To the Members
Your Directors have pleasure in presenting their report on the business and operationsof your Company for the year ended March 31 2019.
| || || |
(Rs. in million)
| || |
| ||2018-19 ||2017-18 ||2018-19 ||2017-18 |
|Revenue from Operations ||113563.2 ||100881.8 ||167181.8 ||158041.5 |
|Other Income ||2913.4 ||1311.2 ||3640.2 ||1503.5 |
|Profit before interest depreciation and tax ||31441.2 ||22169.8 ||32462.4 ||32978.6 |
|Less: Finance Costs ||354.7 ||332.4 ||3078.3 ||2043.5 |
|Less: Depreciation and amortisation ||4263.0 ||3898.1 ||10850.1 ||10858.7 |
|Profit before share of Profit from Jointly Controlled Entity exceptional items and Tax ||26823.5 ||17939.3 ||18534.0 ||20076.4 |
|Add: Share of Profit from Jointly Controlled Entity ||- ||- ||37.5 ||35.2 |
|Less: Exceptional Items ||3399.8 ||- ||3399.8 ||14643.5 |
|Less: Provision for taxation (including deferred tax) ||8035.4 ||4492.7 ||9016.9 ||2884.6 |
|Profit after tax and before non-controlling interest ||15388.3 ||13446.6 ||6154.8 ||2583.5 |
|Less: Non-controlling Interest ||- ||- ||89.3 ||70.9 |
|Net Profit attributable to Shareholders of the Company ||15388.3 ||13446.6 ||6065.5 ||2512.6 |
Consolidated Revenue from Operations for the year ended March 31 2019 were Rs.167181.8 million. International business contributes 68%. Consolidated profit beforeinterest depreciation and amortisation exceptional item and tax was Rs. 32462.4 million.Net profit for the year after exceptional item was Rs. 6065.5 million as against Rs.2512.6 million of the previous year. Earnings per share for the year was Rs. 13.41.
Your Directors are pleased to recommend dividend at ' 5/- per equity share of Rs. 2/-each absorbing an amount of Rs. 2262.7 million. Corporate tax on proposed dividend is Rs.465.1 million.
In compliance with Regulation 43A(1) of the SEBI (Listing Obligations and DisclosureRequirements) Regulations 2015 (Listing Regulations') the Dividend DistributionPolicy has been hosted on the website of the Company www.lupin.com (web link:https://www.lupin.com/pdf/ corporate-policies/dividend-distribution-policy.pdf).
During the year the paid-up equity share capital of the Company rose by Rs. 0.8million consequent to the allotment oRs. 410847 equity shares of Rs. 2/- each to eligibleemployees of the Company and its subsidiaries on exercising options under various stockoption plans. Paid-up equity share capital as on March 31 2019 was Rs. 905 million.
ICRA Limited (ICRA) assigned the rating ICRA A1+' (pronounced ICRA A onePlus') for the Company's short-term credit facilities of Rs. 15000 million indicatingvery strong degree of safety regarding timely payment of financial obligations.
Subsidiary Companies/Joint Venture
As on March 31 2019 the Company had 31 subsidiaries and a joint venture.
Pursuant to the application made to the Registrar of Companies (ROC') Bangaloreby Novel Clinical Research (India) Pvt. Ltd. wholly-owned subsidiary of the Company forremoval of its name from the Register of Companies w.e.f. March 27 2018 the ROC videits Order dated December 8 2018 struck-off the name of the company from the Register ofCompanies. As part of restructuring Lupin Ukraine LLC Ukraine and Gavis PharmaceuticalsLLC USA wholly-owned subsidiaries of the Company were liquidated effective February 72019 and March 26 2019 respectively.
Pursuant to the first proviso to Section 129(3) of the Companies Act 2013 (Act')and Rules 5 and 8(1) of the Companies (Accounts) Rules 2014 salient features of thefinancial statements performance and financial position of each subsidiary and jointventure are given in Form No. AOC - 1 as Annexure A' to this Report. Pursuant to theprovisions of Section 136 of the Act financial statements of subsidiaries and jointventure are available for inspection by Members at the Registered Office of the Companyduring business hours. The Company shall provide free of cost a copy of the financialstatements of its subsidiaries and joint venture to Members upon their request.
