DIRECTORS' REPORT 1. Your Directors have pleasure in presenting the annual report and audited statement of accounts of the Company for the year ended on March 31, 2016. 2. DIVIDEND In view of the improved profit levels reported by your Company in the first three quarters of the financial year under review, an Interim Dividend of Rs. 1.60 (20%) per share was paid in the month of March 2016. Your Directors recommend the aforesaid interim dividend as the final dividend for the financial year ended March 31, 2016. 3. OPERATIONS The Company earned a total income of Rs. 280.10 Crore for the year as compared to Rs. 243.18 Crores during the previous year and a profit after tax of Rs. 11.62 Crore as against Rs. 1.00 Crore during the previous year. The profitability of the Company improved due to robust performance of Global Formulations and API divisions. The Company's Formulations Plant located at Ankleshwar, Gujarat received EU GMP certification valid for the next 3 years. The API Facility located at Navi Mumbai successfully passed the TGA, Australia audit which will have positive impact on future orders. The Company continues to hold EU GMP, WHO GMP and TGA, Australia certifications for the API facility at Navi Mumbai plant and UK MHRA certification for its formulation plant at Ankleshwar. Formulations Business: Performance During the year under review, the Formulations business achieved sales revenue of Rs. 169 Crore, with a growth of 17% over the previous year. The productivity of sales force improved by 25% year-on-year basis. As per the data compiled by Pharmatrac, a market researcher, the Company has improved its rank from 73rd to 66th positions in sales value terms over the previous year. The Company's Nephrocare Division continues to feature among the top 5 Indian Companies operating in the renal therapy segment. The company's strategy of focusing on brand building has shown promising outcomes with Tricaine and Minmin tonic performing well. The Acute care business grew by 23%, Nephrocare by 14% growth and Oncology registered 28% growth. The super specialty Oncology business showed impressive growth as well. The Company's major brands such as Lomotil, Aldactone, Naprosyn, Serenace and Azoran registered healthy growth in the year under review. Outlook In the current year, the Company will continue its emphasis on Focus brands and leverage the strength of its key brands to fuel growth. Dedicated efforts on strengthening Oncology and Nephrology therapies is expected to boost growth in the Chronic Specialty therapies segment, while Gastrointestinal, Pain Management and Nutritionals will drive growth in the Acute therapies segment. With focus on Dialysis and Transplant therapies, the Company will strive to consolidate its position in the Nephrocare space both in domestic as well as export markets. Brand extensions and new product launches in therapies where the Company's core competencies exist, in line with therapy gaps identified, are growth drivers. In addition, entry into new therapies like Dermatology (cosmetology) will provide avenues for further growth. Training of field force will continue to remain the cornerstone for improving productivity by strengthening product knowledge and selling skills. Global Generics Business: Performance The Global Generics business achieved sales revenue of Rs. 25.12 Crores, growth of 136% over the previous year. The company has also received EU GMP certification from the German Health Authority which shall help the Company in foraying into new untapped markets. Outlook The Global Generics business is likely to maintain these levels during the current financial year also despite the downward pricing pressure in the EU - one of its key markets. The Company signed one new contract for Azathioprine for Central and Eastern Europe and product has already been commercialized in few of these markets by the licensing partner. The company has also signed a new contract for a new product - Nicorandil for UK with one of the largest MNCs and this product shall be filed in Q1 FY 17 and is expected to be commercializ in Q4 FY 18. The company has also fared well in UK and Germany and these markets are likely to contribute significantly to the Global Generics business in the next year. The company intends to enter the US market through strategic alliances and partnerships and is already working on the products for this market. The Company's presence in the German tender market will become stronger as market penetration improves with multiple partners. Addition of new customers and new products in EU as well as other geographies will be the key growth drivers in the Generics business. Active Pharmaceutical Ingredients (API/Bulk Drugs) Business: Performance The API business achieved sales revenue of Rs. 35.95 Crores. The business showed a de-growth by 2% over last year as prime markets viz. Mexico & the Middle East which are major contributors to sales revenue, suffered due to weak local currencies and low