We present you the Fortieth (40th) Annual Report on business and operationsalong with the Audited Financial Statements and the Auditor's Report of your Company forthe financial year ended March 31 2018.
|Particulars ||Standalone Results ||Consolidated Results |
| ||FY18 ||FY17 ||FY18 ||FY17 |
|Total revenue ||25502 ||27172 ||43359 ||40787 |
|Expenses ||22444 ||21810 ||37472 ||32453 |
|Share of profit of joint venture and associate net ||- ||- ||213 ||163 |
|Profit before tax ||3058 ||5362 ||6100 ||8497 |
|Income tax ||673 ||1211 ||1569 ||1538 |
|Income tax on exceptional items ||- ||(1042) ||- ||78 |
|Non-controlling interest ||- ||- ||807 ||760 |
|Profit for the year ||2385 ||5193 ||3724 ||6121 |
|Other comprehensive income net ||(65) ||84 ||130 ||646 |
|Total comprehensive income ||2320 ||5277 ||3854 ||6767 |
|Earnings per Share (EPS) before exceptional item ||4.04 ||7.05* ||_6.31 ||10.53* |
|Earnings per Share (EPS) after exceptional item ||4.04 ||8.82* ||_6.31 ||10.39* |
* Adjusted for the effect of bonus shares
Standalone and Consolidated Financial Statements
The Standalone and Consolidated Financial Statements of your Company have been preparedin accordance with Indian Accounting Standards (Ind AS') notified under theCompanies (Indian Accounting Standards) Rules 2015.
Further a statement containing the salient features of the Financial Statements of oursubsidiaries pursuant to sub-section 3 of Section 129 of the Companies Act 2013 in theprescribed Form AOC-1 is appended as Annexure 1 to the Board's Report. Thestatement also provides the details of performance and financial positions of thesubsidiaries.
State of Affairs
The highlights of your Company's Standalone performance are as under:
Revenue from operations for FY18 stood at Rs 24255 mn compared to Rs 26184 mnfor FY17. Other income for FY18 amounted to Rs 1247 mn as against Rs 988 mn in FY17primarily comprised income on investments at Rs 628 mn foreign exchange gain Rs 174 mnand dividend income from subsidiaries at Rs 145 mn.
Core operating margins (EBIDTA margins net of licensing impact of forexR&D and dividend from subsidiaries) was 23% compared to 30% in FY18 on account oflower revenues. Profit for the year stood at Rs 2385 mn compared to Rs 5193 mn for FY17.
Effective Tax Rate (ETR) for the year was 22% as compared to 23% in the previousyear before exceptional item. The highlights of your Company's Consolidated FinancialPerformance are as under:
During the year our consolidated revenues registered a growth of 6% to Rs43359 mn from Rs 40787 mn in FY17. From a segment perspective the research servicesrecorded an annual growth of 19% while Biologics and Branded Formulation registered agrowth of 10% and 11% respectively. Small molecules was down 8%.
Core margins (EBITDA margins net of licensing impact of forex and R&D)stood at 27% as compared to 32% in FY17. Profit for the year stood at Rs 4531 mn comparedto Rs 6881 mn for FY17. Profits for FY17 included tax on exceptional item of Rs 78 mn.
Income Tax on Exceptional Items
Income tax on exceptional items during the FY17 comprised the following:
During the year ended March 31 2017 the Company in its Standalone FinancialStatements recorded MAT credit entitlement of Rs 1042 mn on sale of equity shares ofSyngene International Limited in FY16. However in the Consolidated Financial Statementssuch entitlement is recognised as a credit in equity along with the underlying dilutiongain on sale of equity stake in Syngene as it did not impact Group's control.
During the year ended March 31 2017 Biocon SA ("BSA") transferred all ofits rights interests and obligations in Insulin Analogs (IPR) to Biocon Sdn. Bhd.Consequent to this transfer BSA recorded a net gain in its Standalone books which wasoffered to tax under the Swiss tax laws. The above restructuring did not have any impacton Consolidated Financial Statements except for a tax cost of Rs 78 mn representing thetax payable by BSA locally which had been included within income tax expenses for the yearended March 31 2017.
During FY18 the Company issued and allotted 400 mn equity shares of Rs 5 each as fullypaid bonus shares in the ratio of two equity shares for every one equity share held by theMembers as on the record date June 17 2017. Consequently issued subscribed and paid-upshare capital of the Company has increased to Rs 3000 mn.
Your Directors are pleased to recommend a Final Dividend of Re. 1/- (20%) per equityshare for the financial year ended March 31 2018 entailing a pay-out of Rs 600 mn. Thedividend pay-out is subject to approval of Members at the ensuing Annual General Meeting(AGM).
