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Download Annual Report PDF Format 2013 | 2012 | 2011
Directors Report Year End : Mar '13    Mar 12
TO THE MEMBERS
 
 The Directors have pleasure in presenting the Sixty-fifth Annual Report
 together with the Audited Accounts for the year ended 31st March, 2013.
 The Report reviews the Company''s operations covering Pharmaceutical and
 Consumer Health Care Products. The prior year''s figures in the
 financial statements have been regrouped / rearranged where necessary.
 
 DIVIDEND
 
 Your Directors recommend a dividend of Rs. 17.00 (170%) for the
 financial year ended 31st March, 2013, previous year Rs. 18.00 (180%)
 per equity share. If the proposed dividend is approved by the
 Shareholders at the Annual General Meeting, the total dividend payout
 will be Rs. 3862.41 lakhs. Dividend Payout ratio for the year ended
 31st March, 2013 (if approved by members) would be 29.7% as compared to
 28.3% for the previous year.  Tax on dividend to be borne by the
 Company will aggregate Rs. 656.42 lakhs.
 
 The dividend will not suffer tax in the hands of the Shareholders.
 
 FINANCIAL HIGHLIGHTS
 
 Your Company has had a successful year in terms of sales growth with
 sales of the Pharmaceutical segment showing a growth of 14% over the
 previous year taking the Company''s sales growth to over 13%. This is
 significantly ahead of market growth of 10.2% (Source: IMS MAT March
 2013).
 
 Financial Results
 
                                                         (Rs. in Lakhs) 
 
                                               Apr 2012 -    Apr 2011 -
                                               Mar 2013      Mar 2012
 
 Revenue from Operations (Net)                  66120.98     58406.53
 
 Operating and Other Income                      5238.91      3844.53
 
 Profit before non-recurring expenses           19377.68     20537.59
 
 Voluntary Retirement Scheme                       50.55        45.90
 
 Profit before Taxation                         19327.13     20491.69
 
 Provision for Tax                               6321.62      6022.29
 
 Net Profit                                     13005.51     14469.40
 
 Balance brought forward from previous period   33465.02     25195.62
 
 Profit available for appropriation             46470.53     39665.02
 
 Proposed Dividend                               3862.41      4089.62
 
 Tax on Proposed Dividend                         656.42       663.44
 
 Transfer to General Reserve                     1300.55      1446.94
 
 Balance carried to next year                   40651.15     33465.02
 
 THE PHARMACEUTICAL INDUSTRY - AN OVERVIEW & OUTLOOK
 
 The performance of the Indian pharmaceutical industry is tied to the
 following two salient features of the Indian healthcare sector:
 
 - Out of pocket expenditure, which continues to dominate India''s
 healthcare spend.
 
 - Private providers continue to deliver most of the care, both at
 primary and secondary levels.
 
 Given this scenario, the pharmaceutical industry is impacted by the ups
 and downs of the economy. India''s economic growth in 2012 - 13 was
 pegged lowest in a decade, with the Central Statistical Organisation
 estimating GDP growth at 5%, compared to 6.2% in 2011-12.
 
 The audited pharmaceutical market in India grew by 10.2% to reach USD
 13.8 billion in 2012 - 13.  The retail sector accounted for USD 11.6
 billion and grew by 10.1%, while the hospital sector accounted for USD
 1.4 billion and grew by 9.9%. The market has registered a compounded
 annual growth of 14.2% for the period 2010 - 13.  (Source: IMS MAT
 March 2013)
 
 The pharmaceutical market witnessed a single digit growth in the last
 quarter of 2012 - 13. During the same period 2010 - 2011 and 2011 -
 2012 (MAT March 2011 & MAT March 2012), the audited pharmaceutical
 market had grown by 16% and above. IMS ranks the Indian pharmaceutical
 industry 14th in terms of value and 3rd in volume globally.
 
 OPPORTUNITIES, THREATS, RISKS AND CONCERNS
 
 The long term outlook for the industry continues to be good, driven by
 rising income levels and growth in medical infrastructure, especially
 in the private sector. McKinsey has forecast that the Indian
 pharmaceutical market will grow to USD 55 billion by 2020, driven by
 a steady increase in affordability and a steep jump in market
 access.
 
 The report also cautions that the market will reach only USD 35 billion
 by 2020, if investment is weakened by price controls and economic
 slowdown.
 
 The Drugs (Prices Control) Order (DPCO), 2013, was notified on 15th
 May, 2013, vide which the prices of 348 formulations in the National
 List of Essential Medicines (NLEM) have been brought under price
 control. This Order replaces the earlier price control order of 1995
 that regulated the prices of 74 bulk drugs. The Government has changed
 the pricing model from cost based to market based.
 
