Your Directors are pleased to present the 28th Annual Report of the Company togetherwith the audited accounts for the financial year ended March 31 2015.
|Standalone financials || ||Rs. Million |
| ||2014-15 ||2013-14 |
|Gross Turnover ||82448.4 ||72695.3 |
|Profit before depreciation interest || || |
|tax and exceptional items ||23176.4 ||19942.7 |
|Depreciation/amortization ||2451.5 ||1859.7 |
|Finance cost ||565.8 ||866.2 |
|Exchange difference adjusted to borrowing cost ||755.6 ||2022.2 |
|Profit before tax ||19403.5 ||15194.6 |
|Provision for tax/deferred tax ||4240.0 ||3473.7 |
|Net profit after tax ||15163.5 ||11720.9 |
|Balance brought forward from previous year ||28278.4 ||18752.2 |
|Balance available for appropriation ||43441.9 ||30473.1 |
|Appropriations: || || |
|Dividend on equity shares - Interim ||1312.8 ||874.1 |
|Final || || |
|Tax on dividend ||250.4 ||148.5 |
|Depreciation adjusted (as per Schedule II) ||196.4 || |
|Transferred to general reserve || ||1172.1 |
|Surplus carried to Balance Sheet ||41682.3 ||28278.4 |
Your Directors have approved a third interim dividend of 100% i.e. Rs. 1 per equityshare and together with the first interim dividend of 150% i.e. Rs. 1.50 per equity shareand second interim dividend of 200% i.e. Rs. 2.00 per equity share the total dividend forthe financial year 2014-15 comes to 450% i.e. Rs. 4.50 per share on the equity share ofRs. 1 against 300% i.e. Rs. 3 per share of Rs. 1 paid in the previous year.
Your Company delivered financially satisfactory results by executing on core strategiesand setting the stage for long term growth. The revenue from operations was Rs. 80951million on a standalone basis an increase of 13.8% over 2013-14. On a standalone basisthe EBITDA for 2014-15 was Rs. 23176.4 million an increase of 16.2% over the previousyear.
Profit before tax was increased to Rs. 19403.5 million from Rs. 15194.6 million inthe previous year. This 27.7% increase was achieved by ramping up the volumes improvingproductivity and saving on finance costs. Profit after tax was higher by 29.4% for theyear under review at Rs. 15163.5 as compared to Rs. 11720.9 million in the previousfiscal. Diluted earnings per share on standalone basis is Rs. 51.97 as compared to Rs.40.20 in the previous year.
Members will be pleased to know that the Company did well at the consolidated level aswell. In 2014-15 the consolidated revenues increased by 49.6% to Rs. 121205.2 million.EBITDA for the year grew 23.4% and was Rs. 26603.3 million as compared to Rs. 21552.1million in 2013-14 and diluted earnings per share grew by 34.3% to Rs. 54.0 reflectingstrong execution and continued momentum in the business.
Your Company made the necessary long term investments to advance the geographical reachof formulations to grow both in the US and Europe. The performance in 2014-15 was drivenby competitive edge of the products across the portfolio. Over the financial yearformulation sales grew by 42% in the US and 375% in Europe complimented by theacquisition of commercial operations from Actavis across seven Western European countrieswith effect from April 1 2014.
Formulations in the US contributed 50.5% to the overall formulations revenues in theyear under review and share of Europe has increased to 33.4% in 2014-15 from 12.5% in theprevious year demonstrating the focus on both the markets.
Formulation sales across all geographies grew by 77.7% to Rs. 95586 million ascompared Rs. 53785 million in 2013-14. Formulations business constituted 77.9% of therevenues while active ingredients make the balance 22.1%.
In the US Aurobindo Pharma continued to deliver strong revenue growth with itscustomer relationships and increased market penetration of existing products.
While sales of several generic products have been raised through the year the growthhas been more skewed towards controlled substances and non-institutional business. Theinjectable business in the US continued to outperform and grew by 88.7% over fiscal2013-14.
In addition to the US your Company is now present in over 150 countries with growingvisibility in advanced markets such as France Germany Spain and Italy.
