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Bal Pharma

BSE: 524824|NSE: BALPHARMA|ISIN: INE083D01012|SECTOR: Pharmaceuticals
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Directors Report Year End : Mar '16    Mar 15

To the Members,

The Directors are pleased to present the Twenty Ninth (29th) Annual Report and the Company''s Audited Financial Statements for the Financial Year ended 31.03.2016.

FINANCIAL RESULTS

The following is the summary of the Company''s Consolidated financial performance during the year under review.

(Rs, in Crores)

Particulars

FY 2015-16

FY 2014-15

Total Income from operations

198.32

187.15

Profit from operations before Interest other income and exceptional items.

7.84

10.08

Tax expense

2.39

1.18

Finance cost

6.48

6.52

Profit After Tax

0.26

3.55

Profit After Taxes and Minority Interest and share of profit /loss of associates

1.40

3.62

Earnings per Share (in Rupees)

1.09

2.83

Note : Previous year''s expenses have been regrouped wherever necessary to confirm to this year''s classification.

2. DIVIDEND & APPROPRIATIONS

Your Directors are pleased to recommend dividend of Rs, 1.00/- (i.e 10%) on each Equity Share of Rs, 10/- , thereby absorbing an amount of Rs, 1.41 crores excluding Dividend Distribution Tax of Rs, 28.85 Lakhs.

3. SHARE CAPITAL:

The Company has made the allotment of 13,00,000 Equity Shares of Rs, 10/- each on preferential basis with each share carrying a premium of Rs, 52/-. With this allotment, the Paid-up Equity Share Capital of the Company has increased to Rs, 14,17,23,720/- divided into 1,41,72,372 Equity Shares of Rs, 10/- each.

During the period under review, the Company has not issued shares with differential voting rights nor granted stock options nor Sweat Equity Shares.

4. MANAGEMENT DISCUSSION AND BUSINESS ANALYSIS: Indian Pharmaceutical Industry scenario and opportunities:

India continues to be the global manufacturing hub for the pharmaceuticals during the financial year 2015.16. Presently there are 10,500 manufacturing units and over 3,000 Pharmaceutical Companies in India, and still growing at an exceptional rate. India has about 1,400 WHO GMP approved manufacturing units.1,105 CEP accredit ions , more than 950 TGA approvals and 584 sites approved by the USFDA. Globally more than 90 per cent of formulations approvals for Anti-retroviral (ARVs), Anti-tubercular & Anti-malarial (WHO pre-qualified) have been granted to companies present in India. Manufacturing costs in India are approximately 35-40 percent less than those in the US due to low installation and manufacturing costs. Qualified manpower , availability of raw materials and a huge domestic market for growth are some of the contributing factors for this scenario. India ranks amongst the top global generic formulation exporters in volume terms.

India''s exports of pharma and drugs stood at US$ 16.8 bn. India exports all forms of pharmaceuticals from APIs to formulations, both in modern medicine and traditional Indian medicines. The country''s pharmaceutical industry accounts for about 1.4 per cent of the global pharmaceutical industry in value terms and 10 per cent in volume terms.

Bal Pharma Limited during the year under review has aimed at consolidating its position in Indian market by advancing its project on modernizing and expansion of its manufacturing capabilities, which is expected to be completed by December 2017. Once the enhanced production capability is made available to the Company, it is expected to meet the demand of its signature products in Cardiology, Diabetology, Analgesics, Antipyretics, Antibiotic, Anti histamine, IV fluids, Nutrition supplements etc both in domestic and international markets.

Lifezen healthcare Private Limited, an Over The Counter (OTC) products marketing Company floated by Bal Pharma Limited as its Subsidiary has launched 2 new products in Indian OTC market and the said products has received encouraging response from the market. Even through the Subsidiary is yet to break even in its business; it has made its presence felt in OTC market and aiming at an profitable business model in near future.

5. BUSINESS OPERATIONS

(i) Turnover and Net profit:

During the Financial Year 2015-16, your Company has achieved a gross standalone turnover of Rs, 201.82 Crores as against Rs, 190.67 Crores achieved during the previous Financial Year, thus registering a top line growth of 5%. .

The Net Profit After Tax of the Company during the financial year 2015-16 stands at Rs, 2.81 Crores as against the Net Profit of Rs, 4.02 Crores achieved in the previous financial year 2014-15.

(ii) Formulations Business:

The Formulations Business of the Company has contributed a total revenue of Rs, 111.03 Crores, during the FY 2015-16 as compared to Rs, 115.40 Crores, during F Y 2014-15.

The turnover from export of formulations during the year under review stands at Rs, 61.51 Crores as against Rs, 73.51 Crores achieved during the previous financial year. This drop in revenues is due to sluggish economy in overseas markets.