The dividend will be paid to Members whose names appear in the Register of Members ason the Record Date to be determined by the Board in respect of shares held indematerialised form it will be paid to Members whose names are furnished by NationalSecurities Depository Limited and Central Depository Services (India) Limited asbeneficial owners as on the record date.
Dividend Distribution Policy
As per the provisions of Regulation 43A of SEBI Listing Obligations and DisclosureRequirements (SEBI LODR) the top 500 listed companies shall formulate a DividendDistribution Policy. Accordingly the Policy was adopted to set out the parameters andcircumstances that will be taken into account by the Board in determining the distributionof dividend to its shareholders and/or retaining profits earned by the Company. The Policyis appended herewith as Annexure 2 to the Board's Report and is also available onthe Company's website at http://www.biocon.com/docs/Dividend_Distribution_Policy.pdf.
Transfer of Unpaid and Unclaimed Amounts to IEPF
Pursuant to the provisions of Section 124(5) of the Companies Act 2013 dividend whichremains unpaid or unclaimed for a period of seven years from the date of its transfer tounpaid dividend account is required to be transferred by the Company to Investor Educationand Protection Fund (IEPF) established by the Central Government under the provisions ofSection 125 of the Companies Act 2013. During the year under review the Company hascredited unpaid/ unclaimed dividends of financial year 2009-10 amounting to Rs 546255lying in the unpaid dividend account to the IEPF.
Your Company has formulated a Policy for determining Material' Subsidiariespursuant to the provisions of SEBI LODR. The said Policy is available at the Company'swebsite http://www.biocon.com/docs/PolicyDocument_MaterialSubsidiary.pdf
During the year Syngene USA Inc. was incorporated on August 24 2017 as a whollyowned subsidiary of Syngene International Limited and Biocon_Healthcare Sdn. Bhd. wasincorporated on August 10 2017 as a wholly owned subsidiary of your Company. As on March31 2018 your Company has 12 subsidiaries.
A report on the performance and financial position of each of the subsidiary and jointventure is presented below.
Syngene International Limited India
Syngene International Limited ("Syngene") is engaged in providing contractresearch and manufacturing services from lead generation to clinical supplies topharmaceutical and biotechnology companies worldwide. Syngene's services includeintegrated drug discovery and development capabilities in medicinal chemistry biologyvivo pharmacology toxicology custom synthesis process R&D cGMP manufacturingformulation and analytical development along with Clinical development services. Syngeneis a public limited company incorporated and domiciled in India and has its RegisteredOffice in Bengaluru Karnataka India. The Company's shares are listed on the Bombay StockExchange (BSE) and the National Stock Exchange (NSE) in India.
During the year ended March 31 2018 Syngene registered a revenue growth of 17% to Rs14849 mn in FY18 (FY17 - Rs 12716 mn). The growth was led by an overall strongperformance across all its businesses. EBIDTA margin for the year was 35% with theoperating margin at Rs 5262 mn (FY17 - Rs 4783 mn) registering a growth of 10%.
Pursuant to a fire incident on December 12 2016 at Syngene certain fixed assetsinventory and other contents in one of the buildings were damaged.
Syngene lodged an estimate of loss with the insurance company and the survey iscurrently ongoing. Syngene recorded a loss of Rs 795 mn arising from such incident duringthe year ended March 31 2017. During the year ended March 31 2018 Syngene hasadditionally recorded losses aggregating to Rs _237 mn. Syngene also recognised a minimumInsurance claim receivable for equivalent amounts in the respective periods. Theaforementioned loss and the corresponding credit arising from insurance claim receivablehas been presented on a net basis ( Rs Nil) under Exceptional items in these FinancialStatement. During the year ended March 31 2018 Syngene has received an disbursement ofRs 615 mn(March 31 2017: Rs 200mn) from the insurance company and the same has beenadjusted with the amount recoverable from the insurance company.
In addition Syngene is in the process of determining its final claim for loss of fixedassets and Business Interruption and has accordingly not recorded any further claimarising therefrom at this stage.
On April 25 2018 the Board of Directors of Syngene recommended a dividend of Rs 1/-(10%) per equity for the financial year ended March 31 2018 entailing a pay-out of Rs200 mn. The dividend pay-out is subject to approval of Members of Syngene at
the ensuing Annual General Meeting (AGM).
Syngene USA Inc.
Syngene USA Inc a wholly owned subsidiary of Syngene incorporated on August 24 2017with Registered Office in the State of Delaware United States of America (USA). TheCompany provides sales and business support services to the operations of Syngene in USA.
Biocon Research Limited India
Biocon Research Limited ("BRL") a 100% subsidiary of the Company undertakesdiscovery and development research work in Biologics and provides scientific support forvarious development programmes of the group.
