DIRECTOR'S REPORT The Directors take pleasure in presenting the Twenty Third Report along with the financial statements for the year ended 31st March 2015 Operations/State of Affairs of the Company During the year ended 31st March, 2015, total turnover achieved by your Company was Rs.4055.94 Mn as compared to Rs.3149.45 Mn in the previous year. During the year under review, your Company has registered a net profit of Rs.671.09 Mn as compared to Rs.555.57 Mn in the previous year. This is mainly due to strong business and improved financial performances, and also due to better realization on account of currency movement. Consolidated Financial Statements In compliance with the Accounting Standard - 21 on Consolidated Financial Statements, this Annual Report also includes Consolidated Financial Statements for the financial year under review. From the Consolidated Statement of Profit and Loss, it may be observed that the turnover for the year under review has increased to Rs.7966.68 Mn from Rs.6299.97 Mn in the previous financial year. During the year under review, your company registered a consolidated net profit of Rs.1093.96 Mn as compared to net profit of Rs.719.08 Mn during the previous financial year. Management Discussion and Analysis A report on Management Discussion and Analysis covering industry structure and developments, financial and operational performance of the Company, risks, concerns, opportunities, threats and outlook forms a part of this Report. Dividend Your Directors have recommended subject to the approval of the members in the ensuing Annual General Meeting dividend of Rs.0.12 (12%) per equity share of Rs.1/- each and dividend of Rs.7/- (7%) per preference share of Rs.100/- each for the financial year ended 31st March, 2015. Total cash outflow on account of dividend payment including dividend distribution tax will be Rs.69.72 Mn for the financial year ended 31st March, 2015. Reserves During the year under review, your Company transferred a sum of Rs.10.00 Mn to Capital Redemption Reserve on account of redemption of 100,000 Preference Shares of Rs.100/- each face value. During the year under review, no amount was transferred to General Reserve. Share Capital Your Company has, on 30th March, 2015, issued and allotted 240,06,494 equity shares of Rs.1/- each to qualified institutional buyers under QIP for cash at Rs.54.67 (including premium) per Equity Share. In accordance to the terms of the issue, your Directors at their meeting held on 7th February, 2015 has decided to redeem the entire 13,50,000 7% Redeemable Cumulative Preference Shares of face value of Rs.100/- per share at par out of the profits in tranches before the due date of redemption i.e 27th March, 2018. Accordingly, on 7th February, 2015, your Directors have redeemed 1,00,000 preference shares at par. Consequently, the Issued, Subscribed and Paid-up Equity Share Capital stands increased to Rs.409.31 Mn. and the Issued, Subscribed and Paid-up Preference Share Capital stands reduced to Rs.125.00 Mn. as on 31st March, 2015. Foreign Currency Convertible Bonds (Bonds) Your Company had issued 50,000 Bonds of USD 1,000 each in principal value during the financial year. As on the date of this report, your Company has bought back and extinguished 49,939 Bonds. As on the date of this report, only 61 Bonds of USD 1,000 each in principal value (out of total 50,000 Bonds issued) remained outstanding as the same are not traceable and adequate provision has been made in the book of accounts therefore. Number of Meetings of the Board The Board met 8 (Eight) times in financial year 2014-15 viz., 29.05.14, 26.06.14, 15.07.14, 12.08.14, 25.09.14, 31.10.14, 23.12.14 and 07.02.15. Particulars Regarding Conversation of Energy, Technology Absorption and 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 A. Research and Development (R&D) Your Company is committed to continuously fund its R&D capabilities. One of the Company's biggest strength lies in vibrant and productive R&D function that has continuously placed your Company ahead through consistent development of niche technology, processes and products. Your Company will continue to invest in R&D to keep pace with the changing domestic and global scenario. During the year, your company invested 4.26 % of its total revenue in R&D and related spends amounting to Rs.174.11 Mn with continued product development and dossier filing in US, Europe and other emerging markets. Details Relating to Deposits, Covered under Chapter V of the Companies Act 2013 The Company has not accepted any public deposits and as such, no amount on account of principal or interest on public deposits was outstanding as on the date of the balance sheet. Subsidiaries, Joint Ventures and Associate Companies i. Performance of Marksans Pharma (UK) Limited, which operates in the European market has improved. ii. Nova Pharmaceuticals Australasia Pty Ltd (your company holds 60% of the share capital) which operates mainly in Australia is doing well with consistent growth. Pursuant to a Central Government's Circular dated 8th February, 2011, the audited accounts together with Director's Report and Auditor's Report of the subsidiaries namely M/s. Nova Pharmaceuticals Australasia Pty Limited and M/s. Marksans Pharma (U.K.) Limited are not being appended to the Annual Report. However, a statement giving information in aggregate for each subsidiary including subsidiaries of subsidiaries are attached to the Consolidated Balance Sheet. iii. Your company has acquired 100% share capital of Time-Cap Laboratories Inc., New