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RPG Life Sciences

BSE: 532983|NSE: RPGLIFE|ISIN: INE105J01010|SECTOR: Pharmaceuticals
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Directors Report Year End : Mar '18    Mar 17

The Directors have pleasure in presenting the annual report and audited statement of accounts of the Company for the year ended on March 31, 2018.

1. FINANCIAL RESULTS

The summary of financial performance of the Company for the year under review is given below:

(Rs. in Crores)

2017-18

2016-17

A

Continued Operations

Total Income

348.12

307.42

Profit before depreciation, interest and tax

38.50

28.38

Less: Interest

3.80

2.53

Less: Depreciation

14.34

11.31

Profit for the year before tax

20.36

14.54

Tax (including deferred tax)

6.91

2.45

Profit after tax

13.45

12.09

B

Profit from Discontinued operation

-

8.92

C

Profit for the year after tax

13.45

21.01

D

Other Comprehensive income net of tax

(0.14)

(0.63)

E

Total comprehensive income

13.31

20.38

F

Appropriations:

Dividend Proposed

3.97

4.631

Tax on proposed dividend

0.81

0.94*

*Paid in 2017-18

2. DIVIDEND

The Directors recommend a dividend of Rs. 2.40 (30%) per equity shares of Rs. 8/- each for the financial year ended March 31, 2018.

3. OPERATIONS

The Company earned a total income of Rs. 348.12 crores for the year as compared to Rs. 307.42 crores during the previous year and a profit after tax from existing operations of Rs. 13.45 crores as against Rs. 12.09 crores during the previous year. The profit after tax including discontinued business shows a decline of 36% when compared to the net profit of the previous year. Though the profitability of the Company improved due to better performance of Formulations and API divisions, the overall Profit after Tax including discontinued business has declined due to sale of biotech business in the previous year at a profit of Rs. 8.92 crores. Further, the provision for taxation has risen significantly from 17% to 34% of profit before tax as a result of changes in tax laws resulting in higher tax provisions in the current year and consequently lower net profit.

The Company continues to hold EU GMP, WHO GMP and TGA Australia certifications for its API facility at Navi Mumbai plant and EUGMP, UKMHRA, Health Canada and TGA Australia certifications for its Formulation facility (F2) at Ankleshwar plant.

Formulations Business:

Performance

During the year under review, the Formulations business achieved sales revenue of Rs. 217.67 crores, with a growth of 18.20% over the previous year. As per the data compiled by Pharmatrac, a market researcher, the Company achieved 64th rank in sales value terms over the previous year.

The Company''s strategy of focusing on brand building has shown promising results with Minmin tonic becoming a leading brand in the liquid hematinic market. Lomotil and Azoran scaled '' 30 crores mark in sales.

The Company''s Nephrocare Division continues to feature among the top 5 Indian companies operating in the renal care therapy segment. In FY 18, Nephrocare business clocked sales of Rs. 49.90 Crores registering a growth of 14%.

The Company launched brands Darbepoetin (Darba) and Rituximab (XMAB), in the post-transplant care space. Both the brands displayed robust performances in the first year of launch with Darba at third slot among competing Darbepoetin brands. Among the existing products, Immunotac and Arpimune range showed strong growth.

Outlook

In the current year, the Company will continue its emphasis on Focus brands like Minmin tonic, Tricaine MPS and leverage the strength of its key brands to fuel growth. Gastrointestinal, Pain Management and Nutritionals will drive growth in the acute therapies segment. The chronic segment consisting of Oncology and Nephrocare is expected to grow through greater market penetration. Brand extensions and new product launches in therapies where Company''s core competencies exist would also be growth drivers.

Training of field force will continue to remain the cornerstone for improving productivity by strengthening product knowledge and selling skills.

Global Generics Business:

Performance

The Global Generics business performed well in FY 18 by achieving sales revenue of Rs. 51.26 crores and witnessed a robust growth of 53.20% over the previous year. The Company focused on enhancement of product basket in European Union (EU) and increasing customer base across geographies.

Outlook

The Global Generics business is likely to grow well during the current financial year despite challenges of product pricing in the EU markets. The Company has not only been able to sustain but also grow sales with most of its customers and expects to commercialize a new product in the second quarter of FY 19.