BRL's current business is directed towards the R&D services for Monoclonal Antibodymolecules (mAbs) and Proteins insulin Tregopil (formally referred to as IN-105) and otherinsulin products on behalf of other group companies. The research programs undertaken byBRL have made significant inroads to the next level of global clinical trials. BRLcontinues to hold 0.93% shareholding in Syngene.
During FY18 BRL registered a turnover of Rs 2190 mn and reported a net profit of Rs431 mn compared to a turnover of Rs 1657 mn and a net profit of Rs 661 mn in FY17. FY18revenue includes sale of export incentives to Biocon Limited for a consideration of Rs 181mn.
Biocon Pharma Limited India
Biocon Pharma Limited ("BPL") is a wholly owned subsidiary of the Company.BPL would be engaged in the development and manufacture of generic formulations for salein global markets especially opportunities in US and EU. BPL is in the process of settingup its formulations manufacturing facility for oral solid dosages at Bengaluru. DuringFY18 2 mn equity shares of face value of Rs 10 were issued to Biocon Limited at facevalue.
As at March 31 2018 BPL has not commenced commercial operations and has capitalwork-in-progress of Rs 1862 mn (FY17 - Rs 1130 mn).
Biocon Pharma Inc USA
Biocon Pharma Inc. ("BPI") a wholly owned subsidiary of Biocon PharmaLimited was incorporated in July 2015 in the United States of America. BPI is engaged incommercialization of generic formulations in the United States.
During FY18 BPI commenced commercial operations and has registered a turnover of Rs170 mn and reported a net loss of Rs 218 mn.
Biocon SA Switzerland
Biocon SA ("BSA") a wholly owned subsidiary of the Company is primarilyengaged in identifying and developing novel molecules into commercial products orlicensable assets through strategic partnerships.
In the current year BSA registered a net loss of Rs 255 mn against a net profit of Rs684 mn in FY17 primarily due to expenditure incurred on Research and Developmentactivities. Exceptional gains as explained below resulted in profits for FY17.
Exceptional item represents:
During FY17 BSA and Biocon Sdn. Bhd. had entered into an Assignment and LicenseAgreement pursuant to which BSA transferred all of its rights interests and obligationsin Insulin Analogs (IPR) to Biocon Sdn. Bhd. Consequent to this transfer BSA recorded again of Rs 1150 mn net of tax Rs 78 mn.
Biocon Biologics Limited UK
Biocon Biologics Limited ("BUK") is a wholly owned subsidiary of the Company.Incorporated in the United Kingdom in March 2016 BUK houses Biocon's Biosimilar Biologicsbusiness. Biocon Sdn. Bhd. and Biocon Biologics India Limited are wholly ownedsubsidiaries of BUK. In December 2017 the US Food and Drug Administration approvedOgivri a biosimilar Trastuzumab co-developed by Biocon and Mylan.
During the year ended March 31 2018 BUK earned Rs 852 mn as revenue and reported anet loss of Rs 201 mn as against revenue of Rs 1826 mn and net loss of Rs 189 mn in FY17primarily due to higher expenditure incurred on Research and Development activities.
Biocon Sdn. Bhd. Malaysia
Biocon Sdn. Bhd Malaysia is a step down subsidiary of the Company wholly owned by BUK.Biocon Sdn. Bhd. was established with an objective to set up the group's first overseasmanufacturing facility at Malaysia. The facility is located within BioXcell abiotechnology park in Iskandar Puteri Johor.
The facility is approved for manufacture of Human insulin and glargine drug productfrom National Pharmaceutical Regulatory Authority ("NPRA") Malaysia. During thecurrent year the facility received cGMP certification from HPRA (EMA). With the receipt ofproduct approval from EMA for our Insulin Glargine Biocon Sdn. Bhd. is set to commenceexport of products to EU. Biocon Sdn. Bhd. also received the product approval from NPRAMalaysia for its BASALOG cartridges.
Biocon Sdn. Bhd. holds the commercial and development rights of human insulin andanalogs and continues the related Research and Development activities.
Currently in the second year of commercial operations Biocon Sdn. Bhd. reported atotal revenue of Rs 2716 mn and net loss of Rs 697 mn in FY18 against a total revenue ofRs 998 mn and a net profit of Rs 5 mn in FY17.
Biocon Biologics India Limited India
Biocon Biologics India Limited ("BBIL") is a step down subsidiary of theCompany wholly owned by BUK. BBIL was incorporated on June 08 2016 in India with anobjective to set up greenfield biosimilar biologics facilities. During the current yearthe Board and shareholders of BBIL have approved the acquisition of existing Biosimilarsbusiness from Biocon Limited for a consideration of Rs 5787 mn subject to regulatoryapprovals.
As at March 31 2018 BBIL has not commenced commercial operations and has capitalwork-in-progress of Rs 152 mn.