Aurobindo has delivered to expectations in Europe. The revenues from Europe stood atRs. 31947 million significantly growing over the previous year. This has been primarilyon account of the acquisition of the products from Actavis in Western European markets.Presently France is the biggest market in Europe for Aurobindo followed by GermanyNetherlands Spain UK and Portugal. A concerted effort is being made to create an impactin Western Europe and reach a critical mass.
Aurobindo has been supporting several multilateral agencies to provide cost effectivetreatment of HIV/AIDS patients. Your Company started executing a few notable tenders andstepped up deliveries across regions of triple combination products. Anti-retroviralformulations sales increased by about 14.7% over the previous year. Your Company'sproducts are estimated to have targeted treatment of over 2 million HIV/AIDs affectedpeople across 110 countries.
In the emerging markets such as Africa CIS Latin America and MENA (Middle East andNorth Africa) there was a major shift from tenders/generics to more sustainable andbetter valued branded generics especially in the high value therapy areas ofcardiovasculars and neuro-psychiatry ailments. Close customer interaction helped gaintraction in markets such as Malaysia Myanmar Philippines Vietnam and Cambodia.
Proportion of revenue from active ingredients came down from 34.7% to about 22.1%since there was an exponential growth in the formulations business as compared to the APIbusiness. Your Company sees opportunities for growth of API business. Hence themanufacturing capacities of API are being further expanded.
During the year your Company completed the acquisition of the assets of nutritionalsupplement maker Natrol LLC which was acquired for a consideration of Rs. 8344 million.Natrol manufactures and sells quality nutritional supplements in the US and selectinternational markets. It offers branded products including vitamins minerals andsupplements; diet and weight management products; sports nutrition products; and productsfor hair skin and nails. This acquisition is a strategic move to gain an entry forAurobindo into the growing nutraceutical segment.
The US based Natrol is a leading 35 year old nutraceuticals manufacturer withestablished brands and was acquired with all the manufacturing assets personnel andcommercial infrastructure including the well established brands of Natrol along with anagreement to take on certain liabilities. The due approval was obtained from authoritiesand the acquisition was completed on December 4 2014. In the consolidated financialstatements the financials of the acquired entity have been integrated effective thatdate.
Aurobindo is shaping its future by ensuring sustainable growth with niche anddifferentiated basket of products offering the highest product quality while being costcompetitive to meet the needs of customers and patients.
Your Company has already demonstrated its capabilities by creating a portfolio of verylarge number of generic products including 193 ANDA approvals from the US FDA. Theproduct profile includes wide range of injectables and more difficult to develop complexproducts and drug delivery systems.
The existing manufacturing capacities have helped reach revenues of almost USD 2billion. Three new plants are being commissioned over the next 12 months while three moreare being expanded to double their existing capacities. Systems and processes are beingimproved with the help of a well-known consultant. Aurobindo aims to service its customerswith performance standards in deliveries that meet their expectations.
The developed markets of US Europe and Japan will remain the focus on theorganisational dash board for generics and APIs. There are huge opportunities for yourCompany's ARV products which are being addressed. Emerging markets will be another thrustarea for growth. Overall Team Aurobindo is striving to create an impact in all these keymarkets.
As Members are aware your Company develops manufactures markets and distributesstore brand Over-the-Counter (OTC) products. The mission is to develop as many OTCproducts for most of US retail market as possible providing a consistent and reliablesupply at a fair price and of the highest quality.
The plans are to include Rx to OTC switch molecules ANDA & Monograph OTC productsin various dosage forms/formats - solids (tablets capsules soft gels) liquids semisolids & nasal sprays. The manufacturing sites are located in New Jersey US atLawrenceville with facility to make liquids semi solids & nasal sprays (about 52million units per year); another manufacturing site is at Dayton with facility to makesolids including Drug Enforcement Administration (DEA) controlled products (about 3billion doses per year); and the third facility is set up at Jedcherla near Hyderabadwith capacity to manufacture solids (about 8 billion doses a year). This business issupported with adequate infrastructure including 200000 sq ft of packaging &distribution facilities for solids & liquids.