The Company intends to enter the United States of America (USA) market through strategic alliances and partnerships and is already working on commercialization strategies. Addition of new customers and new products in EU, Australia as well as other markets shall be the key growth drivers in the Generics business. The Company is actively scouting for license partnerships for its products in various International Markets.

Rest of World (RoW) Business:

Africa & South-East Asia (SEA) constitute the RoW geographical space for the Company.

Performance:

During the year, the RoW business achieved sales of Rs. 21.68 Crores.

In the SEA region, Myanmar remained as key market where Siloxogene continued to maintain its leadership position with a market share of 35% in the antacid segment. The other SEA markets of Cambodia, Vietnam and Philippines registered significant growth over the previous year.

In the Africa region, the Company expanded its business in new market with its first commercial supply in FY 18. The Company retained its leadership position in Mauritius, through its anti-diabetic range while in Egypt, its immunosuppressant range remained the best alternative to the innovator brands in the post organ transplant care space.

Outlook:

Nephrology, Oncology and Critical care will be the core therapies in RoW markets. However, the business will continue to tap opportunistic tenders in Anti-diabetic and Cardiovascular therapies across RoW tender markets.

In FY 18, the focus areas for the business will be product portfolio enhancement, geographic expansion and sustaining new markets. Strategic out-sourcing will be the key pillar for growth in the existing and new markets.

Active Pharmaceutical Ingredients (API/Bulk Drugs) Business:

Performance

The API business registered the highest ever sales of Rs. 53.51 crores and a growth of 24% over the previous year. Latin America, the key market for the API business contributed to this performance. In FY 18, the flagship product sold in the Latin American market had a growth of 57% over the previous year. Mexico and Brazil contributed 58% to the API business in FY 18.

Outlook

API business continues to be of strategic importance in the overall growth of the Company. Backward integration in products ensures lesser dependency on procuring APIs from external sources and increased reliability of supplies thus playing a crucial role in the current competitive scenario. This has enabled the company to move towards good improvement in our key export products. The Company is also working on growing its business in Russia and USA which are key focus markets for API.

4. INDIAN ACCOUNTING STANDARDS (IND AS)

As notified by the Ministry of Corporate Affairs, the Company adopted Indian Accounting Standards (''Ind AS'') with effect from April 01, 2017. Accordingly, financial statements of the Company are prepared with comparative data for the year ended March 31, 2017, in compliance with ''Ind AS''.

5. EXTRACT OF ANNUAL RETURN

As required under Section 92 of the Companies Act, 2013, details forming part of the extract of the Annual Return in form MGT-9, is annexed herewith as Annexure A.

6. MEETINGS OF THE BOARD

The details of Board Meetings held during the year are given in the Corporate Governance Report.

7. MEETINGS OF AUDIT COMMITTEE

The details of Audit Committee meetings and composition of the Committee are given in the Corporate Governance Report.

8. DIRECTOR''S RESPONSIBILITY STATEMENT

The Directors confirm that -

a) in the preparation of the annual accounts for the financial year ended March 31, 2018, the applicable accounting standards had been followed and there were no 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 as at March 31, 2018 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 this 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;

e) the Directors, had laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively;

f) 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.

9. STATEMENT ON DECLARATION OF INDEPENDENT DIRECTORS

The Company has received declaration from each of the Independent Directors under Section 149 (6) and (7) of the Companies Act, 2013 and Regulation 16 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

10. PECUNIARY RELATIONSHIP OR TRANSACTIONS OF THE NON-EXECUTIVE DIRECTORS AND DISCLOSURES ON THE REMUNERATION OF THE DIRECTORS

All pecuniary relationship or transactions of the Non-Executive Directors vis-a-vis the Company, along with criteria for such payments and disclosures on the remuneration of the Directors along with their shareholding are disclosed in Corporate Governance Report and Form MGT-9 which forms a part of this report.

11. NOMINATION AND REMUNERATION POLICY

The Company''s policy on Directors'' appointment and remuneration, including criteria for determining qualifications, positive attributes, independence of a Director and other matters provided under Section 178 (3) is annexed with this Report as Annexure B.

12. EXPLANATION AND COMMENTS ON AUDITOR''S AND SECRETARIAL AUDIT REPORT

There is no qualification, disclaimer, reservation or adverse remark made by the Statutory Auditors in Auditor''s Report.