Biocon FZ LLC UAE
Biocon FZ LLC is a wholly owned subsidiary of the Company based in Dubai. Incorporatedin June 2015 Biocon FZ LLC was established as a marketing entity for pharmaceuticalproducts to target markets in the Middle East and GCC. During the year ended March 312018 Biocon FZ LLC earned Rs 1760 mn as revenue and reported a net loss of Rs 13as against a revenue of Rs 1328 mn and a net loss of Rs 21 mn in the immediatelypreceding year.
Biocon Healthcare Sdn. Bhd. Malaysia
Biocon Healthcare Sdn Bhd ("BHSB") a 100% owned subsidiary of Biocon Ltdincorporated in August 2017 in Malaysia. BHSB proposes to carry on the business asimporters and distributors in active pharmaceutical and biopharmaceutical ingredientsdrugs and devices in the Malaysian market. As at March 31 2018 BHSB has not commencedcommercial operations.
Biocon Academy India
Biocon Academy established in 2014 spearheads Biocon's Corporate SocialResponsibility (CSR) initiatives in the area of advanced learning aimed at creating aglobally competitive Biotech ecosystem in India through skill development. Biocon Academyleverages rich industry experience and subject matter expertise of Biocon as well asinternational Education Partners such as Keck Graduate Institute California USA andBITS Pilani India to deliver industry-oriented advanced learning and skill buildingprograms for pharma and biotech graduates. Our Programs are aimed at empowering thestudents with industrial proficiency through job-skills development essential to build apromising career in the Biopharma industry.
Management Discussion and Analysis
In terms of the provisions of Regulation 34 of the SEBI LODR the Management Discussionand Analysis is set out in this Annual Report.
Your Company is committed to maintain the highest standards of corporate governance. Webelieve sound corporate governance is critical to enhance and retain investor trust. Ourdisclosures seek to attain the best practices in corporate governance as prevalentglobally. We have implemented several best corporate governance practices in the Companyto enhance long-term shareholder value and respect minority rights in all our businessdecisions. Corporate Governance Report for FY 2017-18 forms part of this Annual Report.
The requisite certificate from the auditors of the Company confirming compliance withthe conditions of corporate governance as stipulated under SEBI_LODR is annexed to thecorporate Governance Report.
Business Responsibility Report
The Business Responsibility Report ("BRR") of your Company for the year2017-18 forms part of this Annual Report as required under Regulation 34(2) (f) of theSEBI LODR.
Employee Stock Option Plan (ESOP)
Nomination and Remuneration Committee of the Board inter alia administers and monitorsthe Company's employees' stock option plan (Plan) in accordance with SEBI (Share BasedEmployee Benefits) Regulations 2014 (SBEB Regulations). The Plan is implemented throughBiocon India Limited Employees' Welfare Trust (ESOP Trust).
During the year ended March 31 2018 a total of 1894439 shares were transferredfrom the ESOP Trust to the eligible employees under the Company's prevailing ESOP plan. Asat March 31 2018 the ESOP Trust held 9005047 equity shares of the Company. During theyear ended March 31 2018 there has been no material change in the Company's existingplan and the plan is in compliance with SBEB Regulations. Information as required underSBEB Regulations read with SEBI Circular CIR/CFD/POLICY CELL/2/2015 dated June 16 2015have been uploaded on the Company's website and can be accessed at the web-link:http://www.biocon.com/biocon_invrelation_annualreports.asp?subLink=finance
The applicable disclosures as stipulated under the SBEB Regulations as on March 312018 is appended herewith as Annexure 3 to the Board's Report. The Company hasreceived a certificate from the Statutory Auditor that the scheme has been implemented inaccordance with SEBI Share Based Employee Benefits (SBEB) Regulations and the resolutionspassed by the shareholders. The certificate would be placed at the AGM for inspection bythe Members.
Your Company has not accepted any deposit and as such no amount of principal andinterest were outstanding as at the Balance Sheet date.
Loans Guarantees or Investments
Details of loans guarantees and investments covered under the provisions of Section186 of the Companies Act 2013 form part of the notes to the Financial Statements.
Policy on Directors' Appointment and Remuneration
The Company's current policy is to have an appropriate mix of Executive and IndependentDirectors to maintain the independence of the Board and separate its functions ofgovernance and management. As on March 31 2018 the Board consists of 10 Directorsmajority of them being Independent Directors. Besides the Chairperson and ManagingDirector who is a Promoter the Board comprises of Vice Chairman who is a Non-ExecutiveDirector CEO & Joint Managing Director a Non-Executive Director and 6 IndependentDirectors. The Board periodically evaluates the need for change in its composition andsize. The Policy of the Company on Director's Appointment and Remunerationincluding criteria for determining qualifications positive attributes independence of aDirector and other matters as required under sub-section (3) of Section 178 of theCompanies Act 2013 are formulated by the Nomination and Remuneration Committee. ThePolicy of the Company on Director's Appointment and Remuneration is appended herewith as Annexure4 to the Boards' Report.
