The Directors take pleasure in presenting the Eightieth Annual Report
of the Company along with the audited financial statements for the
financial year ended 31st March 2016.
Financial Summary Rs. in core
Year ended Year ended
31st March 2015 31st March 2016
10373 11620 Gross total revenue 12445 14067
1540 1654 Profit before tax 1740 2007
1181 1181 Profit for the year 1398 1506
5330 5412 Surplus brought forward
from last balance sheet 6277 6358
- - Adjustment of tax on
dividend of previous year 13 13
6511 6593 Profit available for
appropriation 7688 7877
161 161 Dividend 161 161
33 33 Tax on dividend 33 33
- - Transfer to general reserve - -
40 41 Adjustment of depreciation - -
6277 6358 Surplus carried forward 7494 7683
The Directors recommend a dividend of Rs.2 per equity share (100%) for
the year 2015-16. The dividend, if sanctioned at the Annual General
Meeting, will be paid to those members whose names appear in the
Company''s Register of Members on Wednesday, 14th September 2016. In
respect of shares held in dematerialised form, the dividend will be
payable on the basis of beneficial ownership as per details furnished
by National Securities Depository Limited and Central Depository
Services (India) Limited.
MANAGEMENT DISCUSSION AND ANALYSIS: 2015-16
Global Business Review
With a vibrant presence globally, Cipla is well-poised for growth that
advances its goal of ensuring affordable access to healthcare for all.
To build a concrete foundation for sustainable long-term growth, the
Company is investing heavily in its pipeline, making choices with
respect to its operating model in certain markets and exploring
initiatives to simplify the business. The financial year under review
has been important for the Company to drive execution of these choices
and enhance the resilience of its business model.
The Company''s revenue from operations on a consolidated basis during
the financial year 2015-16 amounted to Rs.13,678 crore against
Rs.11,345 crore in the previous year, recording a growth of 20.6%. The
income from operations for the Company''s domestic business increased by
5.9%, from Rs.4,825 crore in the previous financial year to Rs.5,111
crore in the financial year under review. Total exports increased by
36.4% during the year to Rs.8,261 crore. During the year under review,
EBIDTA margin reduced by 0.8 percentage points. This was primarily due
to the change in product mix, higher investments in research and
development, and ongoing complexity reduction initiatives. Profit for
the year increased by 27.5% to Rs.1,506 crore from Rs.1,181 crore in
the previous financial year.
India Ratings and Research Private Limited, a Fitch Group Company,
assigned a Long-Term Issuer Rating of IND AAA with a stable outlook to
the Company. The rating is the highest assigned in Fitch''s rating scale
and indicates the highest degree of safety regarding timely servicing
of financial obligations and lowest credit risk.
No material changes and commitments have occurred after the close of
the year till the date of this Report, which affect the financial
position of the Company.
As one of India''s leading pharmaceutical companies, Cipla is in a
strong position to fulfill its commitment to provide modern and
affordable medicines to patients. This year, despite pricing challenges
and the impact of a weak monsoon, Cipla''s domestic revenues for its
prescription business grew by 16% compared to the industry growth of
14%, as per IMS Health data.
The India business contributed ~40% to overall Company revenues, with
new products contributing 4.5% of total India business revenues. The
prescription business accounted for 81% of India business revenues and
market share for this segment currently stands at 5.3%. The Company
grew faster than the market in Anti- infectives, Gastrointestinal and
Urology. The respiratory business saw strong uptake with over 20%
growth in the COPD portfolio.
Cipla continues to focus on high-value opportunities to build out its
specialty portfolio, through a mix of in-licensing and in-house
innovation and development. In-licensing gained momentum in FY 2015-16
with 6 deals executed in oncology, respiratory and dermatology
segments. The Company also initiated several high value innovation
projects, of which a few are likely to be commercialized in FY 2016-17.
With the successful launch of Sofosbuvir in India for the treatment of
Hepatitis-C, Cipla has expanded access to the drug with nearly 10,000
patients being treated under the brand name HepCvir in its first 12
months. Cipla continues to build out its Hepatitis franchise in order
to improve access to breakthrough therapies for patients with HepCvir
Ledipasvir / Daclatasvir combinations.
Cipla also entered new areas through a partnership model - Cutisera in
cosmetology, Nasovac S in vaccines and Reteplase in the
In the coming years, the domestic business will continue to focus on
enhancing depth of portfolio in priority therapy areas, and increasing
sales force productivity with the rollout of Customer Relationship
Management (CRM) and Sales Force Automation (SFA) systems.
Through this, Cipla aims to grow above market rate of growth and
strengthen leadership position in priority therapy areas in the Indian
Cipla is one of the largest pharmaceutical companies in South Africa,
with a private market share of more than 5%. South Africa contributed
11.5% to the overall revenues on a consolidated basis. The business
however was impacted due to the depreciation of the South African Rand
in FY 2015-16. In local currency terms, South Africa business revenue
has grown at ~25% in FY 2015-16 against the previous year. Cipla''s
private market business has grown at 14% for the same period, with
market leadership in the Respiratory, CNS and Oncology segments, and
contributes over 60% of South Africa business revenue. The sales and
distribution arrangement with Teva Pharmaceuticals (Pty) Ltd, an
affiliate of Teva Pharmaceutical Industries Ltd., has gained traction
through FY 2015-16 with strong performance on products such as
Copaxone, further cementing the Company''s status as a preferred
Partner of Choice. Cipla has also introduced low cost vaccines in the
South African market through an exclusive agreement with the Serum
Institute of India. This is in line with the Company''s goal to advance
healthcare for all in South Africa.
