BOARD'S REPORT Your Directors take pleasure in presenting the Twenty-Third Annual Report and Audited Financial Statements for the year ended 31st March, 2015. Your Directors are pleased to recommend an equity dividend of Rs 3.00 per equity share of face value Rs 1 each (previous year Rs 1.50 per equity share) for the year ended 31st March, 2015. MERGERS 1) Ranbaxy Laboratories Limited ("Ranbaxy") Pursuant to the approval of Hon'ble High Court of Gujarat, at Ahmedabad vide its order dated 14th November, 2014, and amended orders dated 28th November, 2014 and 24th December, 2014 and the approval of the Hon'ble High Court of Punjab & Haryana at Chandigarh vide its order dated 9th March, 2015 erstwhile Ranbaxy merged into the Company effective from 24th March, 2015. The appointed date for the merger was 1st April, 2014. Pursuant to the merger of erstwhile Ranbaxy into the Company, 334,956,764 (Thirty Three Crore Forty Nine Lakh Fifty Six Thousand Seven Hundred and Sixty Four) equity shares of the Company, were allotted on 10th April, 2015 to the shareholders of erstwhile Ranbaxy in the ratio of 8 (eight) equity shares of Rs 1 each of the Company for every 10 (ten) equity shares of Rs 5 each of erstwhile Ranbaxy held by them as on the record date i.e. 7th April, 2015. After the said allotment the total number of equity shares of the Company has aggregated to 2,406,120,674 of Rs 1 each. Further 5,000 (Five Thousand) Secured Rated Redeemable 9.20% Non-Convertible Debentures (NCD) of the Face Value of Rs 1,000,000/- each were allotted to the NCD holders of erstwhile Ranbaxy in the ratio of 1 (One) NCD of Rs 1,000,000/- each of the Company for every 1 (One) NCD of Rs 1,000,000/- each held in erstwhile Ranbaxy as on the record date i.e. 7th April, 2015. After allotment the total number of NCDs of the Company is 5,000 Secured Rated Redeemable 9.20% Non-Convertible Debentures of the Face Value of Rs 1,000,000/- each. For further details on merger, you may refer the Management Discussion and Analysis Report, which forms a part of this Report. Further, the merger of erstwhile Ranbaxy with the Company had resulted in owning 46.84% of the voting rights held by erstwhile Ranbaxy in Zenotech Laboratories Ltd. (Zenotech). By virtue of this indirect acquisition, the Company made an open offer under the provisions of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 to the shareholders of Zenotech, except Daiichi Sankyo Company, Ltd., to acquire up to 9,693,332 equity shares of Zenotech (representing 28.16% of the paid-up equity share capital of Zenotech). As a part of the open offer process, the Company had issued Detailed Public Statement (DPS) with respect to the offer on 30th March 2015 and Letter of Offer on 18th June 2015. The offer was opened on 30th June 2015 and closed on 13th July 2015. The total number of shares that were tendered in the offer were 785 shares representing 0.002% of voting share capital of Zenotech. 2) Sun Pharma Global Inc. The Hon'ble High Court of Gujarat, at Ahmedabad vide its order dated 30th July, 2015 approved the Scheme of Amalgamation of Sun Pharma Global Inc., wholly-owned subsidiary of the Company, into the Company, effective from 6th August, 2015. The appointed date for the said merger was 1st January, 2015. The Company intended to reorganize, consolidate and integrate Sun Pharma Global Inc's operations with the activities of the Company as a part of group restructuring and hence Sun Pharma Global Inc has been merged into the Company. Sun Pharma Global Inc., being a wholly owned subsidiary, it was merged into the Company without any consideration. Pursuant to merger of erstwhile Ranbaxy Laboratories Limited into the Company, the Authorized Share Capital of the Company has increased to 5,990,000,000 Equity Shares of Rs 1/- each amounting to Rs 5,990,000,000/- and 100,000 Preference Shares of face value of Rs 100/- each amounting to 10,000,000/- aggregating to Rs 6,000,000,000/-. EXTRACT OF ANNUAL RETURN The extract of Annual Return as provided under sub-section (3) of Section 92 of the Companies Act, 2013 ('the Act') in prescribed form MGT-9 is enclosed as Annexure - A to this Report. SUBSIDIARY/ JOINT VENTURE/ ASSOCIATE COMPANY The statement containing salient features of the financial statements of the Company's subsidiaries/joint ventures/associate companies is given in Form AOC-1, which forms part of this Annual Report. Details pertaining to companies that became subsidiaries/joint ventures/ associates and those that ceased to be subsidiaries/joint ventures/ associate of the Company during the year are provided in Note 31 of the notes to the Consolidated Financial Statements. DIRECTORS & KEY MANAGERIAL PERSONNEL Mr. Sudhir Valia, Whole-time Director of the Company retires by rotation and being eligible offers himself for re-appointment at the ensuing Annual General Meeting. Mr. Uday Baldota was appointed as Chief Financial Officer of the Company with effect from 12th August, 2014. DECLARATION BY INDEPENDENT DIRECTORS The Company has received declaration from all the Independent Directors of the Company confirming that they meet with the criteria of independence as prescribed under sub-section (6) of Section 149 of the Companies Act, 2013. REMUNERATION POLICY FOR DIRECTORS, KEY MANAGERIAL PERSONNEL AND OTHER EMPLOYEES For