70 liquid products have been developed exhibit batches have been made for a few solidsand some are undergoing stability tests. Your Company has also commenced marketing a fewproducts through well-established chain stores in the US. Aurobindo will work to get astrong foothold in this competitive but attractive market.
Streamlining of the newly acquired Natrol's current operation would expand operatingmargin in the near term. The management aims to enlarge the market improve revenues andenhance efficiencies significantly.
Your Company is making determined foray into oncology and hormonal products penems andpeptides technology. In all the newer ventures Aurobindo will build and leverage on itsinherent strengths augmented by a team of generic industry-seasoned professionals. YourCompany has strong relationships in the market that would help to create businesses with abroad unique product portfolio in record time. In essence the new business models arefounded on core competencies.
Your Company has set a vision to build businesses that meaningfully impact theiraddressable markets are respected for customer centric products and services meetindustry benchmarks in productivity of resources are recognized for quality andcompliance standards and in the ultimate analysis create societal wealth for allstakeholdeRs.
In financial terms the objective is to lower earnings volatility strive for higherpredictable and calibrated growth and improve EBITDA margin and Return on Investmenthigher than industry average. The target is to stay cash flow positive improve thequality of the balance sheet lower the leverage reduce interest outgo and expandearnings year-on-year.
RESEARCH & DEVELOPMENT
Clearly your Company's best investment for future growth has been and remains inresearch and development and in order to maintain the momentum allocation of funds wasincreased during the year under review. R&D expenses constituted 3.9% of the grossrevenue for the year. In absolute amount the expenditure in 2014-15 on standalone basiswas Rs. 3182.4 million while it was Rs. 2550.5 million in the previous year. Moreimportantly the resource base was ramped up by adding experienced scientists andresearcheRs.
Aurobindo's expertise in R&D has given your Company the edge in designing theproduct basket process technology drug delivery systems anticipation of customer andpatient needs of the future and intellectual property challenges. Every effort has beenmade to ensure quality and compliance standards are met both at the lab and on theproduction floor while reviewing the costs and time to launch the products in to themarket.
During the year 15 molecules (API/Intermediates) were taken up to modify/optimize themanufacturing technology to bring down the raw materials cost. Four new CRAMS API projectswere taken up for development during 2014-15. Process for one complex API was successfullycommercialized for a Japanese customer.
First half of the financial year saw large number of ANDA filings especially fordifficult to develop niche products primarily in the steriles portfolio as well asoncology and hormonal products. Such products are highly development intensive hold highrisk in bioequivalence but are rewarding from a business perspective. Cost optimizationcontinued to be a focus area with alternate APIs excipients and packs being worked uponfor both the US and EU markets.
In order to execute the requirements of products for which marketing rights wereacquired for the key western European markets from Actavis your Company has set up adedicated formulation R&D. The objective is to design and develop cost effectivecompositions to compete with generics in the EU tender market. Development work has beeninitiated to create a pipeline of 60-70 products to be manufactured at Vizag andcommercialized in the next 12 to 18 months.
Development work is on-going on as many as 20 products in the oncology and hormonesegments both injectable and solid dosage forms. Dossier filings are expected to start inthe financial year 2015-16.
Your Company is deepening the integration of the products acquired from Actavis and itwill remain a priority in 2015-16 to grow the business profitably and create value forshareholdeRs. The value is being realized through a combination of cost and growthsynergies and excellence in deliveries.
In terms of the filings to US FDA a total of 376 ANDAs have been filed as on March 312015 out of which 166 final approvals had been received and another 27 tentative approvals(including 21 ANDA approved under PEPFAR which are not for sales in the US market) toohave been received. The balance 183 ANDAs are under review for approval.
The filings with regulatory authorities across all products are in excess of 2100generic registrations and over 2500 API filings. In addition 594 process patentapplications have been filed so far.
ENVIRONMENT HEALTH & SAFETY
The year under review ended on a satisfactory note in environmental management acrossAPI and formulations divisions. In respect of environment management operations atmanufacturing locations and R&D establishments activities and operations across allsites are adequately stabilized.