Cipla also won Government tenders in antiretrovirals (ARV), respiratory
and newer areas such as mental health, cardiovascular and women''s
health categories, achieving significant growth in the tender business
over the previous year. The newly set up state-of-the-art distribution
centre facility has doubled the Company''s existing capacity and
conferred competitive advantage by helping to improve customer service
levels, enhance compliance, and reduce the cost of distribution.
Capitalizing on its defined future portfolio, key development and
in-licensing projects, and streamlined global organizational structure,
Cipla South Africa will continue to leverage synergies from its
international family. The Cipla brand inspires trust and has become a
household name among consumers, pharmacies, prescribers and key opinion
leaders. Going forward, several Sub-Saharan markets will also be
covered by the South African organization.
In the last quarter of financial year 2015-16, Cipla successfully
completed the acquisition of two US-based entities, InvaGen
Pharmaceuticals Inc. and Exelan Pharmaceuticals Inc. in a transaction
valued at US$ 550 mn. InvaGen Pharmaceuticals is a high volume
generics business platform that provides Cipla with a strong US-based
manufacturing setup and access to large wholesalers/ retailers in the
US. The platform includes 42 approved ANDAs and ~30 pipeline products
that are expected to be approved over the next 4 years. It also has
filed 5 potential first-to-file products which is expected to bring
tremendous value in the coming 5-6 years. There are no material
overlaps in the business, and the current portfolio and the pipeline is
largely complementary to Cipla''s products. InvaGen Pharmaceuticals''
manufacturing footprint spans ~350,000 sq.ft. of GMP area with 3 units
located in Long Island, New York, and a total production capacity of 12
Exelan Pharmaceuticals is a sales and marketing company with a focus on
generic pharmaceuticals for the government and institutional market.
Both companies together had annual revenues of over US$ 230 mn as of
This acquisition is aligned with Cipla''s global growth strategy to grow
its presence in the US pharmaceutical market and increase its position
amongst key pharmaceutical wholesalers and retailers. Having its own
manufacturing base and supply chain will further strengthen Cipla''s
presence in the US and its commitment to make high quality medication
accessible to patients in the country. Cipla''s strategy in the US is to
deliver its complex generics and respiratory portfolio of products.
The North American business contributed 15% to overall revenues
(including the impact of acquisitions) and recorded 117% growth for the
year. Growth was driven primarily by the Company''s partnership with
Teva Pharmaceutical Industries Ltd. for Esomeprazole and the successful
launch of its own label products in the US market.
Cipla currently has over 165 ANDAs filed in the US. Of these, the
Company has approval for over 85.
As Cipla scales its US business next year it will target launch of five
to seven products from the InvaGen pipeline and eight to ten products
from Cipla''s pipeline, including some in limited competition areas. In
parallel, the Company will continue to build on its successful
partnerships for launch of first-to- market and differentiated generics
such as Nexium and Pulmicort.
Cipla has already established a strong US team which has been deeply
involved in Cipla''s launch of its own label products in the US as well
as in the evaluation of inorganic growth opportunities such as InvaGen.
This team shall drive the transition and integration work streams along
with key InvaGen personnel. Cipla has a full integration plan in place
that draws on its experience of a number of successful recent
integrations such as in South Africa.
The European business contributed 4% to the overall revenues, recording
a growth of 30% in revenues for the year on the back of its performance
in both front-end and B2B markets.
Cipla is focused on adding innovative elements to products, services
and information through research and partnerships. The Company''s
flagship product, the salmeterol-fluticasone MDI, is now in the market
in Sweden, Romania, Netherlands, Germany, Croatia, Czech Republic,
Slovakia, Belgium and Hungary. The Company has further strengthened its
respiratory platform with the launch of Mometasone, Fluticasone,
Ipratropium Salbutamol respules and Ipratropium MDI across multiple
European markets in FY 2015-16.
The Company continues to evolve its business model in Europe with the
intention of balancing its portfolio with the best commercial options.
International - Rest of the World
International is defined as all export markets for Cipla excluding
North America, Europe and South Africa. With a diverse range of more
than 1,000 products and over 150 global partners across 100 countries,
Cipla has a presence in Africa, the Middle East, Latin America, Asia
Pacific, China, and Russia. International contributes 25% of Company
revenues and grew by 14% over the last year.
In recent years, Cipla has implemented a business model change in 15
countries including Morocco, Algeria, Yemen, Sri Lanka and Uganda,
adopting the direct-to-market (DTM) approach. DTM markets had robust
growth of ~25% in FY 2015-16, over the previous year. This growth rate
has been achieved despite continuing challenges related to the
situation in Yemen and currency devaluation in several emerging
markets. The Company now holds a leadership position in several
markets such as Uganda, Sri Lanka, Yemen and North Africa.
Cipla''s business in partnership-led markets (B2B) saw a growth of 8% in
FY 2015-16 over the previous year. The Company is proactively
simplifying its businesses, rationalising markets where necessary, and
focusing only on high-growth markets where it holds a leadership
The Cipla Global Access business recorded growth of 12% over the
previous year and reflects Cipla''s continued commitment to the cause of
ensuring access to life-saving medicines for patients worldwide.
STRATEGIC BUSINESS UNITS
Core areas of competence
Active Pharmaceutical Ingredients (APIs)
Cipla''s API legacy spans over five decades of having serviced the
world''s largest pharmaceutical companies with more than 200 generic and
complex APIs. Cipla takes pride in its state-of- the-art API plants
which meet stringent quality and current good manufacturing practices
(cGMP) requirements, all approved by the US FDA and other major
international regulatory agencies.
With a total API manufacturing capacity of 1000 MT, the Company
continues to be one of the significant API players in the industry,
supporting internally as well as global customers. A substantial
portion of the APIs manufactured by Cipla are consumed internally with
a significant increase in consumption due to the new launches and front
ending in several markets globally.