In compliance with Regulation 46(2)(h) of the Listing Regulations policy fordetermining material subsidiaries has been hosted on the Company's website www.lupin. com(web link: https://www.lupin.com/pdf/corporate-policies/policy-for-determining-material-subsidiaries.pdf).
Management Discussion and Analysis
In compliance with Regulation 34(3) read with Schedule V(B) of the Listing RegulationsManagement Discussion and Analysis forms part of this Annual Report.
In compliance with Regulation 34(3) read with Schedule V(C) of the Listing Regulationsa Report on Corporate Governance forms part of this Annual Report. As stipulated bySchedule V(E) of the Listing Regulations certificate from Practising Company Secretarycertifying compliance with the conditions of corporate governance is annexed to theCorporate Governance Report.
Business Responsibility Report
In compliance with Regulation 34(2)(f) of the Listing Regulations the BusinessResponsibility Report forms part of this Annual Report.
Corporate Social Responsibility (CSR)
Way back in 1988 when CSR was unheard of the Company structured its socialresponsibility interventions through Lupin Human Welfare and Research Foundation (LHWRF)its CSR arm. The CSR initiatives implemented by the Company are not imposed from the topbut are designed with people's participation at the village level. LHWRF possesseselaborate and capacitated implementation mechanism right at the grass-root level whichenables it to achieve high impact in its adopted areas of operations. LHWRF operatesthrough 20 centers across India and has touched lives of more than 2.5 million residing inmore than 4171 villages located in 61 blocks oRs. 21 districts. LHWRF mobilizes additionalresources from banks and government by engaging in knowledge and funding partnerships witheminent academic and government bodies. Third party impact assessment studies of CSRinitiatives are regularly carried out through qualitative feedbacks collected frombeneficiaries of projects undertaken. The Company broadly undertakes the following CSRactivities: -
Rural infrastructure development;
Natural Resource Management;
Learn & Earn programme; and
Pursuant to the provisions of Section 135 of the Act read with Companies (CorporateSocial Responsibility Policy) Rules 2014 during the year the Company ought to havespent Rs. 656.7 million on CSR activities. The actual spend was Rs. 379.5 million whichwas substantially higher than Rs. 216.8 million spent in the previous year. The Companyhas been unable to execute its plan of setting-up a state-of the-art JCI and NABHaccredited hospital in Mumbai as it could not identify a suitable plot. The Company aimsto continuously increase its CSR spend and is looking out for new areas/activitiesparticularly deeper sustainable projects to accelerate the spend.
In the course of business the Company spends on a number of social causes whichstrictly may not qualify as CSR activities viz. Punarjyoti' (Rebirth of Eyes')campaign in association with Eye Bank Association of India which promotes the noblemessage of pledging donation of eyes after death; Asthma detection camps includingpediatric asthma were organised pan India which facilitated free screenings by chestphysicians; multilingual website Right2breathe' to educate patients about Asthma andAllergies; a chatbot named ANYA designed to provide medically verified information forhealth-related queries was launched with the aim to answer patient queries related toailments; HUMRAHI app application demonstrates Insulin administration techniques whichare helpful to diabetic patients as also doctors; a unique mobile app named FIGHTTB' a one-stop solution for doctors treating Tuberculosis was created. With a view toprovide affordable medicines to the common man the Company consistently spends largeamounts on Research & Development which though is for a social cause does notqualify as a CSR activity.
Details of CSR activities undertaken by the Company are given in Annexure B' tothis Report. The policy on CSR which has been approved by the Board has been hosted on theCompany's website www.lupin.com.
Directors' Responsibility Statement
In compliance with the provisions of Section 134(3)(c) read with Section 134(5) of theAct your Directors confirm: -
i) that in the preparation of the annual financial statements for the year ended March31 2019 the applicable accounting standards have been followed along with properexplanations relating to material departures;
ii) that they had selected such accounting policies and applied them consistently andmade judgments and estimates that are reasonable and prudent so as to give a true and fairview of the state of affairs of your Company at the end of the financial year March 312019 and of the profit of your Company for that year;
iii) that they have taken proper and sufficient care for the maintenance of adequateaccounting records in accordance with the provisions of the Act for safeguarding theassets of the Company and for preventing and detecting fraud and other irregularities;
iv) that the annual financial statements have been prepared on a going concern basis;
v) that they had laid down proper internal financial controls and that the same areadequate and were operating effectively; and
vi) that they had devised proper systems to ensure compliance with the provisions ofall applicable laws and that such systems were adequate and operating effectively.