Further, there is no qualification, disclaimer, reservation or adverse remark made by the Company Secretary in practice in Secretarial Audit Report.

13. PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS

The Loans, Guarantees and Investments made by the Company are within the limits prescribed under the provisions of Section 186 of the Companies Act, 2013 and the details are given in the notes to the Financial Statements.

14. RELATED PARTY TRANSACTIONS

There were no contracts or arrangements or transactions entered into by the Company with related parties referred to in sub-section (1) of Section 188 of the Companies Act, 2013 during the course of business which were not at arm''s length basis.

Suitable disclosure as required by the Indian Accounting Standards (IND AS 24) has been made in the notes to the Financial Statements. The policy on Related Party Transactions as approved by the Board is uploaded on the Company''s website www.rpglifesciences.com.

15. TRANSFER TO RESERVES

The Company has not transferred any sum to the General Reserve during the financial year ended March 31, 2018.

16. MATERIAL CHANGES AND COMMITMENTS, IF ANY AFFECTING THE FINANCIAL POSITION OF THE COMPANY

There are no material changes and commitments, affecting the financial position of the Company which have occurred between the end of the financial year on March 31, 2018 to which the financial statements relate and the date of this report.

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

The particulars as required under Section 134(3) (m) of the Companies Act, 2013 read with Rule 8 (3) of Companies (Accounts) Rules, 2014, are given in Annexure C to this report.

18. RISK MANAGEMENT

The details of Risk Management Committee (RMC) and its terms of reference are set out in the Corporate Governance Report.

The Company has a robust Risk Management framework to identify, evaluate business risks and opportunities. This framework seeks to create transparency, minimize adverse impact on the business objectives and enhance the Company''s competitive advantage.

The business risk framework defines the risk identification and its management approach across the enterprise at various levels including documentation and reporting. The framework help in identifying risks trend, exposure and potential impact analysis at Company''s business.

19. CORPORATE SOCIAL REPONSIBILITY (CSR)

In accordance with the provisions of Section 135 read with Schedule VII of the Act, the Company, as a part of its Corporate Social Responsibility (CSR) initiative, has adopted a CSR Policy outlining various CSR activities to be undertaken by the Company in the area of health, water, sanitation, promoting education, skill development etc. The CSR policy of the Company is available on the Company''s website i.e. www.rpglifesciences.com under ''Investors'' tab.

During the year under review, the Company has contributed the entire amount of '' 17.15 lakhs to RPG Foundation, the implementing agency towards CSR activities during the FY 2017-18. The Board has constituted a CSR Committee inter alia to recommend on the CSR projects/programs, recommend the amount on each CSR activity and to monitor such CSR activities, being undertaken by the Company. The report on CSR activities as required under the Companies (Corporate Social Responsibility Policy) Rules, 2014 is set out as Annexure D.

20. DIRECTORS AND KEY MANAGERIAL PERSONNEL

Mr. Sachin Nandgaonkar retires by rotation and being eligible offers himself for re-appointment at the ensuing Annual General Meeting.

At the Board Meeting held on November 10, 2017, Mr. CT. Renganathan was re-appointed as the Managing Director of the Company with effect from January 2, 2018 for a term of 3 years subject to approval of shareholders.

None of the Directors and Key Managerial Personnel (KMP) is related to any other Director of the Company.

Mr. CT. Renganathan, Managing Director, Mr. Mahesh Narayanaswamy, Vice President - Finance and Mr. Rajesh Shirambekar, Head - Legal and Company Secretary are Key Managerial Personnel of the Company within the meaning of Section 203 of the Companies Act, 2013.

21. SUBSIDIARY COMPANIES

There were no Companies which have become or ceased to be our subsidiaries, joint ventures or associate companies during the year.

22. FIXED DEPOSITS

The Company has not accepted any fixed deposit from public during the year under review under Chapter V of the Companies Act, 2013. As on March 31, 2018, no deposit was overdue and deposit aggregating to Rs. 5.40 Lakhs was lying unclaimed with the Company.

23. SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS OR TRIBUNALS IMPACTING THE GOING CONCERN STATUS

There are no significant and material orders passed by the Regulators or Courts or Tribunals impacting the going concern status and company''s operations in future.