 The Government has notified the ceiling price for approximately 300
 formulations as of now; with the balance notifications expected
 shortly. Companies are required to implement the new price on the 46th
 day from the date of the price notification. The revised prices will
 adversely impact the revenue and profitability of the Company.
 
 Another dampener is the deteriorating environment for intellectual
 property protection in India.
 
 In line with the slowdown in the current year, IMS has projected a
 lower growth rate for the pharmaceutical industry in the next few
 years. What we need at this moment is a rational regulatory framework
 that fosters innovation, propels steady growth and encourages science
 to find solutions for the unmet medical needs of the country.
 
 FINANCIAL AND OPERATIONAL PERFORMANCE
 
 The Company''s sales for the year under review were Rs. 661 crores
 (April 2011 - March 2012, Rs. 584 crores) which represents a growth of
 13%. The Company continues to maintain its leadership position in
 Pneumococcal Vaccine, Folic Acid, Oral Contraceptives and Liquid
 Antacids. Folvite, Oral Contraceptives, Mucaine, Wysolone, Ativan and
 Pacitane ranked # 1 in their respective segments. (Source: IMS TSA MAT
 March 2013). Prevenar, Wysolone, Autrin and Pacitane registered a
 strong double digit growth during the year. The sales for the
 pharmaceutical segment were Rs. 623 crores and Consumer Health Care
 segment were Rs. 38 crores. Consumer Health Care segment, post a
 slowdown during the year was able to regain some of the lost momentum
 in the last quarter.
 
 As a result of the challenging operating environment, inflationary
 pressures and adverse exchange rates, the material cost has risen to
 41.2% of sales for the year under review as against 36.2% of sales in
 the previous year.
 
 Profit for the year was also impacted due to provision for bad debts
 and increase in other expenses.
 
 Women''s Health Care
 
 The Company strengthened its presence in Women''s Health Care by
 launching several new products during the year: Pausera M (Tranexamic
 Acid Tablets - an original research product of Pfizer Inc.), Wytrol and
 Nordette 28 Combikit.  Two line extensions -- Warclav 375 mg and a new
 flavor variant of Mucaine were also launched during the year.  To
 enhance patient convenience, the Company also modified packs of
 Hetrazan to a strip of 20 tablets and Folvite MB to a strip of 15
 capsules from the existing strips of 10.
 
 The Company''s strategy to expand its presence in its key therapy areas
 by launching new Branded Value Offerings (BVOs) has proved successful.
 Warclav, the Company''s first BVO launched in 2010, lists among the Top
 25 brands of the co-amoxyclav market. Similarly, Folvite MB has entered
 the league of Top 10 brands in Folic Acid segment as per IMS data.
 
 Considering the increased product offerings in the Women''s Health Care
 segment, the Business Unit restructured itself to ensure proper focus
 on both established products and new launches.
 
 The Company continues to engage leaders in Obstetrics and Gynecology at
 the Regional level with the plan to cascade Continuing Medical
 Education Programs at the district levels.
 
 Vaccines
 
 Prevenar 13, the pneumococcal conjugate vaccine, used to protect
 infants and young children against the disease caused by the bacterium
 Streptococcus pneumoniae (pneumococcus) is the major revenue generator
 and continues to be the leader in the toddler vaccine market. Prevenar
 13 is now approved for active immunization of adults aged 50 years and
 above to provide protection against invasive pneumococcal disease.
 
 Consumer Health Care
 
 A new improved range of Anne French packaging, in jars, was launched
 nationally with new communication and differentiated claims like two
 times softer skin to support the improved formulation. This new Anne
 French pack has gained a good response in major markets. The Anacin
 packaging was upgraded from a 6 tablet strip to a 10 tablet strip and
 strong sales and marketing support helped gain business. Short-format
 advertising helped to increase visibility of Anacin in the media.
 
 Increasing media costs and cost of materials due to inflation continue
 to remain a concern for this segment, going forward.
 
 AUDITORS'' COMMENTS AND DIRECTORS'' RESPONSE
 
 The claims under the Drug Prices Equalization Account and the comments
 of the Auditors regarding the amounts payable into the Drug Prices
 Equalization Account in respect of De-methyl Chlor Tetracycline, Chlor
 Tetracycline Hydrochloride, Tetracycline Hydrochloride, Dexamethasone,
 Amoxycillin Trihydrate, Benzathine Penicillin G and their formulations
 and claims by the Government regarding non-compliance with respect to
 prices fixed under para 8 of the Drugs (Prices Control) Order, 1995 for
 Prednisolone based formulations have been explained in Notes 26(i)(a)
 and (b) to the Accounts.
 