This was yet another year that witnessed competencies and commitment demonstrated byAurobindo in sustained environmental management in its manufacturing locations.
From a regulatory perspective environment regulatory approvals have been obtained wellon time for all green field projects. State and central level environmental approvals havebeen obtained for one of the acquired API units. Process for central level environmentalclearance for one of the expansion projects of an API unit is completed and awaitingconsideration of the Expert Technical Committee concerned.
Investments continued to be made for up-gradation of existing environmentalinfrastructure and development of new projects in line with planned manufacturingactivities. Planned activity of establishment of sewerage treatment plants at API units iscompleted for one unit and the project is nearing completion in one more unit. With anobjective to reduce wastewater disposal to CETP and reuse treated wastewater installationof RO plant was taken up in one of the formulations unit. One major achievement in theyear is reduction of disposal costs of organic solid wastes by 50% which was made possibledue to increased awareness discipline and efforts in environmental management practicesat manufacturing locations.
The EHS team of your Company prepared and implemented 'Guidelines for EHS riskassessment'. This framework provides methodologies to be followed to:
a. perform risk assessment of all activities of Aurobindo;
b. rank and prioritize activities;
c. identify and define risk controls;
d. ensure that the controls are working effectively to maintain risk within acceptablelevels.
Several training programs were initiated to increase employee awareness and knowledge.Safety videos were used extensively to make an impact. A separate EHS training matrix wasprepared for contract workmen based on work activities they perform.
Chemical exposure risk assessment was initiated to determine hazardous effects ofchemical exposure. This risk assessment has been completed for 129 materials.
As per the provisions of Section 129 of the Companies Act 2013 read with the Companies(Accounts) Rules 2014 a separate statement containing the salient features of thefinancial statements of the subsidiary companies/associate companies/joint ventures isdetailed in Form AOC-1 and is in Annexure-1 to this Report.
The following companies have become the Company's subsidiaries during the year:Aurovitas Spain S.A.U. Spain; Actavis France SAS France; Arrow Generiques SAS France;Actavis Deutschland GmbH & Co. Germany; Actavis B.V. The Netherlands; ActavisManagement GmbH Germany; Aurovitas S.L. Spain; Aurex B.V. Spain and Natrol LLC U.S.A.
The following companies have ceased to be the Company's subsidiaries during the year:Aurobindo Pharma Limited S.R.L. Dominican Republic; Aurobindo Pharma France SARL Francemerged into Arrow Generiques SAS France; Aurovitas SL Spain while Agile Malta HoldingsLimited Malta merged into Aurobindo Pharma (Malta) Limited Malta.
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated financial statements have been prepared by the Company in accordance withthe requirements of Accounting Standards 21 issued by the Institute of CharteredAccountants of India (ICAI) and as per the provisions of Companies Act 2013. As per theprovisions of Section 136 of the Companies Act 2013 the Company has placed separatelythe audited accounts of its subsidiaries on its website www.aurobindo.com and copy ofaudited financial statements of its subsidiaries will be provided to the Members at theirrequest.
HUMAN RESOURCE DEVELOPMENT
Your Company has the necessary managerial bandwidth to navigate the growthopportunities. Planning ahead of the requirement has ensured that Aurobindo has a strongteam in many markets in manufacturing facilities research labs supply-chain managementand in fact in every functional area. However considering the potential opportunitiesand the organizational growth targets there is a constant review being done to be aheadof the curve. Talent acquisition and talent retention are being given considerableemphasis in people management.
The strength of the organization is manifest in the enthusiasm to overcome competitivepressures in building a robust pipeline of products in the focus to monitor and controlquality in the premium attached to data governance in the commitment to improveOn-Time-In-Full (OTIF) performance and in the hunger to deliver results.
To strengthen the alignment between strategy accountability performance andrecognition there is a challenging but participative target setting and the progress isclosely tracked on a dashboard of milestones and actions key operational metrics andfinancial performance. Individual goals are getting aligned to corporate results. The goalsetting has ring fenced the risks driven the business model towards sustainable growthand made the enterprise collaborative.