Dr. Kamal K. Sharma Vice Chairman was appointed as Advisor to the Company for aperiod of one-year effective October 1 2018. Dr. Sharma had been associated with theLupin Group for over three decades during which he has effectively led the seniorleadership team and was involved in setting vision of the Company building strategy andmentoring the management. The role of Dr. Sharma changed from Executive to Non-Executive.
Mr. Ramesh Swaminathan Chief Financial Officer &
Executive Director resigned from the services of the Company effective December 112018. The Board places on record its sincere appreciation of the contribution made by Mr.Swaminathan during his association with the Company.
Dr. Vijay Kelkar Independent Director resigned from the directorship of the Companyeffective March 28 2019.
The Board records its sincere appreciation of the valuable contributions of Dr. Kelkarwho is an eminent economist technocrat and a renowned public policy thought leader.
Ms. Christine Mundkur Independent Director was appointed as an Additional Directoreffective April 1 2019. Pursuant to the provisions of Sections 149 and 152 of the ActMs. Mundkur holds office up to the date of the forthcoming Annual General Meeting (AGM).Ms. Mundkur has served as Chief Executive Officer and has held senior leadership positionsin large multinational pharma companies. She holds a J.D. from the St. Louis UniversitySchool of Law and a B.S. degree in chemistry from St. Louis University. Notices underSections 152 and 160(1) of the Act have been received from certain Members proposing hername for appointment as Director.
Pursuant to the provisions of Section 152 of the Act
Ms. Vinita Gupta Chief Executive Officer retires by rotation at the forthcoming AGMand is eligible for re-appointment.
Pursuant to the provisions of Section 149(7) of the Act and Regulation 25(8) of theListing Regulations Independent Directors have submitted declarations that each of themmeet the criteria of independence as provided in Section 149(6) of the Act and Regulation16(1)(b) of the Listing Regulations respectively and that there has been no change in thecircumstances affecting their status as Independent Directors of the Company.
During the year four Board meetings were held on May 15 2018 August 8 2018October 31 2018 and February 6 2019 the details of which are given in the CorporateGovernance Report which forms part of this Annual Report.
In compliance with the provisions of Section 134(3)(p) of the Act and Rule 8(4) of theCompanies (Accounts) Rules 2014 the Board carried out an annual evaluation of its ownperformance that of individual Directors as also Committees of the Board. Performanceswere evaluated after seeking inputs from all Directors based on criteria viz. adequacyand composition of the Board quality of deliberations effectiveness of Board proceduresobservance of governance and contributions of Directors at Board and Committee meetings.Performance of individual Directors was evaluated taking into consideration variousaspects viz. leadership qualities transparency qualifications responsibilitiesshouldered analytical abilities knowledge participation in long-term strategicplanning inter-personal relationships and attendance at meetings. Performance evaluationof Independent Directors was carried out without the participation of the Director beingevaluated.
The Audit Committee comprises three directors viz.
Dr. K. U. Mada Chairman and Mr. Dileep C. Choksi both independent directors and Dr.Kamal K. Sharma Vice Chairman. The functions performed by the Audit Committeeparticulars of meetings held and attendance of Members at the said meetings are given inthe Corporate Governance Report which forms part of this Annual Report. Allrecommendations made by the Audit Committee were accepted by the Board.
Nomination and Remuneration Policy
In compliance with Section 178(3) of the Act and Regulation 19(4) of the ListingRegulations on the recommendations of the Nomination and Remuneration Committee (NRC)the Board formulated Policy relating to the remuneration of Directors key managerialpersonnel and other employees. The Policy includes criteria for determiningqualifications positive attributes and independence of directors and other matters. Itbroadly lays down the philosophy guiding principles and basis for recommending payment ofremuneration to the executive and non-executive Directors (by way of sitting fees andcommission). The role of the NRC is disclosed in the Corporate Governance Report whichforms part of the Annual Report. In compliance with proviso to Section 178(4) of the Actthe Nomination and Remuneration Policy has been hosted on the Company's websitewww.lupin.com (web link: https://www.lupin.com/pdf/corporate-policies/nomination-and-remuneration-policy- ll-final.pdf).