A diverse Board enables efficient functioning through differences in perspective andskill and also fosters differentiated thought processes at the back of varied industrialand management expertise gender knowledge and geographical background. The Boardrecognises the importance of a diverse composition and has adopted a Board DiversityPolicy which sets out the approach to diversity. The Policy is available at the web-link:http://www. biocon.com/docs/PolicyDocument_BoardDiversity.pdf
Declaration by Independent Directors
The Company has received necessary declaration from each Independent Director underSection 149(7) of the Companies Act 2013 that he/she meets the criteria of independencelaid down in Section 149(6) of the Companies Act 2013 and Regulation 25 of SEBI LODR.
Pursuant to the provisions of the Companies Act 2013 and Regulation 19 of SEBI LODRthe Board has carried out the Annual Performance Evaluation of its own performance theDirectors individually as well as the evaluation of the working of its various committees.A structured questionnaire was prepared after taking into consideration inputs receivedfrom the Directors covering various aspects of the Board's functioning such as adequacyof the composition of the Board and its Committees Board culture execution andperformance of specific duties obligations independence governance ethics and valuesadherence to corporate governance norms interpersonal relationships attendance andcontribution at meetings etc.
A separate exercise was carried out to evaluate the performance of individual Directorsincluding the Chairperson of the Board who were evaluated on parameters such asparticipation and contribution by a Director commitment including guidance provided tothe senior management outside of Board / Committee meetings effective deploymentof knowledge and expertise effective management of relationship with variousstakeholders independence of behaviour and judgment etc. The Performance Evaluation ofthe Independent Directors were carried out by the entire Board. The Performance Evaluationof the Chairperson and Managing Director was carried out by the Independent Directors. Theevaluation process has been explained in the Corporate Governance Report. The Boardreviewed the evaluation results as collated by the Nomination and Remuneration Committee.
Appointment of Directors and Key Managerial Personnel
The Members at the 39th AGM held on July 28 2017 re-appointed Mr. RussellWalls Ms. Mary Harney and Mr. Daniel Bradbury as Independent Directors for 5 years. TheMembers at the said AGM also appointed Prof. Ravi Mazumdar as a Director liable to retireby rotation. We thank the Members for their support in confirming the above mentionedappointments.
Mr. Rajiv Balakrishnan has ceased to hold office as Company Secretary and ComplianceOfficer effective March 2 2018.
Retirement and Re-appointment
As per the provisions of Section 152(6) of Companies Act 2013 Mr. John ShawNon-Executive Non-Independent Director retires by rotation at the ensuing AGM and beingeligible seeks re-appointment. The Board recommends his re-appointment.
The current term of appointment of Mr. Jeremy Levin and Mr. Vijay Kuchroo IndependentDirectors of the Company shall come to an end at the ensuing AGM. Based on the outcome ofthe Performance Evaluation the Nomination and Remuneration Committee has recommended tocontinue the term of appointment of the Independent Directors and nominated to the Boardre-appointment of Mr. Jeremy Levin and Mr. Vijay Kuchroo as Independent Directors for anadditional term of five consecutive years. A brief profile of Mr. Jeremy Levin and Mr.Vijay Kuchroo is given in the Notice of AGM dated June 22 2018. The Company has receiveddeclarations from both the Independent Directors confirming that they meet the criteria ofindependence as prescribed under sub-section (6) of Section 149 of the Companies Act 2013and Regulation 25 of SEBI LODR. The Company has also received requisite notices in writingfrom Members signifying the candidatures of Mr. Jeremy Levin and Mr. Vijay Kuchroo asIndependent Directors of the Company.
The Board recommends the re- appointment of Mr. Jeremy Levin and Mr. Vijay Kuchroo asIndependent Directors.
Committees of the Board
Currently the Board has four Committees: Audit and Risk Committee Nomination andRemuneration Committee Stakeholders' Relationship Committee and Corporate SocialResponsibility (CSR) Committee. As required under the provisions of Section 177(8) of theCompanies Act 2013 the composition of the Audit Committee is disclosed as under:
Mr. Russell Walls Chairman Mr. Daniel M Bradbury Dr. Jeremy M Levin and Mr. M.Damodaran.
A detailed note on the composition of the Board and other Committees is provided in theCorporate Governance Report section of this Annual Report.
Meetings of the Board
The meetings of the Board are scheduled at regular intervals to decide and discuss onbusiness performance policies strategies and other matters of significance. The scheduleof the meetings are circulated in advance to ensure proper planning and effectiveparticipation in meetings. In certain exigencies decisions of the Board are also accordedthrough circulation.