Government funding. Quinfamide, which is one of the Company's key APIs continued to perform well vis-a-vis last year. Outlook API business has a strategic importance in the overall integration for Di-phenoxylate and Azathioprine (products of the formulation business). One of the key objectives of the Company is to build a strong and sustainable product portfolio. It has a plan to introduce new APIs every year in various key segments. On the basis of EU GMP certification, the Company plans to penetrate EU markets with a new API towards the end of the current financial year. With the emergence of BRIC markets, apart from domestic markets, Brazil & China would be increasingly important markets for some niche APIs that the Company manufactures. Biotech Business: Performance The Biotech business achieved sales of Rs. 23.83 Crores, registering a growth of 3% over the previous year. The Company has managed to register reasonable growth in this division despite increasing competitive and pricing pressures in the domestic market. Growth was driven by strengthening existing client relationships and addition of new clients in Russia, Mexico and Indonesia. Sales to Russia & Indonesia have shown impressive growth. The Company continued to make several improvements and upgrades in its Biotech facility, to meet the requirements of various markets in emerging geographies, in line with its strategy to take products to regulated markets. Outlook The business, despite its profitability, is non- core for the company and therefore, has remained stagnant for several years, with de-growth in some years. The strategy for this business is being reviewed for taking suitable action for the way forward. 4. EXTRACT OF ANNUAL RETURN As required under Section 92 of the Companies Act, 2013, details forming part of the extract of the Annual Return in form MGT-9, is annexed herewith as Annexure A. 5. MEETINGS OF THE BOARD The details of Board Meetings held during the year are given in the Corporate Governance Report. 6. DIRECTOR'S RESPONSIBILITY STATEMENT The Directors confirm that - a) in the preparation of the annual accounts for the financial year ended March 31, 2016, the applicable accounting standards had been followed and there were no material departures; b) the directors had selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year as at March 31, 2016 and of the profit and loss of the Company for that period; c) the directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; d) the directors had prepared the annual accounts on a going concern basis; e) the directors, had laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively; f) the directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively. 7. STATEMENT ON DECLARATION OF INDEPENDENT DIRECTORS The Company has received declaration from each of the Independent Directors under Section 149 (6) and (7) of the Companies Act, 2013 and Regulation 16(b) of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. 8. PECUNIARY RELATIONSHIP OR TRANSACTIONS OF THE NON-EXECUTIVE DIRECTORS AND DISCLOSURES ON THE REMUNERATION OF THE DIRECTORS All pecuniary relationship or transactions of the Non-Executive Directors vis-a-vis the Company, along with criteria for such payments and disclosures on the remuneration of the Directors along with their shareholding are disclosed in Corporate Governance Report and Form MGT-9 which forms a part of this report. 9. NOMINATION AND REMuNERATION POLIcY The Company's policy on Directors' appointment and remuneration, including criteria for determining qualifications, positive attributes, independence of a Director and other matters provided under Section 178 (3) is annexed with this Report as Annexure B. 10. EXPLANATION AND COMMENTS ON AUDITOR'S AND SECRETARIAL AUDIT REPORT There is no qualification, disclaimer, reservation or adverse remark made by the Statutory Auditors in Auditors' Report. Further, there is no qualification, disclaimer, reservation or adverse remark made by the Company Secretary in practice in Secretarial Audit Report. 11. PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS The Loans, Guarantees and Investments made by the Company are within the limits prescribed under the provisions of Section 186 of the Companies Act, 2013 and the details are given in the notes to the Financial Statements. 12. RELATED PARTY TRANSACTIONS There were no contracts or arrangements or transactions entered into by the Company with related parties referred to in Subsection (1) of Section 188 of the Companies Act, 2013 during the course of business which were not at arm's length basis. The policy on Related Party Transactions as approved by the Board is uploaded on the Company's website www.rpglifesciences.com . 13. TRANSFER TO RESERVES The Company has not transferred any sum to the General Reserve during the financial year ended March 31, 2016. 