York through a wholly owned subsidiary Marksans Pharma Inc. Time-Cap was founded in 1979 and is a leading manufacturer and marketer of solid dose generic pharmaceuticals, including private label over-the-counter ("OTC") medications, generic prescription drugs ("Rx"), and nutritional supplements. Time-Cap manufactures over 50 unique products from its facility in Farmingdale, New York, including tablets, caplets, capsules and pellets. Time-Cap will be an ideal platform for your Company to expand its operation in the US. This strategic acquisition will help Marksans to expand its manufacturing capabilities along with product portfolio and penetration into the US. Time-Cap is a zero debt company. Your Company has no Joint Ventures and Associate Companies Loans, Guarantees or Investments Details of Loans, Guarantees and Investments covered under the provisions of Section 186 of the Companies Act, 2013 are given in the notes to the Financial Statements. Internal Financial Control Systems and Their Adequacy Your company has in place adequate system of internal control and management information systems which covers all financial and operating functions. These systems are designed in a manner which provides assurance with regard to maintenance of strict accounting control, optimum efficiency in operations and utilization of resources as well as financial reporting, protection of Company's tangible and intangible assets and compliance with policies, applicable laws, rules and regulations. Your Company has in place a mechanism to identify, assess, monitor and mitigate various risks to key business objectives. The Audit Committee has a process for timely check for compliance with the operating systems, accounting procedures and policies. Major risks identified by the businesses and functions are systematically addressed through mitigating action on continuing basis. Information Technology Your company continues to make required investments in the Information Technology area to cope up with the growing information needs necessary to manage operations efficiently. Health, Safety & Environment Your company is committed to ensure sound Safety, Health and Environment performance related to its activities, products and services. Your company is also committed to strengthen pollution prevention and waste management practices and to provide a safe and healthy environment. Related Party Transactions There are no material related party transactions during the year under review with the Promoters, Directors or Key Managerial Personnel or their relatives. All Related Party Transactions that were entered into during the financial year were in the ordinary course of business on arm's length basis and repetitive in nature. All Related Party Transactions were placed before the Audit Committee of the Board of Directors for information and are entered in the Register maintained under Section 189 of the Companies Act, 2013. The Audit Committee has granted omnibus (ad hoc) approval for Related Party Transactions as per the provisions and restrictions contained in the policy framed under Clause 49 of the Listing Agreement. The policy is available on the Company's website www.marksanspharma.com <http://www.marksanspharma.com> Evaluation of Performance of Board, Committee, and Directors Performance evaluation of the Board as a whole, the Committees of Directors and all individual Directors during the year under review has been carried out in accordance with the criteria framed pursuant to the provisions of the Companies Act, 2013 and Clause 49 of the Listing Agreement. The Board of Directors has expressed its satisfaction over the evaluation process. All the independent directors of your Company also had a separate meeting without the attendance of executive directors and management personnel and reviewed the performance of the Board of Directors as a whole, the Chairman of the Board and the executive non-independent directors and have expressed their satisfaction over the same. The independent directors have also reviewed and expressed their satisfaction over the quality, quantity and timeliness of flow of information between the company management and the Board that was necessary for the Board to effectively and reasonably perform their duties. Policy on Directors Appointment and Remuneration Nomination and Remuneration Committee of the Company has formulated a policy relating to nomination and remuneration of directors as well as key managerial personnel and other employees of the Company. The Nomination and Remuneration Policy, inter alia, provides for the following: The Committee shall identify and ascertain the integrity, qualification, expertise and experience of the person for appointment as Director in terms of Diversity Policy of the Board and recommend to the Board his / her appointment. For the appointment of KMP (other than Managing / Whole time Director) or Senior Management, a person should possess adequate qualification, expertise and experience for the position he / she is considered for the appointment. Further, for administrative convenience, the appointment of KMP (other than Managing / Whole time Director) or Senior Management, the Managing Director is authorised to identify and appoint a suitable person for such position. The remuneration / compensation / commission, etc., as the case may be, to the Managing / Whole-time Director will be determined by the Committee and recommended to the Board for approval. The remuneration / compensation / commission, etc., as the case may be, shall be subject to