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Ranbaxy Laboratories
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Download Annual Report PDF Format 2014 | 2011 | 2010
Directors Report Year End : Mar '14    « Dec 12
The Directors have pleasure in presentng the 53rd Annual Report and
 Audited Accounts for the 15 months period ended March 31, 2014.
 
 STANDALONE WORKING RESULTS UNDER INDIAN GAAP
 
                                                        Rs. in Million
 
                                                 Fifeen           Year
                                           Months ended          ended
                                               March 31,   December 31,
                                                   2014           2012
 
 Net Sales                                    66,570.39      61,124.43
 
 Expenditure                                  80,166.41      63,437.65
 
 (Loss)/ Proft before exceptonal 
 items and tax                                (3,668.84)      2,169.42
 
 Exceptonal Items
 
 – Setlement provision reversal               (1,458.05)             -
 
 – Proft on sale of intellectual 
 property rights                              (4,327.69)             -
 
 – Product recall expenses                            -       2,370.20
 
 – Loss on foreign currency opton 
 derivatve, net (other than on loans)          3,279.16         412.05
 
 – Inventory provision/ write of and
 other costs                                   3,557.92              -
 
 – Provision in respect of non-current 
 investment in a subsidiary                    3,050.96       1,030.00
 
 – Provision for other than temporary 
 diminuton in the value of non–current           713.11              - 
 investment in an associate
 
 (Loss) before Tax                            (8,484.25)     (1,642.83)
 
 Income Tax Expenses
 
 – Current tax                                   305.70         (19.44)
 
 – Deferred tax                                       -              -
 
 (Loss) afer Tax for the Year                 (8,789.95)     (1,623.39)
 
 Balance as per the last Balance Sheet       (25,312.70)    (23,689.31)
 
 CONSOLIDATED WORKING RESULTS UNDER 
 INDIAN GAAP
 
 Net Sales                                   130,403.24     122,528.94
 
 Expenditure                                 133,287.41     112,784.10
 
 Proft before exceptonal items and tax         1,225.75      14,720.53
 
 Exceptonal Items
 
 – Inventory provision/ write of and 
 other costs                                   3,428.73              -
 
 – Impairment of goodwill                      1,629.76              -
 
 – Provision for other-than-temporary 
 diminuton in the value of non-current           305.68              -
 investment in an associate
 
 – Product recall expenses                            -       1,859.54
 
 – Loss on foreign currency opton 
 derivatve, net (other than on loans)          3,279.16         412.05
 
 (Loss)/ proft before tax, share in loss 
 of associate (net) and minority interest     (7,417.58)     12,448.94
 
 Income Tax Expenses
 
 – Current tax                                 3,570.25       2,912.58
 
 – Deferred tax                                 (255.77)         26.46
 
 (Loss)/ proft afer tax and before share 
 in loss of associates (net) and 
 minority interest                           (10,732.06)      9,509.90
 
 Share in loss of associates (net)               140.41         185.82
 
 Minority interest in (loss)/ proft for 
 the period (net)                                (19.95)         96.44
 
 (Loss)/ proft afer tax, share in loss 
 of associates (net) and minority interest   (10,852.52)      9,227.64
 
 Balance as per the last Balance Sheet        (7,957.23)    (17,184.87)
 
 CHANGE IN FINANCIAL YEAR
 
 The Board of Directors of the Company approved change in the fnancial
 year of the Company from January-December to April-March efectve April
 1, 2014. In view of this, the current fnancial year is for a period of
 15 months i.e.  January 1, 2013 to March 31, 2014.
 
 CONSOLIDATED FINANCIAL STATEMENTS
 
 Consolidated Financial Statements for the 15 months period ended March
 31, 2014, under Indian GAAP form part of the Annual Report.
 
 OPERATIONS
 
 The Company contnued to be among the top pharmaceutcal companies from
 India with consolidated global sales of Rs.130,403.24 million for the
 period of ffeen months ended March 31, 2014. Proft before exceptonal
 items, tax, share in loss of associates (net) and minority interest
 stood at Rs.1,225.75 million. However, the Company incurred a loss of
 Rs.10,852.52 million primarily due to provision for diminuton in the
 value of investments, impairment of goodwill, stock provision/write of
 due to inclusion of Mohali and Toansa plants to certain terms of the
 Consent Decree by the US FDA and loss on foreign currency opton
 derivatves.
 