Revenue from external customers registered a year-on-year growth of 7%.
More than 70% of the total sales were from regulated markets and over
one-third of our API sales in FY 2015-16 were to the top generics
players in the world. The gastroenterology and antiretroviral segments
continue to be major contributors to the business.
Cipla continues to build its future pipeline of complex products with
its established robust portfolio selection process, providing early
launch capabilities along with Intellectual Property (IP) advantages.
Deep vertical integration, scale and more importantly its investments
in manufacturing and quality have helped the Company build a quality
Cipla APIs cover a broad spectrum of therapeutic categories with 23
Drug Master Files (DMF) filed in FY 2015-16 in various countries.
Cipla is also ramping up its filings for regulated markets with a
robust pipeline of over 40 APIs at various stages of development
anticipated to be commercialised starting 2018. The Company is expected
to continue the strong pipeline building momentum in the coming years
Cipla Respiratory continues to bring effective and affordable therapy
to patients suffering from diseases such as Asthma, COPD, PAH and
Allergic Rhinitis. This year, Cipla Respiratory provided patients in
100 countries, the world''s largest portfolio of inhalation products
with 28 drug formulations across a range of devices, to suit individual
patient needs. In Europe, we launched several inhalation products,
including the ICS-LABA, Salmeterol Fluticasone in a pMDI (metered dose
inhaler). Cipla''s Respiratory Center of Excellence also made
significant progress on the development of critical new products for
the US and other priority markets.
Over the last 40 years, Cipla has invested significantly in creating
three dedicated manufacturing sites for Respiratory. The Company
manufactures four major dosage forms i.e. metered dose inhalers
(pMDIs), dry powder inhalers (DPIs), nasal sprays and nebulisers in
addition to a range of inhalation devices. This year, the Company was
amongst the largest manufacturers of pMDIs with capacity to produce
over 100 million inhalers. In addition, the Company has built a team of
world-class specialists across Manufacturing, Quality Control, Quality
Assurance, Supply-Chain who continue to collaborate seamlessly across
Cipla Respiratory has unique end- to-end capability covering the value
chain from API, formulation, device development and manufacturing to
doctor and patient initiatives. The Company has played a leading role
across countries in patient awareness, acceptance, compliance and
usage, physician training, medical camps and counselling. In India,
Cipla Respiratory has played a pioneering role in driving the
conversion of patients from oral to inhaled therapy for the treatment
of Respiratory disease. This year, the Company further strengthened and
adapted where necessary its pioneering BreatheFree patient awareness
and education programs across key markets outside India such as South
Africa and Sri Lanka.
Cipla Respiratory has grown to almost ~US$ 400 mn, accounting for ~25%
of the company''s revenues. Despite aggressive competition, the Company
remains focused to retain leadership in serving patients suffering from
Respiratory diseases across the world.
Cipla Global Access
Since its inception, Cipla''s ethos has been firmly rooted in the vision
None shall be denied. The Company strongly believes that access to
high quality, affordable medicines is a basic human right.
Cipla Global Access (CGA) is an international tender based
institutional business that concentrates on four key therapy areas:
HIV/AIDS, Malaria, Multi drug-resistant tuberculosis, and Reproductive
Cipla is among the leading manufacturers of Anti-retroviral drugs in
the world. In 2001, Cipla was the first pharmaceutical company to
supply ARVs to countries with a high HIV burden at less than a dollar a
day. Today Cipla has the highest number of Anti-retroviral products
approved for the treatment of both children and adults. Recently a new
manufacturing facility has been set up to meet the growing demand for
ARV products and expect the plant to start commercial production by
Cipla has developed the taste- masked Lopinavir/Ritonavir pellets (FDA
approved in June 2015) and is going to be available shortly in 20
countries in the first year of launch in 2016. In parallel with this
development, Cipla, in collaboration with DNDi (Drugs for Neglected
Diseases initiative) and with funding support of UNITAID, is working to
develop 4-in-1 taste- masked sprinkles formulations of the combination
LPV/r (Lopinavir/ Ritonavir), 3TC (Lamivudine) and ABC (Abacavir) or
AZT (Zidovudine). The clinical trials of the 4-in-1 formulation are run
in Uganda and Kenya (Chapas study) to assess the clinical efficacy of
the product and combination and the results will be made available in
the coming years. However, to respond to the needs of the paediatric
population and ensure that LPV/r-based products are on the market
before 4-in-1 products become available, the LPV/r pellets are an
alternative and a currently available option.
Cipla is also one of the largest suppliers of antimalarial drugs in the
world. This portfolio covered treatment for over 80 million malaria
patients across all the affected countries. The coverage is increasing
every year and thus saving millions of lives. Cipla anti- malarial
treatment costs less than a dollar for the entire course. Cipla has
always been at the forefront in initiatives to identify, develop,
manufacture and supply low cost treatment with artemisinin-based
combination therapies (ACTs). Cipla is endeavouring to expand its
portfolio to include more potent and safer anti-malarials, using novel
drug delivery systems, such as Rectal Artesunate for which Cipla is
submitting dossiers in several emerging markets. Rectal Artesunate is
indicated in cases of severe malaria in children between 6 months to 6
years of age. It is a life-saving drug in cases where there are no
health facilities offering parenteral treatment.
Reproductive health and family planning is an emerging segment. Cipla
has aligned its strategy with international development initiatives to
provide safe and effective contraceptive drugs to enable reach to over
120 million women.
Cipla has a strong second line TB drug portfolio for treating
multidrug-resistant TB (MDR TB).