the purpose of selection of any Director, the Nomination & Remuneration Committee identifies persons of integrity who possess relevant expertise, experience and leadership qualities required for the position. The Committee also ensures that the incumbent fulfills such other criteria with regard to age and other qualifications as laid down under the Companies Act, 2013 or other applicable laws. The Board has, on the recommendation of the Nomination & Remuneration Committee framed a policy for selection, appointment and remuneration of Directors & Senior Management. The summary of Remuneration Policy of the Company is disclosed in the Corporate Governance Report, which forms a part of this Report. FAMILIARIZATION PROGRAM FOR THE INDEPENDENT DIRECTORS In compliance with the requirements of the Clause 49 of the Listing Agreement, the Company has put in place a Familiarization Program for the Independent Directors to familiarize them with the Company, their roles, rights, responsibilities in the Company, nature of the industry in which the Company operates, business model etc. The details of the Familiarization Program is available on the website of the Company www.sunpharma.com and may be accessed through the web link :<http://www.sunpharma.com/policies>. NUMBER OF MEETINGS OF THE BOARD The Board of Directors of the Company met six times during the previous financial year on 6th April, 2014, 29th May, 2014, 12th August, 2014, 27th September, 2014, 13th November, 2014 and 14th February, 2015. The particulars of attendance of the Directors at the said meetings are detailed in the Corporate Governance Report of the Company, which forms a part of this Report. The intervening gap between the Meetings was within the period prescribed under the Companies Act, 2013. EVALUATION OF PERFORMANCE OF THE BOARD, ITS COMMITTEES AND INDIVIDUAL DIRECTORS The Board of Directors have laid down the manner for carrying out an annual evaluation of its own performance, its various Committees and individual directors pursuant to the provisions of the Act and relevant Rules and the Corporate Governance requirements as prescribed under Clause 49 of the Listing Agreement. The performance of the Board was evaluated by the Board after seeking inputs from all the Directors on the basis of various criteria such as Board Composition, process, dynamics, quality of deliberations, strategic discussions, effective reviews, committee participation, governance reviews etc. The performance of the Committees was evaluated by the Board after seeking inputs from the Committee members on the basis of criteria such as Committee composition, process, dynamics, deliberation, strategic discussions, effective reviews etc. The Nomination and Remuneration Committee reviewed the performance of the individual Directors on the basis of the criteria such as Transparency, Analytical Capabilities, Performance, Leadership, Ethics and ability to take balanced decisions regarding stakeholders etc. In a separate meeting of Independent Directors, performance of Non-independent Directors, performance of the Board as a whole and performance of the Chairman was evaluated, taking into account the views of the Executive Directors and Non-executive Directors. HUMAN RESOURCES Your Company considers its employees as most valuable resource and ensures strategic alignment of Human Resource practices to meet business objectives. Spread across globally the Company has a dedicated resource of over 30,000 employees at various locations across Corporate Office, R & D Centers & 40 plus manufacturing locations and dedicated Sales Professionals across the various geographies (including subsidiary and associate companies). Our constant endeavor is to invest in people and people processes, building capability and enhance our quality through key initiative of personal ownership & communication with an objective to improve our service delivery to the Customers. Attracting the right talent and engaging them for high performance is our focus. We strive to provide a great place to work to our human resources through challenging and learning environment. Information as per Section 197 (12) of the Companies Act, 2013, read with Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014 is provided in a separate annexure forming part of this Report. Further, pursuant to the proviso to Section 136 (1) of the Companies Act, 2013, the report and the accounts are being sent to the members excluding the aforesaid annexure. In terms of Section 136 of the Act, the said annexure is open for inspection at the Registered Office of the Company. Any shareholder interested in obtaining a copy of the same may write to the Company Secretary/Compliance Officer at Corporate office or Registered office address of the Company. DISCLOSURE UNDER THE SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION AND REDRESSAL) ACT, 2013 Your Company strongly believes in providing a safe and harassment free workplace for each and every individual working for the Company through various interventions and practices. It is the continuous endeavor of the Management of the Company to create and provide an environment to all its employees that is free from discrimination and harassment including sexual harassment. The Company has adopted a policy on prevention, prohibition and