The Board during the financial year 2017-18 met five times. The maximum intervalbetween any two meetings did not exceed 120 days as prescribed in the Companies Act2013. Detailed information regarding the meetings of the Board are included in the reporton Corporate Governance which forms part of the Board's Report.
Related Party Contracts or Arrangements
All transactions entered into with Related Parties as defined under Companies Act 2013during the year were in the ordinary course of business and on an arm's length basis. TheCompany has formulated a Policy on "Materiality of Related Party Transactions"and the process of dealing with such transactions which are in line with the provisionsof the Companies Act 2013 and SEBI LODR. The same is also available on the web-link:https://www.biocon.com/ biocon_invrelation_cor_keygovernance.asp?subLink=gover.
Prior omnibus approval from the Audit and Risk Committee are obtained for transactionswhich are repetitive and also normal in nature. Further disclosures on related partycontracts and arrangements are made to the Audit and Risk Committee and the Board on aquarterly basis.
During the year under review there were no material related party transactions underRegulation 23 (4) of SEBI LODR entered into by the Company which necessitates approval ofshareholders. Particulars of contracts or arrangements with related parties referred to inSection 188(1) of the Companies Act 2013 in the prescribed Form AOC 2 isappended herewith as Annexure 5 to the Board's Report.
ICRA and CRISIL continued to reafirm their rating of AA+/ Stable and A1+ respectivelyfor various banking facilities throughout the year enabling your Company to availfacilities from banks at attractive rates indicating a very strong degree of safety fortimely payment of financial obligations.
Conservation of Energy Technology Absorption Foreign Exchange Earnings & Outgo
The particulars as prescribed under sub-section (3)(m) of Section 134 of the CompaniesAct 2013 read with the Companies (Accounts) Rules 2014 is appended herewith as Annexure6 to the Board's Report.
M/s B S R & Co. LLP Chartered Accountants (ICAI Registration No. 101248W/W-100022)were appointed as the Statutory Auditors of the Company to hold office from the conclusionof the 38th AGM held on June 30 2016 until the conclusion of the 43rdAGM of the Company to be held in the calendar year 2021 (subject to ratification of theirappointment by the Members at every AGM).
As required under the provisions of Section 139(1) of the Companies Act 2013 theCompany had received a written consent from M/s B S R & Co. LLP
Chartered Accountants to their appointment and a certificate to the effect that theirappointment if made would be in accordance with the Companies
Act 2013 and the Rules framed thereunder and that they satisfy the criteria providedin Section 141 of the Companies Act 2013.
The Members are requested to ratify the appointment of the Statutory Auditors at theensuing AGM.
The Auditors' Report on the Financial Statements of the Company for the year endingMarch 31 2018 is unmodified i.e. it does not contain any qualification reservation oradverse remark. The Auditors' Report is enclosed with the Financial Statements formingpart of the Annual Report.
The Board of Directors on the recommendation of the Audit and Risk Committee appointedM/s Rao & Murthy Cost Accountants (Firm Registration Number 000065) as the CostAuditors of the Company for the Financial Year 2017-18 under Section 148 of the CompaniesAct 2013. M/s Rao & Murthy Cost Accountants have confirmed that their appointmentis within the limits of Section 141(3) (g) of the Companies Act 2013 and have alsocertified that they are free from any disqualifications specified under Section 141(3) andproviso to Section 148(3) read with Section 141(4) of the Companies Act 2013.
The Audit and Risk Committee has also received a certificate from the Cost Auditorscertifying their independence and arm's length relationship with the Company.
As per the provisions of the Companies Act 2013 the remuneration payable to the CostAuditors is required to be placed before the Members in a General Meeting for theirratification. Accordingly a resolution seeking Members' ratification for the remunerationpayable to M/s Rao & Murthy Cost Accountants is included in the Notice convening the40th AGM.
Pursuant to the provisions of Section 204 of the Companies Act 2013 and Rulesthereunder M/s M. Damodaran & Associates Practicing Company Secretaries wereappointed to conduct the secretarial audit of the Company for the FY 2017-18. TheSecretarial Audit Report for FY 2017-18 is appended herewith as Annexure 7 to theBoard's Report. The Secretarial Audit Report does not contain any qualificationreservation or adverse remark.
The Board has appointed M/s. V. Sreedharan & Associates Practising CompanySecretaries as Secretarial Auditor of the Company for the financial year 2018-19.