 During the period, in terms of the setlement with the US DOJ, the Group
 paid the setlement amount of US$ 515.40 million (including interest
 expense and other related cost) towards resoluton of civil and criminal
 allegatons. During the period, US FDA issued import alerts for the
 Company''s plants at Mohali and Toansa and advised that both these
 plants will be subject to certain terms of the Consent Decree earlier
 entered into by the Company. The Company proactvely, temporarily
 stopped API supplies from Toansa and Dewas facilites to the rest of the
 world pending further internal review. This voluntary decision was
 taken as a precautonary measure and out of abundant cauton to beter
 allow the Company to assess and review the processes and controls at
 these sites.
 
 In March 2014, US DOJ, United States Atorney''s Ofce for the District of
 New Jersey has issued an administratve subpoena seeking informaton
 primarily related to the Company''s API manufacturing facility at
 Toansa. The Company is fully cooperatng with this informaton request.
 
 The Company is contnuing its focus for improving margins through
 innovatve product development, beter product mix, emphasis on branded
 products and control on cost. Signifcant measures have been taken for
 simplifcaton of processes and structures which will result in
 improvement in productvity and efciency across the organisaton.
 
 DIVIDEND
 
 In view of the loss incurred by the Company, no dividend has been
 proposed for the 15 months period ended March 31, 2014.
 
 SCHEME OF ARRANGEMENT BETWEEN THE COMPANY AND SUN PHARMACEUTICAL
 INDUSTRIES LIMITED
 
 The Board of Directors at its meetng held on April 6, 2014 approved the
 Scheme of Arrangement for merger of the Company with Sun Pharmaceutcal
 Industries Ltd. (SPIL) with an Appointed Date of April 1, 2014 at a
 Share Exchange Rato of 4 Equity Shares of SPIL of Re.1 each fully
 paid-up for every 5 Equity Shares of the Company of Rs.5 each fully
 paid-up subject to requisite regulatory approvals in India and overseas
 as well as the approval of shareholders, creditors and the Courts in
 India. The transacton will be benefcial to all the stakeholders of the
 Company. Post-merger, the combined entty is expected to have a
 leadership positon in the Indian Pharmaceutcal Market with about 9.2%
 market share and No.1 Indian pharma company in the USA market, with
 more than  billion in sales. The combined entty will have operatons
 in 65 countries and 47 manufacturing facilites across the globe.
 
 CHANGES IN CAPITAL STRUCTURE
 
 Allotment of shares on exercise of Stock Optons by the Employees
 
 During the period, the ESOPs Allotment Commitee alloted Equity Shares
 (on pari-passu basis) pursuant to exercise of stock optons granted
 prior to 2011 under the old ESOP Schemes as summarised below:
 
 Date of Allotment               No. of Shares
 
 January 11, 2013                    93,050
 
 April 15, 2013                      94,136
 
 July 10, 2013                       28,520
 
 October 11, 2013                    12,273
 
 January 10, 2014                    37,281
 
 The Allotment Commitee of Directors on December 11, 2013, alloted
 600,000 Equity Shares of Rs.5 each for cash at par to Ranbaxy ESOP
 Trust (Trust), set up to administer Ranbaxy Employee Stock Opton
 Plan-2011 (ESOP-2011). The
 
 Trust allocates the shares to the employees of the Company and of its
 subsidiaries on exercise of stock optons from tme to tme under
 ESOP-2011.
 