redressal of sexual harassment at workplace in line with the provisions of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 and the Rules thereunder for prevention and redressal of complaints of sexual harassment at workplace. During the year ended 31st March, 2015, no complaints pertaining to sexual harassment was received by the Company. AUDITORS Statutory Auditors The Company's Auditors, Messrs. Deloitte Haskins & Sells LLP Chartered Accountants (Firm's Regn No. 117366W/W-100018), at the 22nd Annual General Meeting of the Company, were appointed as the Statutory Auditors of the Company for a period of three years, upto the conclusion of the 25th Annual General Meeting of the Company, subject to ratification by members at every Annual General Meeting of the Company. They have confirmed their eligibility under Section 141 of the Companies Act, 2013 and the Rules framed thereunder for reappointment as Auditors of the Company. As required under the Listing Agreement, the Auditors have also confirmed that they hold a valid certificate issued by the Peer Review Board of the Institute of Chartered Accountants of India. Secretarial Auditors Pursuant to the provisions of Section 204 of the Companies Act, 2013 and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Company has appointed Messrs C J Goswami & Associates, Practicing Company Secretaries, Mumbai to undertake the Secretarial Audit of the Company. The Secretarial Audit Report is annexed herewith as Annexure - B. Cost Auditors The Company has appointed Messrs. Kailash Sankhlecha & Associates, Cost Accountants, Vadodara as Cost Auditors of the Company for conducting Cost Audit in respect of Bulk Drugs & Formulations of the Company for the year 2015-16. Pursuant to merger of erstwhile Ranbaxy Laboratories Limited with the Company, the erstwhile Ranbaxy locations being added, the scope of Cost Audit has increased and therefore on recommendation by the Audit Committee, the Board has proposed to increase the remuneration to be paid to Cost Auditors for the financial year ended 31st March, 2015 and for the financial year ended 31st March, 2016. Accordingly the resolution for ratification of increase in remuneration has been proposed for approval of the shareholders at the ensuing Annual General Meeting. Your Directors recommend the resolution for ratification of increase in remuneration of the Cost Auditors. LOANS, GUARANTEES & INVESTMENTS The particulars of loans, guarantees and investments have been disclosed in the financial statements. RELATED PARTY TRANSACTIONS The policy on Related Party Transactions as approved by the Board is available on the website of the Company and can be accessed through the web link <http://www.sunpharma.com/> policies. All contracts/arrangements entered by the Company during the previous financial year with the related parties were in the ordinary course of business and on arm's length basis. No material Related Party Transactions, i.e. transactions exceeding ten percent of the annual consolidated turnover as per the last audited financial statements, were entered during the year by your Company. Accordingly, the disclosure of Related Party Transactions as required under Section 134(3) (h) of the Companies Act, 2013 in Form AOC 2 is not applicable. AUDIT COMMITTEE COMPOSITION The details pertaining to composition of Audit Committee are included in the Corporate Governance Report which forms a part of this Report. RISK MANAGEMENT The Company has developed & implemented an integrated Enterprise Risk Management Framework through which it identifies monitors, mitigates & reports key risks that impacts its ability to meet the strategic objectives. During the year, the Board of Directors have constituted a Risk Management Committee which is entrusted with the responsibility of overseeing various strategic, operational and financial risks that the organization faces, along with the adequacy of mitigation plans to address such risks. A Risk Management Policy was also reviewed and approved by the Board. The Company also has a Risk Management Committee and the details are mentioned in the Corporate Governance Report. INTERNAL FINANCIAL CONTROLS The Company has in place well defined and adequate internal financial control framework. During the year, such controls were tested and no material weaknesses in their design or operation were observed. CORPORATE SOCIAL RESPONSIBILITY ("CSR") In compliance with the requirements of Section 135 of the Companies Act, 2013 read with the Companies (Corporate Social Responsibility) Rules, 2014, the Board of Directors have constituted a Corporate Social Responsibility Committee. The details of membership of the Committee & the meetings held are detailed in the Corporate Governance Report forming part of the Annual Report. The contents of the CSR Policy of the Company as approved by the Board on the recommendation of the Corporate Social Responsibility Committee is available on the website of the Company and can be accessed through the web link: <http://www.sunpharma.com/policies>. Consequent to the loss incurred by the Company in the immediately preceding financial year, the average net profits of the Company for last three financial years is negative, therefore the Company was not required to spend on CSR activities during the previous