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Laurus Labs Ltd.

BSE: 540222 | NSE: LAURUSLABS |

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Series: EQ | ISIN: INE947Q01028 | SECTOR: Pharmaceuticals

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Annual Report

For Year :
2019 2018 2017 2016

Director’s Report

To the Members,

Laurus Labs Private Limited

The Directors have pleasure in presenting the 11th Annual Report of the Company together with the Audited Financial Statements for the Financial Year ended March 31, 2016.

FINANCIAL HIGHLIGHTS

(Rs. Million)

Particulars

2015-2016 |

2014-2015

Gross Income

18,142

13,376

Net Income

17,808

13,263

Profit Before Interest and Depreciation

3,866

2,395

Finance Charges

1,200

1,062

Depreciation/Amortization

916

613

Net Profit Before Tax

1,751

720

Provision for Tax

335

(15)

Net Profit After Tax

1,416

736

Provision for Dividend

49

-

Provision for Dividend Tax

10

-

Surplus carried to Balance Sheet

1,357

736

A. COMPANY’S AFFAIRS

(i) Operations

During the year under review, your Company achieved the following:

-Growth of 34% net income, 61% profit before interest and depreciation over previous year

-Successful contract manufacturing of few products for three of customers

-Construction of Unit-5 (Bloom 2) began and expected to be operational by September 2016

-Scale up and validation completed for 7 APIs

-First time generics in India launched for treatment of Hepatitis C by our Partner

-WHO Geneva and NIP Hungary Joint Inspection completed successfully at Unit-1 and Unit 3 in April 2015

-USFDA Inspection completed successfully at Unit-1 and Unit-3 in April 2015

-The formulation manufacturing facility in Atchutapuram, Visakhapatnam, is made operational from December

2 01 5 and Germany regulatory approval obtained for formulations.

-ISO 9001:2008 Surveillance Inspection completed by NQA, UK at Unit-1 and Unit-3

. 9 DMFs filed in FY 2016

(ii) Outlook

Business prospects will remain positive because of the growing global demand for generics and opportunities provided by expiry of patents in developed markets.

Various business aspects including market conditions, business opportunities, challenges etc. have been discussed at length in the Management’s Discussion and Analysis (MDA), which forms part of this Annual Report.

B. DIVIDEND

Your directors are pleased to recommend (i) 0.001% dividend on preference shares of the Company for the financial year ended March 31, 2016; and (ii) Rs.2/- per share as dividend for the Financial Year ended March 31, 2016, both on Equity and Preference Shares of the Company. The dividend, if approved by the Members, in their forthcoming Annual General Meeting to be held on June 9, 2016, will be paid to the Members, whose names appear on the Register of Members as on June 3, 2016. Your directors have also resolved to release the entire cumulative portion of dividend on the preference shares.

C. TRANSFER TO RESERVES

Your Company does not propose to transfer any portion of profits to Reserves.

D. SHARE CAPITAL

During the year, your Company had allotted 255,375 (Two hundred fifty five thousand three hundred and seventy five only) equity shares of Rs. 10/- each at a price of Rs. 10/per share to various eligible employees of the Company under Employee Stock Option Scheme-2011 upon exercise of their vesting rights. With these allotments, the paid up equity capital of the Company stood at 15,767,255 equity shares of Rs. 10/- each only, aggregating to Rs. 157,672,550/-. The Authorized Share Capital of the Company has been increased from Rs. 880 Mn to Rs. 914 Million by creation of additional 3,400,000 equity shares of Rs. 10/- each. Further, 4.640.940 Series A Preference Shares of Rs. 10/- each in Authorized Share Capital have been reclassified into 4.640.940 equity shares of Rs. 10/- each. Consequently, the Authorized Share Capital of the Company remained as follows:

(A) 24,787,037 (twenty four million seven eighty seven thousand thirty seven) equity shares of par value of Rs. 10 (rupees ten only) each;

(B) 2,259,060 (two million two fifty nine thousand sixty) compulsorily convertible preference shares - Series A of par value Rs. 10 (Rupees ten only) each;

(C) 2,477,387 (two million four seventy seven thousand and three hundred eighty seven) compulsorily convertible preference shares - Series B of par value of Rs. 243 (Rupees two hundred forty three Only) each; and

(D) 4,153,399 (four million one fifty three thousand three hundred ninety nine) compulsorily convertible preference shares - Series C of par value Rs. 10 (Rupees ten only) each

E. FIXED DEPOSITS

The Company did not accept any fixed deposits.

F. CHANGE IN THE NATURE OF BUSINESS, IF ANY

There is no change in the nature of business of the Company or any of its subsidiaries or associates, during the year under review.