Related Party Transactions
All related party transactions entered into by the Company during the year were in theordinary course of business and on an arm's length pricing basis. No related partytransaction was in conflict with the interests of the Company and that material relatedparty transactions were entered into by the Company only with its subsidiaries. The AuditCommittee periodically approves related party transactions. In compliance with Section134(3)(h) of the Act and Rule 8(2) of the Companies (Accounts) Rules 2014 disclosure ofparticulars of contracts/arrangements entered into by the Company with related parties aregiven in Form No. AOC - 2 as Annexure C' to this Report. The policy on dealing withrelated party transactions as approved by the Board has been hosted on the Company'swebsite www.lupin.com web link for which is https://www.lupin.com/pdf/corporate-policies/policy-related-party-transactions.pdf.
The Company has a Risk Management framework in place which defines roles andresponsibilities at various levels of the risk management process. Risk management teamhas a robust mechanism to review the overall risks with specific focus on criticalrisks that matter'. The Risk Management Committee (RMC) has a monitoring mechanismprocess wherein the overall risks are reviewed through periodic discussions anddeliberations with the concerned operational and business teams. It includes focus onmitigation plans to address the overall risk scenario and critical risks thatmatter'. The roles and responsibilities of the RMC have been defined by the Board.Monitoring and reviewing the risk management plan was delegated to the RMC. Particulars ofthe RMC its terms of reference details of meeting held and attendance thereat are givenin the Corporate Governance Report which forms part of this Annual Report.
Particulars of loans/guarantees/investments/ securities
In compliance with the provisions of Section 134(3)(g) of the Act particulars ofloans guarantees investments and securities given under Section 186 of the Act are givenin the notes to the Financial Statements which form part of this Annual Report.
Conservation of Energy Technology Absorption and Foreign Exchange Earnings and Outgo
In compliance with provisions of Section 134(3)(m) of the Act and Rule 8 of theCompanies (Accounts) Rules 2014 particulars pertaining to conservation of energytechnology absorption and foreign exchange earnings and outgo are given in AnnexureD' to this Report.
Human resources are invaluable assets of the Company. Surveys jointly conducted byGreat Places to Work Institute' and The Economic Times' reconfirms that theCompany continues to be ranked high on pan-industry basis.
Robust people practices best-in-class work environment and learning initiatives werethe prime drivers behind the achievements.
The Company has complied with provisions relating to constitution of InternalComplaints Committee as mandated by the Sexual Harassment of Women at Workplace(Prevention Prohibition and Redressal) Act 2013.
Employees Stock Options
Pursuant to Regulation 14(B) of the SEBI (Share Based Employee Benefits) Regulations2014 details of stock options as on March 31 2019 are given in Annexure E' tothis Report.
Vigil Mechanism/Whistleblower Policy
Over the years your Company has established a reputation for doing business withintegrity and has displayed zero tolerance for any form of unethical behaviour. Incompliance with Section 177(9) of the Act Rule 7 of the Companies (Meetings of Board andits Powers) Rules 2014 and Regulation 22 of the Listing Regulations the Company has inplace a robust vigil mechanism for Directors and employees to report concerns details ofwhich are covered in the Corporate Governance Report which forms part of this AnnualReport. The said mechanism provides adequate safeguards against victimization of personswho use the vigil mechanism and provides direct access to the Chairperson of the AuditCommittee. Whistleblower Policy has been hosted on Company's website www.lupin.com.Policies on Code of Conduct and Prevention of Sexual Harassment are on the Company'sIntranet.
Particulars of Employees Remuneration
Disclosure pertaining to particulars of remuneration of employees as stipulated bySection 197(12) of the Act read with Rule 5(1) of the Companies (Appointment andRemuneration of Managerial Personnel) Rules 2014 are given in Annexure F' to thisReport. Statement containing particulars of remuneration of employees for the year endedMarch 31 2019 required to be furnished in compliance with Rules 5(2) and 5(3) of thesaid Rules forms part of the Board Report. The same shall be provided to Members uponwritten request pursuant to the second proviso of Rule 5. Pursuant to Section 136(2) ofthe Act the statement containing particulars of remuneration of employees is availablefor inspection by Members at the Registered office of the Company during business hours onall working days up to the date of the forthcoming AGM.