At every level in the hierarchy learning & development inputs ensure that peoplestay agile and resilient to the challenges of growth.
While Team Aurobindo seeks new opportunities to extend geographies and build on theexisting relationships at every level in every transaction your Company will strive tominimize risks. The team is being sensitized to do whatever it takes to anticipate andpre-empt challenges. The measure of this approach is in the full involvement of themanagement at the senior most level. For instance the team makes no compromise on qualityand compliance. This approach is targeted to achieve predictable growth.
The Board of Directors has adopted the Whistle Blower Policy which is in compliancewith Section 177(10) of the Companies Act 2013 and Clause 49 of the Listing Agreementwith the stock exchanges. The Whistle Blower Policy aims for conducting the affairs in afair and transparent manner by adopting highest standards of professionalism honestyintegrity and ethical behavior. All permanent employees and whole-time directors of theCompany are covered under the Whistle Blower Policy.
A mechanism has been established for employees to report concerns about unethicalbehavior actual or suspected fraud or violation of Code of Conduct and Ethics. It alsoprovides for adequate safeguards against the victimization of employees who avail of themechanism and allows direct access to the Chairperson of the audit committee inexceptional cases. The Whistle Blower Policy is available on the Company's websitehttp://www.aurobindo.com/about-us/corporate-governance.
POLICY ON SEXUAL HARASSMENT
Your Company has constituted an Internal Complaints Committee as per the SexualHarassment of Women at Workplace (Prevention Prohibition and Redressal) Act 2013 and theRules there under. The Company has a policy on prevention & prohibition of sexualharassment at workplace The policy provides for protection against sexual harassment ofwomen at workplace and for prevention and redressal of such complaints. During the yearno complaints have been received under the policy.
The National Long-term Fitch Rating of your Company has been upgraded to 'IND AA' from'IND AA-' indicating stable outlook of the Company.
MEETINGS OF THE BOARD
The Board and Committee meetings are pre-scheduled and a tentative calendar of themeetings finalized in consultation with the Directors to facilitate them to plan theirschedule. However in case of special and urgent business needs approval is taken bypassing resolutions through circulation. During the year under review nine Board Meetingsand five Audit Committee Meetings were convened and held. The details of the meetingsincluding composition of Audit Committee are given in the Corporate Governance Report.During the year all the recommendations of the Audit Committee were accepted by theBoard.
As per the provisions of the Companies Act 2013 Mr. P. Sarath Chandra Reddy and Dr. M.Sivakumaran will retire at the ensuing annual general meeting and being eligible seekreappointment. The Board of Directors recommends their re-appointment.
The re-appointments of Mr. K. Nithyananda Reddy Dr. M. Sivakumaran and Mr. M. MadanMohan Reddy Whole-time Directors and Mr. N. Govindarajan Managing Director are beingproposed at the ensuing Annual General Meeting.
DETAILS OF DIRECTORS & KEY MANAGERIAL PERSONNEL
The Members of the Company at the 27th Annual General Meeting of the Company held onAugust 27 2014 have re-appointed Mr. K. Ragunathan Mr. M. Sitarama Murty and Dr.Rajagopala Reddy as independent directors of the Company for a period of five years up toMarch 31 2019.
Dr. C. Channa Reddy ceased to be a Director due to his resignation from the Board ofthe Company for personal reasons with effect from January 27 2015. The Board places onrecord its appreciation of the services rendered by him as a Director during hisassociation with the Company.
Dr. (MRs. ) Avnit Bimal Singh was appointed by the Board as an Additional Director(Independent Director) of the Company with effect from March 25 2015 and being eligibleher appointment as an independent director for a period of five years up to March 24 2020is being proposed at the ensuing Annual General Meeting. The Board of Directors recommendsher appointment.
Mr. Sudhir B. Singhi relinquished his responsibilities as Chief Financial Officer ofthe Company with effect from July 1 2014 and was re-designated as Head of Global Finance& Operations Department. Mr. Santhanam Subramanian was appointed as Chief FinancialOfficer of the Company with effect from July 1 2014.