It is also aggressively expanding its MDR TB portfolio to meet the
challenges of resistance fast developing among TB patients due to the
high rate of dropouts. Till now, Cipla''s SLTB (Second Line
Tuberculosis) drugs catered to a moderate patient base globally, but
this is likely to increase significantly with the use of new diagnostic
methods of detection of drug-resistant TB. Future development in the
MDR TB therapy area will be focused on newer molecules which can
significantly reduce treatment timelines. Currently, Cipla services
around 70 countries in this area.
Cipla Global Access also caters to the developing world requirement for
essential medications for infections caused by helminths,
schistosomiasis and kala azar, which pose major health threats in low
and middle income countries (LMIC).
In FY 2015-16, Cipla, as part of its access initiatives signed various
non-exclusive, royalty based/ free licensing agreements with innovator
companies such as Gilead, ViiV, BMS and Janssen. It allows for the
manufacturing of generic active pharmaceutical ingredient and finished
formulations of Anti-retroviral and drugs for treatment of Hepatitis C,
a silent killer which till the introduction of the current treatment
was difficult and expensive to treat.
Cipla has developed and fostered robust relationships with all the
major global organizations, regulatory bodies, public institutions and
funding agencies that work towards this common cause. Additionally,
Cipla has partnered with several global scientific research
organizations to develop innovative, effective and affordable
formulations for these four therapeutic areas.
CIPLA NEW VENTURES
CNV continues to nurture exciting businesses with a high innovation
quotient, preparing Cipla for a future beyond generics. It had notable
achievements during the year, across its portfolio - a testimony to the
care and attention that the company is devoting to its medium to
long-term sustainability. In Cipla health, it has sowed the seeds of a
FMCG enterprise focused on Good Science, Good Medicine. Cipla BioTec
has a disruptive Biosimilar story.
Less than 8% of patients eligible for biopharmaceutical treatment
worldwide receive therapy. Access is not just a developing world issue;
in the US and Europe less than 30% receive treatment. In many cases,
patients are not treated due to the cost of biopharmaceuticals which
can approach US$ 75,000 per year for treating cancer and autoimmune
diseases. Biosimilars are now approved in all major world markets,
however high prices still limit access.
Cipla BioTec (CBT) is building on Cipla''s heritage of affordability and
access by developing biosimilars which will be approved in global
markets and usher in a new wave of affordable products. CBT goal is to
treat a million patients. The first product CBT124 is starting human
clinical trials. CBT''s second product CBT127 is in development. CBT
leverages the latest biopharmaceutical production technology to make
its products affordable. This approach allows CBT to enable local
production to make these life changing products. CBT is constructing
commercial manufacturing capacity in two countries to implement its
World Class Products at Affordable Prices and Be Local philosophy.
In line with this strategy, the Company in July 2016 announced the
signing of a memorandum of understanding (MOU) between Cipla BioTec Pvt
Ltd and Dube Tradeport Corporation for setting up South Africa''s first
state-of- the-art biotech manufacturing facility, for the production of
biosimilars, at a cost of a R1.3 bn. The factory, which will be
located in the Department of Trade and Industries Special Economic Zone
of Dube Tradeport in Durban, will manufacture biosimilar drugs made
from living organisms and used in the treatment of cancer and other
diseases. Construction is scheduled to start in early 2017, with full
operations expected to commence in the third quarter of 2018.
Regenerative Medicine is one of the new frontiers of treatment. Cipla
through its strategic investment in Stempeutics, is making Regenerative
Medicine a reality. Stempeutics received Limited Marketing Approval in
India for Stempeucel® Stem Cell therapy to treat Buerger''s Disease.
This is only the 5th Stem Cell Product approved worldwide and the first
novel biologic product ever to be completely developed in India.
Stempeucel® is covered by an extensive patent estate with issued
patents in the US, EU, ANZ, Japan and India among other territories.
Cipla in collaboration with Stempeutics has also launched Cutisera™, a
novel skin care product using growth factors to help reduce wrinkles
and dark spots.
CipTec has initiated efforts to build a specialty pharmaceutical
business in the US for Cipla. The CipTec team has evaluated several
broad therapy areas such as oncology, neurology, dermatology,
ophthalmology and gastrointestinal disorders before picking neurology
as the therapy area of choice for further exploration.
Another key focus area for CipTec in 2015 was to support and build out
Cipla''s first US venture investment - Chase Pharmaceuticals. Chase''s
focus for 2015 was clinical validation of its lead asset CPC-201 for
Alzheimer''s disease. CPC-201 was in a Phase 2a clinical trial
This trial will complete in April 2016. The preliminary data shows that
the drug has demonstrated vastly better tolerability and dose, and has
also demonstrated promising signs regarding cognitive improvement and
functional improvement in Alzheimer''s patients. CipTec participated in
two additional rounds of funding for Chase to support clinical programs
as well as key management hires.
Cipla Health - A Cipla initiative towards improving lives of Indian
The consumer healthcare business was spun-out into a separate company,
Cipla Health Ltd (CHL), effective March 2016. CHL also attracted
investment from a leading private equity fund, Fidelity (FIL Capital
Investments) in April 2016.
Cipla incubated its consumer healthcare business two years ago with a
vision to improve the lives of Indian consumers and leverage the trends
of shifting focus in health from illness to wellness. A dedicated team
was formed with professionals from diverse background of healthcare and
FMCG, to lead this business. The first consumer brand Nicotex, a
smoking cessation product, was first piloted in South India in January
2015 and was launched nationally in October 2015. The launch has been a
great success, with Nicotex helping thousands of consumers towards
Currently CHL is on a good momentum on business, with the Nicotex
marketing campaign winning prestigious awards such as Effie Gold, Goa
Fest - a big win for such a young brand. CHL aims to foray into other
categories in the consumer healthcare space and offer a series of
wellness products to Indian consumers in the coming years.