14. MATERIAL CHANGES AND COMMITMENTS, IF ANY AFFECTING THE FINANCIAL POSITION OF THE COMPANY There are no material changes and commitments, affecting the financial position of the Company which have occurred between the end of the financial year on March 31, 2016 to which the financial statements relate and the date of this report. 15. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO The particulars as required under Section 134(3)(m) of the Companies Act, 2013 read with Rule 8(3) of Companies (Accounts) Rules, 2014, are given in Annexure C to this report. 16. RISK MANAGEMENT The details of Risk Management Committee (RMC) and its terms of reference are set out in the Corporate Governance Report. The Company has a robust Risk Management framework to identify, evaluate business risks and opportunities. This framework seeks to create transparency, minimize adverse impact on the business objectives and enhance the Company's competitive advantage. The business risk framework defines the risk identification and its management approach across the enterprise at various levels including documentation and reporting. The framework help in identifying risks trend, exposure and potential impact analysis at Company's business. 17. CORPORATE SOCIAL RESPONSIBILITY (CSR) The Company has constituted a Corporate Social Responsibility (CSR) Committee pursuant to Section 135 of the Companies Act, 2013 comprising of four Directors, namely, Mr. C. L. Jain, Mr. Narendra Ambwani, Ms. Zahabiya Khorakiwala and Mr. CT. Renganathan. The terms and reference of the CSR Committee includes the following: a) To formulate and recommend to the Board the Corporate Social Responsibility Policy (CSR Policy) indicating activities to be undertaken as specified in Schedule VII of the Companies Act, 2013. b) To recommend to the Board the amount of expenditure to be incurred on the activities undertaken by the Company as per the CSR Policy within the overall limit specified in Section 135 (5) of the Act, as amended from time to time, but not less than 2% of the average net profits (calculated pursuant to Section 198 of the Act) of the Company during immediately preceding financial years or any other sum, as may be prescribed under Section 135 of the Act from time to time. c) To monitor the CSR policy of the Company from time to time. 18. DIRECTORS AND KEY MANAGERIAL PERSONNEL Mr. Sachin Nandgaonkar retires by rotation and being eligible offers himself for re-appointment at the ensuing Annual General Meeting. At the Board Meeting held on October 29, 2015, Ms. Zahabiya Khorakiwala was appointed as an Additional Director. Ms. Neera Saggi resigned from the Directorship of the Company effective from October 29, 2015. The Board places on record its appreciation for the services rendered by Ms. Neera Saggi during her tenure with the Company. None of the aforesaid Directors is related to any other Director of the Company. Mr. CT. Renganathan, Managing Director, Mr. Sachin Raole, CFO & Sr. V.P. - Corporate Services and Mr. Rajesh Shirambekar, Head - Legal & Company Secretary are Key Managerial Personnel of the Company within the meaning of Section 203 of the Companies Act, 2013. 19. SUBSIDIARY COMPANIES There were no Companies which have become or ceased to be our subsidiaries, joint ventures or associate companies during the year. 20. FIXED DEPOSITS Your Company has not accepted any fixed deposit during the year under review under Chapter V of the Companies Act, 2013. As on March 31, 2016, no deposit was overdue and deposit aggregating to Rs. 5.40 Lakhs was lying unclaimed with the Company. 21. SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS OR TRIBUNALS IMPACTING THE GOING CONCERN STATUS There are no significant and material orders passed by the Regulators or Courts or Tribunals impacting the going concern status and Company's operations in future. 22. CHANGE IN THE NATURE OF BUSINESS During the year under review, there was no change in the nature of business. 23. INTERNAL FINANCIAL CONTROL Details in respect of adequacy of internal financial controls with reference to the Financial Statements are stated in Management Discussion and Analysis which forms part of this annual report. 25. WHISTLE BLOWER POLICY The Audit Committee's terms of reference inter-alia include vigil mechanism which also incorporates a Whistle Blower Policy in terms of Section 177(10) of the Companies Act, 2013. The Company has adopted Whistle Blower Policy in the meeting of Board of Directors held on July 24, 2014. The Whistle Blower mechanism provides for Directors and employees to report concerns about unethical behavior, actual or suspected fraud or violation of Company's Code of Governance and Ethics. The Whistle Blower Policy is uploaded on the Company's website www.rpglifesciences.com . 26. FAMILIARISATION PROGRAMMES FOR INDEPENDENT DIRECTORS The Company has familiarisation programmes and the details of it have been uploaded on the website of the Company on the link below: <http://www.rpglifesciences.com/financial_policies.jsp>. 