In the domestic market, Branded formulations of the Company, consisting of mainly Diabetic, Gynaecology and Cardiac drugs have contributed to revenue of Rs, 36.00 Crores during the year under review as against Rs, 22.49 crores achieved during the previous year.

(iii) Bulk Drug Business:

Bulk Drug Business continue to show its momentum in sales with a revenue of Rs, 87.31 Crores during the year under review as compared to Rs, 75.13 Crores achieved during the previous financial year, thereby registering a growth of 10.7%.

Exports sales of bulk drugs during the year under review stands at Rs, 53.60 Crores as against Rs, 48.01 crores registered during the previous financial year.

Domestic sales of the bulk drugs have registered an revenue of Rs, 33.70 Crores as against the revenue of Rs, 27.24 Crores registered during the previous financial year.

(iv) Export Performance:

The overall export sales of the Company during the year under review has recorded a turnover of Rs, 115.11 Crores as against revenue of Rs, 121.53 Crores achieved during the previous financial year.

Revenues from the export sales continue to consistently dominate the Companies overall turnover.

(v) Domestic Performance:

Revenue from domestic sales has registered a turnover of Rs, 82.76 Crores as compared to Rs, 64.46 Crores achieved during 2014-15, there by registering an growth of 22% .

Diabetic and Cardiac drugs of the Company continue to prove their dominance in revenue earnings in Indian markets.

7. AUDIT COMMITTEE:

The Audit Committee, a sub-Committee of Board consists of Dr. G.S.R Subba Rao, Independent Director, Mr. Shrenik Siroya, Non-Executive Director, Mr. Pramod Kumar S, Independent Director and Mrs. Sarika Bhandari, Independent Director.

Mr. Pramod Kumar S was appointed as Chairman of the Committee on 10.02.2016 in place of Dr. G.S.R Subba Rao, who resigned from the Chairmanship of the Committee citing personal reasons. The Audit Committee has been discharging its duties as per the provisions of SEBI (LODR) Regulations, 2015 and as per Section 177 of the Companies Act, 2013.

8. AUDITORS AND AUDITORS REPORT :

a. Statutory Auditors:

Messrs T.D Jain and D I Sakaria , Chartered Accountants were appointed as Statutory Auditors of the Company from Financial Year 2015-16 to 2017-18 i.e., for the period of 3 years, to hold office from the conclusion of 28th Annual General Meeting held on 22nd September, 2015 until the conclusion of 31st Annual General Meeting, subject to ratification of their appointment at every subsequent Annual General Meeting..

There are no qualifications or reservations or adverse remarks by the Statutory Auditors in their report.

b. Cost Auditors:

Pursuant to the provisions of Section 148 of the Companies Act, 2013, the Company has appointed Mr. M.R Krishna Murthy, Cost Accountant as Cost Auditor for conducting audit of cost records of the Company, for the Financial Year 2015-16.

c. Secretarial Auditors:

Pursuant to the provisions of Section 204 of the Companies Act, 2013 read with the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Company has appointed Mr. Parameshwar G. Bhat, Practising Company Secretary to conduct Secretarial Audit of the Company for the Financial Year 2015-16. The Secretarial Audit report for the Financial Year 2015-16 is annexed to this report as Annexure 2. Certain non material observations made by Secretarial Auditor in his report have been suitably addressed by the Management with corrective actions, wherever necessary.

d. Internal Auditors:

Messrs Abhishek Jain and Dheeraj Bafna, Chartered Accountants were appointed as Internal Auditors of the Company for the financial year 2015-16 and their Reports on Internal Audit were periodically reviewed by the Audit Committee and recommends to the Board for its noting. The Internal Audit Reports do not contain any qualifications, reservations or adverse remarks.

9. RISK MANAGEMENT:

The Risk Management Committee of the Company consisting of the Functional heads and Company Secretary of the Company will submit its periodical report to the Board of Directors of the Company on the measures taken for mitigation of potential risk factors.

The Risk Management Policy devised and implemented by the Company is available on the website i.e www.balpharma.com.

10. INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY:

Your Company has an adequate system of internal controls with clearly defined authority limits. Internal controls ensure that the Company''s assets are protected against loss from unauthorized use or disposition and all transactions are authorized, recorded and reported in conformity with Generally Accepted Accounting Principles. These systems are designed to ensure accuracy and reliability of accounting data, promotion of operational efficiency and adherence to the prescribed management policies. These policies are periodically reviewed to meet current business requirements.