24. CHANGE IN THE NATURE OF BUSINESS

During the year under review, there was no change in the nature of business.

25. INTERNAL FINANCIAL CONTROL

Details in respect of adequacy of internal financial controls with reference to the Financial Statements are stated in Management Discussion and Analysis which forms part of this annual report.

26. INFORMATION PURSUANT TO SECTION 197 (12) OF THE COMPANIES ACT, 2013 AND RULE 5 OF THE COMPANIES (APPOINTMENT AND REMUNERATION OF MANAGERIAL PERSONNEL) RULES, 2014

1

The ratio of the remuneration of each Director to the median remuneration of the employees of the company for the financial year;

Mr. H. V. Goenka (Chairman) - 0.63 Mr. C. L. Jain - 0.99 Dr. Lalit S. Kanodia - 0.65 Mr. Mahesh Gupta - 0.95 Mr. Manoj Maheshwari - 0.50 Mr. Narendra Ambwani - 0.66 Ms. Zahabiya Khorakiwala - 0.39 Mr. Sachin Nandgaonkar - 0.78 Mr. Yugal Sikri - 0.94

Mr. CT. Renganathan (Managing Director) - 62.07

2

The percentage increase in remuneration of each Director, Chief Financial Officer, Chief Executive Officer, Company Secretary or Manager, if any, in the financial year;

Mr. H. V. Goenka (Chairman)- Nil

Mr. C. L. Jain - Nil

Dr. Lalit S. Kanodia - Nil

Mr. Mahesh Gupta - Nil

Mr. Manoj Maheshwari - Nil

Mr. Narendra Ambwani - Nil

Ms. Zahabiya Khorakiwala- Nil

Mr. Sachin Nandgaonkar - Nil

Mr. Yugal Sikri - Nil

Mr. CT. Renganathan - 10%

Mr. Mahesh Narayanaswamy - 12% Mr. Rajesh Shirambekar - 8%

3

The percentage increase in the median remuneration of employees in the financial year;

10.80%*

4

The number of permanent employees on the rolls of Company;

1,245 employees as on March 31, 2018.

5

Average percentile increase already made in the salaries of employees other than the managerial personnel in the last financial year and its comparison with the percentile increase in the managerial remuneration and justification thereof and point out if there are any exceptional circumstances for increase in the managerial remuneration;

- Average Salary increase of non-managerial employees is around 11%.

- Average Salary increase of managerial employees is around 10.60%.

- There are no exceptional circumstances for increase in managerial remuneration.

6

Affirmation that the remuneration is as per the remuneration policy of the Company.

Remuneration Paid during the year ended March 31, 2018 is as per the Remuneration Policy of the Company.

Notes:

*The percentage increase in the median remuneration of employee has been calculated after excluding Managing Director''s remuneration.

27. WHISTLE BLOWER POLICY

The Audit Committee''s terms of reference inter-alia include vigil mechanism which also incorporates a Whistle Blower Policy in terms of Section 177(10) of the Companies Act, 2013. The Company has adopted Whistle Blower Policy. The Whistle Blower mechanism provides for Directors and employees to report concerns about unethical behavior, actual or suspected fraud or violation of Company''s Code of Corporate Governance and Ethics. The Whistle Blower Policy is uploaded on the Company''s website www.rpglifesciences.com.

28. FAMILIARISATION PROGRAMMES FOR INDEPENDENT DIRECTORS

The Company conducts familiarisation programme for Independent Directors and the details are uploaded on the website of the Company on the below mentioned link: http: / / www.rpglifesciences.com/Policyon Familiarisationanddetailprogram.pdf

29. FORMAL ANNUAL EVALUATION OF BOARD AND ITS COMMITTEES

Pursuant to provisions of Section 134 of the Companies Act, 2013 and the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Nomination and Remuneration Committee laid down a criteria for evaluating Board effectiveness by assessing performance of the Board as a whole, performance of individual Director and Committees of the Board namely Audit Committee, Nomination and Remuneration Committee, Stakeholders Relationship Committee, Corporate Social Responsibility Committee and Risk Management Committee. The Board approved the criteria laid down by Nomination and Remuneration Committee for evaluating Board effectiveness and engaged a third party agency to conduct Board effectiveness survey during the year under review.