Risk Management Policy
The Company has put in place an enterprise wide Risk Management Framework with anobject of timely identification of risks assessment and evaluation of the same in linewith overall business objectives and define adequate mitigation strategy. On a quarterlybasis the Audit and Risk Committee reviews critical risks on a rotation basis in linewith the mitigation progress/ effectiveness and its impact on overall risk exposure of theCompany all the critical risk areas are covered at least once a year. Annually allcritical risk areas identified are re-evaluated.
Internal Financial Control
The Company has laid down certain guidelines processes and structures which enableimplementation of appropriate internal financial controls across the organisation. Suchinternal financial controls encompasses policies and procedures adopted by the Company forensuring the orderly and efficient conduct of business including adherence to itspolicies safeguarding of its assets prevention and detection of frauds and errors theaccuracy and completeness of accounting records and the timely preparation of reliablefinancial information. These include control processes both on manual and ITapplications including the ERP applications wherein the transactions are approved andrecorded. Appropriate review and control mechanisms are built in place to ensure that suchcontrol systems are adequate and are operating effectively.
Because of the inherent limitations of internal financial controls including thepossibility of collusion or improper management override of controls materialmisstatements in financial reporting due to error or fraud may occur and not be detected.Also evaluation of the Internal Financial Controls are subject to the risk that theinternal financial control may become inadequate because of changes in conditions or thatthe compliance with the policies or procedures may deteriorate.
The Company has in all material respects an adequate Internal Financial ControlsSystem and such internal financial controls were operating effectively based on theinternal control criteria established by the Company considering the essential componentsof internal control stated in the Guidance Note on Audit of Internal Control overFinancial Reporting issued by the Institute of Chartered Accountants of India.
The Vigil Mechanism as envisaged in the Companies Act 2013 the Rules prescribedthereunder and SEBI LODR is implemented through the Company's Whistle Blower Policy toenable the Directors employees and all stakeholders of the Company to report genuineconcerns to provide for adequate safeguards against victimisation of persons who use suchmechanism and make provision for direct access to the Chairman of the Audit and RiskCommittee.
Whistle Blower Policy of your Company is available on the Company's website and can beaccessed at the web-link:https://www.biocon.com/docs/Biocon_Group_Integrity_Whistle_Blower_Policy.pdf.
Directors' Responsibility Statement
Pursuant to the requirement under Section 134 (3) (c) of the Companies Act 2013 yourDirectors confirm that:
(a) In the preparation of the annual accounts the applicable Accounting Standards hadbeen followed along with proper explanation relating to material departures.
(b) they have selected such accounting policies and applied them consistently and madejudgements and estimates that are reasonable and prudent so as to give a true and fairview of the state of Affairs of the Company at the end of the financial year and of theprofit and loss of the Company for that period.
(c) they have taken proper and sufficient care for the maintenance of adequateaccounting records in accordance with the provisions of the Companies Act 2013 forsafeguarding the assets of the Company and for preventing and detecting fraud and otherirregularities.
(d) they have prepared the annual accounts on a going concern basis.
(e) they have laid down Internal Financial Controls based on internal controlsframework established by the Company which were adequate and are operating effectivelyand
(f) they have devised proper systems to ensure compliance with the provisions of allapplicable laws and that such systems were adequate and operating effectively.
Particulars of Employees
The statement containing particulars in terms of Section 197(12) of the Companies Act2013 read with Rule 5(1) of the Companies (Appointment and Remuneration of ManagerialPersonnel) Rules 2014 forms part of this Annual Report and is appended herewith as to theBoards' report.
The statement containing particulars in terms of Section 197(12) of the Companies Act2013 read with Rule 5(2) and 5(3) of the Companies (Appointment and Remuneration ofManagerial Personnel) Rules 2014 forms part of this Annual Report.
Considering the first proviso to Section 136(1) of the Companies Act 2013 the AnnualReport excluding the aforesaid information is being sent to the Members of the Companyand others entitled thereto. The said information is available for inspection at theRegistered Office of the Company during business hours on working days of the Company upto the date of the ensuing Annual General Meeting. Any shareholder interested in obtaininga copy thereof may write to the Secretarial Team of the Company in this regard.
Corporate Social Responsibility (CSR)
At Biocon CSR has been an integral part of our business since its inception. With theincorporation of Biocon Foundation in 2004 the Company formally structured its CSRactivity. Today the Company span its CSR efforts through Biocon Foundation BioconAcademy and some partnership programs with like-minded private organizations andgovernment. The Company promotes social and economic inclusion for the marginalizedcommunities with its integrated system focussing largely in the following areas:
Primary Healthcare- The Company believes that the most cost-efficient method ofensuring the health of a community is by preventing disease from occurring in the firstplace. The Company is providing affordable primary and preventive healthcare services ofassured quality. The initiative provides cushion to low and middle income groups fromhealth shocks caused by a high out-of-pocket health expenditure and it is catering tohealthcare needs of a population of more than 10 Lakhs living predominantly in ruralareas peri-urban areas and slums in Karnataka & Rajasthan.