 SUBSIDIARIES AND JOINT VENTURES
 
 In December 2012, the Company had approved the proposal to integrate
 the business operatons and management of Ranbaxy Unichem Co. Ltd.
 (''Unichem''), its subsidiary, with Daiichi Sankyo (Thailand) Ltd., a
 subsidiary of Daiichi Sankyo Company Limited, Japan. The said
 integraton has been completed with efect from October 1, 2013. Pursuant
 to this, Unichem had become an associate of the Company. During the
 period, a new wholly owned subsidiary company was incorporated in
 Thailand by the name of Ranbaxy (Thailand) Co. Ltd. Ranbaxy Pharma AB,
 Sweden and Ranbaxy (Hong Kong) Limited, non-operatng enttes were
 liquidated during the period. The Hon''ble High Courts of Delhi and
 Punjab & Haryana vide their orders dated 7 December 2012 and 6 February
 2013 respectvely had approved the scheme of merger of Rexcel
 Pharmaceutcals Limited, Solus Pharmaceutcals Limited, Ranbaxy Drugs and
 Chemicals Company, Ranbaxy Life Sciences Research Limited and Ranbaxy
 SEZ Limited, subsidiaries of the Company with Ranbaxy Drugs Limited
 another subsidiary of the Company, with an Appointed Date of April 1,
 2012. The Scheme became efectve on 9 May 2013 upon fling of the Order
 of the Hon''ble High Court of Delhi and Punjab & Haryana with the
 Registrar of Companies at Chandigarh, India.
 
 A statement pursuant to Secton 212 of the Companies Act, 1956, relatng
 to subsidiary companies is atached to the accounts. In terms of the
 general exempton granted by the Ministry of Corporate Afairs vide its
 circular no. 02/2011 dated February 8, 2011, the Audited Accounts and
 Reports of Board of Directors and Auditors of the Company''s
 subsidiaries have not been annexed to this Annual Report. The Company
 has complied with the requirements as prescribed under the said
 circular. The consolidated fnancial statements prepared in accordance
 with Accountng Standard – 21 issued by the Insttute of Chartered
 Accountants of India forming part of this Annual Report include the
 fnancial informaton of the subsidiary companies.
 
 MANAGEMENT DISCUSSION AND ANALYSIS REPORT
 
 Management Discussion and Analysis Report, as required under the Listng
 Agreements with the Stock Exchanges, is enclosed at Annexure ''A''.
 
 EMPLOYEES'' STOCK OPTION SCHEMES
 
 Informaton regarding the Employees'' Stock Opton Schemes is enclosed at
 Annexure ''B''.
 
 LISTING AT STOCK EXCHANGE
 
 The Equity Shares of the Company contnue to be listed on Bombay Stock
 Exchange Ltd. and The Natonal Stock Exchange of India Ltd. Global
 Depository Shares are listed on the Stock Exchange at Luxembourg. The
 annual listng fees for the year 2013–2014 has been paid to these
 Exchanges.
 
 DISCLOSURE OF PARTICULARS
 
 As required by the Companies (Disclosure of Partculars in the Report of
 Board of Directors) Rules, 1988, the relevant informaton and data is
 given at Annexure ''C''.
 
 FIXED DEPOSITS
 
 The Company has not invited / received any fxed deposits during the
 period.
 
 DIRECTORS'' RESPONSIBILITY STATEMENT
 
 In terms of provisions of Secton 217 (2AA) of the Companies Act, 1956,
 (Act), your Directors confrm that:
 
 (i) In the preparaton of the annual accounts, the applicable accountng
 standards have been followed, alongwith proper explanaton relatng to
 material departures, wherever applicable.
 
 (ii) The Directors have selected such accountng policies and applied
 them consistently and made judgments and estmates that are reasonable
 and prudent so as to give a true and fair view of the state of afairs
 of the Company, as at the end of the accountng year and of the loss of
 the Company for the period.
 
 (iii) The Directors have taken proper and sufcient care for the
 maintenance of adequate accountng records in accordance with the
 provisions of the Act for safeguarding the assets of the Company and
 for preventng and detectng fraud and other irregularites.
 
 (iv) The Directors have prepared the annual accounts on a going concern
 basis.
 
 DIRECTORS
 
 As per provisions of the Companies Act, 2013, Mr. Akihiro Watanabe, Dr.
 Anthony H. Wild, Mr. Percy K. Shrof and Mr. Rajesh V. Shah, Independent
 Directors, are proposed to be reappointed at the ensuing AGM for a term
 of fve years. Mr. Takashi Shoda, Non-Executve-Non-Independent Director,
 retres by rotaton at the ensuing AGM and being eligible ofers himself
 for re-appointment.
 
 CORPORATE GOVERNANCE
 
 Report on Corporate Governance alongwith the Certfcate of the Auditors,
 M/s. B S R & Co. LLP, confrming compliance of conditons of Corporate
 Governance as stpulated under Clause 49 of the Listng Agreement with
 the Stock Exchanges forms part of the Annual Report.
 