the prior / post approval of the shareholders of the Company and shall be in accordance with the provisions of the Companies Act, 2013 and Rules made there under. Further, the Managing Director of the Company is authorised to decide the remuneration of KMP (other than Managing / Whole-time Director) and Senior Management, and which shall be decided by the Managing Director based on the standard market practice and prevailing HR policies of the Company. The remuneration / commission / sitting fees, as the case may be, to the Non-Executive / Independent Director, shall be in accordance with the provisions of the Companies Act, 2013 and the Rules made there under for the time being in force or as may be decided by the Committee / Board / shareholders. An Independent Director shall not be entitled to any stock option of the Company unless otherwise permitted in terms of the Act and the Clause 49, as amended from time to time. Whistle Blower Policy/Vigil Mechanism Your Company has established a Whistle Blower Policy to deal with instance of fraud and mismanagement, if any. This policy establishes a vigil mechanism for directors and employees to report their genuine concerns actual or suspected fraud or violation of the Company's code of conduct. Details of the Whistle Blower Policy is displayed on the website of the Company www.marksanspharma.com The said mechanism also provides for adequate safeguards against victimisation of the persons who use such mechanism and makes provision for direct access to the chairperson of the Audit Committee. We confirm that during the financial year 2014-2015, no employee of the Company was denied access to the Audit Committee. Risk Management Policy Your Company is aware of the risks associated with the business. It regularly analyses and takes corrective actions for managing/ mitigating the same. Your Company has institutionalized the policy/process for identifying, minimizing and mitigating risk which is reviewed. The key risks and mitigation actions are placed before the Audit Committee. Corporate Social Responsibility Pursuant to Section 135 of the Act, your Company has constituted a Corporate Social Responsibility (CSR) Committee. The CSR Committee provides guidance on various CSR activities to be undertaken by the Company as per the CSR Policy and monitors its progress. Company's CSR Policy is available on the Company's website www.marksanspharma.com Your company has registered an average net loss for the preceding three financial years amounting to Rs. (3,038.01) Lacs. Hence, the CSR Committee has not recommended any CSR Expenditure for the financial year ended 31st March, 2015. Directors Responsibility Statement In terms of provisions of Section 134(3)(c) of the Companies Act, 2013 your Directors confirm that: • in the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures, if any; • 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 ended 31st March, 2015 and the Statement of Profit and Loss for the period ended 31st March, 2015; • proper and sufficient care has been taken for the 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; • the annual accounts have been prepared on a going concern basis. • Proper internal finance controls were in place and that the financials control were adequate and were operating effectively. • Had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively. Declaration from Independent Directors: The Company has received declarations from all the Independent Directors of the Company confirming that they meet the criteria of independence as prescribed both under the Companies Act, 2013 and Clause 49 of the Listing Agreement with the Stock Exchanges. Familiarization Programme for Independent Directors: The Company proactively keeps its Directors informed of the activities of the Company, its management and operations and provides an overall industry perspective as well as issues being faced by the industry. Company's policy on the familiarization program for the independent directors is available on the Company's website www.marksanspharma.com Disclosure Under Sexual Harassment of Woman at workplace (Prevention, Prohibition and Redressal) Act, 2013 The Company has in place a Prevention of 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 Committees have been set up to redress complaints regarding sexual harassment at Mumbai office as well as Goa plants. All employees (permanent, contractual, temporary, trainees) are covered under this policy. During the year under review, no complaints were received by the Company related to sexual harassment at both the sites. Significant and Material orders Passed by the Regulators or Courts or Tribunals There are no significant material orders passed by the Regulators/ Courts which would impact the going concern status of the Company and its future operations. Change in the Nature of Business During the year under review there is no change in the nature of Business of the Company. Extract of Annual Return The Extract of Annual Return as provided under Section 92(3) of the Companies Act, 2013 and as prescribed in Form No. MGT-9 of the Companies (Management and Administration) Rules, 2014 is appended as Annexure B to this Report. Employees The ratio of the remuneration of each Director to the median employee's remuneration and other details in terms of 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 herewith as Annexure C. The statement showing particulars of employees as required under Section 197(12) of the Companies Act, 2013 read with Rule 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is