Promotion of Education- The Company believes in ensuring inclusive and equitablequality education for all. An afterschool enrichment program on English and Phonics LifeSkills Art and Craft Digital Literacy and games for children of Government schools isalso ongoing successfully. Biocon Academy is an initiative to create a globallycompetitive Biotech ecosystem in India.
Promotion of Art & Culture- The Company gives a lot of emphasis on protectionof national heritage art and culture and our sincere effort to provide grants to restoremany institutions of great public importance including India Foundation for the ArtsBengaluru are steps in that direction.
Gender Equality & Empowerment of Women- Promoting gender equality andempowering women is one of the major objectives of the Company. Biocon Foundation has setup hostels for women who comes from weaker sections of the society. Donation of patrolvehicles to a special cell of Hebbagodi Police for ensuring safety of women is anotherinitiative undertaken towards providing a safe environment.
Technology Incubation- The Company is keenly aware of the power of technology intransformation of the development indicators and therefore we support technologyincubators which are approved by the Central Government. Under this initiative BioconFoundation has provided grants to The Institute of Bioinformatics and AppliedBiotechnology (IBAB) Team Indus & Science Gallery Bengaluru.
Rural Development- The Company works towards combatting the social and economicproblems to ensure the prosperity of rural India. Biocon Foundation has undertakenmany projects to bridge the rural-urban divide in terms of infrastructure. Some of ourinitiatives include construction of roads school buildings community centre communitytoilets drinking water facilities and so on. In an effort to ensuring rejuvenation oflakes in Bengaluru Biocon Foundation has treated Hebbagodi lake by Bio-remediationprocesses and the similar work on revival of Yarandahalli Lake is undergoing.
In compliance with the provisions of Section 135 of the Companies Act 2013 the Boardhas formed a CSR Committee which monitors and oversees various CSR initiatives andactivities of the Company. The CSR Committee comprises of Ms. Mary Harney (Chairperson)Ms. Kiran Mazumadar-Shaw Dr. Vijay Kuchroo and Prof. Ravi Mazumdar.
A detailed report regarding CSR is appended herewith as Annexure 9 to theBoards' report.
Sexual Harassment of Women at Workplace (Prevention Prohibition and Redressal) Act2013
The Company has in place an Anti-Sexual Harassment Policy in line with the requirementsof the Sexual Harassment of Women at Workplace (Prevention Prohibition and Redressal)Act 2013. Internal Complaints Committee (ICC) has been set up to redress complaintsreceived regarding sexual harassment. All employees (permanent contractual temporarytrainees) are covered under this Policy. The Policy is gender neutral. During the yearunder review 3 complaints with allegations of sexual harassment were filed 2 of whichwere disposed-off as per the provisions of Sexual Harassment of Women at Workplace(Prevention Prohibition and Redressal) Act 2013.
Significant and Material Orders
There are no significant and material orders passed during the year by the regulatorscourts or tribunals impacting the going concern status and Company's operations in thefuture.
None of the Directors of your Company are disqualified as per the provisions of Section164(2) of the Companies Act 2013. Your Directors have made necessary disclosures asrequired under various provisions of the Companies Act 2013 and SEBI LODR.
Material changes and commitments
No material changes and commitments affecting the financial position of the Companyhave occurred between March 31 2018 and the date of this Annual Report.
Change in nature of business
There has been no change in the nature of business of the Company. Your Companycontinues to be a pioneer biopharmaceutical company engaged in manufacturing activepharmaceutical ingredients and formulations including biosimilar drugs for diabeticsoncology and autoimmune diseases with sales in markets across the globe.
Extract of Annual Return
In accordance with the provisions of Section 134(3) (a) of the Companies Act 2013 anextract of the Annual Return in the prescribed format is appended herewith as Annexure10 to the Board's Report.
We place on record our appreciation for the committed services by every member of theBiocon family globally whose contribution was significant to the growth and success of theCompany. We would like to thank all our clients partners vendors investors bankers andother business associates for their continued support and encouragement during the year.
We also thank the Government of India and Malaysia Government of Karnataka Governmentof Telangana Government of AP Ministry of Information Technology and BiotechnologyMinistry of Health Ministry of Commerce and Industry Ministry of Finance Department ofPharmaceuticals Department of Scientific and Industrial Research Ministry of CorporateAffairs Central Board of Indirect Taxes and Customs Income Tax Department CSEZ and allother regulatory agencies for their assistance and co-operation during the year and lookforward to their continued support in the future.
| ||For and on behalf of the Board |
|Bengaluru ||Kiran Mazumdar-Shaw |
|April 26 2018 ||Chairperson and Managing Director |
| ||DIN: 00347229 |