of the financial year ended 31st March 2011 and of the profit of
the Company for that period;
iii. taken proper and sufficient care for maintenance of adequate
accounting records in accordance with the provisions of the Companies
Act, 1956 for safeguarding the assets of the Company and for preventing
and detecting fraud and other irregularities; and
iv. prepared the annual accounts on a going concern basis.
Subsidiary Companies
In accordance with circular no. 2/2011 dated 8th February 2011 issued
by the Ministry of Corporate Affairs, the Balance Sheets, including
annexures and attachments thereto of the Company's subsidiaries, are
not being attached with the Annual Report of the Company. The annual
accounts of the subsidiary companies and the related detailed
information will be made available to any member of the Company seeking
such information. These documents will also be available for inspection
by any member at the Registered office of the Company and that of the
respective subsidiary companies. The consolidated financial statements
presented in this Annual Report include financial information of the
subsidiary companies. A statement containing information on the
Company's subsidiaries is included in this Annual Report.
During the financial year ended 31st March 2011, the following
companies were acquired as subsidiaries/step-down subsidiaries: Cipla
(Mauritius) Limited, Cipla (UK) Limited, Cipla-Oz Pty Limited, Four M
Propack Private Limited, Goldencross Pharma Private Limited, Medispray
Laboratories Private Limited, Meditab Holdings Limited, Meditab
Pharmaceuticals South Africa (Pty) Limited, Meditab Specialities New
Zealand Limited, Meditab Specialities Private Limited, Sitec Labs
Private Limited and STD Chemicals Limited.
Corporate Governance
The Company is committed to good corporate governance practices. The
report on corporate governance as stipulated under Clause 49 of the
Listing Agreement forms part of this report.
By and large, the Company is already complying with the recommendations
of Corporate Governance Voluntary Guidelines 2009 issued by the
Ministry of Corporate Affairs.
Disclosure of Particulars
As required by the Companies (Disclosure of Particulars in the Report
of Board of Directors) Rules, 1988, the relevant information and data
are annexed to this report.
Directors
The Company deeply regrets the sad demise of Mr. Amar Lulla on 22nd
April 2011. The Board of Directors would like to place on record its
sincere gratitude to Mr. Amar Lulla and appreciate his pioneering ef
orts during his association with the Company for over three decades. He
has been one of the key persons who played a significant role in
enabling the Company to attain its current position.
Mr. S. Radhakrishnan was appointed as an Additional Director with ef
ect from 12th November 2010 and holds office until the ensuing Annual
General Meeting. He was appointed as Whole-time Director for a period
of five years with effect from 12th November 2010, subject to the
approval of shareholders at the ensuing Annual General Meeting. Mr. S.
Radhakrishnan is a qualified Chartered Accountant, who has been with
the Company for over 26 years and has vast experience in financial,
commercial, legal and allied areas.
Mr. S.A.A. Pinto resigned from the Board of Directors effective 11th
November 2010 due to health reasons. The Directors place on record
their appreciation of his contribution as a member of the Board.
Mr. M.R. Raghavan and Mr. Pankaj Patel retire by rotation and, being
eligible, offer themselves for re-appointment. A brief resume of the
said directors is provided in the Notice.
Cost Auditors
Pursuant to the provisions of section 233B of the Companies Act, 1956
and with the prior approval of the Central Government, Mr. D.H. Zaveri
(Fellow Membership No. 8971) practising Cost Accountant, has been
appointed to conduct audit of cost records of bulk drugs and
formulations for the year ended 31st March 2011. The Cost Audit Reports
would be submitted to the Central Government within the prescribed
time.
Pursuant to Rule 5 of the Cost Audit Report Rules, Cost Audit Reports
for bulk drugs and formulations for the year ended 31st March 2010 were
f led with the Central Government on 29th September 2010 and 30th
September 2010 respectively.
Auditors
Messrs. V. Sankar Aiyar & Co and Messrs. R.G.N. Price & Co., joint
statutory auditors of the Company, retire at the conclusion of the
forthcoming Annual General Meeting and are eligible for re-appointment.
On behalf of the Board,
Y. K. Hamied
Mumbai, 29th June 2011 Chairman & Managing Director
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