DIRECTORS' RESPONSIBILITY STATEMENT
Pursuant to Section 134(3)(c) of the Companies Act 2013 your Directors confirm that:
a. in the preparation of the annual accounts the applicable accounting standards havebeen followed along with proper explanation relating to material departures if any;
b. appropriate accounting policies have been selected and applied consistently.Judgement and estimates which are reasonable and prudent have been made so as to give atrue and fair view of the state of affairs of your Company as at the end of the financialyear and of the profit of your Company for the year;
c. proper and sufficient care has been taken for the maintenance of adequate accountingrecords in accordance with the provisions of the Companies Act 2013 for safeguarding theassets of your Company and for preventing and detecting fraud and other irregularities;
d. the annual accounts have been prepared on a going concern basis;
e. proper internal financial controls have been laid down to be followed by yourCompany and such internal financial controls are adequate and are operating effectively;and
f. proper systems to ensure compliance with the provisions of all applicable laws havebeen devised and such systems are adequate and are operating effectively.
DECLARATION FROM INDEPENDENT DIRECTORS
The independent directors have submitted the declaration of independence stating thatthey meet the criteria of independence as provided in sub-section (6) of Section 149 ofthe Companies Act 2013.
The Company recognizes and embraces the importance of a diverse board in its success.The Board has adopted the Board Diversity Policy which sets out the approach to diversityof the Board of DirectoRs. The Board Diversity Policy is available on the Company'swebsite http://www.aurobindo.com/about-us/corporate-governance.
Clause 49 of the Listing Agreement mandates that the Board shall monitor and review theBoard evaluation framework. The Companies Act 2013 states that a formal annual evaluationneeds to be made by the Board of its own performance and that of its committees andindividual directoRs. Schedule IV of the Companies Act 2013 states that the performanceevaluation of independent directors shall be done by the entire Board of Directorsexcluding the director being evaluated. The evaluation of all the directors and the Boardas a whole was conducted based on the criteria and framework adopted by the Boardincluding performance and working of its Committees.
POLICY ON DIRECTORS' APPOINTMENT AND REMUNERATION
The policy of the Company on directors' appointment and remuneration includingcriteria for determining qualifications positive attributes independence of a directorand other matters are adopted as per the provisions of the Companies Act 2013. Theremuneration paid to the directors is as per the terms laid out in the nomination andremuneration policy of the Company. The nomination and remuneration policy as adopted bythe Board is placed on the Company's websitehttp://www.aurobindo.com/about-us/corporate-governance.
TRANSFER TO RESERVE
The Company has not transferred any amount to general reserve out of the profit of theCompany.
LOANS GUARANTEES OR INVESTMENTS
The details of loans guarantees investments given during the financial year ended onMarch 31 2015 is in Annexure-2 to this Report in compliance with the provisions ofSection 186 of the Companies Act 2013 read with Companies (Meetings of Board and itsPowers) Rules 2014.
CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES
The particulars of contracts or arrangements with related parties referred to insub-section (1) of Section 188 of the Companies Act 2013 is prepared in Form No. AOC-2pursuant to clause (h) of sub-section (3) of Section 134 of the Act and Rule 8(2) of theCompanies (Accounts) Rules 2014 and is in Annexure-3 to this Report.
EXTRACT OF ANNUAL RETURN
As required under Section 92(3) of the Companies Act 2013 and Rule 12(1) of theCompanies (Management and Administration) Rules 2014 the extract of Annual Returnprepared in Form MGT-9 is in Annexure-4 to this Report.
CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION FOREIGN EXCHANGE EARNINGS AND OUTGO
Information with respect to conservation of energy technology absorption foreignexchange earnings and outgo pursuant to Section 134(3)(m) of the Act read with Companies(Accounts) Rules 2014 is in Annexure-5 to this Report.
RISK MANAGEMENT COMMITTEE
Risk Management Committee of the Company consists of the following Directors namely Mr.M. Sitarama Murty Mr. N. Govindarajan and Mr. P. Sarath Chandra Reddy. The Company hasestablished a separate department to monitor the enterprise risk and its management.