INTEGRATED PRODUCT DEVELOPMENT (IPD)
Investing for Future
Cipla''s Integrated Product Development (IPD) majorly includes
development of APIs, formulations development, Analytical, Clinical,
Regulatory, Device, Quality by Design and Pharmacovigilance functions.
Cipla''s R&D expense increased from 5.6% of total revenue in FY 2014-15
to 6.3% in FY 2015-16. As we invest for the future, our total project
R&D spend has been rising steadily.
On the Development portfolio front, we have over 200 formulations
development projects underway of which the top 50 projects address a
market size of US$ 30 bn based on innovator sales. Of these top 50
projects, most projects account for the US and also include inhalation
and injectable delivery forms including complex & first-to-file
opportunities. Our new filings in formulation segment in FY 2015-16
stand at 7 ANDAs for North America, 19 filings (187 MAs) for Europe and
over 700 filings for International markets in addition to 1000
renewals. We expect to file 20 to 25 ANDAs in FY 2016-17 including some
respiratory and oncology filings with some potential first to file
This year, Cipla has also received approvals of 4 ANDAs including
Celecoxib. More than 100 MAs approval in Europe includes key approval
of Fluticasone Salmeterol-MDI, Fluticasone MDI, Ipra Sal (Ipratropium
Bromide Salbutamol Sulphate) Respules, Ipratropium in key EU Markets
and more than 200 approvals in International (rest of the world)
The Company has enhanced the depth of its respiratory offering this
year with new product launches for Fluticasone Salmeterol, Mometasone,
Fluticasone, Ipratropium Salbutamol Respules and Ipratropium MDI across
multiple markets in Europe.
Cipla has completed expansion of its R&D Centre with new buildings and
major laboratory facilities at Vikhroli, Mumbai. IPD has also expanded
R&D applications across multiple technology platforms. These includes
Implants, Ready to Dilute (RTD) injections, Depot injections,
nanotechnology, unit dose nasal sprays, and spray patches. The Company
is also investing in various API technologies like Green chemistry,
Flow chemistry & Peptide synthesis.
Cipla has consistently enhanced efficiency across all IPD Functions
through Jagruti transformation programmes, resulting in reduced
timelines, development costs and more timely regulatory approvals.
Cipla expanded its manufacturing footprint through the acquisition of
InvaGen''s facility in the US, adding capacity of 12 billion units of
In India, Cipla continued its focus on domestic and international
markets through increased capacity of 3.2 billion units, out of which a
state- of-the-art modern technology plant with a capacity of 1.2
billion units is dedicated for ARVs (Anti-retroviral) in sync with the
organization''s vision of None shall be denied. All manufacturing
sites continued to focus on project improvement across asset and
material productivity, energy efficiency and manpower utilization.
Serviceability of formulation products was significantly improved
through releasing capacities by network balancing within units. The
organization continued its focus on reducing process and product
complexities by applying lean tools for business process
simplification. Cipla''s Uganda plant increased portfolio capability to
reduce the turn- around time for the African market.
Cipla commissioned additional API manufacturing capacity of 50 Metric
Tonne/year specifically for Hydrogenation Process. The company
scaled-up 15 key APIs, with continued focus on yield improvement, cycle
time reduction and cost improvement projects. Cipla is continuously
working on reduction of Volatile Organic Compounds by reducing solvent
losses across Cipla sites.
The Company continues to upgrade its manufacturing facilities in terms
of technology, automation, safety, environment and systems as well as
procedures for energy and water conservation.
Cipla Quality as a centre of excellence assures a culture of compliance
and follows systematic interventions to consistently meet or exceed
Cipla''s focus during the year has been to enhance its Quality
Management Systems to meet and/or exceed the current expectations of
Regulatory Bodies such as US FDA, MHRA, TGA, MCC, APVMA, WHO, etc.
Cipla has all state-of-the-art manufacturing facilities that are cGMP
compliant in conformity with national and international standards.
Several dosage forms and APIs manufactured at the Company''s facilities
continue to be approved by major international regulatory agencies.
These agencies include the US FDA, MHRA (UK), TGA (Australia), PIC
(Germany), MCC (South Africa), APVMA (Australia), the Department of
Health (Canada), ANVISA (Brazil), the Danish Medical Agency, and the
In addition, during the year, the first phase of Laboratory Information
Management System (LIMS) has been completed across all Cipla
Laboratories which significantly improves compliance in our
Threats, Risks, Concerns
The pharmaceutical industry has always been under intense scrutiny by
various regulatory authorities, both Indian and international. This
trend continues resulting in regulatory standards being upgraded all
The Company continues to track all these changes, increase vigilance,
and strives to maintain the highest quality standards. Recent changes
by the price regulator in India have resulted in significant challenges
for the pharma industry. There is a lot of confusion in the
interpretation of provisions of the Drugs (Prices Control) Order, 2013
and its implementation and this has affected the availability of some
drugs. The Company is very concerned about these developments and is
taking steps to resolve the issues through various forums.
Cipla has some pending legal cases related to alleged overcharging in
respect of certain drugs under the Drugs (Prices Control) Order, 1995.
The status of these cases as of the date of approval of financial
statements have been summarised in the Notes to the accounts.
Further, vide Order dated 20th July 2016, the Hon''ble Supreme Court
have transferred back the writ petitions to Hon''ble Bombay High Court
along with directions that 50% of the alleged overcharged amount
mentioned in its earlier Order dated 1st August 2003 should be
deposited by the Petitioners in the Bombay Petitions, within 6 weeks.
Accordingly, the Company will be depositing a sum of Rs.175.07 crore on
or before 31st August 2016. The Company has been legally advised that
on the merits of the cases that there is very little likelihood of
these demands crystallising. Hence no provision is considered necessary
in respect of notices of demand received by the Company up to date
aggregating to Rs.1768.51 crore. However, any unfavourable outcome in
these proceedings could have an adverse impact on the Company.