year. However, the Company has voluntarily spent on CSR activities and the Annual Report on CSR activities containing details of voluntary expenditure incurred by the Company including that of erstwhile Ranbaxy and brief details on the CSR activities are given in Annexure - C. PUBLIC DEPOSITS The Company has not accepted any deposit from the Public during the year under review, under the provisions of the Companies Act, 2013 and the rules framed thereunder. MANAGEMENT DISCUSSION AND ANALYSIS The Management Discussion and Analysis on the operations of the Company as prescribed under Clause 49 of the Listing Agreement is provided in a separate section and forms a part of this Report. CORPORATE GOVERNANCE REPORT Report on Corporate Governance and Certificate of the Auditors of the Company regarding compliance of the conditions of Corporate Governance as stipulated in Clause 49 of the Listing Agreement with the Stock Exchanges, are enclosed as a separate section which forms a part of this Report. CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO The information on conservation of energy, technology absorption and foreign exchange earnings and outgo stipulated under Section 134(3)(m) of the Companies Act, 2013 read with Rule 8 of The Companies (Accounts) Rules, 2014, is annexed herewith as Annexure - D. EMPLOYEES' STOCK OPTION SCHEMES Erstwhile Ranbaxy had two Employees' Stock Option Schemes, one by direct allotment and another through Trust route. Pursuant to the merger of erstwhile Ranbaxy Laboratories Limited into the Company, both the Schemes were adopted by the Company with requisite amendments and titled as SUN Employee Stock Option Scheme-2015 and SUN Employee Stock Option Plan-2015. These Schemes are applicable only to the employees of erstwhile Ranbaxy and would continue till the time of expiry/ exercise of all the earlier granted stock options. No further options would be granted by the Company under these Schemes. Disclosures with respect to the Employees' Stock Option Schemes are enclosed as Annexure - E. SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS OR TRIBUNALS There are no significant and material orders passed by the regulators or courts or tribunals which impact the going concern status and Company's operations in future. WHISTLE BLOWER POLICY/ VIGIL MECHANISM To create enduring value for all stakeholders and ensure the highest level of honesty, integrity and ethical behaviour in all its operations, the Company has a 'Whistle Blower Policy' for Sun Pharmaceutical Industries Limited (SPIL) and its Indian subsidiaries and post merger of erstwhile Ranbaxy, the Company has also adopted a "Global Whistle Blower Policy" for its Global subsidiaries (excluding listed companies and their subsidiaries), in addition to the existing code of conduct that governs the actions of its employees. The Corporate Governance Report contains disclosure on the vigil mechanism of the Company. DIRECTORS' RESPONSIBILITY STATEMENT Pursuant to the requirements under Section 134(5) read with Section 134(3) (c) of the Companies Act, 2013, with respect to Directors Responsibility Statement, it is hereby confirmed that: a) in the preparation of the annual accounts for the financial year ended 31st March 2015, the applicable accounting standards have been followed along with proper explanation relating to material departures, if any; b) the Directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at 31st March, 2015 and of the loss of the Company for the year ended on that date; c) the Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; d) the Directors have prepared the annual accounts on a going concern basis; and e) the Directors have laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively. f) the Directors have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively. CONSOLIDATED ACCOUNTS In accordance with the requirements of the Companies Act, 2013 and Listing Agreement, the Consolidated Accounts of the Company and its subsidiaries, form a part of this Annual Report. CREDIT RATING ICRA rating agency has reaffirmed the highest credit rating of 'ICRA A1+' for the commercial paper programs and bank facilities of the Company. Further, CARE rating agency has also reaffirmed the highest credit ratings of 'CARE A1+' for the bank facilities and 'CARE AAA' for the outstanding 9.20% Secured, Redeemable, Non-Convertible Debentures of the Company. BUSINESS RESPONSIBILITY REPORTING The Business Responsibility Report of the Company for the year ended 31st March, 2015, in line with Green initiative, is made available on the website of the Company (www.sunpharma.com) and forms part of the Annual Report, and is kept at the Registered office of the Company for inspection. A copy of the aforesaid report shall be made available to such of those shareholders who are desirous and interested, upon receipt of a written request from them. ACKNOWLEDGEMENTS Your Directors wish to thank all stakeholders and business partners, Company's bankers, medical profession and business associates for their continued support and valuable co-operation. The Directors also wish to express their gratitude to investors for the faith that they continue to repose in the Company. For and on behalf of the Board of Directors ISRAEL MAKOV Chairman Date 11th August, 2015 Place : Mumbai |