The Committee had formulated a risk management policy for dealing with different kindsof risks which it faces in day-to-day operations of the Company. Risk management policy ofthe Company outlines different kinds of risks and risk mitigating measures to be adoptedby the Board. The Company has adequate internal financial control systems and proceduresto combat the risk. The risk management procedure is reviewed by the Audit Committee andBoard of Directors on regular basis at the time of review of quarterly financial resultsof the Company. A report on the risk and their management is enclosed as a separatesection forming part of this report.
AUDITORS & AUDITORS' REPORT
The statutory auditors' report is annexed to this report. The notes on financialstatements referred to in the Auditors' Report are self-explanatory and do not call forany further comments. There are no specifications reservations adverse remarks ondisclosure by the statutory auditors in their report. They have not reported any incidentof fraud to the Audit Committee of the Company during the year under review.
The members of the Company at the 27th Annual General Meeting had appointed M/s. S.R.Batliboi & Associates LLP Chartered Accountants as Statutory Auditors of the Companyup to the conclusion of 30th Annual General Meeting of the Company subject to ratificationof the appointment by the members at every Annual General Meeting. The ratification of theappointment of statutory auditors is proposed at the ensuing Annual General Meeting.
M/s. Sagar & Associates Cost Accountants were appointed as Cost Auditors of theCompany to conduct cost audit of the Company for the year 2013-14. The due date for filingCost Audit Report of the Company in XBRL format for 2013-14 was September 30 2014 and thesame was filed with the Ministry of Corporate Affairs on September 26 2014.
The Board of Directors of the Company has appointed M/s. KPMG to conduct internal auditof the Company for the financial year ended March 31 2015.
INTERNAL FINANCIAL CONTROLS
The internal financial controls (IFC) framework at Aurobindo encompasses internalcontrols over financial reporting (ICOFR) as well as operational controls that have beenput in place across all key business processes of the Company. The internal controls aredesigned to facilitate and support the achievement of the Company's business objectivesand such controls do enable the Company to adapt to changing and operating environment tomitigate risks to acceptable levels and to support sound decision making and goodgovernance.
Details in respect of adequacy of internal financial controls with reference to thefinancial statements are briefly iterated below:
a. The Company maintains all its major records in ERP System (Oracle Financials) andthe work flow and approvals are routed accordingly;
b. The Company has appointed internal auditors to examine the internal controlswhether the workflow of the organization is being done through the approved policies ofthe Company. In every quarter during the approval of financial statements internalauditors present the internal audit report and the management comments on the internalaudit observations; and
c. The Board of Directors of the Company has adopted various SOPs and policies such asrelated party transactions policy whistle blower policy policy to determine materialsubsidiaries and such other procedures for ensuring the orderly and efficient conduct ofits business for safeguarding of its assets the prevention and detection of frauds anderrors the accuracy and completeness of the accounting records and the timelypreparation of reliable financial information.
SECRETARIAL AUDIT REPORT
Pursuant to the provisions of Section 204 of the Companies Act 2013 and Rule 9 of theCompanies (Appointment and Remuneration of Managerial Personnel) Rules 2014 the Companyhas appointed Mr. S. Chidambaram Practicing Company Secretary (C.P.No: 2286) CompanySecretary in Whole-time Practice to undertake the Secretarial Audit of the Company forthe financial year 2014-15. The Secretarial Audit Report issued in form MR-3 is in Annexure-6to this Report. There are no qualifications reservations or adverse remarks in theSecretarial Audit Report.
CORPORATE SOCIAL RESPONSIBILITY
Your Company has formulated a corporate social responsibility policy with the objective'give back to the society'. In line with this approach Aurobindo has undertaken socialactivities such as promoting education hygiene preventive health care eradicatinghunger poverty & malnutrition making available safe drinking water environmentsustainability ecological balance & conservation of natural resources rural sportsand setting up of old age homes etc.