annexed herewith as Annexure D. Human Resources Development and Industrial Relations: The guiding principle of HR Policy at your company is that the "Intellectual Capital" and dedication of employees will help the Company emerge as a successful player in this highly competitive scenario. The recruitment procedure ensures that people with talent and the right skill sets are selected. Nurturing of talent and a Performance Management System (PMS) is in place to ensure that the coordinated efforts of our people lead to achievement of the Business Goals of the company. Empowerment and a motivational package ensure that employees keep performing at peak levels. The HR Policy is directed towards creating "Ownership of Goals" at levels and synchronizing the efforts of all employees to achieve the company's quality and business goals. Development of skills through mentoring and training by our seasoned professionals ensures that the talent pool keeps expanding. The Leadership Role played by our senior professionals helps to keep the next rung of leadership ready to take up the challenges thrown up by the global market. The management helps the process of decision making by decentralizing and empowering professionals to execute tasks in a speedy manner. The management fosters information sharing and free exchange of ideas. Above all, the sense of ownership and empowerment to take decisions helps the Company to adapt and be ahead of the competition in this rapidly changing global environment. The industrial relation at all the plant sites of your company is cordial. As on 31st March, 2015, the Company's permanent employee strength was 421(436 as on 31st March, 2014). Directors & KMP: In accordance with the provisions of the Section 152(6)(e) of the Companies Act, 2013 read with the Articles of Association of the Company, Dr. Balwant Shankarrao Desai (DIN: 03631170), Director of the Company will retire by rotation at the ensuing Annual General Meeting and being eligible, offers himself for re-appointment. Mr. Mark Saldanha's term as the Managing Director of the Company will expire on 5th October, 2015. Your directors have proposed to re-appoint him as the Managing Director of the Company for a further period of five years with effect from 6th October, 2015. Mr. Ajay Shivram Joshi and Mr. Seetharama Raju Buddharaju are being proposed to be re-appointed as Independent Directors. During the year under review, appointment of Mr. Jitendra Sharma, Chief Financial Officer of the Company was formalized in accordance with the Companies Act, 2013. Corporate Governance: Pursuant to Clause 49 of the Listing Agreement, a detailed report on Corporate Governance and a certificate from the Auditors regarding compliance with the conditions of Corporate Governance is annexed herewith as Annexure E. Auditors: M/s. N. K. Mittal & Associates, Statutory Auditors of the Company, hold office till the conclusion of the ensuing Annual General Meeting and are eligible for re-appointment. The Company has received letter from them to the effect that they are eligible and are not disqualified for the appointment and that their appointment, if made, would be within the prescribed limits under the provisions of the Companies Act, 2013. The Board recommends their re-appointment as Statutory Auditors of the Company. There are no qualifications, reservations or adverse remarks or disclaimers made by M/s. N. K. Mittal & Associates, Chartered Accountants Statutory Auditors, in their report. Cost Audit Your Company is a 100% export oriented unit and therefore it is exempted from audit of its cost accounting records. Secretarial Audit Pursuant to Section 204 of the Companies Act, 2013, the Board of Directors has appointed Ms. Khushboo Bakul Gopani, a practicing company secretary (Membership No.29194) as Secretarial Auditor to undertake the Secretarial Audit of the Company. The report of the Secretarial Auditor is annexed herewith as Annexure F. The Secretarial Audit Report does not contain any qualification, reservation or adverse remark. However, as per the observation made by the Secretarial Auditor in their Report, the Company has not considered re-appointment of two existing Independent Directors as an Independent Director for a specified term, not liable to retire by rotation at their 22nd Annual General Meeting of the Company. In regard to this, the company hereby clarifies as follows: As per the provisions of the Companies Act, 2013, every existing company shall appoint an independent director within one year from the date of notification of the rules. The Company already had the requisite number of independent directors as on date of notification of rules. In order to comply with the provisions of the Companies Act, 2013, the Board has appointed Mr. Ajay Joshi and Mr. Seetharama Raju Buddharaju w.e.f. 1st April, 2015 in the Board Meeting held on 7th February, 2015 as the Independent Directors of the Company subject to the approval of members in the ensuing Annual General Meeting. Appreciation The directors place on record their appreciation for the contribution made by the employees at all levels enabling the Company to achieve the performance during the year under review. The directors also appreciate the valuable co-operation and continued support extended by Company's Bankers, Medical Professionals, Business Associates and Investors who have put their faith in the Company. By order of the Board of Directors Mark Saldanha Chairman & Managing Director DIN: 00020983 Dated 8th August, 2015 Place : Mumbai |