G. MATERIAL CHANGES AND COMMITMENTS, IF ANY, AFFECTING THE FINANCIAL POSITION OF THE COMPANY (OCCURRED BETWEEN THE END OF THE FINANCIAL YEAR AND REPORTING DATE)

There are no material changes and commitments affecting the financial position of the Company that have occurred between the end of the financial year of the Company to which the financial statements relate and the date of the Report i.e. between March 31, 2016 to April 29, 2016.

H. SUBSIDIARIES, ASSOCIATES AND JOINT VENTURES

The Company has two Wholly Owned Subsidiaries, namely (i) Viziphar Biosciences Private Limited and (ii) Laurus Synthesis Inc., USA and one Associate Company, namely Sriam Labs Private Limited. There are no Joint Venture entities in which the Company is a partner. However, vide Agreement dated April 18, 2016, the Company had agreed to sell its entire shareholding in Viziphar Biosciences Private Limited to a third party, and this agreement, if completed, would be effective from April 1, 2016 and thereby Viziphar Biosciences would cease to be the Subsidiary of the Company with effect from April 1, 2016.

As per Sec.129(3) of the Companies Act, 2013 the consolidated financial statement of the Company and all its Subsidiaries and Associates prepared in accordance with the applicable accounting standards forms part of this Annual Report. Further, a statement containing salient features of the financial statements of our subsidiaries and associates in the prescribed form in AOC-1 is attached as Annexure-1 to the Directors’ Report.

I. PARTICULARS OF LOANS, GUARANTEES AND INVESTMENTS

During the year, your Company has provided a Corporate Guarantee to Citi Bank, India and, in turn, Standby Letter of Credit issued by Citi Bank, India to Citi Bank Inc. USA on behalf of the Subsidiary Company, namely Laurus Synthesis Inc. USA, for US Dollars 2 Million, to meet the objectives of the said Subsidiary Company, which is well within the limits prescribed under Sec.186 of the Companies Act, 2013.

J. BOARD OF DIRECTORS AND KEY MANAGEMENT PERSONNEL

Mr. Amal Ganguli was appointed as Independent Director liable to retire by rotation by the Board of Directors and Members in their respective Meetings held on April 30, 2015 and July 31, 2015 and is being proposed to be appointed as an Independent Director for a period of 5 years with effect from June 9, 2016, subject to approval of Members.

Mr. Conner Town Mulvi who was appointed as Additional Director in the Board Meeting held on March 24, 2015 was ceased to be director with effect from the date of Annual General Meeting i.e. July 31, 2015, since his appointment was not regularized in the said Annual General Meeting. However, Mr.Conner Town Mulvi was once again appointed as Additional Director with effect from January 18, 2016. His appointment was regularized by the shareholders in the Extra-Ordinary General Meeting held on February 11, 2016.

Mr. A.Nagaraja Kumar had resigned as Company Secretary of the Company with effect from May 8, 2015. Ms.Janaki S who was appointed as Company Secretary from November

1, 2015 also resigned as Company Secretary on January 18, 2016. However, Ms.Janaki will continue to work in the Company as Asst. Company Secretary. Mr.G. Venkateswar Reddy who was appointed as Sr. General Manager (Legal & Secretarial) with effect from December 1, 2015 was appointed as Company Secretary of the Company with effect from January 18, 2016.

K. NUMBER OF BOARD MEETINGS

Board of Director met 9 (nine) times during the financial year 2015-16.

L. BUSINESS RISK MANAGEMENT

Your Company has developed risk management structure to enable the Company to check the business operations of the Company on regular and active basis. This helps in identification, evaluation and mitigation of potential internal or external risks. Both at the Board and at the senior management levels, your Company has established processes and guidelines along with a strong overview and monitoring system. The Company encourages strong ethical values and high levels of integrity in all the activities as a result of which the risk gets mitigated considerably.

M. ADEQUACY OF INTERNAL FINANCIAL CONTROLS

The internal financial controls with reference to the Financial Statements, apart from statutory audit, internal audit and cost compliance, are adequate to the size and operations of the Company.

N. DIRECTORS’ RESPONSIBILITY STATEMENT

In terms of Section 134(5) of the Companies Act, 2013, the Board of Directors of the Company states that:

(a) in the preparation of the annual accounts, the applicable accounting standards had been followed along with proper explanation relating to material departures;

(b) 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) the directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of Companies Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

(d) the directors had prepared the annual accounts on a going concern basis; and

(e) the directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

O. RELATED PARTY TRANSACTIONS

In accordance with Sec.134(h) of the Companies Act, 2013 and Rule 8(2) of Companies (Accounts) Rules, 2014, the particulars of contracts or arrangements entered into by the Company with the Related Parties referred to in Sec.188(1) of the Act, have been provided in Form AOC-2 and attached the same as Annexure-2

The details of related party disclosures as stated in the notes to the financial statements forms part of this annual report.

P. VIGIL MECHANISM

The Company established whistle blower policy in order to assure that the business is conducted with integrity and that the Company’s financial information is accurate.