27. FORMAL ANNUAL EVALUATION OF BOARD AND ITS COMMITTEES Pursuant to provisions of Section 134 of the Companies Act, 2013 and the SEBI (Listing Obligations and Disclosure Requirements Regulations, 2015, the Nomination and Remuneration Committee laid down a criteria for evaluating Board effectiveness by assessing performance of the Board as a whole, performance of individual Director and Committees of the Board namely Audit Committee, Nomination and Remuneration Committee, Stakeholders Relationship Committee and Risk Management Committee. The Board approved the criteria laid down by Nomination and Remuneration Committee for evaluating Board effectiveness and engaged a third party agency to conduct Board effectiveness survey during the year under review. 28. AUDITORS Statutory Auditors: The members of the Company at its Annual General Meeting (AGM) held on September 25, 2014 appointed M/s. Lovelock & Lewes as the Statutory Auditors for a period of 3 (three) consecutive years from the conclusion of the seventh AGM to the conclusion of the tenth AGM. The auditors have confirmed that their appointment shall be in compliance with Section 139 and 141 of the Companies Act, 2013 subject to ratification at the ensuing AGM by the shareholders. The Board recommends ratification of appointment of M/s. Lovelock & Lewes as the Statutory Auditors for the financial year 2016-17. Internal Auditors: M/s. Aneja Associates, Chartered Accountants, are the Internal Auditors of the Company. Secretarial Auditors: M/s. Parikh Parekh & Associates, Practicing Company Secretaries, are the Secretarial Auditors of the Company. The Secretarial Audit Report required pursuant to sub-section (3) of Section 134 and Section 204 (1) of the Companies Act, 2013, is given in Annexure D to this report. Cost Auditors: Pursuant to the provisions of Section 148(3) of the Companies Act, 2013, M/s. Kirit Mehta & Co. (Registration No. 000353), Cost Accountants, was appointed to conduct audit of cost records of Pharmaceutical Activities for the year ended March 31, 2016. Cost Audit reports would be submitted to the Central Government within the prescribed time. Pursuant to Rule 6 of the Companies (Cost Records and Audit) Rules, 2014, cost audit reports for Pharmaceutical Activities for the year ended March 31, 2015 was filed with the Central Government on September 29, 2015. 29. EMPLOYEES STOCK OPTION PLAN The Company has "2005 Employee Stock Option Plan" (ESOP 2005) for granting performance based stock option to employees. The employees have not exercised any options during the financial year ended March 31, 2016. 31. MANAGEMENT DISCUSSION AND ANALYSIS AND CORPORATE GOVERNANCE REPORT In compliance with Regulation 34(3) read with Schedule V of SEBI (Listing Obligations & Disclosure Requirements) Regulations, 2015, Management Discussion and Analysis and Corporate Governance Report, as approved by the Board of Directors, together with a certificate from a Practicing Company Secretary confirming the compliance with the requirements of Corporate Governance policies are set out in the Annexures forming part of this annual report. 32. DISCLOSURE UNDER SEXUAL HARASSMENT OF WOMEN AT THE WORK PLACE (PREVENTION, PROHIBITION AND REDRESSAL) ACT, 2013 The Company has in place an Anti-Sexual Harassment Policy in line with the requirements of the Sexual Harassment of Women at the Workplace (Prevention, Prohibition and Redressal) Act, 2013. Internal Complaints Committee has been set up to redress complaints. The Company has not received any complaint of sexual harassment during the financial year 2015-16. 33. MATERIAL TRANSACTIONS WITH RELATED PARTIES The Company has not entered into any transaction with related parties during the year under review which requires reporting in Form AOC-2 in terms of Companies Act, 2013 read with Companies (Accounts) Rules, 2014. 34. SAFETY Your company has carried out Safety audit, Fire audit and Environment audit through competent authorities at API Navi Mumbai Plant. The Company also organised various safety awareness programmes to impart safety training to its employees. 35. AWARDS The company has won the prestigious Indian Drugs Manufacturers Association (IDMA) Quality Excellence award in 2015 in the Silver category for its API Plant at Navi Mumbai. Nephrocare division of the Company entered in Guinness World Record by setting the world's largest stress ball mosaic consisting of 10,000 stress balls signed by kidney patients & nephrology community. Your Company took part for the first time in EFI (Employers Federation of India) for Excellence in Employee Relations - 2015 and received award for "commitment to excellence in Employee Relations" for its API Plant at Navi Mumbai. 36. APPRECIATION Your Directors record their appreciation of the valuable services rendered by all employees of the Company, their gratitude to the banks for their assistance and to the Company's shareholders, customers and suppliers for their continued support. For and on behalf of the Board of Directors H.V. Goenka Chairman Place: Mumbai Date: April 29, 2016 |