30. AUDITORS

Statutory Auditors:

The members of the Company at its Annual General Meeting held on July 24, 2017 appointed M/s. BSR & Co. LLP, Chartered Accountants (Firm Registration No.101248W/W-100022), as Statutory Auditors of the Company, for a period of 5 (five) consecutive years from the conclusion of the tenth AGM till the conclusion of the fifteenth AGM. The auditors confirmed that their appointment shall be in compliance with Section 139 and 141 of the Companies Act, 2013 subject to ratification at the ensuing AGM by the shareholders. The Board recommends ratification of appointment of M/s. BSR & Co. LLP.

Internal Auditors:

M/s. Deloitte Touche Tohmatsu India LLP, are the Internal Auditors of the Company.

Secretarial Auditors:

M/s. Parikh Parekh & Associates, Practicing Company Secretaries, are the Secretarial Auditors of the Company. The Secretarial Audit Report required pursuant to subsection (3) of Section 134 and Section 204 (1) of the Companies Act, 2013, is given in Annexure E to this report.

Cost Auditors:

Pursuant to the provisions of Section 148(3) of the Companies Act, 2013, M/ s. Kirit Mehta & Co. (Registration No. 000353), Cost Accountants, was appointed to conduct audit of cost records of Pharmaceutical Activities for the year ended March 31, 2018. Cost Audit reports would be submitted to the Central Government within the prescribed time. Pursuant to Rule 6 of the Companies (Cost Records and Audit) Rules, 2014, cost audit reports for Pharmaceutical Activities for the year ended March 31, 2017 was filed with the Central Government on September 2, 2017.

31. EMPLOYEES STOCK OPTION PLAN

The Company has no employee stock option scheme on expiry of ESOP 2005.

32. PARTICULARS OF EMPLOYEES AND RELATED DISCLOSURES

The particulars of employees in compliance with the provisions of Section pursuant to Section 134 (3) (q) read with Rule 5 (2) and 5 (3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 will be provided to the shareholder upon request. The same shall be available for inspection by the shareholder of the Company at the Registered Office of the Company during business hours on working days of the Company till the date of Annual General Meeting of the Company.

33. MANAGEMENT DISCUSSION AND ANALYSIS AND CORPORATE GOVERNANCE REPORT

In compliance with Regulation 34(3) read with Schedule V of SEBI (Listing Obligations & Disclosure Requirements) Regulations, 2015, Management Discussion and Analysis and Corporate Governance Report, as approved by the Board of Directors, together with a certificate from a Practicing Company Secretary confirming the compliance with the requirements of Corporate Governance policies are set out in the Annexures forming part of this annual report.

34. DISCLOSURE UNDER SEXUAL HARASSMENT OF WOMEN AT THE WORK PLACE (PREVENTION, PROHIBITION AND REDRESSAL) ACT, 2013

The Company has in place an Anti-Sexual Harassment Policy in line with the requirements of the Sexual Harassment of Women at the Workplace (Prevention, Prohibition and Redressal) Act, 2013.

Internal Complaints Committee has been set up to redress complaints.

The Company has not received any complaint of sexual harassment during the financial year 2017-18.

35. MATERIAL TRANSACTIONS WITH RELATED PARTIES

The Company has not entered in to any transaction with related parties during the year under review which requires reporting in Form AOC-2 in terms of Companies Act, 2013 read with Companies (Accounts) Rules, 2014.

36. SAFETY

The Company conducts regularly Safety audit and Environment audit through competent authorities for its manufacturing facilities located at Navi Mumbai and Ankleshwar. The Company also organised various safety awareness programmes to impart safety training to its employees.

37. AWARDS

The Company has received an award for Innovative HR Practices in HR Convention and HDM Awards 2017 which validates the progressive culture of the organization.

The Company has won prestigious IDMA Quality Excellence Award (GOLD AWARD) in Bulk Drugs category. The Company also received National Safety Award 2016 for zero accident frequency rate by National Safety Council - Maharashtra Chapter.

38. APPRECIATION

Your Directors record their appreciation for the valuable services rendered by employees of the Company, their gratitude to the banks for their assistance and to the Company''s shareholders, customers and suppliers for their continued support.

For and on behalf of the Board of Directors

Place: Mumbai H.V. Goenka

Date: May 2, 2018 Chairman

Source : Dion Global Solutions Limited
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