 COST AUDIT
 
 M/s. R. J. Goel & Co., Cost Accountants, were appointed as the Cost
 Auditor of the Company and their Audit report on the Cost Accounts of
 the Company for the 15 months period ended March 31, 2014, will be
 submited to the Central Government in due course.
 
 In terms of the Companies (Cost Accountng Records and Compliance)
 Rules, 2011, Cost Audit Report for the year ended December 31, 2012 was
 fled on June 8, 2013, well before the last date of fling being June 30,
 2013.
 
 AUDITORS
 
 M/s. B S R & Co. LLP, Chartered Accountants, retre as Auditors of the
 Company at the conclusion of ensuing Annual General Meetng and have
 confrmed their eligibility and willingness to accept the ofce of the
 Auditors, if reappointed.
 
 AUDITORS'' REPORT
 
 With regard to the comments contained in the Auditors'' Report,
 explanatons are given below :-
 
 (i) The accumulated losses of the Company at the end of the current
 period are more than ffy percent of its net worth (Computed without
 adjustng accumulated losses) and the Company incurred cash losses in
 the current period (Clause x of the Annexure to the Auditors'' Report)
 
 The accumulated losses are primarily due to provision created (net of
 reversal) for setlement with the Department of Justce (DOJ) of the
 United States of America for resoluton of civil and criminal allegatons
 by the DOJ (refer to note 8 of the fnancial statements) in earlier
 years. The Company has incurred cash losses during the current period
 primarily due to US FDA related remediaton costs and certain exceptonal
 items including loss on foreign exchange opton derivatves and inventory
 provision/ write of and other costs at Toansa and Mohali plants.
 
 (ii) Short Term funds used for long term purposes (Clause xvii of the
 Annexure to the Auditors'' Report)
 
 The Company had created a provision for setlement (net of reversal
 during the current period) with the DOJ during the year ended December
 31, 2011, which is currently refected as payable of Rs.29,238.60
 million to a subsidiary (refer to note 8 of the fnancial statements).
 This has resulted in long-term funds being lower by Rs.35,175.73
 million compared to long-term assets as at 31 March 2014. Accordingly,
 short term funds of Rs.35,175.73 million have been used for long-term
 purposes. The Company expects to overcome the situaton in the near
 future.
 
 (iii) Procedures of physical verifcaton of inventories and maintaining
 proper records of inventories and fraud reported on the Company (clause
 (ii)(b), (c) and clause (xxi) of the Annexure to the Auditors'' Report)
 
 During the current period, the Company has writen-down carrying amount
 of inventory by Rs.424 million, consequent to the fndings of an
 exercise carried out by the management in response to certain internal
 informaton received by it. The fndings primarily concluded intentonal
 incorrect inventory management of certain intermediate products by
 certain manufacturing unit level staf resultng in yield mismanagement
 and consequent incorrect higher quantty of inventories. Appropriate
 actons have been taken by the Company including strengthening of
 internal controls.
 
 (iv) Slight delay in deposit of statutory dues (clause ix(a) of the
 Annexure to the Auditors'' Report).
 
 In few cases, there was slight delay in depositng small amounts of
 statutory dues. Requisite correctve actons have been taken.
 
 STATEMENT OF EMPLOYEES
 
 Statement of partculars of employees as required under Secton 217(2A)
 of the Companies Act, 1956 (Act) and Rules framed thereunder forms
 part of the Annual Report. However, in terms of the provisions of
 Secton 219(1)(b) (iv) of the Act, this Report and Accounts are being
 sent to all the shareholders excluding the Statement of partculars of
 employees under Secton 217(2A) of the Act. Any shareholder interested
 in obtaining a copy of the statement may write to the Company Secretary
 at the Corporate Ofce of the Company.
 
 ACKNOWLEDGEMENTS
 
 The Directors hereby wish to place on record their appreciaton of the
 signifcant contributon made by each and every employee of the Company.
 The Directors also thank all other stakeholders for their support and
 encouragement. Your Directors look forward to your contnued support in
 the years to come.
 
                                  On behalf of the Board of Directors
 
 Gurgaon                                   Dr. Tsutomu Une
 
 May 9, 2014                                 Chairman
Source : Dion Global Solutions Limited
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