At the 34th AGM held on Wednesday August 3 2016 Members appointed B S R& Co. LLP Chartered Accountants (Firm Registration No. 101248W/W-100022) asStatutory Auditors of the Company for a period of five years from the conclusion of the34th AGM till the conclusion of the 39th AGM subject toratification of their appointment by Members at every AGM. Pursuant to the Companies
Amendment Act 2017 Members are not required to ratify appointment of StatutoryAuditors at every AGM.
Pursuant to the provisions of Sections 139(1) and 141 of the Act the Company hasreceived Certificate from B S R & Co. LLP certifying that their appointment would beas per the conditions prescribed by the said Sections.
The Internal Audit Department and Ernst & Young LLP conduct internal audit of Indiaoperations. Local Chartered Accountant firms conduct audits of Carrying & ForwardingAgents and Central Warehouses of the Company in India. Internal audit findings arediscussed at meetings of the Audit Committee and corrective actions taken.
As recommended by the Audit Committee the Board at its meeting held on May 15 2018appointed Mr. S. D. Shenoy practising Cost Accountant (FCMA No. 8318) as Cost Auditor toconduct cost audit for the year ended March 31 2019 pursuant to the provisions ofSection 148 of the Act read with the Companies (Cost Records and Audit) Amendment Rules2014. Mr. Shenoy confirmed that he was free from disqualifications as specified underSection 141 read with Sections 139 and 148 of the Act held a valid certificate ofpractice and that his appointment met the requirements of Sections 141(3)(g) and 148 ofthe Act. Mr. Shenoy also confirmed that he was independent maintained an arm's lengthrelationship with the Company and that no orders or proceedings were pending against himrelating to professional matters of conduct before the Institute of Cost Accountants ofIndia or any competent authority/court.
The Company has maintained cost records as specified by the Central Government underSection 148(1) of the Act.
Pursuant to Rule 14 of the Companies (Audit and Auditors) Rules 2014 remunerationpayable to the Cost Auditor is required to be ratified by Members. Accordingly anOrdinary Resolution was passed by the Members approving the remuneration payable to Mr.Shenoy at the 36th AGM held on August 8 2018.
As stipulated by Section 148(6) of the Act read with Rule 6(6) of the Companies (CostRecords and Audit) Rules 2014 Cost Audit Report in Form No. CRA-4 (XBRL mode) for theyear ended March 31 2018 under the head Drugs and Pharmaceuticals' was filed withthe Central Government on October 17 2018 well within the prescribed time.
Pursuant to the provisions of Section 204 of the Act Rule 9 of the Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 and Regulation 24A ofthe Listing Regulations the Board at its meeting held on May 15 2018 appointed Ms.Neena Bhatia Company Secretary in Practice (FCS No. 9492) to undertake Secretarial Auditof the Company for the year ended March 31 2019. Secretarial Audit Report in prescribedForm No. MR-3 is given in Annexure G' to this Report.
The Company continues to have an unqualified Secretarial Audit Report.
Annual Secretarial Compliance Report
In compliance with Circular No. CIR/CFD/CMD/1/27/2019 dated February 8 2019 issued bythe Securities and Exchange Board of India (SEBI) Ms. Neena Bhatia Company Secretary inPractice (FCS No. 9492) was appointed for issuing Annual Secretarial Compliance Reportfor the year ended March 31 2019. The said Report confirms that the Company hasmaintained proper records as stipulated under various Rules and Regulations and that noaction has been taken against the Company or its material subsidiaries orpromoters/directors by the SEBI/Stock Exchanges.
Compliance with Secretarial Standards
The Company continues to comply with Secretarial Standards on Board Meetings (SS-1) andGeneral Meetings (SS-2) issued by the Institute of Company Secretaries of India.
Extract of Annual Return
In compliance with the provisions of Sections 134(3)(a) and 92(3) of the Act read withRule 12(1) of the Companies (Management and Administration) Rules 2014 an extract of theAnnual Return as on March 31 2019 in Form No. MGT-9 is enclosed as Annnexure H'to this Report.
The same is available on the Company's website www.lupin.com (web link:https://www.lupin.com/investors/ extract-of-the-annual-return/).
Your Directors convey a sense of high appreciation to all employees of the Company fortheir commitment hard work significant contributions and continued dedication. Theyacknowledge the whole-hearted support and cooperation received by the Company from variousdepartments of the Central and State governments financial institutions banksdistributors suppliers business associates members analysts medical professionals andcustomers.
For and on behalf of the Board of Directors
Manju D. Gupta
Mumbai May 15 2019