Pursuant to the provisions of Section 135 and Schedule VII of the Companies Act 2013the Corporate Social Responsibility (CSR) Committee of the Board of Directors has beenformed consisting of following members namely Mr. K. Nithyananda Reddy Mr. K. Ragunathan(Independent Director) Dr. M. Sivakumaran and Mr. P. Sarath Chandra Reddy to recommendthe policy on Corporate Social Responsibility and monitor its implementation. Your Companyhas initially decided to focus on education health drinking water and sanitation as keyareas which require attention. The objective is to make an impact on the quality of lifeof the common people in its neighborhood.
Your Company assesses each project for feasibility organizes the volunteers andsupport staff before initializing the activity. Being the first year of a co-ordinatedapproach the earmarked monies i.e. the stipulated two per cent of the average net profitof the last three financial years could not be spent in full and hence is being carriedforward.
Corporate Social Responsibility policy was adopted by the Board of Directors on therecommendation of Corporate Social Responsibility Committee and it is placed on theCompany's website at: http://www.aurobindo.com/about-us/corporate-governance.
Annual report on the CSR activities of the Company during the year are also placed onthe Company's website at: http://www.aurobindo.com/social-responsibility/csr-activities.
Report on Corporate Social Responsibility as per Rule 8 of the Companies (CorporateSocial Responsibility Policy) Rules 2014 is in Annexure-7 to this Report.
STATEMENT OF PARTICULARS OF APPOINTMENT AND REMUNERATION OF MANAGERIAL PERSONNEL
The statement of particulars of appointment and remuneration of managerial personnel asper Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules2014 is in Annexure-8 to this Report.
All properties and insurable interests of the Company including building plant andmachinery and stocks have been fully insured.
MATERIAL CHANGES AND COMMITMENTS
There are no material changes and commitments in the business operations of the Companyfrom the financial year ended March 31 2015 to the date of signing of the Director'sReport.
There were no significant and material orders passed by the regulators or courts ortribunals impacting the going concern status and Company's operations in future.
A separate section on Corporate Governance standards followed by your Company asstipulated under Clause 49 of the Listing Agreement with the stock exchanges is enclosedas a separate section forming part of this report.
The certificate of the Practicing Company Secretary Mr. S. Chidambaram with regard tocompliance of conditions of corporate governance as stipulated under Clause 49 of theListing Agreement with the stock exchanges in India is annexed to the Corporate GovernanceReport.
MANAGEMENT DISCUSSION AND ANALYSIS
Management Discussion and Analysis Report for the year under review as stipulated underClause 49 of the Listing Agreement with the stock exchanges is presented in a separatesection forming part of this report.
Your Company has not accepted any fixed deposits from the public within the purview ofChapter V of the Companies Act 2013.
Industrial relations at all units of the Company have been harmonious and cordial. Theemployees are motivated and have shown initiative in improving the Company's performance.
TRANSFER OF UNPAID AND UNCLAIMED AMOUNT TO IEPF
The dividends which remain unpaid/unclaimed for a period of seven years have beentransferred on due dates by the Company to the Investor Education and Protection Fund(IEPF) established by the Central Government.
The paid up share capital of the Company increased by Rs. 525254 during the year dueto the allotment of 525254 equity shares of Rs. 1 each on exercise of stock options underthe Employee Stock Option Plan - 2006 (ESOP 2006) of the Company.
EMPLOYEE STOCK OPTION SCHEME
The Members at the Annual General Meeting of the Company held on September 18 2006approved formulation of Employee Stock Option Scheme - 2006 (ESOP 2006) for the eligibleemployees and Directors of the Company and its subsidiaries. Details of the stock optionsas on March 31 2015 is in Annexure-9 to this Report. The details of the employeestock options form part of the notes to accounts of the financial statements in thisAnnual Report.
Your Directors would like to thank the employees of Aurobindo for the dedication theyhave shown to accelerate the Company towards sustainable growth and shaping the future.The Directors are also grateful to the customers business associates banks andgovernment agencies for their support and co-operation. Every day the investors haveshown their trust in Aurobindo. The Board shall continue to reciprocate their trust in theCompany.
| ||For and on behalf of the Board |
| ||K. Ragunathan |
|Hyderabad ||Chairman |
|May 28 2015 ||DIN: 00523576 |