The Industry is concerned about the recent actions by the Ministry of
Health in banning a large number of Fixed Dose Combinations, and this
led to various litigations being filed by the industry associations and
several companies in the court. A final judgment is still awaited.
Cipla operates in a number of markets where geo-political risks exist.
No significant or material orders have been passed by the Regulators or
Courts or Tribunals which may impact the going concern status of the
Company and its future operations.
Health Safety & Environment (HSE)
HSE measures remain a priority for Cipla. The company continues to
upgrade HSE standard at all locations. ISO 50001 is implemented at
Patalganga, Kurkumbh, Bengaluru, Goa and Indore locations, to benchmark
energy conservation threshold levels for a greener environment.
Cipla''s manufacturing facilities at Goa, Bengaluru, Baddi, Indore,
Kurkumbh, Patalganga and Sikkim are certified for ISO 14001 and OHSAS
Hazards and risk associated with site activities are identified across
all manufacturing locations and risk control and mitigation measures
are continuously implemented. Our facilities have been regularly
audited and HAZOP studies of new products have been done as part of
continuous improvement in HSE systems. Online systems are in place to
monitor applicable legal compliances. The Company organised specialised
safety training such as process safety, road safety and behavioural
safety to increase safety awareness at all working levels.
Safety week and electrical safety day were celebrated and fire service
day was observed at the manufacturing units to create awareness among
the employees. Fire safety and road safety training is conducted in
schools nearby to our manufacturing facilities.
World Environment Earth Day were celebrated by conducting green drive
programme of mass tree plantation. The Company continues to maintain
modern, well-equipped effluent treatment plants and effluent testing
system at its manufacturing facilities. Treated water from this
facilities is recycled and used for utility or gardening.
The Company''s various locations have received HSE awards including best
environment, health and safety practices, National award for Excellence
in Energy Management and Greenco (Silver rating) award for Kurkumbh
Internal Control Systems and their adequacy
The Company''s internal control procedures are adequate to ensure
compliance with various policies, practices and statutes in keeping
with the organization''s pace of growth and increasing complexity of
The Company maintains a system of internal controls designed to provide
reasonable assurance regarding the following:
- Effectiveness and efficiency of operations
- Adequacy of safeguards for assets
- Prevention and detection of frauds and errors
- Accuracy and completeness of the accounting records
- Timely preparation of reliable financial information
Key controls have been tested during the year and corrective and
preventive actions are taken for any weakness.
The internal controls and governance process are duly reviewed for
their adequacy, effectiveness through periodic audits by Cipla''s
independent internal audit function supported by various internal
auditors and are found to be adequate. Risk based internal audit plan
is approved by the Audit Committee which also reviews adequacy and
effectiveness of the Company''s internal financial controls. The Audit
Committee is periodically briefed on the corrective and preventive
action taken to mitigate identified risks. During the year under
review, no fraud was reported by the auditors to the Audit Committee /
Board of Directors.
Corporate Social Responsibility (CSR)
The CSR policy is available on the Company''s website at
The Annual Report on CSR initiatives as required under section 135 of
the Companies Act, 2013 and the Companies (Corporate Social
Responsibility Policy) Rules, 2014 as amended from time to time forms
part of this Report as Annexure I.
Business Responsibility Report
As mandated by the Securities and Exchange Board of India (SEBI), a
standalone Business Responsibility Report (BRR) forms part of the
Annual Report and is available on the Company''s website at
www.cipla.com. The BRR contains a detailed report on Business
Responsibilities vis-ŕ-vis the nine principles of the National
Voluntary Guidelines on Social, Environmental and Economic
Responsibilities of Business framed by the Union Ministry of Corporate
Affairs. Any shareholder interested in obtaining a copy may write to
the Company Secretary at the Registered Office of the Company.
Directors'' Responsibility Statement
Pursuant to section 134(3)(c) of the Companies Act, 2013 it is
confirmed that the Directors have:
i. followed applicable accounting standards in the preparation of the
annual accounts and there are no material departures for the same;
ii. selected such accounting policies and applied them consistently
and made judgements and estimates that are reasonable and prudent so as
to give a true and fair view of the state of affairs of the Company as
at 31st March 2016 and of the profit of the Company for that period;
iii. taken proper and sufficient care for maintenance of adequate
accounting records in accordance with the provisions of the Companies
Act, 2013 for safeguarding the assets of the Company and for preventing
and detecting fraud and other irregularities;
iv. prepared the annual accounts on a going concern basis;
v. laid down internal financial controls to be followed by the Company
and that such internal financial controls are adequate and were
operating effectively; and
vi. devised proper systems to ensure compliance with the provisions of
all applicable laws and that such systems were adequate and operating
A report on Corporate Governance along with a certificate from Dr. K.
R. Chandratre, Practising Company Secretary, regarding compliance with
Clause 49 of the erstwhile Listing Agreement and SEBI (Listing
Obligations and Disclosure Requirements) Regulations, 2015 (SEBI
Listing Regulations) forms part of this report.
Conservation of Energy, Technology Absorption, Foreign Exchange
Earnings and Outgo
As required under Section 134(3)(m) of the Companies Act, 2013 read
with Rule 8(3) of the Companies (Accounts) Rules, 2014, the relevant
information and data are annexed to this report as Annexure II.
Disclosure under The Sexual Harassment of Women at Workplace
(Prevention, Prohibition and Redressal) Act, 2013
The Company has in place a Policy on Prevention, Prohibition and
Redressal of Sexual Harassment at workplace in line with the
requirements of The Sexual Harassment of Women at Workplace
(Prevention, Prohibition and Redressal) Act, 2013. An Internal
Complaints Committee (ICC) has been set up to redress complaints
received regarding sexual harassment.