11. DIRECTORS'' RESPONSIBILITY STATEMENT

In compliance with the provisions of Section 134(5) of the Companies Act, 2013, your Directors wish to confirm:

a) that in preparing the Annual Accounts, all the applicable Accounting Standards have been followed along with proper explanation relating to material departures;

b) that the Directors had selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the Financial Year and of the Profit and Loss of the Company for that period.

c) that the Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing/detecting fraud and other irregularities;

d) that the Directors have prepared the annual accounts on a going concern basis.

e) that the Directors have laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and are operating effectively.

f) that the Directors have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems are adequate and operating effectively.

12. CONTRACTS AND ARRANGEMENTS WITH RELATED PARTIES :

All contracts/arrangements/transactions entered by the Company during the financial year with related parties were in the ordinary course of business and on arm''s length basis. During the year, the Company had not entered into any contract/arrangement/ transaction with related parties that could be considered material

i.e., exceeding 10% of the annual consolidated turnover of the Company, as defined in SEBI (Listing obligations and Disclosure Requirements) Regulations, 2015.

The Company''s Policy on the Related Party Transactions as approved by the Board can be accessed from our website

i.e www.balpharma.com.

Please refer to the note #34 to the financial statements, which sets out related party disclosures.

13. SUBSIDIARY, JOINT VENTURE AND ASSOCIATE COMPANIES:

During the year under review, the following Companies listed below are Company''s Subsidiaries, Joint Ventures or Associate Companies. A report on the performance and financial position of each of the Subsidiaries, Associates, Joint Venture companies as per Companies Act, 2013 is provided as Annexure 1 to the Board''s Report and hence not repeated here for the sake of brevity.

Sl.

No.

Name of the Company/LLP

Nature of Business

% of stake as on 31.03.2016

01

Lifezen Healthcare Private Limited

Marketing of Over the counter (OTC) products

50%

02

Bal Research Foundation

Research and Development in Pharma and health care.

80%

03

Balance Clinics LLP

Diabetic care clinics

80%

14. DIRECTORS AND KEY MANAGERIAL PERSONNEL (KMP):

In accordance with the provisions of the Companies Act, 2013 and the Articles of Association of the Company, Mr. Shrenik D Siroya, Non Executive Director of the Company retires by rotation at the Annual General Meeting and being eligible offers himself for reappointment.

As per Section 196,197 and Schedule V of the Companies Act,2013, Dr.S.Prasanna is being reappointed as the Whole time Director of the Company for a period of 2 years w.e.f 1.10.2016 to 30.9.2018.

The Company has received declarations from all the Independent Directors of the Company confirming that they meet the criteria of independence as prescribed under Section 149(6) of the Companies Act, 2013.

The Company has devised a Policy for familiarization of independent Directors with the Company, their roles, rights, responsibilities in the Company etc and the same is uploaded on the website of the Company i. e www.balpharma.com.

The Company also has in place a Policy for Nomination and remuneration of KMP''s, Senior Managerial personnel and Directors of the Company, which is in compliance with Section 178 of the Companies Act, 2013. The said Policy is available on the website of our Company.

15. VIGIL MECHANISAM:

The vigil mechanism of the Company, which also incorporates Whistle Blower Policy as per the SEBI (LODR) Regulations, 2015, includes compliance task force comprising of Senior Executives of the Company. The complete text on the vigil mechanism and Whistle Blower Policy can be accessed from our website i.e., www.balpharma.com.

16. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND FOREIGN EXCHANGE OUTGO:

As per provisions of Section 134(m) of the Companies Act, 2013, read with the rule 8 of the Companies (Accounts) Rules, 2014, details relating to the Conservation of Energy and Technology Absorption and Foreign Exchange Earnings and Outflow are given in Annexure-3, which forms part of the Board''s Report.

17. PARTICULARS OF EMPLOYEES:

Information as per Rule 5(1) of Chapter XIII of Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is enclosed as an Annexure - 5 to this report.

18. CORPORATE GOVERNANCE AND ADDITIONAL INFORMATION TO SHARE HOLDERS:

A detailed report on the Corporate Governance System and practices of the Company are given in a separate section of this Annual Report. Detailed information for the shareholders is given in Additional Shareholders information section.

19. PARTICULARS OF LOAN GIVEN, INVESTMENTS MADE, GUARANTEES GIVEN OR SECURITY PROVIDED BY THE COMPANY:

The Company has not given any loan or guarantees covered under the provisions of Section 186 of the Companies Act, 2013.

20. MATERIAL CHANGES AND COMMITMENTS AFFECTING THE FINANCIAL POSITION OF THE COMPANY BETWEEN END OF THE FINANCIAL YEAR AND THE DATE OF THE REPORT:

There were no material changes and commitments between the end of the financial year and the date of the Report, which affect the financial position of the Company.

21. EXTRACT OF ANNUAL RETURN:

Extract of the Annual Return of the Company for the Financial Year 2015-16, in Form MGT-9 is annexed to this report as Annexure - 4.