Q. AUDITORS

(i) Statutory Auditors

S.R.Batliboi Associates LLP, Chartered Accountants, the auditors of the Company retire at the ensuing Annual General Meeting and have confirmed their eligibility and willingness to accept office, if reappointed.

(ii) Cost Auditors

In accordance with Section 148 of the Companies Act, 2013 read with Companies (Audit & Auditors’) Rules, 2014 and the Companies (Cost Records and Audit) Amendments Rules, 2014, the Company maintains the cost records in respect of its business.

Your Board has appointed M/s. Bharathula & Associates, Cost Accountants, as the Cost Auditor of the Company for the Financial Year 2016-17. As required by the Act, the remuneration of the Cost Auditors have to be ratified by the Members and accordingly the resolution relating to the Cost Auditors is being placed before the Members for their ratification.

R. AUDITORS’ QUALIFICATIONS/RESERVATIONS/ ADVERSE REMARKS

There are no Auditors’ Qualifications or reservations or adverse remarks on the financial statements of the Company.

S. SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE COURTS/REGULATORS

There are no significant and material orders passed by the Courts or Regulators against the Company.

T. CORPORATE SOCIAL RESPONSIBILITY INITIATIVES

Pursuant to the provisions of Section 135 and Schedule VII of the Companies Act, 2013, CSR Committee of the Board of Directors had framed the policy on Corporate Social Responsibility and the Projects and Programs undertaken by the Company during the year under review have been provided in Annexure-3 and forms part of this Report. The composition of the CSR Committee of Directors is as follows:

Mr. V V Ravi Kumar

Chairman

Mr.Rajesh Kumar Dugar

Member

Mr.Narendra Ostawal

Member

Mr.Amal Ganguli

Member

U. EXTRACT OF ANNUAL RETURN

As required pursuant to section 92(3) of the Companies Act, 2013 and rule 12(1) of the Companies (Management and Administration) Rules, 2014, an extract of annual return in MGT 9 is given in the Annexure-4 and forms part of this Report.

V. PARTICULARS OF EMPLOYEES

In accordance with the provisions of Section 134 and Rule 5(2) of Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the list of employees drawing remuneration exceeding Rs. 5.00 Lakhs per month is given in the Annexure 5 and appended hereto and forms part of this Report.

W. HUMAN RESOURCES

The management believes that the competent and committed human resources are vitally important to attain success in the organization. In line with this philosophy, utmost care is being exercised to attract quality resources and suitable training is imparted on various skill-sets and behavior. Annual sports and games were conducted across the organization to enhance the competitive spirit and encourage bonding teamwork among the employees.

X. EMPLOYEE STOCK OPTIONS

During the year, the Company has allotted 255,375 (Two hundred fifty five thousand three hundred and seventy five) equity shares of Rs. 10/- at a price of Rs. 10/- per share to various eligible employees of the Company under Employee Stock Option Scheme-2011 upon exercise of their vesting rights.

The details of stock options are as mentioned in Annexure 6 and forms part of this Report.

The Company had also granted 177,188 Stock Options to the Employees during the year as Grant-V under the ESOP Scheme 2011.

Further, the Board has approved and recommended to the Shareholders to approve a new Employees Stock Option Scheme 2016 wherein 300,000 stock options will be reserved to the employees at an exercise price of 25% less than the Fair Market Value of the Share of the Company on the date of grant of options. The vesting shall be 25% after two years of Grant, 25% after three years and 50% will be after four years of the Grant. The Nomination and Remuneration Committee of Directors of the Company will frame all necessary terms and conditions etc. under the said Scheme.

Y. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS/OUTGO

The information required under Section 134 (3) (m) of the Companies Act, 2013, read with Rule 8(3) of Companies (Accounts) Rules, 2014, is appended hereto as Annexure 7 and forms part of this Report.

Z. POLICY ON PREVENTION OF SEXUAL HARASSMENT

The Company has formulated and implemented a policy for Prevention of Sexual Harassment of Women at workplace. During the year under review, the Company has not received any complaints under the policy.

The Company has many systems, processes and policies to ensure professional ethics and harmonious working environment. We follow Zero Tolerance towards Corruption and unethical conduct. These are ensured through Whistle Blower Policy, Anti-Corruption Policy, Gift Policy, Sexual Harassment Policy and Redressal Guidelines.

ACKNOWLEDGEMENTS

Your Directors would like to place on record their sincere appreciation to customers, business associates, bankers, vendors, government agencies and shareholders for their continued support.

Your Directors are also happy to place on record their sincere appreciation to the co-operation, commitment and contribution extended by all the employees of the Laurus family and look forward to enjoying their continued support and cooperation.

For and on behalf of the Board

Dr. C. Satyanarayana V. V. Ravi Kumar

Chief Executive Officer Executive Director

Hyderabad A

April 29, 2016

Director’s Report