The policy has set guidelines on the redressal and enquiry process that
is to be followed by complainants and the ICC, whilst dealing with
issues related to sexual harassment at the workplace towards any
employee. All employees (permanent, temporary, contractual and
trainees) are covered under this policy. All employees are treated with
dignity with a view to maintain a work environment free of sexual
harassment whether physical, verbal or psychological.
A total of 14 cases were reported under the Prevention of Sexual
Harassment Policy during the financial year 2015-16, out of which 2
cases were under investigation at the end of financial year.
Subsequently, all the cases were satisfactorily addressed and
appropriate action was taken.
Employee Stock Option Scheme
As required under the Securities and Exchange Board of India (Share
Based Employee Benefits) Regulations, 2014, the applicable disclosures
as on 31st March 2016 are available on the Company''s website at
There is no material change in the Employee Stock Option Schemes during
the financial year under review and the Employee Stock Option Schemes
are in compliance with the Securities and Exchange Board of India
(Share Based Employee Benefits) Regulations, 2014.
The Human Resources function contributes to Cipla''s growth story by
working as a strategic partner to the business. The technical and
quality demands of pharma combined with our own vision to grow
significantly over the next few years are driving the need for us to
build an agile, engaged, and energized work force. While doing this,
your Company continues to retain focus on Cipla values and its core
philosophy of placing people before profits. Our core objective has
been to build organizational capability through skill enhancement
across levels, sales force training and enhancing competencies in line
with changing business needs.
There has also been a focus on strengthening existing, middle and
The Company has institutionalized a robust performance management
process; individual goals and key performance indicators have been
aligned to organizational goals and imperatives.
In making Caring for Life translate to Caring for employees,
various employee centric interventions like people friendly policies
and work- life balance have been launched. While serving global
customers, employing people across the globe is an equally important
aspect of our vision thereby building a truly global company. Employees
are motivated through various skill-development, engagement and
voluntary programs. We also ensure that employees are aligned with our
organizational culture and values whilst never losing sight of our
Details of remuneration as required under section 197(12) of the
Companies Act, 2013 read with Rule 5(1) of the Companies (Appointment
and Remuneration of Managerial Personnel) Rules, 2014 is annexed as
Particulars of employee remuneration as required under section 197(12)
of the Companies Act, 2013 read with Rule 5(2) and (3) of the Companies
(Appointment and Remuneration of Managerial Personnel) Rules, 2014
forms part of this Report. Having regard to the provisions of the first
proviso to section 136(1) of the Companies Act, 2013, the Annual Report
excluding the said information is being sent to the members of the
Company. The said information is available for inspection at the
registered office of the Company during working hours and any member
interested in obtaining such information may write to the Company
Secretary at the Registered Office of the Company. The said information
is also available on the Company''s website www.cipla.com.
Particulars of loans, guarantees or investments
Particulars of loans, guarantees and investments under section 186 of
the Companies Act, 2013 are provided in Notes 13 and 40 to the
Extract of Annual Return
As required under section 92(3) of the Companies Act, 2013, the extract
of Annual Return in Form No. MGT-9 forms part of this Report as
Secretarial Audit Report
The Board had appointed M/s. BNP & Associates as the secretarial
auditor for the financial year 2015-16. The secretarial audit report
for the financial year ended 31st March 2016 is annexed to this report
as Annexure V. The report does not contain any qualification,
reservation or adverse remark.
The Company believes in upholding professional integrity and ethical
behavior in the conduct of its business. To uphold and promote these
standards, the Company has formulated a Vigil Policy which serves as a
mechanism for its directors and employees to report genuine concerns
about unethical behavior, actual or suspected fraud or violation of the
Code of Conduct without fear of reprisal. The details of Vigil Policy
is available on the Company''s website at http://www.
Contract and Arrangements with Related Parties
All contracts / arrangements / transactions entered by the Company with
related parties during the financial year 2015-16 were in the ordinary
course of business and on an arm''s length basis. During the year, no
material related party transactions were entered into by the Company,
the details of which are required to be provided under section
134(3)(h) of the Companies Act, 2013.
The policy on materiality of and dealing with related party
transactions is available on the Company''s website at
Internal Financial Controls
The Board has adopted policies and procedures for ensuring orderly and
efficient conduct of its business, including adherence to the Company''s
policies, the safeguarding of its assets, the prevention and detection
of frauds and errors, the accuracy and completeness of the accounting
records and timely preparation of reliable financial disclosures.
Cipla has aligned its current systems of internal financial control
with the requirement of Companies Act, 2013, on lines of globally
accepted risk based framework as issued by the Committee of Sponsoring
Organisations (COSO) of the treadway commission. The Internal Control -
Integrated Framework (the 2013 framework) is intended to increase
transparency and accountability in an organisation''s process of
designing and implementing a system of internal control. The framework
requires a company to identify and analyse risks and manage appropriate
responses. The Company has successfully laid down the framework and
ensured its effectiveness, some of which are outlined below:
Cipla has a well-defined delegation of power with authority limits for
approving revenue as well as expenditure. Processes for formulating and
reviewing annual and long term business plans have been laid down.
The Company has adopted accounting policies which are in line with the
Accounting Standards prescribed in the Companies (Accounting Standards)
Rules, 2006 that continue to apply under section 133 and other
applicable provisions, if any, of the Companies Act, 2013 read with
Rule 7 of the Companies (Accounts) Rules, 2014 and relevant provisions
of the Companies Act, 1956, to the extent applicable. These are in
accordance with generally accepted accounting principles in India.
Changes in policies, if any, are approved by the Audit Committee in
consultation with the Statutory Auditors.