 An early resolution of this issue by the Government will provide much
 needed clarity for the future. The Company has made detailed
 submissions to the Government.
 
 With regard to the observations made by the Statutory Auditors under
 Para (xxi) of the Annexure to the Auditors'' Report dated 14th May,
 2013, your Company has discontinued all business transactions with the
 distribution agent referred to therein and is taking necessary steps in
 consultation with its legal advisors. The Company has also taken steps
 to improve the effectiveness of its processes in particular, in the
 Order to Cash process to prevent future recurrence of this nature.
 
 DIRECTORS
 
 In accordance with the Articles of Association of the Company, Mr.
 Pradip Shah and Mr. D. E. Udwadia retire by rotation at the ensuing
 Annual General Meeting and being eligible, offer themselves for
 re-appointment.
 
 At the 64th Annual General Meeting of your Company, Mr. Aijaz
 Tobaccowalla was appointed as Managing Director of the Company with
 effect from commencement of business, 16th August, 2012, subject to the
 approval of the Central Government, which has since been received.
 
 DIRECTORS'' RESPONSIBILITY STATEMENT
 
 Pursuant to Section 2I7(2AA) of the Companies Act, 1956, your Directors
 confirm that:
 
 i) in the preparation of the annual accounts, the applicable accounting
 standards have been followed;
 
 ii) appropriate accounting policies have been selected and applied
 consistently, and have 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 as at 31st March, 2013, and of the profit of the Company
 for the period Ist April, 2012 to 31st March, 2013;
 
 iii) proper and sufficient care has been taken for the maintenance of
 adequate accounting records in accordance with the provisions of the
 Companies Act, 1956, for safeguarding the assets of the Company and for
 preventing and detecting fraud and other irregularities.
 
 iv) the annual accounts have been prepared ''on a going concern
 basis''.
 
 CORPORATE GOVERNANCE
 
 A Report on Corporate Governance along with a Certificate from Messrs.
 B S R & Associates, regarding compliance with the conditions of
 Corporate Governance as stipulated under Clause 49 of the Listing
 Agreements with the Stock Exchanges are annexed hereto.
 
 CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE
 EARNINGS AND OUTGOINGS
 
 The particulars required under Section 2l7(l)(e) of the Companies Act,
 1956, read with the Companies (Disclosure of Particulars in the Report
 of Board of Directors) Rules, 1988, are annexed hereto as Annexure I.
 
 INFORMATION PURSUANT TO SECTION 2I7(2A) OF THE COMPANIES ACT, 1956
 
 The information required under Section 2l7(2A) of the Companies Act,
 1956, (the Act) read with the Companies (Particulars of
 Employees) Rules, 1975, as amended, forms part of this Report. However,
 as per the provisions of Section 219 (1) (b) (iv) of the Act, the
 Report and Accounts are being sent to all shareholders excluding the
 statement of particulars of employees under Section 217 (2A) of the
 Act. Any shareholder interested in obtaining a copy of the statement
 may write to the Company Secretary at the Company''s Registered Office.
 
 AUDITORS
 
 The Auditors, Messrs. B S R & Associates, retire at the conclusion of
 this Annual General Meeting and offer themselves for re-appointment.
 Messrs. B S R & Associates have confirmed their eligibility for
 re-appointment under Section 224(lB) of the Companies Act, 1956.
 
 Messrs. B S R & Associates, if appointed, will hold office up to the
 conclusion of the next Annual General Meeting of the Company.
 
 COST AUDITORS
 
 Pursuant to the provisions of Section 233B of the Companies Act, 1956,
 read with General Circular No. 2/2013 dated 31st January, 2013 issued
 by the Ministry of Corporate Affairs, companies were required to file
 their Cost Audit Reports and Compliance Reports by 28th February, 2013.
 The Company filed its Reports for the financial year ended 31st March,
 2012, on 29th January, 2013.
 
 The Cost Audit Report for the financial year ended 31st March, 2013 is
 due to be filed by 27th September, 2013.
 
 M/s. RA & Co., confirmed their eligibility and have been appointed as
 Cost Auditors to conduct Cost Audit of the Company''s records for the
 year ending 31st March, 2014.
 
 ACKNOWLEDGEMENTS
 
 The Directors record their thanks to the Company''s employees at all
 levels for their dedication and commitment throughout the year. The
 Directors would also like to record their thanks to the external
 stakeholders for their continued support and co-operation.
 
 Your Directors take this opportunity to thank the Parent Company,
 Pfizer Inc. USA, for their valuable guidance and support.
 
                           For and on behalf of the Board of Directors
 
 Place: Mumbai                                             Pradip Shah
 
 Date: 30th July, 2013                                        Chairman
Source : Dion Global Solutions Limited
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