22. CORPORATE SOCIAL RESPONSIBILITY:

The Board has constituted a Corporate Social Responsibility Committee consisting of Dr. G.S.R Subba Rao, Mr. Pramod Kumar

S, Dr. S. Prasanna and Mr. Shailesh Siroya as its members.

The Committee has formulated a Corporate Social Responsibility (CSR) Policy and the Board has approved the Policy for its implementation. The CSR Policy may be accessed from our website i.e., www.balpharma.com .

Due to delay in suitable planning of the CSR activities, the Company could not spend any amount towards Corporate Social responsibility for the year ended 31.03.2016.

23. HUMAN RESOURCES:

The human resources of the Company continue to contribute its share in the growth of the Company. Human Resource agenda of the Company for the year continued to focus on building a talent pipeline, enhancing individual and organizational capabilities for future readiness, driving greater employee engagement, and strengthening employee relations through progressive people management.

There was no complaint lodged by any woman employee under Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013, with the Company during the period under report.

24. ANNUAL BOARD EVALUATION:

Pursuant to the provisions of the Companies Act, 2013 and Listing Regulations, the Board has carried out an annual performance evaluation of its own performance, its Committee''s and the Directors individually. The manner in which the evaluation has been carried out has been explained in the Corporate Governance Report

25. LISTING WITH STOCK EXCHANGES:

The Securities and Exchange Board of India (SEBI), on September

2, 2015, issued SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 with the aim to consolidate and streamline the provisions of the Listing Agreement for different segments of capital markets to ensure better enforceability. The said regulations were effective December 1, 2015. Accordingly, all listed entities were required to enter into the Listing Agreement within six months from the effective date. The Company entered into revised Listing Agreement with BSE Limited and the National Stock Exchange of India Limited, during November 2015.

The Company has paid the Annual Listing Fees for the year 201617 to National Stock exchange of India Limited (NSE) and BSE Limited (BSE) where the Company''s Shares are listed.

26. CEO & CFO CERTIFICATION:

The Board has acknowledged that Managing Director as the CEO of the Company and DGM Finance and Accounts as the CFO for the purpose of compliance under the Listing Regulations. The CEO and CFO have certified to the Board, in terms of Regulation 33(2) of SEBI (LODR) Regulations, 2015, that the financial statements present a true and fair view of the Company''s affairs and do not omit any material facts which may make the statements or figures contained therein misleading.

27. INSURANCE COVERAGE:

The Board of Directors reports that your Company has adequate and comprehensive insurance cover on all the movable and immovable assets of the Company.

28. CREDIT RATING:

The Company''s financial discipline is reflected in the BBB (stable) rating given by ICRA for the Companies borrowings, both for term loan and working capital for the financial year 2015-16 which is a notch above the previous year''s credit rating of BBB - . The Company looks forward to further improve its credit rating during the Financial Year 2016-17.

29. DISCLOSURE UNDER THE SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION AND REDRESSAL) ACT, 2013:

The Company has in place an Anti Sexual Harassment Policy in line with the requirements of the Sexual Harassment of Women at the Workplace (Prevention, Prohibition & Redressal) Act, 2013. Internal Complaints Committee (ICC) has been set up to redress complaints received regarding sexual harassment. All employees (permanent, contractual, temporary, trainees) are covered under this policy.

The following is a summary of sexual harassment complaints received and disposed off during the year 2015-16:

No. of complaints received : NIL No. of complaints disposed off : NIL

30. GENERAL:

Your Directors state that no disclosure or reporting is required in respect of the following items as there were no transactions on these items during the year under review.

1. Details relating to deposits covered under Chapter V of the Act.

2. Issue of equity shares with differential rights as to dividend, voting etc.

3. Issue of shares (including sweat equity shares) to the employees of the Company under any scheme.

4. Neither the Managing Director nor the whole time Directors of the Company receive any remuneration or commission from any of its subsidiaries.

5. No significant or material orders were passed by the regulators or courts or tribunals which impact the going concern status and Company''s operations in the future.

31. APPRECIATION:

Your Directors wish to express their sincere appreciation on significant contributions made by the employees through their dedication, hard work and commitment. Your Directors also place on record their sincere thanks on the trust reposed on the Company by the medical fraternity and the patients. We also acknowledge the support extended by Canara Bank, Punjab National Bank, EXIM Bank, Corporation Bank and other financial institutions, government agencies, shareholders and investors at large. We look forward to the continued support from all the quarters in our endeavor to help people lead healthier lives.

For and on behalf of the Board of Directors

Bengaluru Dr. S. Prasanna Shailesh D Siroya

10th August 2016 Whole Time Director Managing Director

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