Cipla uses a SAP ® (ERP) system to record data for accounting and
management information purposes. The ERP system is configured to ensure
all transactions are integrated seamlessly with the underlying books of
account. It has continued its efforts to align all its processes and
controls with global best practices.
The Management periodically reviews the financial performance of the
Company against the approved plans across various parameters and takes
action, wherever necessary.
The Company has constituted a Risk Management Committee under the
Chairmanship of Mr. Subhanu Saxena, Managing Director and Global Chief
Executive Officer. There are no risks which in the opinion of the Board
threaten the existence of the Company. However, some of the risks which
may pose challenges are set out in the Management Discussion and
Analysis which forms part of this Report.
During the financial year 2015-16, your Company has not accepted any
deposit within the meaning of sections 73 and 74 of the Companies Act,
2013 read together with the Companies (Acceptance of Deposits) Rules,
Pursuant to the provisions of the Companies Act, 2013 and SEBI Listing
Regulations, the Board has carried out an annual performance evaluation
of its own performance, the directors individually and that of its
Committees. The manner in which the evaluation has been carried out is
stated in the Corporate Governance Report.
Subsidiaries, Associates and Joint Ventures
The Company had 55 subsidiaries/ step-down subsidiaries and Associates
as on 31st March 2016. The consolidated financial statements presented
in this annual report include financial results of the subsidiary
companies. The names of companies which have become or ceased to be
Company''s subsidiaries or associates or joint ventures during the year
under review is attached as Annexure VI.
The policy for determining material subsidiaries is put up on the
website at http://www.cipla.com/uploads/
A report on the performance and financial position of each of the
subsidiaries, associates and joint venture forms part of Consolidated
The financial statement of the Company including consolidated financial
statements, financial statements of subsidiary companies are available
on Company''s website www.cipla. com. These documents will also be
available for inspection by any member at the Registered Office of the
Company during business hours. The copy of the said financial
statements will be made available to any member of the Company seeking
Directors and Key Managerial Personnel
During the year under review, the members approved the appointment of
Ms. Samina Vaziralli as a Whole-time Director designated as Executive
Director for a period of five years with effect from 10th July 2015.
Dr. Nachiket Mor resigned from the Board of Directors effective 7th
August 2015 due to his other commitments. The Directors place on record
their appreciation of the contributions made by him as a member of the
Ms. Naina Lal Kidwai has been appointed as an Additional Director with
effect from 6th November 2015 and holds office up to the date of the
ensuing Annual General Meeting.
Mr. S. Radhakrishnan has been re-appointed by the Board of Directors as
a Whole-time Director for a period of two years with effect from 12th
November 2015, subject to the approval of members at the ensuing Annual
Mr. M. K. Hamied retires by rotation and, being eligible, offers
himself for re-appointment.
Mr. Subhanu Saxena is stepping down as the Director, Managing Director
and Global Chief Executive Officer of the Company with effect from
close of business hours on 31st August 2016.
At the meeting of the Board of the Directors held on 12th August 2016,
Mr. Umang Vohra has been appointed as an Additional Director and
Managing Director and Global Chief Executive Officer for a period of
five years with effect from 1st September 2016, subject to the approval
of members at the ensuing Annual General Meeting.
A brief resume of the Directors seeking appointment/ re-appointment is
provided in the Notice.
Pursuant to the provisions of section 203(1) of the Companies Act,
2013, the Key Managerial Personnel of the Company during the year were
- Mr. Subhanu Saxena - Managing Director and Global Chief Executive
- Mr. Rajesh Garg - Director, Whole-time Director and Chief Financial
Officer (Demitted office w.e.f. close of business hours on 12th June
Mr. Umang Vohra - Global Chief Operating Officer and Global Chief
Financial Officer (Appointed w.e.f. 1st October 2015)
- Mr. Mital Sanghvi - Company Secretary
All Independent Directors of the Company have given declarations that
they meet the criteria of independence as prescribed under section
149(6) of the Companies Act, 2013 and Regulation 16(1)(b) of the SEBI
The criteria for determining qualifications, positive attributes and
independence of a director are attached as Annexure VII.
The salient aspects of Remuneration Policy have been outlined in the
Report on Corporate Governance.
Neither the Managing Director nor the Whole-time Directors received any
remuneration or commission from any of the Company''s subsidiaries.
Number of meetings of the Board
During the year under review, 8 Board Meetings were held. The details
of the Board Meetings are stated in the Report on Corporate Governance.
Composition of Audit Committee
The details pertaining to composition of Audit Committee are included
in the Report on Corporate Governance.
Pursuant to the provisions of section 148 of the Companies Act, 2013,
Mr. D. H. Zaveri, a practising Cost Accountant (Fellow Membership No.
8971) has been appointed to conduct the audit of cost records of
pharmaceutical products for the financial year ended 31st March 2016.
Pursuant to section 148(6) of the Companies Act, 2013 and Rule 6(6) of
the Companies (Cost Records and Audit) Rules, 2014, the Cost Audit
Report, in Form CRA-4 (in XBRL mode), for the year ended 31st March
2015, under the head ''Drugs and Pharmaceuticals Industry'' was filed
with the Central Government within the prescribed time.
M/s. V Sankar Aiyar & Co. and M/s. R.G.N. Price & Co., joint statutory
auditors of the Company, retire at the conclusion of the ensuing Annual
General Meeting (AGM). In accordance with the provisions of section 139
of the Companies Act, 2013 and the mandatory rotation of auditor
requirement, it is proposed to appoint Walker Chandiok & Co LLP,
Chartered Accountants, as statutory auditors of the Company to hold
office from the conclusion of ensuing 80th AGM till the conclusion of
The Auditors'' Report for the financial year 2015-16 does not contain
any qualification, reservation or adverse remark.
On behalf of the Board
Y. K. Hamied
12th August 2016